MDA Presentazione

““Strategic Sectors Focus”Strategic Sectors Focus”

Mr. Luca Vianelli, Partner and Managing DirectorMr. Luca Vianelli, Partner and Managing DirectorMDA CONSULTING S.E.A. – BANGKOK MDA CONSULTING S.E.A. – BANGKOK

andandPT. MUTUALLINK INDONESIA – JAKARTAPT. MUTUALLINK INDONESIA – JAKARTA

““Strategy is important but execution is everything”Strategy is important but execution is everything”

““INDONESIA: The Golden Chance” SeminarINDONESIA: The Golden Chance” SeminarConfindustria Vicenza, 29Confindustria Vicenza, 29thth November 2011 November 2011

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AGENDAAGENDA

1.1. Indonesia at a GlanceIndonesia at a Glance

2.2. Facts of IndonesiaFacts of Indonesia

3.3. Strategic Sectors FocusStrategic Sectors Focus

4.4. Doing Business in IndonesiaDoing Business in Indonesia

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Indonesia at a GlanceIndonesia at a Glance

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• Country name: Republic of Indonesia

• Capital city: Jakarta - 24 Million inhabitants (2010)

• Total Area: 1,904,569 km2 - World ranking 16

• President: Susilo Bambang Yudhoyono (since October

2004)

• Population: 240,271,522 (July 2009 est.) – World ranking: 4

• Language: Bahasa Indonesia, English, Dutch and local

dialects

• Currency: IDR (Indonesian Rupiah)

• Religion: Islam (majority), Christian, Catholic, Buddha,

Hindu – Indonesia is the largest Muslim country in the

world


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• GDP (Purchasing Power Parity): US$ 1.03 trillion (2010 est.) – World ranking: 16

• GDP real growth rate :6.1% (2010 est.) – World ranking: 50

• Labor force : 116.5 million (2010 est.) – World ranking: 5

• Imports : US$ 127.1 billion (2010 est.) – World ranking: 30


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INDONESIA amongst INDONESIA amongst ASEAN CountriesASEAN Countries

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Facts of IndonesiaFacts of Indonesia

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Sound Economic Fundamentals

• GDP size of nearly US$ 707 billion in 2010, Indonesia is the largest economy in Southeast Asia.

• Indonesia’s economy grew by 4.5% in 2009, 6.1% in 2010 and is expected to reach 6.4% this year, providing a case for Indonesia’s inclusion in the so-called BRIC economies.

• Private consumption accounts for 70% of GDP and has increased by 5.3% in 2008

• Future economic expansion is expected to include more inclusive growth as nominal per-capita GDP is expected to quadruple by 2020, according to a Standard Chartered report.

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• Indonesia’s debt to GDP ratio has steadily declined from 83% in 2001 to 26% by the end of 2010; the lowest among ASEAN countries, aside from Singapore which has no government debt.

• In April 2011, Standard & Poor’s had improved Indonesia’s credit rating to BB+. The rating reflected Indonesia’s resilience to the global financial crisis, improving government and external credit-metrics, and an ability to manage domestic political challenges to the reform agenda.

• Listed as one of the top 10 most attractive destinations for foreign direct investment (FDI) as per UNCTAD World’s Investment Prospects Survey in 2010.

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GDP Growth in Percentage (year on year)


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An Upward Trend in FDI (Foreign Direct Investment) Inflow


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Indonesia’s Economic Potential


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Stronger Investment Climate

• All the improvements that have been and continue to be applied have placed Indonesia as #1 country for entrepreneurship in the recent 2011 BBC survey. It has also managed to jump 10 places to 44th from a total of 139 ranked countries in the World Economic Forum’s Global Competitiveness Report in 2011.

• Listed as one of 10 countries improving investor protections as

per Doing Business Report 2010 by IFC (The World Bank).

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Dynamic Demographic Base

• Over 50% of the population (240 million people) is under 29 years old and lives in the urban area.

• Education spending accounts for 16% of total government expenditures, higher than any other sector, and university graduates are trained in technical fields such as finance and economics (28%) or engineering and sciences (27.5%).

• Labor cost is relatively low.

• The services sector has grown by over 16% (from 1998 to 2009).

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Population’s Growth ProjectionPopulation’s Growth Projection

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Labor Cost in 2009Labor Cost in 2009

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Abundant Natural Resources

• Indonesia is rich in non-renewable energy (coal), renewable energy (geothermal and hydro power), and agricultural products (palm oil, cocoa and rubber).

• Natural resource-based export has expanded to 52.7% of total share in 2010 from 50.3% in 2009.

• The mining industry accounted for 28% of the total Foreign Direct Investment as of 1st quarter of 2011.

• Development potential is far from saturated, particularly in renewable energy.

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Abundant Natural Resources

• Indonesia is home to a biodiversity that is only second to Brazil. Indonesia has become a commodities powerhouse and a leading commodities exporter:

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Indonesia’s mining companiesIndonesia’s mining companies

Source: Kompas Newspaper 23 May 201119

Expanding Global Influence

• A leading member of ASEAN, Indonesia shapes integrative approaches in the region for security, trade and commerce and will be the integral part of the ASEAN Economic Community in 2015.

• Southeast Asia’s only member of the G-20, the latest global grouping for transnational economic policy.

• Standard Chartered sees Indonesia’s inclusion in the G-7 by 2030, projecting that Indonesia’s economy could be the 10th largest in 2020 and the 5th largest in 2030.

• Emerging as a key player on cross-cutting policy issues such as climate change, which have direct and indirect impacts on business and investment decisions.

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Strategic Sectors FocusStrategic Sectors Focus

1.1. Agriculture: Palm Oil, Rubber and CocoaAgriculture: Palm Oil, Rubber and Cocoa

2.2. Energy: Crude Oil, Fuel, Gas, Coal, CBM, Bio-FuelEnergy: Crude Oil, Fuel, Gas, Coal, CBM, Bio-Fuel

3.3. Renewable Energiea: Geo, Hydro, Waste to EnergyRenewable Energiea: Geo, Hydro, Waste to Energy

4.4. Infrastructures: Road, Railways, SeaportInfrastructures: Road, Railways, Seaport

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2010 GDP Composition2010 GDP Composition

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2010 GDP Growth (’06 - ’10)2010 GDP Growth (’06 - ’10)

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The growth of manufacturing industry non-oil and gas amounted 5.1% in 2010 showed a significant increase compared to same period in 2009 which is only reached 2.6%. The highest increases are:

•transportation and parts amounted to 10.35%; •fertilizer, chemical and rubber industry grew by 4.67%;•other goods industries by 2.98 %


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Agriculture: Sector SnapshotAgriculture: Sector Snapshot

• Contribution to GDP: 15.3% (2010)• Contribution to Exports: 3.17%• Number Employed: 41 million (2010)• Main Products: Palm Oil, Rubber, Cocoa,

Cassava, Coffee, Tea, Tobacco, Rice.

• Main Export Markets: China, USA, Japan, Singapore, Korea, EU.

• Changes to the Negative Investment List for 2010 have opened up parts of the agricultural sector that were previously closed to foreign investment.

• For example, investors can now own up to 49% in staple crop plantations over 25 hectares such as soybeans, sweet potato, rice and cassava;

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Agriculture: World Palm Oil Production Agriculture: World Palm Oil Production (2009)(2009)

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Agriculture - Palm Oil Plantation PlanAgriculture - Palm Oil Plantation Plan

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Agriculture: Palm Oil Production and ExportAgriculture: Palm Oil Production and Export

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Agriculture – Palm Oil Agriculture – Palm Oil

• Fertile land, a favorable climate and low labor costs have made Indonesia the leading producer of crude palm oil (CPO) worldwide.

• 4.5% of GDP and nearly 7% of total export value for 2010. Government targets of a 16% rise in exports for 2011 and more ambitious goals to 2020 which would double output.

• Private enterprises accounting for an estimated 48% of production, small hold farmers at 40% and state owned plantations at 12%.

• Sumatra ha 70% of cultivation while other plantations are found in East and West Kalimantan.

• Government Regulation No. 62/2008 provides a 30% net tax deduction for 6 years for investors in various sectors including the downstream CPO industry. 30

Source: Oil Palm Business Association

The 2007’s EU directive that makes mandatory to use at least 10% of biofuel in transportation by 2020 is also contributing to the growing demand.

Demand for exports is being driven by China and India’s rapid growth for use as edible oils in foodstuffs and for bio-fuel production.

Agriculture – Palm Oil Agriculture – Palm Oil

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• Indonesia is the world’s 2nd largest natural rubber exporter after Thailand, while having the largest area of rubber plantations.

• Demand is predicted to reach 16.2 million MET by 2020 up from 11.2 million MET for 2011 (International Rubber Study Group).

• Consumption of national production is currently only at 15%.

Agriculture – RubberAgriculture – Rubber

• Investors may own up to 95% of a 25 hectare or more plot of land for cultivation and integrated downstream facility; this includes sheet rubber, thick latex and the crumb rubber industry.

(as per the Negative Investment List 2010)

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Association of Natural Rubber Producing Countries (ANRPC)

Agriculture – Rubber’s worldwide productionAgriculture – Rubber’s worldwide production

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• Indonesia is the world’s 3rd largest cocoa exporter for 18% of global market share with 470,000 MET produced in 2010.

• Demand is arising out of increased confectionary and chocolate consumption from markets such as China and India as well as the European Union.

• Indonesia’s cocoa production is concentrated in Sulawesi where 63% of the country’s raw cocoa is produced.

• The value added chain in cocoa is a priority area for the government with the target of $6.25 billion USD in export value by 2025.

• The target of 1 million MET annual output over the period 2013-2014 requires investments and meet

Agriculture – CocoaAgriculture – Cocoa

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Agriculture – Cocoa’s worldwide productionAgriculture – Cocoa’s worldwide production

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• Cocoa is a priority area for the government as stated in Presidential Decree No. 28/2008. In order to incentivize investment into the downstream cocoa industry, a progressive tax was introduced in April 2010 that increases in line with global prices for raw cocoa beans under Ministry of Finance Decree No. 67/2010.

• Incentives for investors include expected revisions to Government Regulation Number 62/2008 on income tax facilities, which will soon cover cocoa.

• Other incentives include the exemption of import tax on machinery and capital goods needed for production as well as exemption of VAT on cocoa beans.

Agriculture – Cocoa’s government incentivesAgriculture – Cocoa’s government incentives

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Energy – Sector SnapshotEnergy – Sector Snapshot

Contribution to GDP: 11% (2010)Imports: $2.36 billion (2010)Proven Oil Reserves: 4.2 billion barrels (end 2010)Proven Gas Reserves: 108.4 trillion cubic feet Proven Coal Reserves: 5529 million METProven potential in Geothermal Energy: 27 GWProven potential in Hydropower: 75 GWOther Energy Sources: Coal Bed Methane, Biomass, Solar, Sea Current EnergyCurrent Energy Mix:

Oil 47.6%, Coal 26.3%, Gas 21.4%, Hydro 3.2%, Geothermal 1.5% (2010)

Relevant Law : Energy Law No.30/2007 Setting the National Energy Policy on course to secure energy security and pursue greater reliance on renewable energy by providing incentives for its development.

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Energy Mix: 2010 vs. 2025Energy Mix: 2010 vs. 2025

Source: PLN

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Energy – Crude Oil (2010)Energy – Crude Oil (2010)

Source: Ministry of Energy and Mineral Resources

• Indonesia ranks 20th place in the world as an oil producer, providing 1.2% of total global production.

• Targets for production increases have been set at 1 million bpd by 2015, up from 2011 production figures at 443,790 bpd.

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• The two largest oil fields by production are Minas and Duri on the east coast of Sumatra that are both maturing with over 80% of reserves.

• The main players in the country’s oil sector are Chevron, Pertamina, Total, Conoco Phillips and Medco. Chevron is the leading producer of oil accounting for 47% of total production in 2009 after acquiring Unocal in 2005.

• Further refinery capacity is still required and the Kuwait Petroleum Corporation announced in April 2011 plans to construct a refinery at Balongan, West Java.

Energy – Crude OilEnergy – Crude Oil

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Energy – Fuel (2010)Energy – Fuel (2010)


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• The Energy Law of 2007 set in motion Indonesia’s plan to shift its reliance on fossil fuels, mainly coal and oil, towards more environmentally friendly and sustainable means.

• The aim is to reduce oil dependence to 20% by 2025 while increasing the input of renewable and alternative forms of energy to make up 15% of the total.

• Within non-renewable, Indonesia is seeking to capitalize on its vast reserves of coal bed methane. This presents a number of opportunities for investment and technology partnerships as the government aims to incentivize investment in these areas in order to realize its goals to be a low cost, low carbon economy.

Energy – FuelEnergy – Fuel

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Energy – GAS (2010)Energy – GAS (2010)

• Indonesia has the 3rd largest reserves of natural gas in the Asia Pacific region at 108.4 trillion cubic feet of proven reserves at the end of 2010; three times that of its oil reserves.

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• Pertamina accounts for about 15% of total natural gas production, CNOOC for 37% as per 2009 alongside local and international energy companies such as Total, BP, ConocoPhillips, and ExxonMobil who dominate the upstream gas sector.

• The main production sites are in Arun Aceh, the site of the first LNG exports in 1978, Bontang in East Kalimantan and Tangguh in Papua.

Energy – GASEnergy – GAS

• In 2008, 52.2% of natural gas was exported to the traditional markets of Japan, South Korea and Taiwan.

• New projects that are underway such as Tangguh in Papua under BP, that came on-stream in 2009 and the Cepu block in Central Java by Exxon Mobil and Pertamina are designed to give a boost to the country’s role as an LNG exporter.

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Energy – Coal (2010)Energy – Coal (2010)

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Energy - Coal’s volumes prodictionsEnergy - Coal’s volumes prodictions

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Energy - Countries Ranked for Coal Energy - Countries Ranked for Coal (2009)(2009)

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• Indonesia is the 2nd largest producer of coal bed methane (CBM) after China with reserves of 453 trillion cubic feet;

• Indonesia has the largest proven global reserves of CBM with the main sources being located in Kalimantan, South Sumatra and Riau.

• Production targets are set at 500 tcf (2015) and to 900 tcf (2020);

• The first CBM fed power plant located in East Kalimantan will come on stream in 2011 (operated by PT Ephindo in a consortium with GE).

• 5 further work areas are also expected in 2011.

• Pricing of CBM power for the domestic market is at $0.27 USD per kwh; 50% lower compared to diesel. PLN forecasts that CBM could produce as much as 2000 MW of power for the country by 2015.

Energy – Coal Bed Methane (2010)Energy – Coal Bed Methane (2010)

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Energy - BiofuelsEnergy - Biofuels

• In 2006, the Government of Indonesia established its first national policy on biofuels as part of the National Security Act.

• The government had set up goals of reaching 2% biofuels in the energy mix by 2010 (5.29 million kiloliters), growing to 3% by 2015 (9.84 million kiloliters) and 5% by 2025 (22.26 million kiloliters).

• In 2007, the government announced an interest rate subsidy of Rp 1 trillion for farmers growing biofuels crops including jatropha, oil palm, cassava, and sugar cane.

• The government prohibits rainforest deforestation for biofuels purposes.

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• There are currently 13 companies producing industrial ethanol in Indonesia. The 4 largest producers have 75% of the total capacity.

• Production of industrial ethanol has annually grown by 3% (2006–2010) At this rate production of industrial ethanol will reach 194 ML in 2011 and 200 ML in 2012.

• Domestic industrial users consume more than 70% of total industrial ethanol produced in Indonesia. Exports of industrial ethanol have grown annually by almost 9% within (2006 – 2010).

• Exports shall reach 43 M liters in 2011 and 48 M liters in 2012.

• The industry may have additional capacity of 272 M liters due to conversion from fuel to industrial ethanol plant.

Energy – Bio-ethanolEnergy – Bio-ethanol

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• Fuel ethanol in Indonesia is produced from sugarcane molasses. Indonesia has about 5.5 M acres dedicated to sugarcane production.

• Indonesia is among the top 10 sugarcane producers in the world with about 30 million tons/year.

• There were 52,195 ha planted with cassava in 2007 and it is expected to increase to 782,000 ha.

• In Indonesia, 1 ton of molasses yields about 250 liters, and 1 ton of cassava yields about 155 liters of anhydrous ethanol (USDA).

• The main export market for Indonesian ethanol is Japan.

Energy – Bio-ethanolEnergy – Bio-ethanol

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Energy – Bio-ethanol PlanEnergy – Bio-ethanol Plan

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• Production of biodiesel will increase from 455 ML (2010) to a range between 530 and 650 ML (2011) (IBP Association forecast)

• Production could reach as high as 700 ML in 2012.

• Indonesian Jatropha biodiesel is still in research stage.

• Every 4 kg of dry Jatropha beans produce 1 liter of Jatropha oil.

• 1 kg of dry Jatropha beans is priced at IDR 2,000. The feedstock cost therefore is roughly IDR 8,000/liter of Jatropha oil.

• Conversely 1 liter of palm oil is extracted from 4.55 kg of palm’s fresh fruit bunch which is priced at IDR 1,100/kg.

• The number suggests that feedstock costs associated with palm-oil based biodiesel at IDR 5,000/liter are significantly cheaper than that of Jatropha biodiesel.

Energy - BiodieselEnergy - Biodiesel

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Energy – Biodiesel PlanEnergy – Biodiesel Plan

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Renewable Energy PotentialRenewable Energy PotentialEnergy Resource Potential in Indonesia:

Major Islands Geo Thermal Hydro Biomass

Mwe MW MWJava 3086 54 13622Bali 226 20 347Sumatra 5433 5489 6433Kalimantan - 6047 6231

Sulawesi 721 4479 5337Nusa 645 292 1174Tenggara - - -Maluku 142 217 1093Papua 24974 6814Total 10027 41436 41651* total geothermal potential: installed, reserve, and resources for electricity is around 20,000 MW Source: DESDM, RUKN (National Electricity Master Plan), 2004

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Electricity Production (2010)Electricity Production (2010)


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Renewable Energy – Geothermal Renewable Energy – Geothermal (2010)(2010)


• Indonesia has 27 GW of proven geothermal energy reserves and currently taps less than 5% of the potential.

• The plans as per the second Fast Track Program are to build 43 geothermal power plants by 2014 and to produce 9,000 MW by 2025. 57

Source: Glendale Partnersc

RE – Geothermal’s production, development, planRE – Geothermal’s production, development, plan

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RE - Countries Ranked for Geothermal RE - Countries Ranked for Geothermal (2008)(2008)

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• The hydro power potential is proxy 75 GW and there are over 100 hydro sources of varying sizes that have been identified as per the end of 2010; less than 8% of capacity is utilized.

• Despite hydro power aiming to have 5,140 MW of hydro powered electricity on stream by 2019, there were only 3 large scale projects being executed at the end of 2010.

Renewable Energy– Hydro Power Renewable Energy– Hydro Power (2010)(2010)

Source: Indonesia Renewable Energy Society 60

• Large scale hydro projects have proved more popular as an investment opportunity. The beginning of 2011 saw a number of new projects from foreign companies; South Korea’s Hyundai was awarded at $340 million USD contract to build an 88 MW hydro plant in Aceh, Sumatra in May 2011 while Norwegian and Chinese firms have also won contracts for plants in Sulawesi.

• The World Bank also announced a $640 million USD loan to contribute to a pumped water system at an existing plant in Upper Cisokan to expand electricity capacity during peak hours.

Renewable Energy – Hydro Power Renewable Energy – Hydro Power

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Renewable Energy – Waste to EnergyRenewable Energy – Waste to Energy

• Indonesia produces 200,000 MET of garbage per day and it is estimated that of the existing waste, at least 4,000 MW of electricity could be generated.

• The largest project of its kind is located at Bantar Gabang Landfill in East Jakarta, the waste to power plant had produced 4 MW of power in 2010, due to increase to 16 MW by 2015.

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Renewable Energy – BiomassRenewable Energy – Biomass

63Source : IEA Task 33 Meeting, June 2006

Biomass Main region Production (million ton/year)

Energy potential

(million GJ/year)Remarks

Rubber wood Sumatera, Kalimantan, Java41 (replanting) 120

Small logs d<10cm. Big and medium logs are used as fire wood in brick and roof tile industries: price 20,000 - 30,000 IDR/m3.

Logging residues Sumatera, Kalimantan 4.5 19

Sawn timber residues Sumatera, Kalimantan1.3 13

Residues of factories are often used as fire wood by local communities, residues available for free.

Plywood and veneer production residues

Kalimantan, Sumatera, Java, Papua, Maluku 1.5 16

Sugar residues Java, Sumatera, South Kalimantan

Bagasse: 10 Cane tops: 4

Cane tissues: 9.678

Bagasse is generally used sugar factories (90%). The use of cane tops and tissues needs to be investigated.

Rice residues Java, Sumatera, Sulawesi, Kalimantan, Bali, Nusa Tenggara

Husk: 12 Bran: 2.5 Stalk: 2

Straw: 49

150

Stalk and straw are generated at the field and generally burnt, in some areas used for feeding or Husks often burnt uncontrolled.

Coconut residues Sumatera, Java, SulawesiShell: 0.4

Husk: 0.7 7

Residues are generated decentralized and usually left on the plantation field. Largely used as fire wood and for the production of charcoal.

Palm Oil residues Sumatera, new areas: Kalimantan, Sulawesi, Maluku, Nusa Tenggara, Papua

Empty fruit bunches: 3.4 Fibers: 3.6 Palm shells: 1.2

67Palm shells and fibers are common fuel sources, EFB are generally incinerated.

Renewable Energy – BiomassRenewable Energy – Biomass

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Source of biomass Energy Potential (per year)

Rice residue 150 GJ

Rubber wood 120 GJ

Sugar residue 78 GJ

Palm oil residue 67 GJ

Plywood, veneer, sawn timber residues,

coconut residues, and agricultural wastes

< 20 GJ

• It is estimated that Indonesia produces 146.7 million tons of biomass per year, equivalent to about 470 GJ/y

Source : ZREU,2000

Renewable Energy – Solar Renewable Energy – Solar

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Solar Power Plant Development in Indonesia (2011-2020)

• Indonesia (PLN) has plan to an additional capacity of 55.484 MW and renewable energy share will increase from 12% to 19% with total capacity 11.540 MW on the year of 2019.

• PLN has plan to develop 620MW of Solar PV by 2020.

Renewable Energy IncentivesRenewable Energy Incentives

• Ministry of Energy and Mineral Resources Regulation No.31/2009 on Power Purchase by PT PLN from new small and medium scale power plants using renewable energy sources.

• PLN is obliged to buy energy from renewable power plants below 10 MW and ensures a higher pricing system for mini and micro plants outside of Java and the eastern area.

• Tax reduced by 5% for 6 years, reduced tax rate on dividend payments for international investors, projects exempted from VAT and import duties for equipment.

• Negative Investment List 2010 Presidential Decree 36/2010 stipulates that all electricity generating power plants have a maximum limit of 95% foreign ownership.

• Plans to increase the bio fuel subsidy in the 2012 state budget from Rp 2,000 to Rp 3,000 for biodiesel and Rp 3,500 for bio ethanol.

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Energy: Reveneus and InvestmentEnergy: Reveneus and Investment


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Infrastructure: Sector SnapshotInfrastructure: Sector Snapshot

Contribution to GDP: 6% (2010) Existing Road Network: 476,337 km (2009)Existing Railway Network: 4,800 kmNumber of Airports: 187 (local and international)Number of Commercial Sea Ports: 111

Main Government Bodies: Ministry of Transport, BAPPENAS, Ministry of Public Works, Ministry of State Owned Enterprises through Directorate General of Highways, the Indonesian Toll Road Authority.

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Indonesia’s vast size stretching over 5,000 km across the equator and being made up of over 17,000 islands has made the development of an efficient national transport network a challenge and priority.

Infrastructure - ChallangesInfrastructure - Challanges

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•Rail – Accounts for less than 10% of passenger and less than 1% of freight transport. Jakarta is the largest city in the world without proper intra-city rail;

•Roads - 35% of subnational roads and 10% of national roads are classified as “Heavily Damaged”; subnational roads are 92% of network; •Ports - Indonesia has only 2 international hub ports; no investment for 25 years;

Source: Glendale Partners

Infrastructure: investmentsInfrastructure: investments

• Indonesia will spend $250 billion over the next 5 y (Morgan Stanley)

• $85 billion is estimated to be spent on electricity, 27% will go toward roads, and 21% on telecom.

• GDP shall growth to more than 7% a year by 2015. -May 12, 2011-

• Network development plan is being carried out in several phases under the National Long Term Transport Sector Plan 2005-2025 as well as being part of the Master Plan for ASEAN Connectivity to 2015.

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• The length of Indonesia national road network has grown from 391,009 km in 2005 to 476,337 km in 2009 (Statistics Indonesia).

• From 2001 to 2009, road length increased by an average of around 2% per year while private vehicle ownership has increased by 11-13% per year (University of Gadjah Mada).

• Indonesian government plan to construct over 800 km of new toll roads by 2014 with Trans-Java connectivity as a priority. Of the 27 priority infrastructure projects, 18 of these are toll roads.

Infrastructure - RoadsInfrastructure - Roads

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The 6 Economic CorridorsThe 6 Economic Corridors

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Infrastructure – Java Toll RoadsInfrastructure – Java Toll Roads

73Source: Glendale Partners

Infrastructure – Infrastructure – JabodetabekJabodetabek Toll Roads Toll Roads

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Infrastructure - RailwaysInfrastructure - Railways

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• Rail Network of Java in 1931: Total Length of Rail 4,072Km

• Rail Network of Java in 2010: Total Length of Rail 3,012Km

• Rail Network of Sumatra in 1931: Total Length of Rail 1,860Km

• Rail Network of Sumatra in 2010: Total Length of Rail 1,348Km

Jakarta 1920 Jakarta 2010

• Sector’s monopoly was over in 2007.

• The railway tracks are under state ownership with state and private companies paying a fee to use the rail lines.

• Under the National Railway Master Plan, 2010-2030, Indonesia’s railways will gradually be moved towards greater commercialization.

• There are 9 railway projects including the rail link from Soekarno Hatta International Airport to Jakarta and the coal railway line in Kalimantan.

• The Ministry of Transport is also moving ahead with ways to attract investors into specialized industrial railways such as for CPO (Sumatra) and Coal (Kalimantan) transport by preparing to speed up approvals through e-licensing.


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• In 2011 with the agreement of a loan from the Japanese International Cooperation Agency and a tender issued for the estimated $1.8 billion USD scheme. Made up of two lines, it will be 110 km in total length.

• The first line is the North – South line to be completed in 2 phases beginning construction in 2012, with the first section operational by 2016 and the second by 2018. A second line covering an East–West route is undergoing feasibility studies with the aim to begin construction in 2024.. It will have both above and underground sections and is projected to be able to carry 420,000 passengers a day by the third year of operation.

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Infrastructure – MRT planned projectInfrastructure – MRT planned project

Jakarta Kota to Lebak Bulus To be constructed under Japanese financing.


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Infrastructure – Seaports comparisonInfrastructure – Seaports comparison

Thailand Indonesia Malaysia

Terminals Old river port Monopoly Monopoly Largest ship 2,000 TEU 2,000 TEU 3,000 TEU Transshipment 100% transshipped in Singapore Freight to US US$ 4,000 US$ 4,000 US$ 4,000

Terminals 7 Terminals Monopoly 3 Terminals Largest ship 15,000 TEU 4,000 TEU 15,000 TEU Transshipment Low 60%+ Become a hub Freight to US US$ 2,250 US$ 3,500 US$ 2,000


• Sea transportation is a vital aspect of Indonesia’s trading infrastructure carrying over 90% of internationally traded goods.

• Indonesia has 1,700 small ports throughout the islands; 111 of these are commercial ports while only 11 are container ports.

• Highly inefficient system: Indonesia’s cargo has to go through Malaysia and Singapore.

• Tanjung Priok handling 70% of Indonesia’s total import and export flow: its 5 million TEU limit capacity will be reached in 2011.

• The price of shipping a standard container from West Sumatra to Jakarta is over three times the cost of Jakarta to Singapore.

Infrastructure - SeaportInfrastructure - Seaport

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Infrastructure – Seaport Future ProjectsInfrastructure – Seaport Future Projects

Doing Business Doing Business in Indonesiain Indonesia

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Doing Business in IndonesiaDoing Business in Indonesia

• Foreign Direct Investment (FDI) Company and Joint Ventures can be established in Indonesia.

• Trading and Business Transactions can be conduct with a Foreign Direct Investment Company.

• A Foreign Company that wishes to assess the potential market in Indonesia may establish a Representative Office and not a branch office.

• Indonesian laws and regulations classified representative offices into 3 forms:• Foreign Representative Office• Foreign Trade Representative Office• Foreign Construction Service Representative Office

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MDA S.E.A. CONTACTSMDA S.E.A. CONTACTS

MDA Consulting S.E.A. Co. Ltd.MDA Consulting S.E.A. Co. Ltd.Bangkok ThailandBangkok ThailandSuite 504 Tonson BuildingSuite 504 Tonson Building

50 Soi Tonson Ploenchit Road50 Soi Tonson Ploenchit RoadBangkok 10330Bangkok 10330

Tel: Tel: +662 6522447 +662 6522447 Fax: Fax: +662 6522448+662 6522448

Email: Email: [email protected] site: Web site: www.mda.co.th

““Strategy is important but execution is everything”Strategy is important but execution is everything”84

mailto:[email protected]

http://www.mda.co.th/

Back Up SlidesBack Up Slides

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In year 2010-2014 the Indonesia Ministry of Industry focuses on 6 industry groups that have good opportunities to be developed:

(1)Labor Intensive Industries; (2)Small and Medium Industries; (3)Capital Goods Industries;(4)Natural Resource-Based Industry; (5)High Growth Industry;(6)Special Priority Industries;

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Source: Ministry of Agriculture, 2011

Agriculture – Agriculture – Share of Indonesia Rubber ProductionShare of Indonesia Rubber Production

Under the economic corridor program, Sumatra has been designated as the main site for rubber plantations and downstream production, specifically in Medan, Pekanbaru, Jambi and Palembang. 87

FDI by Sector (2011)FDI by Sector (2011)

Source: BKPM88

Source: BKPM, 2011

FDI by Sector (Q3 2011)FDI by Sector (Q3 2011)

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Potential Energy Resources

Province HydroMW

GeothermalMwe

BiomassMW

BiogasMW

Windm/s

PVkWh/m2/day

Aceh 5 1,185 43 3 4 North Sumatra 3 2,522 2,365 47 3 - West Sumatra 10 485 1,117 26 4 - Riau 0.4 485 1,570 9 4 - Jambi 1,385 1,033 9 4 - Bengkulu 2 1,073 355 9 - - Bangka Belitung 0.4 485 1,570 9 4 - S. Sumatra 3 1,335 2 27 5 5 Lampung 2,969 1,774 5 6 - 20

Banten - 285 - - 2.9 4.4 DKI Jaya - - 7.6 0.7 4.0 4.2 West Java 2 3,397 3,735 40 - 4 Central Java 2 6 4 4,048 63 3 5 DI Yogyakarta - 10 20.8 7.7 - 4.5 East Java 2 654 5,464 26 4 4 Bali 80 350 347.4 31.9 2.4 5.3 W. Nusa Tenggara 6.2 250 615.4 28.2 3.1 5.1 E. Nusa Tenggara 14.8 1,850 1,160 56.7 4.1 5.7 W. Kalimantan 235.9 - 2.3 17.5 3 4.6

Cent. Kalimantan 2.8 - 3,004 3,791 3 - E. Kalimantan 1.2 - 3,224 4.9 3.0 4.2 S. Kalimantan 3.2 - 1.1 9 2.9 9.4 Central Sulawesi 17.1 250 1,150 9 3.0 5.5 South Sulawesi 25.9 250 2,506 41.5 - - North Sulawei 17.8 8 5 737 6 3.0 4.9 S. E. Sulawesi 270 5 872 10 - - Gorontalo 61.1 40 72 - - 4.9 Maluku & North 0.8 750 1,093 5.7 3.3 -

Maluku Papua 9.8 - 6,814 9.4 3.4 5.7

Source: workbank.org

Renewable Energy PotentialRenewable Energy Potential

90


• The success of the Jakarta plant and other small scale projects around the country such as in Bali and Bandung illustrates the potential of such plants in the future.

Source: PLN

91

Oil and Condensate Production ForecastOil and Condensate Production Forecast

Source: Directorate General of Oil & Gas (MoEMR) 2008-2009 (actual) 2010.

92


Energy – Coal Bed Methane CBM (2010)Energy – Coal Bed Methane CBM (2010)

93

Related Regulation

• Presidential Regulation No. 4/2010 stipulates the acceleration of the use of renewable energy alongside coal and gas, to be carried out by PLN and private investors. The regulation actively invites private investors to participate in electricity power plants and transmission infrastructure. The regulation also requires for land acquisition for power generation projects to be carried out within 120 days, but this only extends to projects in which PLN is participating.

Renewable Energy IncentivesRenewable Energy Incentives

94


• Law No. 30/2009 on Electricity decentralizes the authority on the electrical sector and hands over power to local and regional authorities.

• Companies engaging in electricity power generation must be legal entity established under Indonesia law and therefore registered with BKPM as per Law No. 20/2002.

• As per the 2010 Negative Investment List, foreigners may own up to 95% in electricity generating projects. Investment into power generation is under the jurisdiction of the BKPM for small scale projects; larger scale projects require the approval of MEMR while all projects will involve local government authorities approval to be executed.

95

• The World Economic Forum’s Global Competitiveness Report 2010-2011 where Indonesia ranked 44th overall, put the country at 90th for infrastructure and 96th for port efficiency. Similarly, the World Bank Logistics Performance Index places Indonesia at 75th out of 155 countries.

• Ports are managed by four state owned companies PT Pelindo I, II, III and IV while the sector has been recently opened up to private sector and foreign involvement in 2011 under the 2008 Shipping Law.

96


97


• The need to radically upgrade facilities is recognized by the government and a new drive is underway as part of the national infrastructure development master plan.

• New ports are being planned to relieve some of the congestion. In North Jakarta, Kalibaru Container Port is due to begin construction at the end of 2011 to easy off some of the pressure from the main Tanjung Priok Port that has been stagnating in terms of capacity. It will accommodate 6.5 million TEUs as well as host an oil and gas terminal.

• Further upgrade plans under the SOEs PT Pelindo I, II, III & IV are underway to expand the capacity of Tanjung Priok by 1.7 million TEUs as well as the construction of new ports at Ancol, North Jakarta and Lamong Bay in Surabaya.

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• Private companies have also moved in to fill the gap by constructing their own ports and terminal facilities such as AKR Corporindo and property developer Jababeka’s dry port in Cikarang.

• With the break of PT Pelindo’s monopoly on port management under the 2008 Shipping Law thus opening up the sector to private players in 2011, this should see greater competition as well as improved efficiency.

• Increased private sector involvement will bring a much needed boost to improve both turnaround times and high costs. This move is necessitated by the upcoming ASEAN single window in 2012 and the single market in 2015 which will see further intensification of regional trade.

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MDA Presentazione

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