Technical Services Investment Proposition€¦ · Indonesia Investment Coordinating Board Why...
Transcript of Technical Services Investment Proposition€¦ · Indonesia Investment Coordinating Board Why...
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
Indonesia Investment Coordinating Board
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)
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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)
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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.
Indonesia Investment Coordinating Board
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.
Indonesia Investment Coordinating Board
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)
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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
Indonesia Investment Coordinating Board
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)
Indonesia Investment Coordinating Board
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)
Indonesia Investment Coordinating Board
Jln. Jend. Gatot Subroto No. 44Jakarta 12190 - Indonesia
t . +62 21 525 2008
f . +62 21 525 4945
Contact Centre :0807 – 100 – 2576 (BKPM)
www.bkpm.go.id
Thank You
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