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INDONESIA INVESTMENT OPPORTUNITIES

INDONESIA INVESTMENT OPPORTUNITIES. Luky Eko Wuryanto Deputy Chairman for Investment Planning. 26 March 2010. WELCOME TO INDONESIA !!. Largest archipelago in the world - Island s : > 17,000 - Land : ± 1.9 million km 2 - Sea : ± 5.8 million km 2

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INDONESIA INVESTMENT OPPORTUNITIES

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  1. INDONESIA INVESTMENT OPPORTUNITIES Luky Eko Wuryanto Deputy Chairman for Investment Planning 26 March 2010

  2. WELCOME TO INDONESIA !! • Largest archipelago in the world • - Islands : > 17,000 • - Land : ± 1.9 million km2 • - Sea : ± 5.8 million km2 • - Coastal line : ± 81,000 km • Population of 230,500,000 with more than 32 million belonging to the middle class (Income > US$4,000). • GDP ±US$ 590 billion, with Income per Capita ±US$ 2,600 (2009) • Ethnically diverse • One of the largest democratic countries 6,435 Km(3 time zones)

  3. Why Indonesia ? ...things you may not know

  4. ROBUST MACROECONOMIC INDICATORS We were in much better shape before the crisis in 2008 .... Compared to where we were before the crisis in 1997 • GDP/capita in 2007 and 2008 was 20% higher than it was before the crisis in 1997. • Government deficit was successfully maintained at very small percentage (< 2 % of GDP). • Debt ratio stayed within conser-vative range (~ 35% of GDP). • Solid financial sector: • Low NPL: 4.0% • Credit-deposit ratio: 76.0% • CAR: 16.8% • Unemployment and poverty continues to fall, especially since 2006 • Stock market had slumped, along with world markets, but in 2009 JSX became the second best performer in the world (86% upside), surpassing China. • Impact on export-import sector is not as volatile as other more exposed Asian countries  trade balance still a surplus (as decrease in export was offset by greater decrease in imports).

  5. ROBUST MACROECONOMIC INDICATORS Stable outlook ..... Perfect timing to start or even expand investment !! • Up to the 1st half of 2009, Indonesia’s central bank has maintained its benchmark rate below 9% and since the Q4th- 2008 it has revived growth. • Fiscal expenditures are managed conservatively and prudently. • Fiscal stimulus kept at manageable size ~1,4% of GDP but significantly directed toward “pro-poor, pro-jobs, and pro-growth” strategic programs. • Those “non-reactional” yet systematic set of policy measures gains a lot of admiration from global communities. • Domestically, robust consumption level is solid proof that people’s confidence could be maintained during these uncertain conditions. • Among economies in post-crisis recovery, Indonesia is ahead of the pack. Now GoI has committed to boost the economy to grow by at least 7% by 2013. • With improving collaboration between Indonesia and South Korea, Korean competitive technologies will find even greater opportunities for penetration in Indonesia.

  6. Global “Bandwagon” • In the last 6 months, three prominent international ratings agencies have upgraded Indonesia’s sovereignty ratings (in spite of global economic uncertainties) to 1-2 notches below investment grade and conferred it a stable outlook: • Moody’s in Sep. 2009, from Ba3 to Ba2/stable • Fitch in end of Jan. 2010, from BB to BB+/stable • S & P in March 2010, from BB- to BB/stable • For 2009 – 2011, UNCTAD has put Indonesia (from their survey in 2009) among the top 10 most attractive economies for FDI, surpassing other SE Asia tigers i.e., Thailand, Malaysia, and Vietnam. • Bottom line: Indonesia is more than ready to transform our economy from aconsumption driven to investment driven model over the next 5 years.

  7. “Demographic Bonus”.. A large and young working age population with few dependents, resulting in higher potential consumption spending and fewer government outlays for entitlements Demographic Bonus More skilled “bonus”

  8. Abundant Natural Resources Must be at least partially processed domestically by 2013 (new mining law: 4/2009) About 40% is assumed feasible. Up to now, 1.200 MW has been developed. • Abundant resources for gas based energy and petrochemical industries • Not includingNon Convential Gases, from Coal Bed Methane and Coal Gassification

  9. Global Influence

  10. Beyond Economic Numbers • One of the largest democratic countries in the world .. and we are becoming more mature politically. • Our commitment to combating corruption is very high at every level of government. • The new administration has relentlessly spawned new initiatives to significantly improve our investment climate (centralized OSS, more justified restrictive investment list, more targeted and collaborative investment promotion, etc.) • Significantly improved homeland security

  11. South Korea FDI Performance

  12. South Korea is among top10 and climbing

  13. Performance by Sector – S.Korea FDI

  14. Challenges AHEAD

  15. From theGlobal Competitiveness Report 2009: Indonesia is in transition from a Factor-Driven Economy to an Efficiency-Driven Economy • Ideal composition for development programs should be: • Basic Requirement • Infrastructure • Institutions • Educ & Heath • Economic stability • Efficiency Enhancer • Higher education • Goods & labor mart eff. • Techology readiness • Financial market sophist. • Business & Innovation • Business sophistication • Innovation 50% 40% 10% Medium Term Focus • Boosting Infrastructure Development • Developing environmental friendly food + energy activities • Creating more diversified yet higher value added economic activities

  16. Investment Opportunities

  17. Source: BlueBook, PUBLIC-PRIVATE PARTNERSHIPS Infrastructure Projects in Indonesia, BAPPENAS, Usulan 2010 The Investment Coordinating Board

  18. Potential Project Ready to Offer Priority Project

  19. 2nd Phase 10,000 MW (up to 2014) Funds needed: 7.6 bill US$ b. Developed by private companies Funds needed: 8.5 bill US$ a. Developed by State Owned Power Company (PLN)

  20. Mega ProjectsJava-Sumatra Suspension Bridge • Cost: ~ 10 – 12 bill US$ • Length: ~ 25 km • Connecting 2 of the busiest economic clusters in both Sumatra and Western Java. • National team has been formed to prep its imple-mentation details

  21. ALTERNATIVE ENERGY – Gas Origin Potential (Natural) Gas suppliesNatural gas: 165 TCF at production rate of 2.7 TCF (may rise to 3 TCF in 2009)Non-conventional gases:CBM ~ 453 TCF at production rate of 0 Coal ~ 19 billion MT, assuming 60% is low rank coal that would be converted to synthetic gas ~ 11 billion MT ~ 665 TCF at production rate of 0 Current coal gassification technologies (Shell, Lurgi, Chevron, GE etc) and even modifications from Chinese Manufacturers, have been proven to be more efficient (compared to fuel based) and more environmentally friendly

  22. Current and Upcoming Investment Activities in Oil & Gas and Mineral Mining/Smelters Upcoming oil refinery complex Coal mining and potential coal gassification compl. Oil and Gas refinery complex Coal to Liquid (CTL) and petrochem. Coal to Liquid (CTL) and petrochem. Cooper and gold mining Nickle mining and smelter complex LNG complex

  23. Value Added Calculation in Minerals Bauxite • Indonesia has the world’s 7th largest reserves • All of it is exported as raw materials • Currently, material need for prevailing aluminium smelter imported from Australia. • We need to expand our capacity for aluminium smelter since it is a strategic upstream industry that could support many downstream industries. Nickel • Global FeNI production is currently around 1,5 mill ton/year. Indonesia contributes 100 thousand ton/year. • With its potential, Indonesia can produce 250 thou ton/year. • As an inexpensive energy alternative, FeNI production in Indonesia can become the most efficient in the world.

  24. Cocoa Industry Current Cocoa export structure: A: cocoa beans, C: cocoa butter  93,3 % B. D, E, F: cocoa powder, cocoa paste, others Cocoa Beans Cocoa Butter Chocolate Bar VALUE ADDED 1 3 19

  25. Investment Opportunities in Some Areas (1)PAPUA: The Eastern STAR • Tremendeously rich in Natural Resour-ces (copper, gold, oil and gas) • Has potential for hydro based power plant with capacity up to 12 thuo MW. • Suitable for Integra-ted Pulp & Paper Cluster, CPO Cluster, Sugar Industry Clus-ter, and modern rice estate.

  26. Investment Opportunities in Some Areas (2)EAST JAVA: New Dev’t Complex • East Java is the most populated province in Indonesia. • This newly built bridge connects Surabaya Me-tropolitan area (2nd largest metropolitan city) to the highly po-tential area in Madura island. • Gov’t is determined to develop Suramadu Development Area (dotted circle) as a National Strategic Area to enhance various industrial activities that currently have been flourishing in Surabaya. Madura Island

  27. Striving toward CompetitivenessRECENT INITIATIVES ..

  28. 3-FRONT STRATEGY • On investment roadmap: setting up long-term investment strategy, divided into four phases: low hanging fruits  boost infrastructure development  industrialization  knowledge-based economy. • On policy front: speed up centralized “one-stop shop” investment licensing, computerized licensing system, less restrictive negative-list, regional champions, Special Economic Zone, etc • On promotional strategy: Targeted investment promotion: diversified by area, by prospective sectors, and done with an integrated approach

  29. Thank YouINVEST IN REMARKABLE INDONESIAwww.bkpm.go.id

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