INDONESIA AT GLANCE: BUSINESS AND INVESTMENT OPPORTUNITY EMBASSY OF THE REPUBLIC OF INDONESIA & CAMARA COMERCIO DE MEDELLIN, MEDELLIN, 19 AUGUST 2014

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2 INDONESIA AT GLANCE: BUSINESS AND INVESTMENT OPPORTUNITY EMBASSY OF THE REPUBLIC OF INDONESIA & CAMARA COMERCIO DE MEDELLIN, MEDELLIN, 19 AUGUST 2014

3 REMARKABLE INDONESIA! fourth most populous country world-largest Muslim community third largest democracy world largest archipelagic state founder of ASEAN G-20 member megadivers e country largest economy in Southeast Asia

4 REMARKABLE INDONESIA : COUNTRY FACTS Area Population Total: 1,904,569 square km; Land: 1,811,569 sq km; Water: 93,000 sq km 253,609,643 (July 2014 est.) GDP $1.285 trillion (2013 est.) GDP Growth Rate: 5.3% (2013 est.) Economic Growth GDP Per Capita Unemployment Rate Inflation Rate Total Exports Total Imports FDI Inflow 6.2% growth; 5.9% within 5-year compound annual growth $5,200 (2013 est.) 6.6% (2013 est.) 7.7% (2013 est.); 4.3% (2012 est.) $178.9 billion (2013 est.) $178.6 billion (2013 est.) $19.9 billion (2013 est.

5 GDP COMPOSITION IN SECTORS: INDUSTRY FOCUSED Indonesia s GDP composition

6 INDONESIA S MAIN EXPORT IMPORT COMMODITIES EXPORT COMMODITIES Million US (2013) MINERAL FUELS AND OILS ,3 FATS, OILS AND WAXES ,9 RUBBER AND RUBBER ARTICLES 9.394,2 ELECTRICAL EQUIPMENTS ,4 ORES, SLAG AND ASH 6.544,1 MACHINERY 5.968,5 PAPER 3.756,6 CLOTHES (NOT KNITTED OR CROCHETED) 3.906,2 ORGANIC CHEMICAL 2.760,2 MISCELLANEOUS CHEMICAL PRODUCTS 3.816,1 KNITTED OR CROCHETED CLOTHES 3.481,4 WOOD 3.634,9 VEHICLES OTHER THAN TRAINS 4.567,2 FOOTWEAR 3.860,4 PEARLS, PRECIOUS STONES AND METALS, AND IMITATION JEWELLERY 2.751,3 MAN-MADE STAPLE FIBRES 2.327,8 PLASTIC & PLASTIC ARTICLES 2.602,8 IMPORT COMMODITIES Million US (2013) MACHINERY ,5 ELECTRICAL EQUIPMENTS ,1 IRON AND STEEL 9.553,6 VEHICLES OTHER THAN TRAINS 7.914,8 PLASTIC & PLASTIC ARTICLES 7.774,3 ORGANIC CHEMICAL 7.041,3 ARTICLES OF IRON OR STEEL 4.747,7 AIRCRAFT AND SPACECRAFT 1.530,8 CEREALS 3.621,4 FOOD WASTE AND ANIMAL FODDER 3.042,1 RUBBER AND RUBBER ARTICLES 2.212,9 FERTILIZERS 1.747,6 COTTON 2.554,8 CHEMICALS AND ALLIED PRODUCTS 1.914,5 PEBT 1.412,8 OPTICALS, PHOTOGRAPHIC AND MEASURING EQUIPMENT, MEDICAL INS ,1

7 INDONESIA S MAIN TRADE PARTNERS Top 10 Export Partners Export Volume ($) Top 10 Import Partners Import Volume ($) Japan $30,135,106,982 China $21,659,502,652 Singapore $17,135,025,448 Korea, South $15,049,860,022 United States $14,910,181,324 India $12,496,314,269 Malaysia $11,280,284,955 Thailand $6,635,141,100 Australia $4,905,413,057 Netherlands $4,664,300,841 China $29,387,066,842 Singapore $26,087,258,529 Japan $22,767,831,170 Malaysia $12,243,573,114 Korea, South $11,970,370,657 United States $11,614,234,745 Thailand $11,437,238,797 Australia $5,297,647,618 Saudi Arabia $5,199,395,114 India $4,305,643,140

8 BALANCE OF TRADE INDONESIA COLOMBIA (USD) Descriptio n Total Volume of Trade , , , , ,86 Exportto Colombia , , , , , ,37 Import from Colombia , , , , , ,49 Balanceof Trade , , , , , ,88

9 INDONESIA S TEXTILE AND TEXTILE PRODUCTS : WHAT TO OFFER INTEGRATED AND INVOLVED IN ALMOST EVERY SECTOR OF THE TEXTILE SUPPLY CHAIN -production of man-made fibers (polyester, nylon and rayon); man-made and cotton yarn spinning; weaving and knitting; dyeing, printing and finishing; apparel manufacturing. GREAT INDUSTRIAL CAPACITIES: spinning capacities up to 7.8 million short-staple spindles, 103,000 long-staple spindles and 90,000 open-end rotors; weaving segment s capacities numbered 29,000 shuttleless looms, 197,000 shuttle looms and 34,000 filament weaving looms; of 500,000 tons for polyester staple fiber, 825,000 tonsmanmade fiber subsector manufacturing capacities for polyester filament yarn and 30,000 tons for nylon filament yarn.(2004). In 2005, fiber production totaled 752,000 tons, with 559,621 tons for domestic use and 192,379 tons for exportation; Yarn production totaled 1.6 million tons in the spinning industry, 51 percent was used domestically and 49 percent was exported. In the weaving and knitting sector, 591,451 tons of goods produced and was used domestically, 344,748 tons were exported. The apparel and other textile product segment exported 63 percent of the 690,860 tons of goods it produced and found domestic buyers for 273,238 tons of end-products. Total exports valued at USD billion in 2010, up from USD 9.34 billion in Exports are targeted to increase over 2011 to $15 billion USD. In 2010, 37.6% of garment exports wenttotheusaand19.4%totheeuropeanunion

10 INDONESIA S TEXTILE AND TEXTILE PRODUCTS : WHAT TO OFFER STRATEGIC LOCATION: 3000 companies operating in Indonesia with 2661 companies only in Jakarta (comprises 28companies in the man-made fiber subsector; 204in spinning; 1,044in weaving, knitting and finishing; and 861in apparel manufacturers) it means that those companies operating near the most strategic and comprehensive infrastructures like airport and seaport. OPPORTUNITY TO MAXIMIZING THE ADVANTAGES OF FREE TRADE AGREEMENTS as Indonesia has signed many FTAs, Preferential Trade Agreements (PTA) and other low-tariffs and preferential commitments with many big market countries such as EU, ASEAN; Japan, China, United States, Korea, Australia, etc. HIGH PROSPECT INVESTMENT - Low labour costs, political stability, availability of raw materials and cheap industrial land. Cheaper alternatives to China s rising wages:(the average textile worker wage in China has risen to $247 USD a month, in comparison to $140 in Indonesia) In 2005, textile industry employed 1.8 million workers directly and 3.7 million workers in indirectly related operations(contributes 1,9% of total employment in Indonesia). BIG MARKET FOR FOREIGN APPAREL PRODUCTS. Branding and marketing of Indonesian made textiles has not yet been able to compete with other foreign products. Domestic brands have not taken a strong footing among Indonesian consumers. Foreign apparel brands have therefore flourishedintheupperendofthemarket.

11 TEXTILE AND TEXTILE PRODUCTS : WHAT WE NEED FURTHER INVESTMENT IN MACHINERY, EQUIPMENTS AND TECHNOLOGIES, particularly to modernize our AGING MACHINERIES in the spinning and weaving sector. In 2005, the fiber, spinning, weaving and knitting, and garment sectors utilized more than 50% of aging machinery (66% of weaving machinery and 35% of spinning machinery were more than 20 years old. Restructuring and modernizing existing capabilities are now the main agenda of our textile industry. Until now, investment in Indonesia s textile industry reached billion USD in 2011, mainly came from local manufacturers as well as from the entrance of foreign players to the Indonesian market. SUPPLY OF COTTON. Indonesia produces only 0.3 percent of its total domestic demand for cotton and rely heavily on importation from its trading partners, mainly from United States, Australia, Brazil and African countries. ALTERNATIVE MARKET ACCESS particularly because the new tight competition in the US and EU markets; Apart from the domination of China, Indonesia s real competitors are India, Vietnam and Bangladesh for apparel industry; Thailand and Brazil for fabric; and Pakistan for yarn.

12 ENERGY RESOURCES: OIL SECTOR (1) Petroleum and other liquids, ranked as the 24th-largest crude oil producer in the world in 2013, accounting for about 1% of world production Indonesia possessed 3.6 billion barrels of proven crude oil reserves as of January 2014 International oil companies (IOCs) in the Indonesian oil market include Chevron, Total, ConocoPhillips, ExxonMobil, and BP China National Offshore Oil Corporation (CNOOC) and South Korea's KNOC also hold significant upstream assets PT Pertamina (Pertamina), Indonesia's state-owned integrated energy supply company, accounted for approximately 17% of domestic crude production through 2012 General rules of FDI: Local governments retain 15% of net revenues from oil and 30% of net revenues from gas produced within their jurisdiction. Domestic Market Obligations(DMOs) require that a minimum of 25% of oil production be made available to the Indonesian market. Currently, Indonesia is a net importer of oil.

13 ENERGY RESOURCES: OIL SECTOR (2)

14 ALTERNATIVE ENERGY RESOURCES: NATURAL GAS Indonesia possessed trillion cubic feet (Tcf) of proven natural gas reserves in Pertaminaaccounted for 13% of natural gas production in 2012 through its subsidiary companies Foreign companies such as Total, Inpex, ConocoPhillips, and ExxonMobil dominate the upstream gas sector. Total and ConocoPhillips produced nearly 50% of dry natural gas in Indonesia in 2010, Indonesia was the fourth-largest LNG exporter in 2013, following Qatar, Malaysia, and Australia. General rule of Investment: Pursuant to a Domestic Market Obligation (DMO) stipulated in Indonesia's government regulations, 25% of natural gas produced from production-sharing contracts in Indonesia must supply the domestic market.

15 ALTERNATIVE ENERGY RESOURCES: OTHERS Indonesia plans to replace some oil product imports by promoting greater biofuels production and revising upward the required level for biofuels blending with diesel and gasoline. The government mandated the use of fuel ethanol in the past, requiring a 3% ethanol blend in public vehicles and 7% in private vehicles Indonesia is the largest biodiesel producer in Asia. In 2012, output reached roughly 37,000 bbl/d. Indonesia's government also promotes exploration of coal bed methane (CBM) and shale gas asthe country has CBM reserves of 453 Tcfbased on preliminary studies. Singapore-based Dart Energy and Indonesian PT EnergiPasirHitambegan CBM exploration activities in East Kalimantan in 2013, with the goal of supplying both power plants and the BontangLNG facility. The government anticipates CBM production to reach 183 Bcf/y by Further investment is needed to develop these potential industries.

16 MINERAL RESOURCES : COALS Indonesia remains the world's largest exporter of coal by weight and exports about 75% of its production. Coal production quadrupled between 2002 and 2012, reaching 452 million short tons. Supply growth slowed to 9% in 2012, its lowest level since 2008 as a result of low international coal prices. Approximately two-thirds of Indonesia's coal production comes from East Kalimantan, according to industry estimates. The government passed the 2009 Law on Mineral and Coal Mining No.4 to stimulate development of the domestic mineral processing industry and to increase foreign investment in the mining sector.

17 FOREIGN INVESTMENT REGULATION ON MINING SECTOR: SOME HIGHLIGHTS Policies and Regulation Prohibition of exportation of unprocessed minerals Divestment Requirement Value Adding Requirement Description Export of unprocessed minerals after 12 January 2014 is prohibited, requiring mining companies to process and refine their product in Indonesia foreign shareholders in companies holding a mining production permit are required to divest shares gradually to achieve majority Indonesian ownership within 10 years from the commencement of commercial production with the details as follows : 20% local ownership by year six, 30% local ownership by year seven, 37% local ownership by year eight, 44% local ownership by year nine and 51% local ownership by year 10. Requires all mineral ores to be processed in Indonesia before being exported. Raw ores and semi-processed minerals with purity levels below the Government's threshold can no longer be exported after 12 January The requirement of process would be Copper 15%, Iron Ore 62%, Lead 57%, Zinc 52%, Manganese 49%, Titanium 56-58%, Ilmenite 56%

18 INDONESIA S PULP AND PAPERS : FACTS Currently the 11 th largest producer of paper and the 9 th largest producer of pulp in the world. Has the potential to become the world s third largest producer of pulp and papers. Pulp industry s processing capacityrose significantly from to 7,9 million metric tons per year andpaper industry s capacityfrom 1.2 million to 12.2 million tons between 1988 and Pulp production also increased from to 7 million tons, and paper production from tons to 10.5 million tons between 1988 and In 2010, pulp and paper products generated US$5.7 billion in export earnings. Indonesia has now 80 pulp and paper companies including 10 operating integrated factories of pulp and paper, 67 paper factories and 3 pulp factories. Domestic companies make up 64 of the 80 companies consisting of pulp factories with a capacity 2,797,100 tons a year and paper producers with a capacity of 4,913,380 tons. Foreign companies are smaller in number only 13 units but they are largest in capacity. These companies have a production capacity of 3,410,000 tons of pulp and 4,800,300 tons of paper a year.

19 ASIAN PULP & PAPER (APP) : SINAR MAS GROUP Pulp Capacity: Indah Kiat (Riau) = 2.3 Adt/yr Lontar Papyrus (Jambi) = 800,000 Adt/yr Integrated with pulp and paper production in Indonesia and China. 35 plantation concessions cover 2.3 m hectares in Riau, Jambi, South Sumatra, West and East Kalimantan

20 MAJOR PULP MILLS IN INDONESIA

21 AGRICULTURE: INDONESIA FACT major global key producer of a wide variety of agricultural tropical products employed around 49 million Indonesian individuals, which represents 41 percent of the total Indonesian labourforce (2012) Notable products: palm oil, rubber, cocoa, coffee and other agricultural products The world s largest producer of palm oil with the expected production of 31 million metric tons in 2013 compared to other countries (Malaysia: 19 million mt; Thailand: 2,1 million mt; Colombia: 1 million mt)

22 AGRICULTURE: PALM OIL The majority of Indonesia's palm oil production is exported (see table below). The most important export destination countries are China, India, Malaysia, Singapore and the Netherlands. Year Production (million metric tonnes) Export (million metric tonnes) Export (in USD$ billion)

23 INDONESIA S PALM OIL : WHAT TO OFFER Palm oil in Indonesia is one of the promising sectorsfor both business and investment, for a number of reasons 1. Big profit margins, while the product is simple to produce. 2. Large and increasing international demand. 3. Crude palm oil (CPO) production costs in Indonesia are the lowest worldwide. 4. Higher rates of productivity compared to other edible oil products. 5. Bio-fuel is expected to increase its significance at the expense of expensive gasoline.

24 INVESTMENT OPPORTUNITY IN INDONESIA Abundant and Diverse Natural Resources due to its geographical characteristics such as largest archipelagic state, more than islands located in the very strategic location, between two continents, large land and sea territories; megadiverse country; Indonesia is renowned as a great producer of various energy and mineral resources, such as natural gas, nickel, timber, bauxite, copper, fertile soils, coal, gold, silver, tin and petroleum. Located in the center of the equatorial line, making Indonesia enriched with a massive tropical rainforests, volcanoes as well as swampy mangrove areas, contributing to make our land and soil fertile. Young, large and burgeoning population 4 th most populous country with 251 million people, dynamic labor market participation, growing at 2.3 million per year. A rapidly urbanizing population also provides for strategic pools of labor force in centers of investment. Over 50% of the population is under 29 years old and 60% of the population is under the age of 39, around 52% of the population lives in urban areas a great skilled and low-cost labor forces A growing and affluent middle class supports GDP growth with approximately 56.7% of GDP accounting for private consumption in In 2010, 56.5% of the total population is in the middle-income class, growing from 37.7% in 2003.

25 INVESTMENT OPPORTUNITY IN INDONESIA Political Stability Largest Muslim population with a democratic system respecting human rights, freedoms and pluralism Fourth time in row, Indonesia is successful in practicing a peaceful democracy in the 2014 legislative and presidential elections. Our new elected president, Mr. JokoWidodowill be inaugurated in October Many people believe that he will make Indonesia better and stronger than ever. Government Support to Improve Investment Climate Relentless efforts by the Indonesian government to make investment climate more friendly and easier to foreign investors, such as the enactment of new investment law in 2007; policy package to improve the ease of doing business in Indonesia; economic policy packages which simplifies investment licensing procedures and provides tax incentives

26 29 TH TRADE EXPO INDONESIA October 2014 in Jakarta will showcase best Indonesian export products ranging from industrial, mining, agricultural to Craft sectors. Expected attendance from at least buyers from over 100 countries, and generated in total trade transactions valued at over US$ 1,5 billion. For more information, please visit m/or contact the Indonesian Embassy in Bogota. Hope to see you all there!