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The Indonesian government has done a lot to enhance the quality of the business

environment for the private sector, particularly in the last three years.

- Rodrigo Chaves, World Bank Indonesia Country Director

Investing in Indonesia : Why now?

https://news.bcpriok.info/wp-content/uploads/2017/03/cropped-bg4.jpg Property of MCIT, Republic of Indonesia. For Discussion Only

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WHY INDONESIA WHY NOW?

▪ Steady economic growth in the past 10 years

▪ Investment grade by all major rating firms

▪ 5th largest economy in the world by 2030

▪ 135 million consuming class by 2030

▪ 180 million population in productive age by 2030

▪ Significant improvement in regulatory

environment as reflected in Ease of Doing

Business

▪ Most aggressive infrastructure development in

IŶdoŶesia’s historLJ

▪ Extra incentive for investments in industrial, tourism

and special economic zones

▪ Fiscal reform for long term sustainable growth

▪ Law reform to ease business and investment

▪ Concrete policy for eradication of corruption

▪ CitizeŶs’ trust oŶ the IŶdoŶesiaŶ GoǀerŶŵeŶt is at all

time high

▪ StroŶg iŶǀestors’ ĐoŶfideŶĐe to iŶǀest further iŶ

Indonesia

▪ Policies reform in ICT sectors

Source: Indonesia Investment2017,Bank Indonesia 2017

WHY INDONESIA?

STEADILY IMPROVING ECONOMIC PERFORMANCE

Source: Bank Indonesia 2017, BKPM2017

EVEN DURING GLOBAL ECONOMIC SLOWDOWN, INDONESIA STILLRECORD REPUTABLE GROWTH THAN MOST COUTRIES

2017 ALSO MARKS THE TIME INDONESIA REGAINED INVESTMENTGRADE ACROSS ALL MAJOR RATING AGENCY

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Source How will the global economic order change by 2050, PwC 2017 4

GDP FORECAST IN MARKET EXCHANGE RATE (USD in Billion) GDP FORECAST IN PURCHASING POWER PARITY (USD in Billion)

WHY INDONESIA?

INDONESIA IN POSITION TO BREAK THE TOP 5 LARGEST ECONOMY

No 2016 2030

1 United States 18,562 China 26,499

2 China 11,392 United States 23,475

3 Japan 4,730 India 7,841

4 Germany 3,495 Japan 5,468

5 United Kingdom 2,650 Germany 4,347

6 France 2,488 United Kingdom 3,530

7 India 2,251 France 3,186

8 Italy 1,852 Brazil 2,969

9 Brazil 1,770 Indonesia 2,449

10 Canada 1,532 Italy 2,278

16 Indonesia 941

No 2016 2030

1 China 21,269 China 38,008

2 United States 18,562 United States 23,475

3 India 8,721 India 19,511

4 Japan 4,932 Japan 5,606

5 Germany 3,979 Indonesia 5,424

6 Russia 3,745 Russia 4,736

7 Brazil 3,135 Germany 4,707

8 Indonesia 3,028 Brazil 4,439

9 United Kingdom 2,788 Mexico 3,661

10 France 2,737 United Kingdom 3,638

Source: Taking Advantage of the Demographic Dividend in Indonesia, UNFPA 2015 IndonesiaAn Inevitable Choice of Economic Transformation, Waltham Economy of Asia Review, 20114

WHY INDONESIA?

GROWING PRODUCTIVE POPULATION AND CONSUMING CLASS

ESTIMATED 180M POPULATION IN PRODUCTIVE AGE,AT THE PEAK OF DEMOGRAPHIC DIVIDEND

90 MILLION INDONESIANS COULD JOINTHE CONSUMING CLASS BY 2030

Unleashing Indonesia Potential, McKinsey Global Institute 2012Antara News, 2016 5

6http://www.todayonline.com/sites/default/files/styles/photo_gallery_image_lightbox/public/23111382.JPG?itok=WXPxxh-8

We are once again confronting challenging times in Indonesia.

The world looks full of uncertainty and risk.What does it all mean?

It means that today is the time to invest - the best time toinvest.

President Joko Widodoat Singapore-Indonesia Business Dialogue 2017

Property of MCIT, Republic of Indonesia. Not for redistribution.

▪ 24 sea ports

▪ 60 ferry ports

▪ Increase number of vessels

▪ 15 airports

▪ Increase pioneer flights

▪ 2159 km city rails

▪ 1099 inter-city rails

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WHY NOW?

NEW CENTERS FOR ECONOMIC GROWTHNEW ECONOMIC ZONES TO SPUR MORE EQUAL AND DIVERSED GROWTH

Special Economic Zones

Industrial Zones

Strategic National Tourism Zones

Source: Coordinating Minister for Economic Affairs, 2017

NEW INFRASTRUCTURES TO SUSTAIN GROWTH

▪ 2650 km public roads

▪ 1000 km toll road

▪ Rapid transit bus in 29 cities

▪ MRT in 6 metropolitans and

17 large cities

▪ 97.2% electrification

▪ 35000 MW power plan

▪ 33 Dams

▪ 30 hydroelectric power plants

▪ Irrigation systems for 1 m ha

▪ Oil refineries with 2 300.000 barrel capacity

▪ Increase the capacity of existing oil refineries

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• Deregulation• Strategic

ProjectAcceleration

• Encouraginghousing for low-

income

• Simplificationof LicensingProcedures,

Duration and Cost ofStarting a Business

in Indonesia

I 9 Sep 2015 II 29 Sep 2015 III 7 Oct 2015 IV 15 Oct 2015•3 Hours Permit

Issuance Program• The abolition

of VATfor the transport

industry• Integrated

LogisticsFacility

• Lowering Fueland ElectricityPrice

• Simplification ofLand Permit for

Investment activity• Expanding

Small BusinessLoan

Recipients

• Fair Wagessystem, simpleand can be

projected• The ease and

affordability ofSmall Business

Loans

V 23 Oct 2015• Decrease in

TaxRevaluation of

Assets• Eliminating double

taxation of REITs

VI 5 Nov 2015• Development of SEZ

• Ease ofWaterSupply

• Simplifying theImport Licensing for

Pharmaceuticalproducts

VII 4 Dec 2015• Acceleration of Land

Certification Process• Tax Incentives

for laborintensive

industry

VIII 21 Dec 2015• One Map Policy

•Refineryconstruction

• Incentives for theAviation Industry

IX 27 Jan 2016• Acceleration of

Construction forElectrical

Infrastructure• Meat Price

Stabilization• Deregulation in

the LogisticsSector

X 11 Feb 2016• Ease of

InvestmentRestrictions

XI 29 Mar 2016• Publishing REITs

and KURBE(export- orientedbusiness

loans)• Indonesia Single Risk

Management - ISRM•PharmaceuticalIndustry Development

XII 28 Apr 2016

E C O N O M I CP O L I C Y P A C K A G E

I N D O N E S I A 2 0 1 5 - 2 0 1 9

•Acceleratingdevelopment of

affordable housing,by reducing,

integrate, andaccelerate the

licensing process

XIII 24 Aug 2016• Creating a roadmap

for the nation's e-commerce industry:

•easing andwidening access

to funding•offer taxincentives, etc.

XIV 10 Nov 2016• Cost reduction for

freight and logistics•Opportunities forlogistic insurance andvessel maintenance• Strengthening

National SingleWindow

WHY NOW?

ECONOMIC POLICY PACKAGES FOR BUSINESS AND INVESTORS

STIMULUS TO HELP BUSINESS AND INVESTORS DURING GLOBAL ECONOMIC SLOWDOWN

XV 15 Jul 2017• Task Force for

business licensingprocess,

checklist licensing ateconomic zones and data

sharing for licensing•Regulator reforms and

single submission system

XVI 31 Aug 2017

▪ Central Government Task Force and Provincial Units

▪ Multi-sectors, from logistics, public services to education

▪ 17,600 reports in the first 50 days

▪ By July 2017 : 917 sting operations, 1834 suspects processed

and Rp 17 billion confiscated

▪ Presidential directive to halve 42,000 existing regulations by 2019

▪ By end of 2016, 324 regulations were revoked and 75 regulations

were revised across 20 Ministries and 3,143 regulations in

Ministry of Home Affairs and at Local Governments level

ILLEGAL LEVIES ERADICTION TASK FORCE [SABER PUNGLI]

SIMPLIFICATION OF REGULATION

WHY NOW?

CONCRETE MEASURES FOR LAW REFORM

Areas of Law Reform package I :

1. Legislation management

2. Reforming law enforcement agencies

3. Creating legal culture

I 26 Oct 2016

Areas of Law Reform package |I :

1. Simplification of regulations

2. Accessibility of legal assistance

3. Early warning system for radicalism and

terrorism

II 17 Jan 2017

LAW REFORM PACKAGES TO IMPROVE BUSINESS AND INVESTMENT CLIMATES

Source: Setkab, 2016, Kompas 2017, Detik 20179

Source: Government at a Glance 2017, OECD

WHY NOW?

HIGH CONFIDENCE ON INDONESIA

TRUST OF INDONESIAN CITIZENS TO THEGOVERNMENT IS AT ALL TIME HIGH

INVESTORS WILLINGNESS TO INCREASEINVESTMENTS PLACED INDONESIA AS 3rd in ASIA

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Source: Asia BusinessOutlook Survey 2017, The Economist Corporate Network 2017

WHY NOW?

COMPETITIVENESS AND REGULATORY ENVIRONMENT

GLOBAL COMPETITIVENESS RANK

EASE OF DOING BUSINESS

2019

40

11Source:World Economic Forum 2017,World Bank 2017

(Rank) 2014 2015 2016 2017

Singapore 1 3↓ 2↑ 2 -

Malaysia 17 22↓ 23↓ 24↓

Thailand 46 46 - 46- 26 ↑

Indonesia 120 106 ↑ 91 ↑ 72 ↑

Viet Nam 93 91 ↑ 82 ↑ 68 ↑

(Rank) 2014 2015 2016 2017

Singapore 2 2 - 2 - 3 ↓

Malaysia 20 18 ↑ 25 ↓ 23 ↑

Thailand 31 32 ↓ 34 ↓ 32 ↑

Indonesia 34 37 ↓ 41 ↓ 36 ↑

Viet Nam 68 56 ↑ 60 ↓ 55 ↑

WHY NOW?

ICT POLICIES UPDATE

DEVICES NETWORKS APPLICATIONS

▪ Domestic component

requirements

▪ Certification process for mobile,

handheld and tablet computers

▪ Affirmative policy to ensure

universal access of

telecommunication

▪ Business Classification: Digital

Platform

▪ Safe Harbor

▪ Revision of GR 82/2012: Data

localization

▪ Over the Top Service

▪ Next Indonesia Unicorn

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WHY NOW?

PRESIDENTIAL DECREE NO.74/2017: INDONESIA DIGITAL ECONOMY ROADMAP 31

INITIATIVES TO BE COMPLETED IN 1-YEAR-TIME

Source: Kominfo 2017

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Thank You

SUPPLEMENT 1

PALAPA RING

Source: Kominfo 2017

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SUPPLEMENT 2

INCENTIVES AT SPECIAL ECONOMIC ZONESy1. Income Tax (PPh) b. Outside of main activity (Tax allowance)

a. Main activity: ▪ 30% reduction of net income for 6 years

▪ > Rp 1 T investment : 20-100% reduction of PPh for 10-25 years ▪ Earlier depreciation and amortization

▪ Rp 500 B- 1 T investment: 20-100% reduction of PPh for 10-15 years ▪ 10% PPh dividend paid to foreign tax payer (WPLN)

▪ <Rp 500 M investment: 20-100% reduction of PPh for 5-15 years for special activit ▪ Compensation for losses 5-10 years

2. Value Added Tax and Sales Tax on Luxury Goods (PPN and PPnBM)

▪ Import: not imposed

▪ Transaction between entities in Special Economic Zone: not imposed

▪ Transaction between entities in different Special Economic Zone: not imposed

3. Custom and Duties

▪ Import: free custom and postponed import duties

▪From Special Economic Zone to domestic market: import duties follows the prefential tariff based on domestic components

4. Property ownership (Special Economic Zone for Tourism

▪ Free of PPnBM and PPn for luxurious goods

▪ Foreigners/foreign business entities can own property built on land based on agreement with rights holder of the land

5. Main Activity in Tourism

• Qualify for Local Tax reduction• Qualify for Local Retribution reduction Source: Coordinating Ministry for Economic Affairs 2017

This is a ǁ ell-deserved upgrade thanks to its prioritization offisĐal sustaiŶaďilitLJat the edžpeŶse of groǁth iŶ ϮϬϭ6,

- Trinh Nguyen, Natixis SA Hong Kong

More upgrades are possiďle, ǁ ith FitĐh aŶd MoodLJ’s potentially moving Indonesia up the scale further into

investment grade. All these may be a cause for a raucouscelebration, but also quiet reflection. Tough reforms got

IŶdoŶesia to this poiŶt.

- Wellian Wiranto, Oversea-Chinese Banking Corp.

CREDIT RATING AS JULY 2017THE INVESTMENT GRADES WERE HARD EARNED THROUGH

SERIOUS REFORM BY THE GOVERNMENT

Source: Bank Indonesia, 2017, Bloomberg 201717

SUPPLEMENT 3

INVESTMENT GRADE BY MAJOR RATING FIRMS

SUPPLEMENT 4

INVESTORS’CONFIDENCE

Source: BKPM, 2017

GROWTH OF GDP CONTRIBUTION IS OBSERVED ACROSSALL TOP SECTORS (in USD b, YoY growth 2016)

4.3%

3.3%

3.9%

5.2%

1.1%

7.7%

8.9%

3.2%

8.9%

3.8%

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CONSISTENT INCREASE IN INVESTMENTS IN THE PASTTHREE YEARS

19Source: Kominfo 2017

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