INVESTMENT OPPORTUNITIES IN INDONESIA Nurul Ichwan Director of

INVESTMENT OPPORTUNITIES IN INDONESIA Nurul Ichwan Director of IIPC London Zaragoza, 4 July 2017

OUTLINE I. Introduction II. Investment Performance III. What and Where to Invest? IV. How to Invest? 2

Our Strength and Positioning Introduction The Investment Coordinating Board of the Republic of Indonesia 3

INDONESI A SPAIN Population: 40. 56 million GDP: USD 1, 199 trillion Population: 258 million (4 th in the world; 40% of ASEAN) GDP : USD 861 billion (35% of ASEAN GDP) Madrid 12 fligh , 181 km t dir ect f , 15 hou r rom Mad s flight rid t o Jak (no arta ) Jakarta

Indonesia’s Population Projection NUMBER OF PEOPLE KALIMANTAN SULAWESI SUMATERA MALUKU JAVA BALI PAPUA NUSA TENGGARA Source: National Statistic Agency (BPS), 2017. PRODUCTIVE AGE The Investment Coordinating Board of the Republic of Indonesia 5

Global Population World’s Largest Markets European Union (EU) United States Population: 514 million GDP: USD 18. 46 trillion China Population: 322 million GDP: USD 17. 42 trillion Population: 1, 368 million GDP: USD 10. 35 trillion Global Inward FDI 2016 [Source: FDI Markets of the Financial Times, 2017] India Population: 1, 252 million GDP: USD 2. 05 trillion Southeast Asia (ASEAN) HALF OF GLOBAL FDI IN 2016 RECEIVED BY ASIAPACIFIC COUNTRIES Population: 618 million GDP: USD 2. 16 trillion The Investment Coordinating Board of the Republic of Indonesia 6 Source: World Bank, CIA World Factbook, 2016.

Asia-Pacific ASEAN India China Others Total Inward FDI 2016 USD billion Share 62 31. 2 23 59 177 35% 18% 13% 34% 100% Myanmar 4. 9% portion Foreign Direct Investment Inflow Investment in Southeast Asia Jan -Dec 2016 FDI PORTION TO ASEAN Country Jan – Dec 2015 Jan – Dec 2016 Vietnam Malaysia Indonesia Phiippines Singapore Myanmar Cambodia Thailand Laos Brunei 31. 6% 10. 7% 40. 3% 5. 0% 3. 6% 4. 9% 0. 7% 3. 0% 0. 1% 0% 36. 6% 20. 5% 17. 9% 6. 2% 5. 8% 4. 9% 4. 4% 3. 6% 0. 1% 0% Total ASEAN 100% Thailand 3. 6% portion Vietnam 36. 6% portion Malaysia 20. 5% portion Phillippines 6. 2% portion Singapore 5. 8% portion Indonesia 17. 9% portion Source: fdimarkets. com , 2017. The Investment Coordinating Board of the Republic of Indonesia 7

A Brief Overview of Indonesia Spatial GDP Growth Population: million 258 46, 5 (4 th largest population) 2. 9 bilion times of Singapore’s GDP Growth Q 3 2016: 0. 84% Papua & Maluku GDP Growth Q 3 2016: 0. 40% GDP Growth Q 3 2016: 0. 18% GDP Growth Q 3 2016: 0. 34% Times of Singaporen’s population $ 859 GDP: Sulawesi Kalimantan Sumatera Middle-Income Class ASEAN, 190 million Java GDP Growth Q 3 2016: 3. 24% Bali & Nusa Tenggara GDP Growth Q 3 2016: 0. 16% National Statistic Agency (BPS), Nov 2016 source: world bank 41 Indonesia 64 million Other 9 countries 39 Projected Economic Growth: 5. 0% source: Ministery of Finance 81 57 60 WEF Global Competitiveness 2016 -2017 Growing Digital Economy 18 130 billion US dollars Online sales in 2015, up 40% (y/y) in 2020 (projection) Digital in Indonesia (in Mio) Growth Shifting from comoditybased economy to manufacturing & service sector. (Since March 2015) Active internet users 88. 1 +21% Active Socmed users 88. 0 +19% Mobile connections 326. 3 +2% Active Mobile Social users 76 +19% Facebook users 88 Rank 4 th Source: wearesocial. com, Sept 2016 The Investment Coordinating Board of the Republic of Indonesia 8

Indonesian people by age and gender 258 MILLION PEOPLE WOMEN: 128. 71 M MEN: 129. 98 M 9

Indonesia has shown progressive achievement in the past years TARGET TOP 40 15 Indonesia’s Ease of Doing Business Rank, 2013 -2017 129 2013 109 106 91 120 2014 2015 2016 2017 2018 10

Indonesia in the future. . . 2030. . . 2050. . . Emerging markets will dominate the world’s top 10 economies in 2050 (GDP at PPPs) 11

Indonesia as an investment destination Investment Performance The Investment Coordinating Board of the Republic of Indonesia 12

Indonesia is a global destination for investment Rising Direct Investment Grade Rating (May 2017) Source: BKPM, February 2017 2015 43. 6 billion US dollars (IDR 545. 4 trillion) Investment realization 2016 45. 4 billion US dollars (IDR 612. 9 trillion) Investment realization + 17. 8% Investment realization growth (y/y) + 12. 4% Investment realization growth (y/y) Indonesia: The 3 rd investment destination in Asia (Jan ‘ 16) Source: The Economist, Asia Business Outlook Survey 2016 Indonesia: The 3 rd most preferred place for business investment after India and China (Dec 2016) Source: JBIC (Japan Bank for Int’l Corp) Survey, Outlook for Japanese FDI The Investment Coordinating Board of the Republic of Indonesia 13

Top 10 global countries for FDI in Indonesia from 2010 -2016 Spain is on the 27 th place in terms of value invested in the last six years FDI Realization from the World to Indonesia, 2010 -2016 (in USD million) Global Rank Country 1 Singapore 2 No. of Projects Realization (USD million) 13, 545 41, 128. 4 Japan 8, 379 20, 381. 5 3 United States 1, 494 9, 447. 3 4 South Korea 8, 344 9, 108. 3 5 The Netherlands 2, 014 8, 366. 2 6 Malaysia 4, 244 8, 300. 1 7 British Virgin Islands 3, 042 6, 286. 4 8 Hong Kong, PRC 2, 242 5, 229. 7 9 United Kingdom 1, 530 5, 103. 3 10 China 4, 135 4, 833. 4 27 Spain 237 168. 7 72. 875 175. 641, 2 Total FDI 14

Top 10 global countries for FDI in Indonesia in 2016 ONLY Spain invested USD 50 million in 103 projects in 2016 FDI Realization from the World to Indonesia, 2010 -2016 (in USD million) Global Rank Country No. of Projects Realization (USD million) 1 Singapore 5, 874 9, 178. 69 2 Japan 3, 302 5, 400. 91 3 China 1, 734 2, 665. 30 4 Hong Kong 1, 137 2, 248. 33 5 The Netherlands 840 1, 475. 00 6 United States 540 1, 161. 94 7 British Virgin Islands 1, 555 1, 157. 27 8 Malaysia 1, 652 1, 115. 56 9 South Korea 2, 996 1, 065. 80 10 Mauritius 250 576. 48 26 Spain 103 50. 09 25, 321 28, 964. 07 Total FDI 15

From 2010 -2016, FDI realization from top 10 European countries contributed to 10% of the total FDI in Indonesia (excl. from BVI) Spain's FDI realization in Indonesia by sector from 2010 - 2016 (in USD million) 50. 09 50. 00 USD million 40. 00 39. 24 30. 00 20. 00 15. 69 10. 00 1. 09 - 2010 TERTIARY 39. 24 SECONDARY PRIMARY TOTAL 39. 24 2011 0. 74 0. 35 1. 09 3. 15 2012 0. 68 0. 50 1. 97 3. 15 2. 89 2013 0. 68 0. 35 1. 86 2. 89 2014 2. 75 11. 73 1. 21 15. 69 2015 55. 14 1. 20 0. 24 56. 59 (excl. investment from British Virgin Island) Global Rank 56. 59 60. 00 Top 10 European countries for FDI based on investment value from 2010 -2016 45. 63 4. 36 0. 10 50. 09 Country No. of Projects Realization (USD million) 5 The Netherlands 2, 014 8, 366 9 United Kingdom 1, 530 5, 103 15 Switzerland 515 1, 078 16 France 1, 019 839 17 Germany 881 685 20 Luxembourg 238 620 24 Belgium 289 302 25 Italy 447 283 27 Spain 237 168 30 Malta 1 119 8, 004 17, 566 72. 875 175, 641. 2 Total FDI from top-10 European countries Total FDI from the World • Most of Spanish FDI in Indonesia are concentrated on the tertiary sector namely: construction services, hotels & restaurants • The biggest year of Spanish FDI realization in Indonesia in the last six years was on 2015 with USD 56. 59 million 16

In 2016 ONLY, FDI realization from top 10 European countries contributed to 9. 98% of the total FDI in Indonesia (excl. from BVI) FDI Realization from Europe to Indonesia From 2010 -2016 (in USD million) Top 10 European countries for FDI based on investment value in 2016 only (excl. investment from British Virgin Island) Glob al Rank 5 Country No. of Projects The Netherlands 11 Switzerland 13 United Kingdom 15 Luxembourg 17 Belgium 20 Germany 21 Malta 22 France 26 Spain 29 Italy Total FDI from top-10 European countries Total FDI from the World Realization (USD million) 840 1, 475 218 346 495 306 117 181 118 169 310 133 2 119 424 109 103 50 169 26 2, 796 2, 918 72. 875 28, 964. 0 • In 2016 only, Spain was the 9 th biggest investor from Europe in terms of total value of investment realization • FDI realization from European countries peaked in 2014 with total realization value of USD 3. 91 billion 17

Priority Sectors What and Where to Invest? The Investment Coordinating Board of the Republic of Indonesia 18

Indonesia has determined its infrastructure targets for the period of 2016 – 2019 which were stipulated in the National Medium Term Plan Logistic Related Banda Aceh Miangas Belawan Kuala Tanjung Maratua Pontianak Dumai Singkawang Batam Maloy Padang Pangkal Pinang Enggano Muara Teweh Halmahera Sorong Sultan Hassanuddin Jayapura Taria Ambon Namniwel Kenyam Aboy Makassar Tj. Priok Kertajati Pohuwato Tojo Una Palangkaraya Banjarmasin Panjang Bitung Tj. Perak Cilacap Moa Lombok Kupang Improve transport efficiency by road development and maintenance • develop 2, 650 km of new roads • develop 1, 000 km of new toll roads • rehabilitate 46, 770 km of existing road Merauke Koroway Batu Location of 24 new seaports & 15 new airports Source: Bappenas Reduce logistic cost by improving railway infrastructure develop new tracks in Java, Sumatra, Sulawesi, and Kalimantan: § 2, 159 km inter-urban railways § 1, 099 km urban railways Sea toll concept as a means to support Indonesia in becoming the world maritime axis. • develop 24 new seaports • increase number of substantial vessels (pioneer cargo, transport vessels, pioneer crossing vessels) • develop 60 crossing ports Strengthen connectivity through air transport infrastructure development • develop 15 new airports • develop air cargo facilities in 6 locations • increase number of pioneer airplanes Develop urban transport • develop Bus Rapid Transit (BRT) in 29 cities • develop Mass Rapid Transit (MRT) in 6 metropolis and 17 large cities. Energy Related Achieve electrification ratio of 96. 6% by 2019 through generating capacity improvement • develop power plants with total capacity of 35, 000 MW Source: KPPIP, 2017 Achieving food sovereignty through irrigation system improvement • develop 33 new dams and 30 hydropower plants • expand 1 million ha irrigation system • rehabilitate existing irrigation system Ensure efficiency of fuel production by optimizing domestic refineries • build new oil refineries of 2 x 300, 000 barrels • Expand existing refineries in Cilacap and Balongan

Tourism is “the next big thing” FDI & DDI in tourism sectors grew by +20. 0% (in IDR value) FDI & DDI Inflow* in Tourism Sectors (in IDR tn) +20% FDI &DDI in. Tourism Sectors by Location (2012 -2016, in %) Riau Islands 8% 15. 0 12. 5 9. 0 8. 4 6. 4 2012 2013 Jakarta 25% 2014 2015 West Java 9% East Java 4% Bali 33% 2016 *Note: based on internal BKPM calculation method Source: BKPM 20

Tourism is “the next big thing”: 10 New Bali (1/2) Tourism: The industry of 21 st century SEZ Kelayang Cape 10 National Strategic Tourism Areas (“New Bali”) Toba Lake SEZ Lesung Cape Bromo Tengger Semeru Seribu Islands SEZ Mandalika Komodo Borobudur SEZ Morotai Wakatobi 21

10 Priority Tourism Destinations in Indonesia Toba Lake (North Sumatera) Lesung Cape (Banten) Kelayang Cape (Bangka Belitung) Kepulauan Seribu dan Kota Tua Jakarta (DKI Jakarta) Mandalika (West Nusa Tenggara) Borobudur Temple (Central Java) National Strategic Tourism Zone 22 Wakatobi (South East Sulawesi) Bromo-Tengger. Semeru (East Java) Tourism Special Economic Zone Morotai Island (North Maluku) Labuan Bajo (East Nusa Tenggara)

LAKE TOBA AT A GLANCE

10 Priority Tourism Destinations in Indonesia Total Investment USD 20 Milion Investment Profile (USD 10 Bilion Public Investment and USD 10 Bilion Private Investment) PERFORMANCE NO DESTINATION INTERNATIONAL TOURIST ARRIVAL (PEOPLE) 2012 2013 PROJECTION 2019 FOREIGN EXCHANGE (USD) INVESTMENT (USD MILLION) INTERNAT’L TOURIST ARRIVAL (PEOPLE) FOREIGN EXCHANGE (USD MILLION) 15, 464 10, 680, 000 1, 000 975 451, 000 1, 600 500, 000 500 Tanjung Lesung 8, 336 1, 739, 000 5, 000 1, 000 4 Kepulauan Seribu & Kota Tua Jakarta 4, 627 16, 384, 000 1, 000 5 Borobudur 193, 982 227, 337, 000 1, 500 2, 000 6 Bromo-Tengger-Semeru 34, 466 33, 387, 000 1, 000 7 Mandalika 121, 482 125, 307, 000 3, 300 2, 000 8 Labuan Bajo 41, 972 54, 147, 000 1, 200 500, 000 500 9 Wakatobi 2, 179 3, 315, 000 1, 400 500, 000 500 10 Morotai 618 500, 000 3, 000 500 1 Lake Toba 2 Tanjung Kelayang 3 TOTAL USD 20 Bilion 10 Milion USD 10 Bilion 24

10 Priority Tourism Destinations in Indonesia Development Profile NO DESTINATION GATE ESTIMATED AREA OF ZONE DEV’T (Ha) SINGLE MANAGEMENT 1 Lake Toba Great Sumatera 2 Tanjung Kelayang Great Sumatera 1, 200 Special Economic Zone 3 Tanjung Lesung Great Jakarta 1, 500 Special Economic Zone Great Jakarta 1, 000 Tourism Authority Board 5 Borobudur Great Yogyakarta 1, 000 Tourism Authority Board 6 Bromo-Tengger-Semeru Great Surabaya 1, 000 Tourism Authority Board 7 Mandalika Great Bali 1, 035 Special Economic Zone 8 Labuan Bajo Great Bali 1, 000 Tourism Authority Board 9 Wakatobi Great Sulawesi 500 Tourism Authority Board 10 Morotai Great Maluku Papua 300 Special Economic Zone 4 Kepulauan Seribu & Kota Tua Jakarta 500 Tourism Authority Board Total Estimated Area of Zone Development: 11, 736 Ha* * Indicative area based on updated plan on April 2016 25

Procedure to Establish Business in Indonesia How to Invest? The Investment Coordinating Board of the Republic of Indonesia 26

FLOW CHART – How to Set Up Business in Indonesia? 1. Consultation Establishment of the Company (PT PMA): 1. Request PT Name to Ministry of Law & Human Rights (MLHR) 2. Deed of Establishment PT & Ao. A 3. Certificate of Domicile 4. Tax ID number 5. Legalization of Ao. A by MLHR 1. Finding Local Partner(s), if required by Negative Investment List (NIL) 2. Setting Up PT PMA. Before/after obtaining Principle License from BKPM 2. Check Negative Investment List /NIL (Presidential Regulation No. 44 of 2016). If opens 100% foreign investors -> suggest the investor(s) to find local partner(s) If opens partially foreign investors -> investors need to find local partner(s) INVESTOR KBRI/KJRI MINISTRIES/ INSTITUTIONS IIPC LONDON/BKPM Special Permit/Certification or Recommendation, if required. 1. Consultation Certain ministries assigned Attaché in KBRI: Trade or Transportation or Education 3. Matchmaking Representatives from 22 ministries sit in BKPM’s OSS. 2. Check Negative Investment List/ NIL (Pres Reg. 44/16) 4. Principle License 5. Proposing Fiscal Incentives to Ministry of Finance via BKPM, if requested. Requirements: 1. Application Form 2. Applicant’s ID 3. Detail of Activity Plan & Work Flow Chart for Manufacturing Companies 4. Recommendation from Relevant Ministry, if needed 5. Signatures & Stamps of the Applicants or Proxies 6. Presentation in front of BKPM Officials, if needed. 27

BKPM has strengthened its one-stop service Licensing process for Foreign, Across Provinces, and Strategic investments: 1 Apply Principle License HQ OFFICE § Central office comprises representatives from 22 ministries § Central office provides 3 -hour licensing process* to start construction § Direct construction* facility in 32 industrial parks *Terms & Conditions Apply 2 Apply Business Incentives HQ OFFICE Incentives Related Unit Import Tariff Tax Allowance Tax Holiday O&G Recommendation Forest Usage Permit 3 Tax Office Mo. Finance 4 Apply Business License HQ OFFICE § Business activities can be kick-started Mo. Trade, Mo. Energy Mo. Environment Apply Operating Licenses REGIONAL OFFICE License Tech. assessment of Land Location License Construction License Land Certification Environment License HO (Hinderordonnantie) Related Unit “Pertanahan” District/City 1 -stop Regional District/City “Pertanahan” District/City Regional Environment Office 1 -stop Regional District/City Source: BKPM 28

Thank You Indonesia Investment Promotion Centre (IIPC) Terima Kasih Contact me: Nurul Ichwan Director Beijing Opening in 2017 E: nurul@investinindonesia. uk T: +44 (0) 20 7397 8568 F: +44 (0) 20 7397 8565 Indonesia Investment Promotion Centre (IIPC) 3 rd Floor, St Martin's House 16 St Martin's Le Grand London, EC 1 A 4 EN United Kingdom Badan Koordinasi Penanaman Modal (BKPM) Indonesia Investment Coordinating Board www. bkpm. go. id 29