Kuala Lumpur, 19 April 2018

Remarks by Chairman of BKPM 3rd Indonesia Investment Forum 2018

Indonesia has a large and diverse economy

2

The largest economy in SE Asia &

member of G20

WHERE ON EARTH

Indonesia’s GDP growth is projected to be ranked 4th in 2050

3

PPP

Rank

2016 2030 2050

Country GDP at PPP

(US$bn) Country

Projected GDP

at PPP (US$bn) Country

Projected GDP at

PPP (US$bn)

1 China 21,269 China 38,008 China 58,499

2 United States 18,562 United States 23,475 India 44,128

3 India 8,721 India 19,511 United States 34,102

4 Japan 4,932 Japan 5,606 Indonesia 10,502

5 Germany 3,979 Indonesia 5,424 Brazil 7.540

6 Russia 3,745 Russia 4,736 Russia 7,131

7 Brazil 3,135 Germany 4,707 Mexico 6,863

8 Indonesia 3,028 Brazil 4,439 Japan 6,779

9 United Kingdom 2,788 Mexico 3,661 Germany 6,138

10 France 2,737 United Kingdom 3,638 United Kingdom 5,369

GDP at PPP Rankings (Projection for 2030 and 2050)

World Bank’s Economic Growth Projection Country 2017 2018 2019 2020

China 6.8 6.4 6.3 6.2

Cambodia 6.8 6.9 6.7 6.7

Philippines 6.7 6.7 6.7 6.5

Vietnam 6.7 6.5 6.5 6.5

Laos 6.7 6.6 6.9 6.9

Myanmar 6.4 6.7 6.9 6.9

Malaysia 5.8 5.2 5.0 4.7

Indonesia 5.1 5.3 5.3 5.3

Thailand 3.5 3.6 3.5 3.4

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

Indonesia in 2045:

Population: 309 million

Working age population: 52%

Urban population: 75%

Middle class population: 80%

Income per capita: USD 29,300

Share economu from service: 73%

Source: WorldBank, 2018

Rise of Indonesian Middle Class

4

Additional people in

The consuming class

45

85

135 170

195

180

145 110

Bellow

Consuming class

Consuming

class

2010 20203 2030 in 5-6%

GDP scenario

2030 in 7%

GDP scenario

240

265 280 280

Mckinsey research shows Indonesian consuming

class will grow almost double in 10 years since 2010

40 90 125 4

6

8

11

13

14

22

26

73

85

Health care

Beauty and

cosmetics

Telecommunication

s

Housing and utilities

Transportation

Education

Apparel

Leisure

Food and beverage

Financial services

13

16

19

26

30

42

57

105

194

565

2011 2030

Source: Canback Global Income Distribution Database; Indonesia’s Central Bureau of

Statistics, Mckinsey Consumer and Shopper Insight Indonesia Study, 2011, Mckinsey

Global Growth Model; Mckinsey Global Institute analysis

INDONESIAN MIDDLE CLASS SPENDING (US$ BILLION)

Achievement of International Recognition (1/2)

Investment Grade from International Credit Rating Agencies

BB+/ Stable

Baa2 / Stable

BBB/

Stable

BBB/

Stable

BBB-/ Positive

BBB+/ Stable

5

Achievement of International Recognition (2/2)

Country

India

DB 2018 DB 2017

130

78

35 40

123 125

100

China

Russia

Brazil

Country

Singapore

Malaysia

Thailand

Brunei

Vietnam

Indonesia

Lao PDR

DB 2018 DB 2017

2

23

46

72

82

91

139

99 113

78

91

2

24

26

56

68

72

141

72

Philippines

Indonesia

120 114

91

106

2014 2015

Ease of Doing Business Indonesia, 2013-2017

19

72

2016 2017 2018 2013

129

ASEAN Country BRIC

BKPM started to enganged in EODB reform since 2014 by assignment from Coordinating Minister of Economic Affairs.

6

Invest in Indonesia NOW

7 Source: WorldBank Report, 2017

Most aggressive infrastructure development in Indonesia’s history

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

Citizens’ trust on the Indonesian Government is at all time high

Strong investors’ confidence to invest further in Indonesia

Policies reform in ICT Sectors

The Year of 2017: Investment Continues to Grow Beyond the Target

8

growth

+7.9

%

growth

+23.1%

2013 2014 2015 2016 2017 2018

(Target)

FDI DDI

399.2

463.1

545.4

612.8

692.8

765.0

↑ . % ↑ . %

↑ . %

↑ . %

2017 ↑ Y-o-y

DDI 21.3%

FDI 8.5%

Total 13.1%

Realization in 2017 compared to its target:

102.1% *DDI and FDI accumulation, 2018

Investment Realization (IDR Trillion)

[CATEGORY

NAME] 61%

Europe 11%

America 9%

Africa [PERCEN

TAGE]

Australia & Pacific

1%

DDI 35% (Rp 942T)

FDI 65% (Rp 1.770T)

FDI & DDI Shares, 2013-2017 (in %, IDR)

Source: BKPM, 2018

Investment Still Centralized in Java, but Bali & NT Records Highest Growth

9

Investment Distribution, 2013-2017 (Rp Trillion)

Kalimantan (223)

Bali & NT (63) Jawa (949)

Sumatera (271)

Sulawesi (140)

Papua & Maluku (123)

15%

54%

13%

4%

7% 8%

Investment Growth, 2017 (y/y)

2%

19%

0%

10%

43%

14%

Sumatera Jawa Kalimantan Sulawesi Bali & NT Papua &Maluku

*Note: based on internal BKPM calculation method

Source: BKPM, 2018

In the last 5 years, Investment has Created more than 7 million jobs, with FDI Contributes to 61%, mostly from Asia.

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Top-10 Investment per Sector

Singapore Japan Malaysia United States China

IDR 2,713.3 T. 7,260,995 100,414

Investment Additional jobs Projects

USD 34.03B

15,422 projects

USD 7.75B

5,075 projects

USD 20.69B

9,673 projects

USD 7.89B

4,461 projects

USD 7.78B

1,637 projects

No. Sector Inv.

(IDR T.) Proj.

1. Mining 241.4 3,781

2. Metal, Machinary and

Electronics 200.8 6,448

3. Electricity, Gas and Water 158.5 1,627

4. Chemical and

Pharmaceutical 152.9 3,436

5. Transportation Equipment

& Others 128.8 2,878

6. Food Industry 127.9 5,500

7. Transportation, Warehouse

& Telco 122.2 1,969

8. Real Estate, Industrial

Estates 119.6 3,047

9. Crops & Plantation 105.7 2,494

10. Paper and Printing 73.8 858

Source: BKPM, 2018

Investment from Malaysia is Rising

Source: BKPM, 2018

1,11

5.6

1,21

3.6

2016 2017

USD 1.2 B Total Malaysia’s

investment realization in 2017

+8.8% Malaysia’s investment

realization in 2017 compared to in 2016

Rank Sectors Investment

Value ∆ Y-o-y

% of

total

1 Transport, warehouse and Telco 341.7 ↑ 1,005.8% 28.2%

2 Chemical and Pharmaceutical 159.4 ↑ 45.5% 13.1%

3 Food crops and plantation 125.1 ↓ 55.7% 10.3%

4 Food industry 122.7 ↓ 67.4% 10.1%

5 Trade and repair 111.9 ↑ 456.6% 9.2%

Other Sectors 352.8 29.1%

Total 1,213.6 ↑ 8.8% 100.0%

Top-5 Investment Sectors Malaysia’s Investment Realization in 2017 (USD million)

15.3

%

32.6

%

52.1

%

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Indonesia’s priority sectors for investment

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Tourism New Bali

Lifestyle Industry e.g: creative economy, digital

industry

Maritime Including fisheries and cold storage

Agriculture Labor Intensive Industry e.g: textile, garment, furniture, etc

Export Orientation Industry e.g: automotive, electronic, machinery, etc

Import Substitution Industry e.g: pharmaceutical raw material, petrochemical

Infrastructure Energy, transportation, industrial estates, SEZs

Manufacturing Industry

Value added Industry e.g: agro-industry, smelters, etc

The new big deal

Int’l tourists arrival grew at +25%, investment in tourism up +45%

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Annual investment growth in tourism in SE Asia surpasses Asia, 2016-2026 (estimation)

Source: WTTC, 2016

11.5m

14.0m IDR15 T

IDR22 T

2016 2017 2016 2017

Int’l Tourist Arrival +22%

Investment realization* in Tourism +47%

Indonesia

Source: Ministry of Tourism & BKPM, 2018 * KBLI 5511, 5512, 5513, 5519, 5590, 5610, 5621, 5629, 5630, 6812, 7911, 7912, 7991, 7999, 9321, 9322, 9323, 9324, 9329 * Exchange rate 2016: IDR 13,900; 2017: IDR 13,400

Tourism is “the next big thing”: 10 New Bali

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10 National Strategic Tourism Areas

Tourism: The industry of 21st

century SEZ Kelayang Cape

Toba Lake SEZ Lesung Cape

SEZ Morotai

SEZ Mandalika

Borobudur

Seribu Islands

Bromo Tengger Semeru

Wakatobi

Komodo

15% 29% 34% 39% 43% 46% 50% 53%

38.2

72.7 88.1

102.8 112.6

123.0 133.5

144.9

2013 2014 2015 2016 2017 2018 2019 2020

Internet Users

(No. of people, millions)

Internet Penetration

(% of population)

2013-2015 are actual figures, 2016-2020 are forecast. Source: McKinsey&Company, Statista, population data from World Bank

Indonesia is home for >100 million internet users

32.3mn new users between 2017 & 2020

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Indonesia aims to be the center of digital economy in SE Asia in 2020

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E-Commerce

Potential of Transaction in Indonesia:

2013

US$8bn

Players

On Demand Services

Internet users in 2017

Mobile social users in 2017

112.6mn

92.0mn

Players

2016

US$20bn

2020

US$130bn

Financial Technology (Fintech)

Transaction in Indonesia 2016 (projection)

Nominal of transaction per population 2014

US$14.5bn

US$56.98

Players

Internet of Things (IOT)

Market opportunity in Asia Pacific

2015

US$250bn

Players

2020

US$583bn

Source: Ministry of Communication and Informatics RI, Tech in Asia, IDC, Daily Social, Bank Indonesia, Statista, Idea, World Bank

Investment in Indonesian start ups reached US$4.93 billion in 2017

17

US$2billion Investment from Softbank & Didi Chuxing

US$1.2billion Tencent is the largest investor

US$1.1billion Alibaba is the largest investor

US$0.5billion JD.com is one of the largest investors

US$0.1billion Acquired by Grab

US$22million

Indonesian 4th unicorn, after Gojek, Tokopedia and Traveloka

US$3.2million Indonesian 1st start up registered in the stock market

- Acquired by Blibli.com (Djarum Group)

Source: Bisnis Indonesia, Jan 2018

Most of Manufacturing Industries are Open 100% for FDI

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100% FDI

Textile Industry

100% FDI

Waste Recycling Industry

100% FDI

Smelter & Steel Industry

100% FDI

Automotive Industry

Source: Negative List of Investment (Presidential Regulation No. 44 Year 2016)

To Support Manufacturing Industry Development, 47 Industrial Estates with Direct Constructions (KLIK) Facility Have Been Developed

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Central Java KI Kendal KI Bukit Semarang Baru KI Wijayakusuma KI Demak Tanjung Emas Export Processing Zone

East Java Java Integrated Industrial & Port Estate

KI Maspion

KI Tuban

Safe N Lock Industrial Estate

South Sulawesi KI Bantaeng KI Makassar

Banten Modern Cikande Industrial

Estate KI Wilmar Krakatau Industrial Estate

Cilegon Millenium Industrial Estate

West Java

Bekasi Fajar Industrial Estate

KI Delta Silicon 8

Karawang Internasional Industrial City

Suryacipta City of Industry

GT Tech Park

Artha Industrial Hill

KI Marunda Center

KI Greenland International Industrial

Center (GIIC)/Deltamas

KI Jababeka Tahap III

North Sumatra KI Medan

Riau Islands

Batamindo Industrial Park

Bintang Industriall Park II

Kabil Integrated Industrial Park

West Point Maritime Industrial Park

Bintan Inti Industrial Estate

DKI Jakarta

Kawasan Berikat Nusantara/KBN

KI Jakarta Industrial Estate

Pulagadung/JIEP

KI Kota Bukit Indah Ind. City

KI Indotaisei Kota Bukit Indah

East Jakarta Industrial Park

Bekasi International Industrial Estate

MM 2100 Industrial Town

KI Terpadu Indonesia - China

KI Kujang Cikampek

KI Lion

Cibinong Center Industrial Estate

KI Rancaekek

East Kalimantan

KI Kariangau

Riau

KI Dumai

KI Tanjung Buton

West Sumatera

KI Padang

Yogyakarta

KI Piyungan

Blue font: Phase 1

Green font: Phase 2

Red font: Phase 3

To boost investment, BKPM keeps innovating

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DOCUMENT DIGITALIZATION

From 3 days to

1 DAY

±40%

KBLI can

DIRECTLY apply for Business License

BKPM has eliminate Principle License (Izin Prinsip/IP), now becomes Investment Registration (Pendaftaran Investasi/PI)

BKPM has simplified and strengthened its one-stop service

21

Licensing process for Foreign, Across Provinces, and Strategic investments:

Source: BKPM

Operating Permits 3

At line Ministries & Local Governments

CONSTRUCTION PHASE

Business License 4

BKPM

Business kickstart

Business Incentives 2

BKPM

Tax & other incentives application

30%discount

Investment Registration

1

BKPM

Formerly In-Principle License

Government develops Online Single Submission (OSS) for investment: From “Service” to “Monitor & Facilitate”

22

Licenses

Leading Sector Task Force

Licenses

Investors

Supporting Task Force

Licenses

National Task Force

Monitoring

Monitoring

Monitoring

Integrated online system

with data sharing

One-Stop Service

Application

New Tax Holiday Scheme

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Provisions Existing (MoF Regulation No. 159 of 2015)

Changes (MoF Regulation No. 35 of 2018)

Subject New Taxpayer New Investment

Reduction rate 10-100% 100%

(single rate)

Time Period

5-15 years

extended up to 20 years

subject to approval from

Minister of Finance

Transition time Not regulated

50% for 2 years

Industry

coverage

8 Pioneer Industries 17 Pioneer Industries

No. Time Period Investment Value

1. 5 years IDR 500 billion up to less than IDR 1 trillion

2. 7 years IDR 1 trillionup to less than IDR 5 trillion

3. 10 years IDR 5 trillion up to less than IDR 15 trillion

4. 15 years IDR 15 trillion up to less than IDR 30 trillion

5. 20 years Minimum IDR 30 trillion

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