invest in
5th International Conference & Exhibition on Palm Oil| Jakarta, 26 May 2014
Investment Policy on Sustainable Palm Oil Industry
Hanung Harimba Rachman
Director of Planning for Agribusiness Industry and Other Natural Resources
© 2014 by Indonesian Investment Coordinating Board. All rights reserved
Topic of Discussion
I. Investment Policy: sustainable economic growth
II. Policy on Palm Oil: supporting downstream industry
The Investment Coordinating Board of the Republic of Indonesia
2
I. Investment Policy: sustainable economic growth
The Investment Coordinating Board of the Republic of Indonesia
3
Indonesia
Macroeconomic Overview 2007 - 2013
Year
Indonesia GDP
Growth
World GDP
Growth
2007
6.30%
5.3%
2008
6.00%
2.70%
2009
4.60%
-0.40%
2010
6.10%
5.20%
2011
6.50%
3.90%
2012
6.23%
3.20%
2013
5.78%
3.00%
Q1-2014
5.21%
3.70%*
Sustainable
direct investment
growth
total investment realization
in Q12014 (IDR 106.6 trillion),
13.5% higher than Q1 2013 of
IDR 105.3 trillion equvalent USD
10.7 billion or 23.3% of 2014
target
42.2
34.8
Source: BPS, IMF
Notes: *) 2014 World GDP Growth projection data by IMF
Investment Realization in Indonesia
27.9
Based on Capital Expenditure (USD Billion)
Excl. oil, gas, and financial sectors
15
Assumption:
Q1-Q2 rate USD 1 = IDR 9,300
Q3-Q4 rate USD 1 = IDR 9,600
Q1 2014 & Q1 2013 rate USD 1 = IDR 10,000
28.6
23.4
FDI
24.6
19.5
16.6
10.7
10.8
4.2
2009
DDI
6.8
8.4
2010
2011
10.2
2012
The Investment Coordinating Board of the Republic of Indonesia
13.6
2013
9.4
7.2
6.6
3.5
2.8
Q1-2014
Q1-2013
4
Source: BKPM, 2014
Indonesia Today… and Indonesia in 2030
Source: McKinsey Global Institute, September 2012
The Investment Coordinating Board of the Republic of Indonesia
5
rd
The World’s 3 Largest
Democratic and
Decentralized Nation
251 million of
population in 2013
Remarkable
Biggest
The World’s
Archipelagic Nation
17,508 islands
81,000 km Coastal Line
1.9 million sq km Land Area
3.1 million sq km Sea Area
3 time zones
G-20
Member State
1 trillion of
USD
GDP (PPP) in 2012
USD 4,540 of GDP per
Capita (PPP)
Indonesia
One of Asia Pacific’s most
vibrant democracies
that has maintained
political
stability…
(The World Bank, 2013)
The World’s Most
Stable Economy
in the Last Five Years.
(The Economist, 2012)
Abundant Natural Resources: The Key Indicators
Source: Coordinating Ministry For Economic Affairs RI, 2011
In 2013. the
export of palm oil
reached 21
million ton/year
Indonesia is one of the world’s major producer
of a broad range of commodities.
The Investment Coordinating Board of the Republic of Indonesia
7
APEC CEOs: Indonesia
has capacity to surprise
with greater business opportunities than expected...
Source: PricewaterhouseCoopers, 2013
The Investment Coordinating Board of the Republic of Indonesia
8
Indonesia’s Investment Performance
Indonesia is the 3rd
Investment Destination in Asia
(Source: The Economist, 2013)
Increase their level of investment
Still in the market, but will not invest more
Reduce their investment
Have no plans to invest
0.7
China
73.8
20.6 5.0
India
54.1
32.0
13.9
0.8
Total Investment (% GDP)
Indonesia
(Source: Bloomberg, 2013)
53.5
Malaysia
55
50
45
40
35
30
25
20
15
10
27.1
43.0
18.6
2.2
16.3
38.5
2.4
Thailand
38.6
33.9
25.2
3.3
Vietnam
37.7
Singapore
34.8
32.8
26.2
0.7
10.6
53.9
3.1
South Korea
28.9
46.1
Philippines
28.1
45.5
Australia
27.0
47.6
21.9
0.8
25.6
5.6
19.8
3.1
Japan
26.2
55.4
15.4
1.5
Brazil
China
India
Indonesia
Korea
Russia
Hong Kong
21.4
58.8
18.3
3.2
Taiwan
The Investment Coordinating Board of the Republic of Indonesia
15.2
51.2
30.4
Source : World bank (2013)
9
The Most Attractive Investment Destination in ASEAN
The ASEAN Business
Advisory Council
Survey on ASEAN
Competitiveness 2012
“Half of 405 businesses surveyed
intended to invest in
Indonesia over the next years
(2011-2014).”
Source: ASEAN-BAC, 2012
Notes: (1) Value next to each bar reflects the percentage of respondents that plan to invest or increase investments while value within the bar shows respondents’
average rating on the investment attractiveness of each country. (2) Each respondent was allowed to select multiple responses. Percentages do not sum up to 100%.
The 2012 ASEAN-BAC Survey on ASEAN Competitiveness collated responses from businesses across all ten ASEAN ountries, comprising a mix of small, medium and large
firms. A majority of the businesses had been in operation for more than ten years, had trade/investment linkages within ASEAN and had at least general knowledge of
ASEAN policy initiatives.
The Investment Coordinating Board of the Republic of Indonesia
10
Japan Bank for International Cooperation Survey 2013
Indonesia: The most promising country for overseas
business
Rank
2005
(Japan Bank
2006
2007
for International
Cooperation
2013)
2008
2009
2010 Survey 2011
1
China
China
China
China
China
China
2
India
India
India
India
India
3
Thailand
Vietnam
Vietnam
Vietnam
4
Vietnam
Thailand
Thailand
5
US
US
6
Russia
7
2012
2013
China
China
Indonesia
India
India
India
India
Vietnam
Vietnam
Thailand
Indonesia
Thailand
Russia
Thailand
Thailand
Vietnam
Thailand
China
Russia
Thailand
Russia
Brazil
Indonesia &
Brazil
Vietnam
Vietnam
Russia
US
Brazil
Brazil
Indonesia
-
Brazil
Brazil
Korea
Brazil
Brazil
US
US
Russia
Russia
Mexico
Mexico
8
Indonesia
Korea
Indonesia
Indonesia
Indonesia
US
US
Rusia
Myanmar
9
Brazil
Indonesia
Korea
Korea
Korea
Korea
Malaysia
US
Rusia
10
Taiwan
Taiwan
Taiwan
Taiwan
Malaysia
Malaysia &
Taiwan
Taiwan
Myanmar
US
Positive Factors
1. Future growth potential of local market
2. Inexpensive source of labor
3. Current size of local market
4. Supply base for assembler
5. Industrial cluster development
Issues of Concern
1. Rising labor costs
2. underdeveloped infrastructures
3. Execution of legal system unclear (frequent changes)
4. Intents competition with other companies
5. Difficult to secure management-level staff.
6. Labor problems
Source: JBIC, November 2013
The Investment Coordinating Board of the Republic of Indonesia
11
We provide “one-stop shop”
(PTSP) licensing provision and our
services for investors include…
INDONESIA INVESTMENT COORDINATING BOARD
 Establishing an Investor Relation Unit at
BKPM for information, facilitation and inqueries
handling from existing and potential investors.
 Rolling-out the Electronic Information
Services and Investment Licensing
(SPIPISE) in 105 regions throughout Indonesia.
 Helping contain various obstacles and giving
consultation.
 Facilitating foreign workers permit.
 Launching the online investment tracking
system.
17 Action Plans Package to Improve the Ease of Doing Business
1
2
3
4
5
Starting a business 5 actions plan involving the Ministry of Manpower and Transmigration, Ministry of
Trade, Provincial Government of DKI Jakarta, and Ministry of Law and Human Rights.
Getting electricity 2 actions plan, the issuance of Ministry of Energy and Mineral Resources and State
Electricity Company (PLN) regulation regarding mechanism/procedures of electricity connection
Paying taxes and insurance premium 2 actions plan, the issuance of regulation regarding online tax
reporting system and simplification of procedures for the payment of social security program consisting of:
pension insurance, death insurance, working accident insurance and health insurance
Enforcing contract 2 actions, study on Small Claim Court as a reference for the formulation of the Supreme
Court Regulation and prepare academic paper about procedure to resolve small claim cases
Resolving insolvency assess compatibility between regulations and implementation of procedures, time,
and cost for resolving insolvency or bankruptcy process
property issuance of regulation on the property registration/land ownership transfer certificate
6 Registering
which includes the simplification of procedures, time and cost
7 Dealing with construction permits 3 actions plan involving Provincial Government of DKI Jakarta, PT
PAM Jaya, and PT Telekomunikasi Indonesia
8 Getting credits issuance of implementing regulation of Bank Indonesia concerning Credit Indformation
Management Institution
The Investment Coordinating Board of the Republic of Indonesia
13
Investment Opportunities: Quality Investments
Sectors Focused in BKPM’s Plan
Export-oriented
sectors: downstream
industry of palm and
rubber, electrical
equipment, metal,
paper, textile.
Industrial sectors with
increasing domestic
consumption
trend: cement and
building material
industries.
Import substitution of
capital goods and
raw materials:
machinery, iron and
steel, automotive and
spare parts, and basic
chemical.
Import substitution of
consumer goods:
food and beverages,
home appliances, and
oil refinery industries.
Downstream
industries of
mining, agriculture,
fisheries and forestry:
smelter, CPO and cocoa
industries, paper,
furniture.
Infrastructure
sector encouraged
through PPP: energy, air
and sea ports, roads,
water supply, waste
management and
railways.
Tourism and
creative industries.
The Investment Coordinating Board of the Republic of Indonesia
14
Roadmap of Indonesia Investment
More than 15 years
10-15 years
Development of
Big-Scale Industry
5 years
Acceleration of
Infrastructure
Development
1-2 years
Quick wins and
low hanging
fruits
Encouraging and
facilitating readyto-invest
investors
Developing soft
infrastucture
(education and
health facilities) and
hard infrastructure
(bridge, port,
etc) through PrivatePublic Partnership
Scheme
Developing big-scale
industrials through
industry cluster (e.g.
Petrochemical,
transportation means,
and national defense)
Knowledge-Based
Economy
Developing economy
by innovation and
high-technology
The Investment Coordinating Board of the Republic of Indonesia
Source: BKPM
15
Policy on Palm Oil
Downstream Industries: Quality Investments
Source: The Royal Plantation, 2014
The Investment Coordinating Board of the Republic of Indonesia
16
II. Policy on Palm Oil: supporting downstream industry
The Investment Coordinating Board of the Republic of Indonesia
17
Investment Realization
Investment Realization of Oil-Producing Fruit Crops
(US$ ‘000)
2,000,000.00
1,500,000.00
1,000,000.00
500,000.00
2009
2010
2011
FDI
2012
2013
DDI
Investment Realization of CPO and Cooking Palm Oil
(US$ ‘000)
600,000.00
400,000.00
200,000.00
2009
2010
2011
FDI
2012
2013
DDI
The Investment Coordinating Board of the Republic of Indonesia
Source: BKPM, 2014
18
Investment Incentives
TAX
ALLOWANCE
IMPORT DUTY
FACILITY
(Government Regulation No.52/2011)
30
% of investment value
Reduction of corporate
net income tax for 6 years,
5% each year.
129
business segments
(MoF Regulation No.176/PMK.011/2009)
Machines, goods,
materials for production
2 years import duty exemption
or 4 years for companies using
locally-produced machines
(min.30%).
Industries
Eligible for tax
allowance, expanded
from 38 segments in the
previous regulation.
Under certain requirements among others:
minimum amount of investment value and
workforce, and certain project location
(especially outside Java island).
Which produces goods and/or services,
including:
1. Tourism and culture
2. Public transportation
3. Public health services
4. Mining
5. Construction
6. Telecommunication
7. Port
The Investment Coordinating Board of the Republic of Indonesia
19
Granted tax holiday
TAX HOLIDAY
1
(MoF Regulation No.130/PMK.011/2011)
5-10
years
50
Tax relief facility, starting
from the commencement
of commercial production.
% for a further 2 years
Reduction of income tax after
the expiration of the tax
holiday and can be extended by
MoF.
Pioneer industry
1. Basic metal industries;
2. Oil refinery industries and/or basic
organic chemicals;
3. Machinery industries;
4. Industries of renewable resources;
5. Communication devices
industries.
IDR
1
2
PT Unilever Petrokimia received tax
holiday facility since end of 2012. It plans to develop
the palm oil downstream industry in Sei Mangke,
North Sumatera.
PT Petrokimia Butadiene plans to
develop the factory of butadiene in Cilegon, Banten.
Application on processs
1.
2.
3.
4.
5.
6.
Sinar Mas Group
Musim Mas Group
Wilmar Group
Domba Mas
Salim Ivomas Pratama
Asian Agri Group
trillion
Minimum investment plan.
Source: Merdeka, 2014
The Investment Coordinating Board of the Republic of Indonesia
20
Negative Investment List: Presidential Regulation No.39 of 2014
The Investment Coordinating Board of the Republic of Indonesia
21
Negative Investment List: Presidential Regulation No.39 of 2014
Business Fields
KBLI
Conditions
Palm plantation cultivation for area less than 25 Ha
01262
Reserved for micro, small, medium enterprises and
cooperatives
Seeding palm plantation for area less than 25 Ha
01262
Reserved for micro, small, medium enterprises and
cooperatives
Palm Oil Industry below certain capacity according to
Regulation of Minister of Agriculture Number 26 of
2007 and/or its amendment
10431
Reserved for micro, small, medium enterprises and
cooperatives
Seeding palm plantation for area equal or more than
25 Ha
01262
maximum 95 % for foreign capital ownership , and
recommendation of the Minister of Agriculture cq.
The Director General of Plantation
Palm plantation for an area of 25 Ha or more, up until
a certain area according to Regulation of Minister of
Agriculture Number 26 of 2007, without a processing
unit
01262
maximum 95 % for foreign capital ownership , and
recommendation of the Minister of Agriculture cq.
The Director General of Plantation
Palm oil industry, with similar capacity or exceeding a
certain capacity, according to Regulation of Minister
of Agriculture Number 26 of 2007 and/or its
amendment
10432
maximum 95 % for foreign capital ownership , and
recommendation of the Minister of Agriculture cq.
The Director General of Plantation
Palm plantation and palm oil industry (CPO) for 25
Ha area of land or more, integrated to the processing
unit by the same capacity or exceeding a certain
capacity according to Regulation of Minister of
Agriculture Number 26 of 2007 and/or its amendment
01262
and
10432
maximum 95 % for foreign capital ownership , and
recommendation of the Minister of Agriculture cq.
The Director General of Plantation
The Investment Coordinating Board of the Republic of Indonesia
22
To support sustainable downstream palm oil industry
Industrial Area Development
• Facilitation and Coordination of Industrial Estate Development in Sei Mangkei (North
Sumatra), Kuala Enok-Dumai (Riau), and Maloy (East Kalimantan);
• Establishment of Innovation Center for Palm Oil Downstream Industry in Industrial
Estate Sei Mangkei, North Sumatra.
Anti Negative Campaign
• Active participation in the Promotion of Investment and Anti Negative Campaign
• Implement the Indonesia Sustainable Palm Oil (ISPO) to certified palm oil companies in
Indonesia in order to compete in world wide market.
Restructuring CPO Export Duty and derivative products through Finance Minister
Regulation (PMK) 75 of 2012 in conjunction with PMK No. 128 in 2011.
The Investment Coordinating Board of the Republic of Indonesia
23
Thank You
Terima Kasih
Indonesia Investment Promotion Centre (IIPC)
Badan Koordinasi
Penanaman Modal
(BKPM)
Indonesia Investment
Coordinating Board
Jln. Jend. Gatot Subroto No. 44
Jakarta 12190 - Indonesia
t . +62 21 5292 1334
f . +62 21 5264 211
e . info@bkpm.go.id
www.bkpm.go.id