Indonesia is looking to attract more overseas funds to support its rapid infrastructure growth, with a vision to provide reliable, beneficial and sustainable Public Works infrastructure to support the realization of a safe and peaceful, fair and democratic and more prosperous Indonesia.  There incentives for investments including fiscal and tax incentives and tax holiday for certain investment sectors. 

Below are some presentations from Indonesian Ministry of Public Works concerning infrastructure investment.

- Regulation on Public Infrastructure Investment and Doing Construction Business

- Water Supply and Solid Waste Management Investment Opportunities in Indonesia

- Toll Road Investment Opportunities in Indonesia 1

- Toll Road Investment Opportunities in Indonesia 2

By 2050, the size of the Indonesian banking sector could rival that of France or Italy, while returns could be considerably higher. Organisations require a clear strategy to match their ambitions to the relative pros and cons of organic growth, acquisition, branch or joint-venture options.

Download this paper from PricewaterhouseCoopers to know more outlines concerning the prospects for market growth and assesses the various options for entry and development.

Currently, Indonesia maintains 21 million hectares of protected forest out of the existing 133 million hectares of forest across its islands. The protected forest keeps high biodiversity where the wild animal live freely. Indonesian oil palm plantations area in 2009 occupied 7,8 million hectares and in 2008 was 7,3 million hectares. From this amount, about 3,8 million hectares originated from forest while the remaining come from conversion of other uses.

Investment in palm oil industry in Indonesia is very prospective, in particular for the downstream processing industries. According to research, Indonesia was predicted to gain the higher share in capturing this market opportunity, 50 % of the world market. Total investment required for CPO plants development, in particular downstream industry of palm oil  by 2020 is estimated US $  567 million – 750 million.

The Indonesian Embassy, in cooperation with the Indonesian Ministry of Forestry, held a seminar on Promoting Indonesia’s Sustainable Palm Oil in Rome on 18 November 2010. You can download the presentations that were discussed during the seminar by clicking on the link below

Ambassador Oemar – Indonesia’s Sustainable Palm Oil

Fadhil Hasan – Supply of Palm Oil and Current Status of Indonesia Biodiesel

Paulus Tjakrawan – Palm Oil Biodiesel Potential as Renewable Resource

Blueprint of the Tengku Agung Sultanah Latifah bridge (1196 m long and 17 m wide), Siak Regency, Riau.

Batam. The Capital Investment Coordinating Board (BKPM) has approved in the first quarter this year 20 new foreign investment projects worth US$16.9 million in Batam, Riau Islands province.

The projects come from Singapore, Malaysia, Taiwan, Australia, Norway, South Korea and the Netherlands, head of marketing and public relations of BP Batam, Rustam H Hutapea, said here on Saturday.

Their businesses include ship building/repair, restaurant, recreation and trading. Other businesses include electronic component, machinery/processing equipment/metal works, electricity control equipment, oil and gas mining supporting services, rubber goods, garments, housing, property development, business consultancy and management, loading and uploading services, metal processing and metal goods.

He said the number of approvals this year was higher than in the same period last year which was recorded at 18.

Meanwhile the value of investment projects approved this year rose 1.43 percent from US$16,649,493 in the same period last year.

Source: ANTARA News – 25 April 2010

Gorontalo.

Victor Nikijulu, the director general of business and investment at the ministry of fishery and marine resources, said he was optimistic the target would be reached through development of various fishery products.

“What needs to be improved first is the fishery infrastructure and facilities for fishermen,” he said.

If the infrastructure and facilities is improved it is not impossible for the quality and quantity of fishery products to rise, he said.

He said his office was now seeking to develop markets in the Middle East and Africa, relying on processed fishery products.

He said unless Indonesia changed its marketing strategy it would lose to Vietnam who is a newcomer in the field.

“We must immediately change the products to have more added value so that they would market well,” he said.

Source: ANTARA News – 18 April 2010

Singapore. Standard & Poor’s Ratings Services today raised its long-term foreign currency sovereign credit ratings on the Republic of Indonesia to ‘BB’ from ‘BB-’. The outlook is positive. At the same time, Standard & Poor’s affirmed its ‘BB+’ long-term local currency rating and ‘B’ short-term foreign and local currency rating. The outlook on local currency rating remains positive.

“The rating upgrade reflects steadily improving debt metrics and growing foreign currency reserves with continued cautious fiscal management,” said Standard & Poor’s analyst Agost Benard.

With nominal GDP growth averaging just under 20% and primary fiscal surpluses averaging 1.9% of GDP over the past five years, net general government debt declined to 26% of GDP in 2009, half what it was five
years ago. Standard & Poor’s believes the government will remain committed to cautious fiscal management and that nominal GDP will continue growing at double digits, with government debt ratios improving further.

Indonesia’s external liquidity is supported by a steady accumulation of foreign reserves, now at nearly U$70 billion (as of end February), providing approximately 5.5 months of current account payments cover. However, Indonesia’s ratings continue to be constrained by relatively high external debt of a projected 58% of current account receipts this year, and a low-income economy with per capita GDP of US$2,300, which is still less than half the median for the ‘BB’ rating category. Structural and institutional impediments to higher economic growth remain rating constraints.

The affirmation of the ‘BB+’ local currency rating is based on our view that the sovereign’s fiscal flexibility does not yet match what is typically associated with higher rating categories, due to the combination of intermittent inflationary pressure, a narrow revenue base, significant infrastructure needs, and a difficult-to-adjust subsidy regime.

“The positive outlook reflects Standard & Poor’s expectation that the political pressures experienced by the administration will prove to be only a temporary distraction from implementing its fiscal, administrative, and structural reform agenda,” said Mr. Benard.

The ratings could be raised if inflation pressure diminishes, the external debt burden declines, the sovereign’s balance sheet improves, or reforms such as subsidy rationalization suggest that fiscal and external vulnerabilities are reduced. Conversely, a stalling of reforms or the absence of timely and adequate policy response to renewed fiscal or external pressures would result in the outlook reverting to stable.

Source: Standard & Poor’s – 12 March 2010

Primary Credit Analyst: Agost Benard, Singapore, (65) 6239-6347; agost_benard@standardandpoors.com

Secondary Credit Analyst: Kim Eng Tan, Singapore.

• Improving government debt ratio and growing foreign currency reserves reduce Indonesia’s vulnerability to shocks.
• We have raised our long-term foreign currency sovereign credit rating to ‘BB’ from ‘BB-’ and affirmed the ‘BB+’ long-term local currency rating on the limited fiscal flexibility.
• The positive outlook on the long-term foreign currency rating reflects our expectations that the broader economic and fiscal reform agenda will proceed apace once the current political distractions subside.

In his press release today, the main sovereign analyst for S & P Indonesia, Agost Benard, said that the main factor supporting this decision is steadily improving debt metrics and growing foreign currency reserves which reduced vulnerability to shock with continued cautious fiscal management.

Deputy Governor of Bank Indonesia, Hartadi A. Sarwono said that the rating upgrade is already expected and it is about time they finally upgrade us since S & P rating were the lowest one compared to the rating assigned by Moody’s (Ba2/stable) and Fitch (BB+/ stable).

The positive outlook given by S&P reflects their positive expectations that the structural reform agenda, economic and fiscal policy to support higher economic growth will continue to be implemented as the political pressures are diminishing and believed to be only a temporary distraction.

As stable macroeconomic fundamentals, intensified external liquidity, gradually declining government debt ratio, supported by cautios fiscal management and implementation of structural reforms, is expected to sustain economic growth in up coming years, hopefully the positive momentum can be maintained to achieve investment grade target.

Source: Bank of Indonesia – 12 March 2010

Investire in Indonesia:
I. Solide basi economiche
II. Classifica degli investimenti
III. Stabilità politica
IV. Maggiore mercato e base industriale nel Sud-Est Asiatico
V. Protagonista regionale e globale di rilievo
VI. Clima più propizio per gli affari
VII. Abbondanza di potenziale

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In order to learn more about Indonesia’s economic potential, retrieve highlights of reasons on why you should strongly consider investing in the Indonesian archipelago — available in English and Italian. Below are quick descriptions of brochure’s content.

Invest in Indonesia:
I. Solid economic fundamentals
II. Investment grade
III. Political stability
IV. Largest market & industrial base in South East Asia
V. Prominent regional and global player
VI. Better climate for business
VII. Plentiful potentials

There is also a brochure from the The Indonesian Investment Coordinating Board entitled Invest in Remarkable Indonesia (only available in English)

Money talks: Indonesian Investment Coordinating Board chairman Gita Wirjawan (second right) addresses a seminar at the World Bank headquarters in Washington, DC on Tuesday. Gita updated a World Bank panel of experts on the latest situation on Indonesia’s economic reforms, including in the areas of investment.

Jakarta. The Investment Coordinating Board (BKPM) has regained some of its past role in the areas of investment licensing, amendments to the negative list and preparation of the country’s investment road map.

Speaking at the International Monetary Fund headquarters and earlier at the World Bank on Tuesday, BKPM chairman Gita Wirjawan said he would do whatever it takes to make investment more welcome in the country, including pleading with other ministries to hand over licensing powers to BKPM.

“One time, I was asked to wait by one of the ministers, and I waited for one and a half hours. And I dared to wait. I took a completely private sector approach. I was not there for my ego. I was there for his signature,” Gita said.

In the end, he added,  he got signatures from 15 ministers, who relegated their powers to BKPM.

With this new licensing power, BKPM could serve as a “one stop shop” for both foreign and domestic investors who want to invest in the real sector, [including manufacturing] and SMEs,  leaving aside banking, oil and gas.

Under the one stop shop service, BKPM could process investment licensing as fast as in five hours and in seven days at the slowest. It aims eventually to be able to complete the process within one hour.

Gita said BKPM had also taken over responsibility for  drafting amendments to the negative investment list from the Trade Ministry.

The negative list has drawn protests from investors by limiting investment opportunities. He said a new negative list would be ready in the next few months.

In addition, BKPM is also tasked to draft the investment road map that would chart the ways and means to transform Indonesia’s natural resource-based economy, towards the ultimate aim of achieving a knowledge-based economy.

The road map would include steps to increase capacity building to help build infrastructure, including improving regulatory frameworks.

Once infrastructure is much improved, then Indonesia should be able to kick off a major process of industrialization, which would need among other things to be backed by comprehensive fiscal policies, including possible tax holidays for high priority sectors.

“After all of these stages, we would start positioning Indonesia as one of the world’s knowledge-based  economies, on a par with other developed countries in the region,” Gita said.

With BKPM assuming all these functions, it is no longer simply a promotional agency but is developing a policy focus, serving as a “kitchen” for policy making and implementation to help improve the investment climate, Gita added.

Gita noted however that the new powers bestowed upon BKPM were still far from what BKPM did during its glory days in the early 1980s, when the board was involved not only in licensing but also in making fiscal concessions like tax holidays.

What’s more important, Gita said, was to change the bureaucratic culture at BKPM towards one of serving the needs of investors, to help achieve the investment target of US$200 billion in five years.

“With the right tweaking, we should be able to achieve these numbers,” he said.

Source: The Jakarta Post – 25 February 2010

Jakarta.

Two other working drafts of government regulations related to mineral and coal mining activities, namely a government regulation on supervision and monitoring as well as that on (land) reclamation and post-mining activities are currently undergoing final review by the State Secretariat.

Deputy Director General for Mineral Coal and Geothermal, S. Witoro Soelarno, conveyed his relief that both the president finally signed (and, thus, issued) both government regulations, bearing in mind that mining stakeholders have long been waiting for a regulation that guides the implementation of the new Law Number 4 year 2009 on Mineral and Coal Mining. Ideally, the Ministry of Energy and Natural Resources ought to provide four government regulations to serve as technical guidelines to the Law on Mineral and Coal Mining.

The Government Regulation 22/2010 on Mining Area contains technical guidelines on determining state reservation area, mining commercial area, and local’s mining area. This government regulation also put (all) mining areas within the domain of the national land planning, rendering illegal all mining activities that fall outside of the above mentioned mining areas.

While Government Regulation 23/2010 on Mining Commercial Activities related to Mineral and Coal guides companies and local people in obtaining commercial mining permits, auction procedures, and in reporting. Additionally, this government regulation also gives a guideline on the allocation of production – related to mineral and coal mining – to cater to the interest of national industry; and serving as a national technical guideline on the processing and purification of mining products.

A delay in the issuance of technical guidelines to the mineral and coal mining law has resulted in various practical obstacles in mining activities. A number of investors who has applied for a permit to undertake commercial mining activities since last year were forced to stop conducting mining operations.

Moreover, this delay caused uneasiness among the business community that would not want to see an introduction of a new provincial regulation which works against their interest – bearing in mind that authorities at the provincial level have been keen on issuing new mining permits.

“We fear that due to provincial interest for economic gains, local authorities issue new mining pemits by self-interpreting the law on mineral and coal mining (instead of following the interpretation of the central government”, said a businessman from Balikpapan, East Kalimantan.

For example, the East Kutai Regent Irsan Noor challenged a letter by the Ministry of Energy and Natural Resources’ Directorate General for Mineral Coal and Geothermal claiming that a regency has the authority to issue mining permits. On 9 December 2009, the Attorney General’s Office ruled the case in favor of the East Kutai Regency when in fact the issuance of mining permits needs to go through an auction in which its procedure is outlined in the newly signed government regulation on commercial mining activities related to mineral and coal.

There is a wisdom behind the issuance of these two new government regulation in the early months of 2010 in order to prevent regents from issuing their own commercial mining permit using auction procedure outlined by their own provincial regulation. Such condition may create much confusion in the Indonesian mining industry.

Source: Tambang – 12 February 2009
Photo: Ministry of Energy and Natural Resources