#1จ BKPM BADAN KOORDINASI PENANAMAN MODAL "Indonesia 4.0: An Opportunity for Transformation" Nurul Ichwan Director of Investment Planning for Services and Zones Jakarta, 26 February 2020#2Avoiding middle income trap through industry 4.0 Demographics Abundant working-age population and increasingly educated and IT savvy young generation Urbanization 68% of the population is projected to live in urban areas by 2025. Income rise also drives higher consumption. Key Challenges Global commodity prices challenges and opportunities for Indonesia in terms of the country's trade balance and enhancing the quality and diversity of investments in Indonesia. Risk of growth slowdown and non- inclusive development Food prices, health shocks and natural disasters can pose a threat to economic growth. Strategies Increase labor productivity 2 Closing infrastructure gap 3 Closing the skills gap Industry 4.0 ☐ Raise productivity and GDP growth in Indonesia Harnessing the digital revolution to provide more job opportunities and reach more inclusive economic development Required skills include technological skills as well as creativity and advanced problem solving. Source: McKinsey, 2019; The World Bank, 2014 2#3Making Indonesia 4.0: Manufacturing Industry Revitalization Making Indonesia 4.0 Indonesia as one of the global Ten Largest Economies. 10% contribution of net export to GDP Increase net export level to the same level as in 2000 2x rise in cost productivity Boost production and its cost. 2% of PDB allocated to R&D Develop local innovation skills Targeted sectors: Targeted outcomes: Food & beverage Textiles and apparel Automotive Chemical 70% Manufacturing industry GDP 65% manufacturing industry export 60% manufacturing industry workforce Electronic Improve raw materials supply chain; 6. Attract FDI; 2. Redesign industrial zones; 7. Improve human capital quality; 3. Meet sustainability standard; 10 National Priorities 8. Develop innovation ecosystem; 4. Empower SMEs; 9. Incentives for technological investment; 5. Develop national digital infrastructure; 10. Synchronize regulations and policies. Source: Ministry of Industry, 2019 3#4Industry 4.0 and the future of work in Indonesia 23 million jobs could be displaced by automation Between 27 million to 46 million new jobs could be created in the same period 10 million of these jobs will be the new types of occupations. Many more jobs are predicted to be created by 2030 than are lost to the increasing automation Seen as primary leaders 1 Companies Industry 4.0 Key actors in addressing the skills mismatch by more than 50% of executives. 2 Labor agencies Facilitate employee mobility in labor market, eg, through supporting retraining or making benefits more portable Educational institutions Help companies fill their skills need, eg, by focusing courses on skills most relevant in the future Industrial associations Enable employers to build better talent pipelines in particular sectors to find skills that match demand Source: McKinsey, 2019 4#5Indonesia - Switzerland future collaboration Healthcare, construction, manufacturing, and retail are the sectors that will likely benefit from increased labor demand. The driving factors include: . Increasing spending on healthcare for aging. populations; • Investment in infrastructure and buildings; • Energy transition spending; • Spending on technology development and deployment. Switzerland investment in Indonesia 2014 - 2019 (USD mn) Chemical & pharmaceutical 584,93 Other services 306,87 F&B 193,6 Trade & repairs 172,93 Machineries, electronic & optical 156,57 0 100 200 300 400 500 600 700 Future collaboration Fostering academic and industry collaboration particularly in the sectors where Switzerland is very well-known of such as medical engineering and the related industries. Best practice on how to embrace technological revolution Switzerland's experience with highly reliable technology infrastructure in harnessing technological revolution such as artificial intelligence and cognitive computing systems 2 Knowledge transfer opportunities 3 Switzerland is among the world's leading countries in terms of filed patents per capita which implies high level of innovative thinking. Source: BKPM, 2020; McKinsey, 2019; KPMG, 2016. 5#6Aceh Simeulue George A A THANK YOU LET'S INVEST IN INDONESIA PALA Nias Siberut Medan agsiantar Rekanbaru Padang Sumatra 3600 (Sumatera) Lingga Bahru SINGAPORE Kap-Pontianako OKiching Sintang (Kalimantan) Tarakan Celebes Kep. Talaud Sea Manado Morotai Borneo Samarinda- Gorontalo Laut Maluku Halmahera Palu Jambi Buntok Bangka Sampit elas Kep Sula Tol Kendawangan Banjarmasin Makale Palembang Belitung Celebes (Sulawesi) Bengkulu D Majene Kendar Buru I N D Laut O Singkang Telukbetung N E Enggano Jakarta Java Sea Makassa Buton Maccas S Ambon I Waigeo Manokwari Sorong Obi Yapen Seram Pun A Selat Sunday Baubau Semarang Madura Bandung Selayar Borobudur Java Java (Jawa) Chi Indonesia Investment Coordinating Board Badan Koordinasi Penanaman Modal (BKPM) Jl. Jenderal Gatot Subroto No. 44 Jakarta 12190 - Indonesia Tel: (+6221) 525 2008 Fax: (+6221) 525 4945 Contact Center: 0807 100 2576 E-mail: [email protected] www.bkpm.go.id Yogyakarta Surabaya Bali Sumbaw J Malang Den follow us on bkpm BKPMINDONESIA bkpm_id THEBKPMVIDEO in Coordinating Board Indonesia Investment www.investindonesia.go.id#7Investment Realization and Projection 2015-2024 Kabinet Kerja 2015-2019 Total = Rp 3.382,0T (206,9% of total 2010-2014) 1600,0 Average growth (y-o-y) = 11,9% Investment realization projection 2020-2024 Total = Rp 5.799,71* (171,4% of total 2015-2019) Average growth (y-o-y) = 13,1% Triliun Rupiah 1400,0 1.294,1 1200,0 1.128,3 1000,0 991,3 809,6 886,0 800,0 721,3 692,8 612,9 600,0 545,4 400,0 200,0 0,0 2015 2016 2017 2018 2019 2020 2021 *) Projection figures 2020-2024 refers to Presidential Regulation (Perpres) 18 /2020 on RPJMN 2020-2024 1.500,0 2022 2023 2024 7#8Investment Target 2020 Target 2020 Rp 886 T Investment realization target in 2020 Rp 246.3 T Target of investment realization manufacturing industry in 2020 including downstream industry. 48.8% Target share of investment distribution outside Java#9Investment Realization Performance Trend 2014-2019 By country of origin 2019. 60 USD bn USD bn 50 54,41 51,75 52,74 50 43,4 43,64 44,52 Singapore China 6,59 4,74 40 40 Japan 4,31 30 30 28,29 28,22 Hong Kong, PRC 2,89 32,24 26,12 20 20 24,52 28,53 28,96 29,28 Netherland 2,6 19,51 14,87 10 14,36 15,56 0,15 Switzerland 0 2014 2015 2016 2017 2018 2019 DDI FDI -Total Others 7,01 0 2 4 6 8 There is relatively constant rise in Indonesia's investment realization from 2014 to 2019. The country booked its highest investment realization in 2019 during the last 5 years. DDI and FDI contribute 40% and 60% respectively to the total investment realization within the same period. Total FDI realization in 2019 is USD 28.29 bn. Singapore, China, Japan, Hong Kong and Netherland are the top 5 investing countries in Indonesia in 2019. Switzerland is ranked 19th with total investment value of USD 0.15 bn. Source: BKPM, 2020#10Switzerland Investment Performance 2014-2019 Investment trend Based on sectors (USD mn) USD mn 700,00 USD mn 600,00 615,46 Chemical & pharmaceutical 500,00 Other services 400,00 300,00 200,00 150,83 100,00 61,84 0,00 346,70 F&B 238,74 150,70 Trade & repairs 172,93 Machineries, 306,87 193,6 2014 2015 2016 2017 2018 2019 electronic & 156,57 optical 584,93 There is fluctuation in Switzerland's investment in Indonesia in 2014-2019. 2015 was the year when Switzerland's investment hit the lowest point at USD 61.84 mn and 2017 was the time when it reached its peak at USD 615.46 mn. However, there is decreasing trend from 2017 onwards. 0 100 200 300 400 500 600 700 Chemical and pharmaceutical industry accounts for 37% of total Switzerland's investment in Indonesia. Other top performer industries include other services (20%), F&B (12%), trade and repairs (11%), and machineries, electronic & optical (10%). Source: BKPM, 2020 10#11Switzerland Investment 2014-2019 (based on location) USD mn DKI JAKARTA USD 471.49 mn (30%) Java accounts for over 75% of total Switzerland's investment in Indonesia in 2014-2019. RIAU ISLANDS USD 154.86 mn (10%) BANTEN USD 582.11 mn (37%) WEST JAVA USD 214.74 mn (14%) EAST JAVA USD 50.60 mn (3%) Over one-third of Switzerland's investment in Indonesia is located in Banten. Other locations of Switzerland's investment include Riau Islands (10%), Jambi (2%), East Kalimantan (1%), and Lampung (1%). Source: BKPM, 2020 11#12Policy Direction 2020-2024 Improvement of Doing Business Ranking (EODB) 6 Key Performance Indicators of BKPM Acceleration of large investment realization Encouraging partnership between large investment project and local SMEs The distribution of quality investment throughout Indonesia Focusing investment promotion on the targeted sectors and countries Increasing domestic direct investment (DDI), particularly SMEs 12#13Improving EoDB ranking Indonesia's EoDB ranking 2015-2020 and 2021 target: 2015 2016 2017 2018 2019 2020 Target 2021 60 72 73 73 91 106 120 Out of 190 countries surveyed by EoDB 2020, 115 countries have improved EoDB 2021 target: 1. Establish commitment among ministries based on Presidential Instruction (Inpres) No. 7/2019 to undergo structural reform on 11 indicators; 2. Structural Reform ☐ Formulate action plan on improving EoDB through interministries coordination; ☐ Issue 17 regulations consisting of 15 ministrial regulations (Permen) and circular letter (surat edaran) to support structural reform. 3. Implementation monitoring referring to regulations issued in relations to 11 indicators; 4. Information dissemination regarding the related regulations and policies on EoDB improvement to ministries and regional administration. 13#14Policy Direction 2020-2024 1 Encouraging partnership between large investment project and local SMEs Rp + Minimum investment value requirement reducing current requirement for minimum investment value for FDI from Rp 10 billion excluding land and building (existing) to Rp 2.5 billion if foreign investor partners with local SMEs in its production supply chain, particularly in developing application/ software (recommendation) Facilities for companies that partner with SMEs Recommendation to be granted tax allowance for large company which partners with SMEs. List of SMEs that are ready to partner with large companies will be provided. Facilitation of Business Management and Financing for SMEs ☐ Improve production quality and quantity referring to the large companies' standard. Facilitation of financing for SMEs in regard to partnership with financial institution and stock selling at a stock exchange. ☐ Large company can partner with SMEs through joint participation in the large company supply chain. 2 Distribution of quality investment Increase investment to boost job creation and regional added value Downstreaming the processing of natural resources and export oriented investment. Promote investment in capital goods/raw ✓✓✓✓ materials with regard to meeting domestic 贏 MOBİ demands (import substitution) Distribution of quality investment to outside Java, particularly infrastructure as well as improving investment and other economy. 14#15Policy Direction 2020-2024 3 Focusing investment promotion on targeted sectors and countries Sector Downstreaming of natural resources processing Export oriented industry Strategies Infrastructure Human capital development(e.g.: Vocational education cluster) Import substitution industry Targeted country East Asia, Middle East, Europe East Asia, Europe, America Europe, East Asia, Middle East Australia, Europe, America East Asia, Europe, America Tourism (e.g.: tourism operator, developer and supporting tourism service) Labor-intensive industry (e.g.: furniture, textile, and electronic industry) Australia, America, Europe, East Asia East Asia Promote collaboration between local entrepreneur and foreign investor 2 Support distribution of quality investment throughout Indonesia, particularly outside Java 3 Ease incentive request that suit investor's need 15#16Increase DDI, particularly SMEs SMEs' contribution to national economy: SMEs' contribution to job creation: SMEs' contribution to investment: 60.3% to GDP (2017) Source: BPS, Kemenkop UKM (2017) Strategies 96.8% (2017) of total workforce 58,2% of total investment (2017) Assistance of business management (legal issues, capital, technology, marketing, production, and operation Increase partnership between DDI and FDI and SMEs Facilitation of access towards opportunity and investment potentials, particularly at the regional level 16#17Online Single Submission (OSS), integrated online system Company Individual A. NEW INVESTOR (New registration) B. EXISTING INVESTOR (Re-registration) OSS www.oss.go.id KEMENTERIAN PERINDUSTRIAN REPUBLIK INDONESIA KEMENTERIAN PERDAGANGAN REPUBLIK INDONESI KEMKOMINFO (NIB) IZIN IZIN USAHA OPERASIONAL/ KOMERSIAL Monitoring National task force BKPM Obtaining investment license ■ Business Identification Number (NIB) ■ Business license ■ Commercial/ operational License Ministrial task force Regional task force 17 17#18SUPER DEDUCTION dan INVESTMENT ALLOWANCE 200% Super deduction untuk pengembangan SDM dan program vokasi Pengurangan penghasilan bruto paling tinggi 200% dari jumlah biaya yang dikeluarkan, untuk WP Badan yang menyelenggarakan kegiatan praktik kerja, pemagangan, dan/atau pembelajaran dalam rangka pembinaan dan pengembangan sumber daya manusia berbasis kompetensi tertentu 300% Super deduction untuk mendorong aktivitas R&D Pengurangan penghasilan bruto paling tinggi 300% dari jumlah biaya yang dikeluarkan, untuk WP Badan yang melakukan kegiatan penelitian dan pengembangan tertentu di Indonesia 60% Insentif investment allowance untuk industri padat karya Fasilitas PPh berupa pengurangan penghasilan neto sebesar 60% dari jumlah investasi berupa aktiva tetap berwujud, untuk WP Badan yang melakukan investasi baru atau perluasan usaha pada bidang yang merupakan industry padat karya, atau tidak mendapat fasilitas sebagaimana dimaksud Pasal 31A UU Pajak Penghasilan atau fasilitas sebagaimana dimaksud dalam Pasal 29 ayat (1) 18