indonesia’s economic updates
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INDONESIA’S ECONOMIC UPDATES:
NEW INVESTMENT OPPORTUNITIES
FOR JAPANESE BUSINESS PEOPLE
Ambassador Heri Akhmadi
Pandemic and World Economy
2
2020 STARTED WITH OPTIMISM, SUDDENLY COVID-19 CHANGED THE GAME
WEO January:3.3%
WEO April : -3.0%
WEO June: -4.9%
WEO October: -4.4%
WEO Jan: -3.5%
Jan-20
Feb-20
Mar-20
Apr-20
May-20
Jun-20 Jul-20
Aug-20
Sep-20 Oct-20 Nov-20
Dec-20
Jan-21
IMF WEO Global
Growth Projection2020
BREXIT TRANSITION31 January2020
US-CHINA TRADE DEAL
PHASE I15 January 2020
THE WHO
ANNOUNCE PANDEMIC11 March 2020
OIL PRICE PLUNGED
TO NEGATIVEF24 April2020
ANNOUNCE EFFICACY(>90%)17 November2020
RECTRICTIVE MOBILITY
WENT VIRALApril2020
RELAXING RESTRICTIVE
MOBILITY MEASURESJuly2020
LIMITED USAGE OF VACCINE (e.g.
by RUSSIA & CHINA)October2020
BIDEN-HARRIS
ADMINISTRATION7 November2020
US PRESIDENTIAL ELECTION3 November2020
2021: EAST ASIA & PACIFIC
GDP GROWTH OPTIMISTIC
OUTLOOK 7.4%, AS
CONSUMPTION GROW 9.5%January2021
BRITAIN AS FIRST COUNTRY
DELIVER VACCINATION,
FOLLOWED BY >30
COUNTRIESDecember2020
PFIZER & MODERNA
Started with new optimism, as:Started with new optimism, as:1. US-China trade war cool down;2. Brexit signals transition; and3. lowest Indonesia’s fiscal deficit ever of
1.76%GDP (IDR307.2 trillion).
Yet at Feb-March, Covid-19 affects confidence & change global trajectories toward recession
98.1108.7 13
1.2
133.6
118.7
118.6
59.5 73.3
72.2
52.6 61.
7
66.5
72.3 89.3
89.9
30.5
38.5
41.
8
57.2
67.6
66.0
37.0 48.9
52.5
130.0
131.
2
132.4
41.
1
50.4
56.4
43.4
46.6
47.1
GER
CHN
IND
INA MAS
PHP
SGP
THA
VIE
2021f
US FRA
Source: BPS, Ministry of Finance, Bloomberg,IMF
COVID-19 PANDEMIC PUSHED MANY COUNTRIES TO IMPLEMENT EXTRAORDINARY MEASURESCountercyclical policies to address economic slowdown
Eco
no
mic
Gro
wth
(%,yo
y)
Covid-19 negatively economic
pandemicaffect
performancesin manycountries.
Countries need to spendstimulus to
the pandemic,massive handle even in lower revenuegeneration.
Consequently, fiscal deficitand the debt areincreasing.
to otherCompare countries, economic
Indonesia’s contraction,
deficit, and debt to GDPratio are relativelymoderate.
Pre
limin
ary
Outt
urn
&Fi
scal D
efici
t
Pro
ject
ion (
%G
DP
)
Fisc
al D
eb
tPro
ject
ion
(% t
oG
DP
)
-4.9 -3
.1
1.4
-4.3
-7.0
-2.3 -0
.7
3.9
-0.1
-15.6 -1
0.8 -8
.2
-10.8-8
.6 -6.5 -3
.2
-11.
9
-11.
8
-13.1 -10.9
-6.1
-5.7 -2
.9
-6.5 -4
.7
-8.1
-7.3
1.2
-5.2
-4.9 -2
.9
-4.0
-4.0
GER
CHN
IND
INA* MAS
THA
VIE*
Rata-rata 2015 -2019
2020f 2021fAverage 2015 –
2019 PHP SGPUS* FRA
*) preliminary realization
2019 2020f
2.9 2.3-1.0 -2.1 -
3.2-3.5
-4.1 -4.7
-5.0
-5.6
-5.8
-6.2
-6.8
-8.3
-8.4
-8.8
-9.5
-9.9
-30.0
-20.0
-10.0
0.0
10.0
Q1 Q2
Q3
Q4
2020
Vietnam
China
SouthKorea
Indonesia
RussiaSaudiArabia
Japan
Germany Malaysia Singapore Thailand EU Mexico
France
Italy Philippines UKUSA
Possible scenarios of Global Growth“Global economy is expected to recover slowly, but prospect for global growth is still uncertain”
The World Bank
The trend of decreasing Covid-19
cases and vaccinations provides
optimism and hope for economic
recovery.
However, needs to remain
vigilant of the potential for a re-
escalation of Covid-19 due to the
widespread of new coronavirusvariants
Indonesia’s Economic Recovery
14,518
5.656
M-
20 A-
20
M-
20 J- 20
J- 20
A-
20 S-
20
O-
20
N-
20 D-
20 J-21
F-21
Indonesia’s Covid-19 DailyCases
(as of 20 March 2021)
• Since January, Indonesia has implemented PPKM (Social Mobility Restiction) as an outbreak controlmeasure.
• Indonesia's active casesfell from 176 thousand (5 Feb) to 129 thousand.
• The government will continue to strengthen 3T protocols, encourage 3M, and acceleratevaccinations.
INDONESIA CONTINUES DOWNWARD TREND IN DAILY COVID-19 CASESIn line with tightening restrictions since the end of the year
6
Cumulative Cases
1.46million
TotalDeaths
39.5 thousand
2.7%
Recovery
1.29million
88.4%
Active Cases
129.8 thousand
8.,9%
mber: worldometers.info, KemenkesRI
5.02
-2.07
5.06 5.05 5.01 4.96
2.97
-3.49
-2.19
Q1 Q2
Q3
Q4
Q1
-5.32
Q2Q3
Q4
AnnuallyQuarterly
Indonesia GDP Growth (%,YoY)
2019 2020
Household Consumption (57.7%)*
GovernmentConsumption
(9.3%)
Investment (31.7%)
Export (17.2%)
Import (16.0%)
Q1 Q2 Q3 Q4
* (%) Contribution to Nominal GDP2020
Source: Statistics Indonesia
ECONOMIC GROWTH CONTINUES THE RECOVERY PHASEDespite the hardship, Indonesia’s economy has shown a modest recovery
The government plays a role as the center of
recovery, being the only component that grows
positively. Other expenditure components indicate
the direction of improvement
The direction of this recovery will accelerated in2021
through the state budget that remains as
countercyclical instrument, an effective vaccination
program, and a strengthened National Economic
Recovery (PEN) program
3.8
-6.9
9.8
1.81.9
Q1 Q2
Q3
Q4
2.8
-5.5
-4.0-3.6
-2.6
1.7
-8.6
-6.5 -6.2
-4.9
Q1 Q2
Q3
Q4
0.4
-12.0 -11.7
-7.2-7.7
Q1 Q2
Q3
Q4
-3.6
-18.3
-23.0
-13.5-14.7
Q1 Q2
Q3
Q4
POSITIVELY MODERATEGROWTH
POSITIVELY MODERATEGROWTH
10.6
1.1
-0.9
2.43.3
Q1 Q2
Q3
Q4
THE RECOVERY TREND IS ALSO SHOWED
FROM THE PRODUCTION SIDE
9.810.9 10.7 10.9
10.6
3
5
7
9
11
13
15
17
Q1 Q2
Q3
Q4
10.4
15.316.5
11.6
Q1
3.7
Q2 Q3 Q4
5.9
1.2
2.41.4
2.6
Q1 Q2 Q3Q4
Communication & Information (4.5%)
HealthServices (1.3%)
EducationServices(3.6%)
Real Estate(2.9%)
Financial & Insurance Services (4.5%
)
2.1
-6.2
-4.3-3.1
-2.9
4
2
0
-2
-4
-6
-8Q1 Q2 Q3
Q4
Manufacturing (19.9%)*
1.3
-30.8
-16.7-13.4
-15.0
Q1 Q2
Q3
Q4
Transportation& Warehouse(4.5%)
0.4
-2.7
-4.3
-1.2-2.0
Q1 Q2
Q3
Q4
Mining (6.4%)
1.9
-22.0
-11.8-8.9
-10.2
-35
-25
-15
-5
5
Q1 Q2
Q3
Q4
Accommodation & food Beverages
(2.6%) 2.9
-5.4-4.5
-5.7
-3.3
Q1Q
2
Q3
Q4
Construction (10.7%)
Quarterly
2.2 2.6
1.8
-1
3
1
5
7
9
11
Q1 Q2 Q3Q4
Agriculture(13.7%)*
1.6
-7.6
-5.1
-3.6
-3.7
Q1 Q2
Annually
Q3
Q4
Trade (12.9%)
3.8
2.3 2.01.3
2.3
Q1 Q2 Q3Q4
* (%) Contribution to Nominal GDP2020Source: Statistics Indonesia(processed)
HIGHGROWTH
DEEP NEGATIVEGROWTH
INDONESIAN SOVEREIGN CREDIT RATING HAS BEEN STABLE DURING THE PANDEMICJCR Ratings has affirmed Indonesia’s Sovereign Credit Rating at BBB with a stable outlook
• The JCR ratings mainly reflect the country's solid domesticdemand-led economic growth potential, restrained public debt,and resilience to external shocks supported by flexible exchangerate and monetary policies and accumulation of foreignexchange reserves.
• The ratings are constrained by its relatively high dependence onnatural resources, the revenue base that remains small relativeto the size of the economy, and the domestic financial systemwhich is still in the process of financial deepening.
RatingAgencySovereign
CreditRatingOutlook
Moody’s Baa2 Stable
Fitch BBB Stable
S&P BBB Negative
Japan Credit RatingAgency BBB+ Stable
Rating & Investment BBB+ Stable
March April May June July August September
U.K Italy, Hong Kong, Australia, Brazil India U.S. Indonesia Laos
Rating Mexico, South Africa Outlook revised Outlook revised Outlook revised Rating affirmationwith
Rating
downgraded Rating downgraded to negative to negative to negative stable outlook downgraded
MalaysiaOutlook revised
to negative
During the Pandemic, the rating agencies has downgraded more than 100 sovereign ratings and
revised the outlook for more than 120 sovereign ratings to “negative”Source:Fitch
October
KoreaRating
affirmationwith stable
outlookTurkeyOutlook revised
to negative
November December
SouthAfrica Rating
downgraded
Indonesia Rating affirmation with stableoutlookMalaysia
downgraded
2021 ECONOMIC RECOVERY WILL BESTRENGTHEN
Achievement 2020 2021STRENGTHENING PANDEMIC HANDLING & ECONOMIC RECOVERY
Indonesia is taking a big but measured
steps to handle the pandemic
Overcoming the spread of Covid-19, protectingthepurchasing power of poor and vulnerablepeople,maintaining the sustainability of the businessworld,includingMSMEsSupported by synergy between
institutions and all elements of the Nation
Government, legislative institutions, lawenforcementofficers, KSSK, private sector, andsociety
Indonesia's economic and fiscal pressures
are better than many other countries
Indonesia's economic contraction and wideningfiscaldeficit and debt were relatively moderate comparedtomany othercountries
Priority policieswillcontinue
Indonesia is optimistic, but remains vigilant that the pandemic can be controlled and socio- economic activities will continue torecover
“We all have to be optimistic that the beginning of 2021
will be a turning point for the pandemic problem."(President RI's remarks at the annual meeting of the financial services industry, 15 Jan
'21).
Mass vaccination
Strengthening 3M & 3T
Optimizing PEN program
12
OMNIBUS LAW
ON JOB CREATION:NEW INVESTMENT OPPORTUNITIES
FOR JAPANESE BUSINESS PEOPLE
Game Changer for Indonesia’s Structural Reform
The benefits include:
1
Simplification of Business Permits
•Location and spatial permits•Environmental permits•Building permits (IMB, SLF)•Risk-based approach licensing
02
Investment Requirements
•Closed business fields•Priority business fields•Investment implementation
03
Labor
Minimum wage, outsourcing, foreign workers, severance pay, sweetener, working hours
4
7
10
Protection and Empowerment of MSMEs Criteria, database, collaboration, partnership, incentives and financing, single permits
Ease of Doing Business Immigrations, patent, MSMEs establishment, downstream processing, oil and gas business, and Village-owned Enterprises (BUMDes)
Support for Research and Innovation
•Export development•SOEs and/or private sector support
2
5 6
Government Administration
Authorities, standardization,discretion, electronification
Sanctions
•Elimination of criminal sanctions for administrative errors
8Land Acquisition
•Land procurement•Forestry
9
Central Government Investment and Strategic Project
•Establishment of IndonesiaSWF•Support for national strategi projects, including landand permits
Economic Zones
•Special Economic Zones•Supporting infrastructure•FTZ enclave
11
Simplify the business permits and investmentrequirements
Speed up the land procurement for public needs
Developing Special Economic Zones
Better employment policies including foreign worker requirements, termination, and minimum wages
Support SME businesses and simplify SME legalization process
New tax policies on dividend and foreign workers
1 3Omnibus Law streamlines, simplifies, and aligns multiple regulations toprogressively improve Indonesia’s investment ecosystem and job creation
OMNIBUS LAW:LAYING THE GROUND FOR INVESTMENT PUSH
Omnibus
Law on Job
CreationLaw No 11/2020
Investment Growth and licensingleniency
Ease, Protection and Empowerment of
Micro, SMEs
Employment Research and Innovation
Ease of doingBusiness
Land Procurement
Economic ZoneGovernment
Administration
Central Government Investment &
National StrategicProject
Penalty
Derived regulation, consisting of 45 Government Regulations (PP) and 4 Presidential Regulations (Perpres) has been ratified
Promoting job creation
Easing the opening of
new job fields
Helping to eradicate
corruption
Streamlining regulation
Omnibus Law on the Job Creation
Indonesia Investment Authority (INA)Your Trusted Investment Partner
INDONESIA INVESTMENT AUTHORITY (INA)Stipulated under the Law on Job Creation for the purpose of long terminvestment
Administer theassets
Carry out fund placement in the form of
financial instrument
Carry out asset
Management Activity
Engage incooperation
with another party including a trustfund
Lend or borrowDetermine a prospective investment
partner
Supervisory Board
Board of Director
managing investment,including plan, organize,supervise, control as well asevaluate investment
ORGANIZATION
INA also play an active role in improving the Indonesian investment climate with itsauthorities:
Capital Maximization Mission
Development Mission
increase investment and strengthen the long-term value of assets in
order to support sustainabledevelopment
OBJECTIVES
co-investment directly on asset/project level and limited partnership on
master fund
Master FundThematic
Fund
FUND STRUCTURES
Indonesia’s Investment Authority (INA)INA provides flexibility for investors to direct their investments either in funds or
direct to assets with professional managers and clear governance
Nusantara Investment Authority
(NIA)
Government of Indonesia
Equity Co – Investment
(Minority Ownership)directly to thematic funds, portfolio companies and/or asset level
Overseas and domestic
Investor (s)Fund
Anchor Investor(s)
International and domestic funds
Infrastructure
Toll Roads Airports Seaports
Other Sector
Potential sectors, e.g.,:
• Healthcare;
• Tourism;
• Tech, etc
Initial capital injection of
±USD 5 Bn
17
JBIC already commits to invest US$4 billion in the Master Fund of INA
19
More details on Omnibus Law and
Indonesia’s Investment Authority
www.dashboard.kbritokyo.jp
TERIMA KASIH –ありがとうございます
20
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