Technical Services Investment Proposition€¦ · Indonesia Investment Coordinating Board Why Canadian firms are investing in Indonesia Indonesia’s GDP will increase by over 150%

Badan Koordinasi Penanaman Modal

Technical Services Investment Proposition

23rd August 2016

Indonesia Investment Coordinating Board

Why Canadian firms are investing in Indonesia

Indonesia’s GDP will increase by over 150% to $2.2 trillion by 2025

The services sector will increase by $300 billion by 2020 – 3rd biggest increase in the world

Indonesia has the 4th

largest population in the world (261 million as of August 2016)

Indonesia is very cost effective - the average monthly wage is $161

Indonesia is one of the fastest growing economies in the world in the world (>5% p.a. 2012-16)

Access to the $2.5 trillion ASEAN market with a population of 620 million


What Canadian investors say about Indonesia

invested by Canadian firms

in Indonesia

of Canadian investors in Indonesia are

planning to re-invest in Indonesia

(WAVTEQ, June 2016 survey)

of Canadian investors in Indonesia would recommend other

Canadian companies to invest in Indonesia

(WAVTEQ, June 2016 survey)


Why invest in Indonesia’s services sector?

Demand for services

$700 billion size of Indonesia’s services

sector in 2020

Indonesia’s competitive strengths services investment World’s third largest service sector, ranked by increase in absolute size from 2015-20 Word’s fourth largest population of 260 million with rapid GDP growth Labour costs nearly half of China and lower than India for skilled positions Better availability of scientists & engineers than China or India Effective corporate tax less than half China and India

Growth in the services sector

6.6% forecast growth in the

services sector 2015 to 2025

Track record

Services is the leading sector for FDI projects in Indonesia

(2011-15)

Global importance

$300 billonthe increase in Indonesia’s

service sector from 2015-2020 – 3rd biggest in the world


Demand for services in Indonesia

1. Indonesia’s services economy is forecast to increase from $385 billion in 2015 to $712 billion in 2020

2. Indonesia is the 3rd most important country in the world in terms of contribution to growth in the global services sector (2015-2020)

Size of Indonesia’s services sector GDP, 2011-2020 ($ billion)

Source: EIU

370 383 388 386 385435

505

578

644712

0

100

200

300

400

500

600

700

800

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020


Composition of the technical services sector in Indonesia

Management, Scientific and

Technical Consulting Services, 25%

Architectural, Engineering and

Related Services, 18%Advertising, Public Relations, and Related

Services, 16%

Other Professional, Scientific and

Technical Services, 13%

Specialized Design Services, 10%

Legal Services, 10%

Computer Systems Design and Related

Services, 5%

Scientific Research and Development

Services, 1%Accounting, Tax

Preparation, Bookkeeping and

Payroll Services, 1%

As of 2016, there are 33,476 professional, scientific and technical services companies in Indonesia, in the following key sectors:

Source: fDi Intelligence based on Dun & Bradstreet Global Reference Solution


Key opportunities for Canadian services investment -Technical services for the energy sector

Supporting energy projectsThe Electricity Supply Business Plan (RUPTL) indicates at least 80.5 GW of power plants will need to be constructed by 2025, with around 50 GW coming from Independent Power Producers (IPPs). This will create huge demand for technical & scientific services

SolarThe Government of Indonesia set a national target of approximately 1,400 MW installed solar photovoltaic capacity by 2025. In order to achieve this target, an estimated US$3,755 million of investment will be required from 2015 to 2025. Electricity generation from solar photovoltaic is expected to reach 9,986 GWh

Hydroelectricity11 hydro projects are in in various stages of appointment or construction with a further nine down for direct appointment

BiomassBiomass is forecast to account for to 5.1% of the total National Energy Mix in 2025, compared to its current contribution of 2%, with rapid growth expected

GeothermalInstalled capacity of geothermal is 4.6% of available capacity. A total of 21 sites geothermal sites are being made available over the next 2 years through auction (16 to independent companies)


Key opportunities for Canadian services investment -Technical services for the industrial sector

Supporting Indonesia’s booming manufacturing sector• Indonesia’s industrial production as a percentage of its GDP was 41.3% in 2015 - higher than China,

India, Malaysia, Philippines, Singapore, Thailand, and Vietnam.• Indonesia’s manufacturing industry is forecast to grow by over 6-9% p.a. • Beverages and Machinery & Equipment industry are the highest growth sectors, growing at nearly

10% per annumTechnical services for the machinery & equipment sector• There are 2700 machinery & equipment companies in Indonesia in 2016, compared to only 990 in

2009 - 270% growth in 8 years• The major demand is concentrated in three sectors:

• Mining: one of the world’s largest producers of tin, nickel, ignite, copper & coal. More than half of total demand for heavy equipment in Indonesia comes from the mining sector. Sales of construction & mining equipment could rise up to 5000 units in 2016

• Agriculture: Total market demand for food & beverage is expected to reach nearly $230 billion in 2016 and $330billion by 2020 – 10% growth per annum. Dairy products and fisheries are two key growth areas, with some products (like yogurt) growing by nearly 20% p.a.

• Construction: Indonesia’s construction sector is growing 7-8% per year. There is a backlog of some 15 million residential units. International tourism receipts are forecast by EIU to grow from $9.5 billion in 2015 to $13.7 billion in 2020. Around $14 billion of investment is needed for tourism development. Some 50 locations in Indonesia are available for tourism development. There has been over $8 billon of FDI in Indonesia’s construction sector from 2011-15


Key opportunities for Canadian services investment -Technical services for the transportation sector

Providing technical services for air transportation • Indonesia’s aviation industry is booming, growing by 28.10% average per annum

between 2005 and 2014.• The number of air passengers in Indonesia is growing rapidly - from 27.4 million in

2009 to 94.5 million in 2014• By 2034, Indonesia’s airports are expected to handle an additional 183 million

passengers compared to today • Indonesia is expected to be the sixth largest market in the world for air travel. By 2034,

270 million passengers are expected to fly to, from and within the country• The ASEAN Open Skies Policy (also known as ASEAN Single Aviation Market) was

implemented in 2015 opening freight services between ASEAN countries. Freight traffic is expected to grow by 50% p.a. Indonesia is to open seven cities to incoming and outgoing freight services

• The Indonesian government is planning 45 new airports by 2025 (24 by 2017)

Key opportunities for Canadian investors in traffic control systems, ground handling, aircraft maintenance, passenger

services, freight services, and logistics and distribution


FDI Track Record – Canada case studies

ManulifeManulife has operated in Indonesia since 1985. Through various regulated entities, Manulife provides individual protection, investment and savings accumulation solutions as well as group employee benefits solutions. The Company distributes both conventional and takaful (syariah) products through multiple distribution channels including agency, bank, direct and telemarketing. Manulife Indonesia has over 1.9 million customers supported by more than 12,000 employees and sales representatives in 1,500 points of sales throughout Indonesia.

Sun Life Financial Indonesia Sun Life has been in Indonesia for nearly 20 years and currently operates through three entities, including through a joint venture with CIMB Niaga, Indonesia’s 5th largest bank (by assets). They employ over 400 employees and distribute their products nationally through 8,000 agents, 100 insurance advisors and 300 telemarketers. The company had revenues of over IDR 2 trillion and had over IDR 7 trillion in assets at year-end 2013.


FDI Track Record – technical services case studies

Leading multinational companies include US engineering independent Bechtel and German multinational conglomerate ThyssenKrupp, both of which are active in Indonesia’s architectural and engineering sector.

ThyssenKrupp has a base in Jakarta and in 2013 the company won a contract from PT Holcim Indonesia, to build a cement plant in near the town of Tuban on the northern coast of the island of Java. The contract is worth around US$250 million.

Bechtel is also based in Jakarta and, in 2015, the company signed a master service agreement with Indonesian state-owned energy company Pertamina. This partnership will see Bechtel help Pertamina prepare bankable feasibility studies, basic engineering designs and front-end engineering designs for downstream projects, including for new refineries and for upgrading the capacity of existing refineries.


Competitive strengths for services – Size of market

0

500

1000

1500

2000

2500

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Indonesia

Philippines

Thailand

Malaysia

Vietnam

Singapore

Indonesia’s GDP 2025 forecast:• Increase >150% to $2.2 trillion• Larger than India’s in 2015• Nearly same size as Canada’s ($2.6 tn)• GDP/capita: $3370 (2015) to $7840

GDP 2011-2025, US$ billion (EIU forecasts)


Competitive strengths for for services – Size of population

6

31

69

92

101

255

7

36

70

103

128

308

0 50 100 150 200 250 300 350

Singapore

Malaysia

Thailand

Vietnam

Philippines

Indonesia

Population projection (mid-2030, Millions) Population (2015, Millions)

Source: fDi Benchmark (IMF and Population Reference Bureau World Population Data Sheet)

Population by country, 2015-2030

Indonesia’s population is the 4th largest in the world and will increase to over

300 million people


Competitive strengths for for services - Skilled workforce

Source: fDi Benchmark (Global Competitiveness Report, World Economic Forum, Switzerland, 2015-16 )

Availability of Scientists and Engineers – out of 7 (2015)

3.9

4.0

4.2

4.3

4.5

4.6

3.4 3.6 3.8 4 4.2 4.4 4.6

Vietnam

Philippines

India

Thailand

China

Indonesia


Competitive strengths for for services – Available workforce

Unemployment rate, 2015-2020

3.6%

6.0%

4.1%

3.2%

2.4%

2.0%

0.8%

5.9%

8.4%

6.0%

4.0%

2.9%

2.9%

1.9%

0.8%

6.3%

0% 1% 2% 3% 4% 5% 6% 7% 8% 9%

India

Philippines

China

Malaysia

Vietnam

Singapore

Thailand

Indonesia

Forecast Unemployment Rate in 2020 (%) Unemployment Rate in 2015 (%)

Source: fDi Benchmark (Economist Intelligence Unit March 2016 & International Monetary Fund 2016)

Indonesia has the least tight labour market in ASEAN


Competitive strengths for for services – Low taxes

Total Tax Rate (% profit) in 2015

61%

68%

43%

40%

39%

28%

30%

0% 10% 20% 30% 40% 50% 60% 70% 80%

India

China

Philippines

Malaysia

Vietnam

Thailand

Indonesia

Source: fDi Benchmark (World Bank Doing Business 2016)

Indonesia has low effective tax rates


Competitive strengths for for services – Lowest wages in ASEAN

Average monthly wages, USD, 2011-2020

Source: EIU

0.00

100.00

200.00

300.00

400.00

500.00

600.00

700.00

800.00

2011 2012 2013 2014 2015 2016 2017 2018 2019

Indonesia

Malaysia

Philippines

Thailand

Vietnam


Competitive strengths for for services – Low labour costs for engineering positions

Labour costs by country for an engineer, USD, 2015

Source: fDi Benchmark

57537

24030

15893

15840

15552

13801

12000

11029

0 10000 20000 30000 40000 50000 60000 70000

Singapore

China

India

Malaysia

Thailand

Indonesia

Philippines

VietnamIndonesia has highly competitive labour

costs


Competitive strengths for for services – Innovation

Total of Patent applications, non-residents (foreign investors) (2014)

3255

3960

6267

6924

9009

7321

0 1000 2000 3000 4000 5000 6000 7000 8000 9000 10000

Philippines

Vietnam

Malaysia

Thailand

Singapore

Indonesia

Source: fDi Benchmark (World Bank World Development Indicators)


Competitive strengths for for services – Low cost of living

Cost of Living Index, 2015*

Source: fDi Benchmark *Rating 0-10 (0=lowest cost of living; 10=highest cost of living) (2014)

5.7

3.28

2.22

2.14

1.86

1.82

1.4

1.79

0 1 2 3 4 5 6

Singapore

China

Malaysia

Thailand

Philippines

Vietnam

India

Indonesia

The Investment Coordinating Board of the Republic of Indonesia

21

Badan Koordinasi Penanaman Modal (BKPM)


Jln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesia

t . +62 21 525 2008

f . +62 21 525 4945

e . [email protected]

Contact Centre :0807 – 100 – 2576 (BKPM)

www.bkpm.go.id

Thank You

Terima Kasih

Documents

Technical Services Investment Proposition€¦ · Indonesia Investment Coordinating Board Why Canadian firms are investing in Indonesia Indonesia’s GDP will increase by over 150%