Professional Documents
Culture Documents
Director for Bilateral and Multilateral Cooperation Indonesia Investment Coordinating Board
The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms. 1
Pratomo Walujo
Worlds fourth most populous country, with young demography and rapidly growing middle class large open market potential and competitive manpower; Worlds largest archipelago, 17,000+ islands huge development potential of infrastructure, transportation and logistics; Worlds third largest democracy balance of power between the state and civil society; dynamic stability; 2009 GDP: IDR 5,613.4 trillion (USD 610 billion dollars), the largest economy in Southeast Asia; Large natural resources endowment long-term business potential and raw material self sufficiency; and Geo-political importance comparative connectivity with other parts of the world.
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advantage
in
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EconomicIndicators 20042009
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*) Indonesias forex reserve stood at US$ 69.7 billion per February 2010 the equivalent of 7.6 months of imports.
Rating Upgrades: Indonesia is on course to obtain an investment grade for its sovereign debt rating.
* S&P: long-term foreign currency rating of BB, with positive outlook (March 2010) * Fitch: BB+/stable (January 2010) * Moodys: Ba3/stable (September 2009)
Global Rating
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Bright investment prospect: Indonesia is the worlds top 8 FDI destination due to its large market and natural resource endowment (UNCTAD, World Investment Prospect 2009). 5
Yearsofreforms internalconsolidation:
*Soundmacroeconomicmanagement *Wellestablished democracy,withacleardivisionofauthoritybetween thecentralandlocal governments * Various domestic institutions have been established: improving the levelplayingfield * Unprecedented number of new laws/regulations and ongoing reform programs,includingpublicservicemanagement * Tax law revisions in 2008 that cut income tax rates in 2009 helped cushioncorporateincomeweakness.
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DecisivepreemptivemeasurestakenbytheGovernment
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TrendofDomesticandForeignInvestmentsinIndonesia 20022009
R ealiz ationofF oreig nD irec tInv es tment
(MillionUS D) 15000 10000 5000 0 2002 2003 2004 2005 2006 2007 2008 2009
RealizationofDomesticInvestment
(MillionRp)
40000 35000 30000 25000 20000 15000 10000 5000 0 2002 2003 2004 2005 2006 2007 2008 2009
INVESTMENTREALIZATION FROMOECDCOUNTRIES
INVESTMENTREALIZATION RANK COUNTRY P 1 2 3 4 5 6 7 8 9 10 11 12 13 14 03/28/10 15 JAPAN UNITEDKINGDOM KOREA UNITEDSTATES SWITZERLAND GERMANY AUSTRALIA FRANCE NETHERLANDS ITALY BELGIUM LUXEMBOURG NORWAY DENMARK CANADA 124 61 186 27 11 18 26 12 32 11 5 1 4 2 2 2009 I 678,9 587,7 624,6 171,5 132,1 103,9 79,7 29,0 1.198,7 41,1 1,8 5,6 2,9 1,1 0,4 P 480 230 672 125 34 74 109 60 126 35 17 3 11 8 11 2006 2009 I 3565,3 3447,4 2029,1 533,3 343,4 335,7 320 307,3 147,1 52,1 30,1 28,5 18,3 3 2,9
INVESTMENTREALIZATION FROMOECDCOUNTRIES
INVESTMENTREALIZATION RANK COUNTRY P 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 03/28/10 FINLAND TURKEY SPAIN AUSTRIA NEWZEALAND SWEDEN IRELAND POLAND HUNGARY SLOVAKREP. GREECE ICELAND MEXICO CZECHREP. PORTUGAL 1 2 4 1 3 2 2 2 2009 I 0,8 1,3 1,2 0,3 1,3 0,6 0,6 0,4 P 4 7 7 6 3 3 2 3 1 1 2 1 2 2006 2009 I 2,7 2,5 2 1,6 1,3 0,8 0,6 0,5 0,4 0,3 0,2 0,2 0,2
InvestmentTarget
InvestmentNeeds:
ForInfrastructure2010 2014:Rp.1,429Trillion (3,94%fromGDP)*) ForElectricity2010 2014:Rp.US$50.390,9 Million**)
InvestmentTarget:Rp.2000Trillionp.a.
Note: *)StatementfromtheHeadoftheNationalDevelopmentPlanningAgencyRepublicofIndonesia(BAPPENAS) **)StatementfromtheMinisterofEnergyandMineralResourcesRepublicofIndonesia
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FDI Policy
High FDI restrictions Limited number of sectors open to FDI (positive list of investment) Strong Divestment requirements
Period of reform Transformation of positive list to negative list in 1986 Allowed 100% foreign equity ownership from 1994 Reduced divestment requirements Reduced minimum initial capital requirement Eased restrictions to expatriates and use of imported machinery Incentives for export-oriented investment
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1. Legal Certainty: Gradual process of regulatory reform to harmonize regulations at the national and sub-national levels, and reduce the lack of clarity and inconsistent implementation; 2. Procedure Simplification: Adoption of the Electronic System for Investment and Information Services (SPIPISE) at the PTSP centres in several cities starting with Batam. Review of licensing process for simplification; 3. National Logistics: Development of a national system to improve the flow of goods; 4. Information System: Full operation of the Indonesian National Single Window (NSW) for imports and exports. Implementation of Integrated Custom Services Area (KPPT) in the Jababeka (Jakarta Industrial Park) as a pilot project; 5. SEZs: Development of SEZs using the PPP scheme; 6. Labour policies: Adjust policies to business climate conditions.
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3-FRONT STRATEGY
Oninvestmentroadmap:settinguplongterminvestment strategy,dividedintofourphases:lowhangingfruits boost infrastructuredevelopment industrialization knowledgebasedeconomy. Onpolicyfront:speedupcentralizedonestopshop investmentlicensing,computerizedlicensingsystem,less restrictivenegativelist,regionalchampions,SpecialEconomic Zone,etc Onpromotionalstrategy:Targetedinvestmentpromotion: diversifiedbyarea,byprospectivesectors,anddonewith an integratedapproach
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o Currently being conceptualized o 15-20 years horizon o Focuses on three priority sectors: Infrastructure,
energy, and food/agriculture o First Target : quick wins and low hanging fruits o Shifting from consumer centric to industrial centric o Provide Incentives for pioneer projects (e.g. Coal gasification, oil refinery, aluminium and nickel smelters) and priority projects (maritime product processing, cocoa processing, strategic infrastructure, components manufacturing, etc.).
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REGULATIONSONINVESTMENT
1. 2. LawNo.25of2007concerningInvestment; NegativeListonInvestment:
a. b. c. PresidentialRegulationNo.76of2007concerningCriteriaandRequirementsforthe DeterminationofBusinessFieldsClosedandOpenwithConditions toInvestment; PresidentialRegulationNo.77of2007concerningListofBusinessFieldsClosedand OpenwithConditionstoInvestment; Presidential Regulation No. 111 of 2007 concerning Amendment to Presidential Regulation Number 77 of 2007 concerning List of Business Fields Closed and Open withConditionstoInvestment.
3. 4.
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LawNo.25of2007 onInvestment
Embodies an important milestone of the Governments investment policy: * Division of authority on investment affairs. * Equal treatment for domestic and foreign investors. * Tax and non-tax incentives. * Dispute resolution mechanism. * Integrated one-stop service. * Freedom to transfer and repatriate profits. * Protection against nationalization. * Corporate social responsibility (CSR) requirements. * Special Economic Zones. 03/28/10
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Investment List
Background:
* Switch from a Priority List (positive list) to an Investment List (Business fields that are closed and open to investments with certain requirements)
Main considerations
* * * * environmental protection, conservation of non-renewable natural resources, protection against health hazards, preservation of national culture and heritage and empowerment of MSMEs
Review Mechanism:
* regular evaluation, * involving various stakeholders 03/28/10
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TheInvestmentListcomprises: 1. Business fields closed for Investment (Domestic and Foreign) 2. Business fields open for investment with certain requirements (Conditional List)
* Reserved for MSMEs * Partnership with MSMEs * Foreign Equity Participation * Certain Locations * Special Licenses
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New Approach
Comprehensive: all sectors of the economy, including oil/gas, mining, banking, non-bank financial institutions, that used to be covered separately. Better coordination: close coordination between various ministries and consultations with relevant stakeholders. This reduces potential regulatory conflicts. Greater Transparency promoting business certainty:
* Limitations are clearly stated. * More specific sectors using 5-digit ISIC codes are identified. Example: used to be in one big telecom sector but now is only for specific sub-sectors. * Grandfather Clause protects investors that received investment approval prior to Presidential Regulation 03/28/10 No.77/2007 21
Sectoral Policies
Sectoral and cross-sectoral initiatives by relevant ministries, e.g. National Policy for Industrial Development, National Energy Road Map, National Logistics Blueprint. Development of General Plan for Investment (RUPM), which focuses on investment policies for three priority sectors, i.e. Infrastructure, energy, and food/agriculture.
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Investment Administration
Inlinewith: LawNo.25of2007,Art.30para(4)andpara(7) GovernmentRegulationNo.38 of2007,AnnexP PresidentialRegulationNo.27of2009,Art.8
TheCentralGovernmentsinvestment AdministrationiscarriedoutbyBKPM
1.Investmentsthatare: AcrossProvinces; Relatedtononrenewablenaturalresourceswithhighenvironmentaldamagerisks; InIndustriesthatareofhighnationalpriorityscales; Linkedtothefunctionsofunitingandlinkingregions; Linkedtonationaldefenseandsecuritystrategy; 2.ForeignInvestment&ForeignInvestorsthatuseforeigncapital: Conductedbyforeigngovernments&foreignnationalsorforeignbusinessentities; Usingforeigncapitalderivedfromforeigngovernment, basedonagreementmadeby theGovernment&ForeignGovernment. 3.OtherinvestmentfieldswhichbylawbecometheGovernmentsAffairs.
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To minimize time and cost of investing Equal treatment of domestic and foreign investors
Forms of facilitation
One Stop Integrated Services (PTSP) and Electronic System for Investment and Information Services (SPIPISE) SEZs (Special Economic Zones) Tax and non tax incentives National Logistics Blueprint National Single Window (NSW)
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Administration of licensing and nonlicensing pertinent to investment started from application to the phase of issuance of documents in one place. .
Simplicity of service, fiscal facilities, and investment information, with the acceleration, simplification of service, and alleviation or elimination of cost.
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Objectives of SPIPISE
To integrate data, license, and non-license services; To provide easy, fast, accurate, transparent, and accountable license and non-license services; To synchronize investment service policies of various sectoral ministries and also between the Central and local governments.
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INVESTMENTAND BUSINESSCLIMATE
PriorityTheme investmentenhancementbyimprovinglegal certainty,simplifyingprocedures,improving informationsystems,anddeveloping Special EconomicZones(KEK)
Coresubstance LegalCertainty SimplificationofProcedures NationalLogistics Information System
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SpecialEconomic Zones(SEZs)
SEZs are established to accelerate development in certain areas that are strategic for national economic advancement and to safeguard the progress of local communities within the national economy An SEZ is a bordered area appointed to implement a special economic function and equipped with certain facilities. Businesses in SEZs enjoy additional, non-fiscal incentives such as: Simplified administrative procedures; Relaxed labour and immigration regulations; No equity ownership limitation for foreign investors; Negative List of Investment is not applicable in SEZs area; High quality infrastructure will be provided. 03/28/10
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DEFINITIONOFNSW
Conceptof NSW
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MainGoalofNSW System
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Benefitofthe INSW
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GOIUnderstandingof GreenGrowth
Green growth aims to achieve sustainable development Climate and environmental challenges are considered development issues These challenges should be addressed not only through sound environmental policies but also solid economic policies, incl. macro-economic management, fiscal policy plans, revenue-raising alternatives, carbon pricing, and long-term investment options.
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RegulatorySupport
Investment Law 2007 Fiscal Incentives: tax, Investment tariff custom, should promote facilities environmental sustainability Incentives and disincentives
Investment Priority List: criteria to screen investment, incl. environmental criteria
Promotion or restriction of certain activities within a sector/sub-sector (e.g. in forest and land use sector)
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EconomicandFiscal Policies
MOFs Green Paper on Economic & Fiscal Policy Strategies for Climate Change in Indonesia: 1) strategies to guide longer term policy reform for climate change mitigation; 2) strategies to access international financing and canvassing the need for policy reform and institutional development Energy: discussion on carbon tax/levy on fossil fuel combustion is being processed, in parallel with removal over time of energy subsidies. This will be coupled with policy to access international carbon markets; introducing incentives for energy efficiency and deployment of low emissions technology, exemplified by a specific geothermal policy strategy. Land-use and forestry sectors: incentives will be given for carbon abatement measures through the inter-governmental fiscal transfer system, working towards the creation of a Regional Incentive Mechanism for climate change.
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Regulatory Framework
LawNo.40of 2007onCompanies:obligeslimitedcompaniesto fulfill their social and environmental responsibility (Corporate Social Responsibility CSR). It is also stipulated in the 2007 Investment Law, the Environmental Management Law and the MiningLaw. LawNo.8 of1999onConsumerProtection Successivelawsontrademark LawNo.21of 1961, LawNo.19 year 1992, Law No. 14 of 1997 (in line with the agreement in TRIPs Agreement on Trade Related Aspects of Intellectual PropertyRights),andLawNo.15year2001. Successive laws on patent Law no. 6 of 1989, Law No. 13 of 1997andLawNo.14of 2001. Successivelawsoncopyright Law No.6of 1982,LawNo.7of 1987,LawNo.12of 1997, andLawno.19of 2002. Lawno.23 of2002onChild Protection.
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CURRICULUMVITAE
1.Name 2.Address 3.Position : : : Pratomo Walujo,SH,MSc Jl.KahayanNo.6 Depok Timur KotaDepok Phone.021 7710577 DirectorforBilateralandMultilateralCooperation InvestmentCooperationDeputyUnit, InvestmentCoordinatingBoard Jl.Gatot Subroto No.44Jakarta Phone.0215202045 pratomo@bkpm.go.id Marriedwith3children 1.FacultyofLaw,UniversityofIndonesia(UI),1984 2.MasterofScienceinBusinessAdministration UniversityofIllinoisatUrbana Champaign,USA,1992 1.MinistryofFinance,1978 1982 2.InvestmentCoordinatingBoard(BKPM) 1982 now.
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JobExperience
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