Masterplan Acceleration and Expansion of Indonesia Economic Development 2011 - 2025

1. The Proposal MasterplanAcceleration and Expansion of Indonesia Economic Development2011 - 2025 Luky Eko Wuryanto Coordinating Ministry for Economic Affairs Republic of Indonesia Seoul, February 17 - 2011

2. Benchmarking current performance of Indonesia’s economy

3. Robust Macro Economic Indicators In US$

4. Young and Increasingly Productive Population Source: Nat. Statistics Agency More than 30 years span of demographic bonus

5. Rich Natural Resourcesmost of them are still intact to be processed into higher VA products • Abundant resources for gas-based energy and petrochemical industries • Not including Non- Conventional Gases, from Coal Bed Methane and Coal Gassification About 40% is assumed feasible. Up to now, 1.200 MW has been developed. Will be at least partially processed domestically by 2013 (new mining law: 4/2009)

6. Stepping up in Global Influence 100 years of independence • Note: • *) Calibrated using G-Sachs and Standard Chartered Bank predictions for Indonesia 2050.

7. The Proposal The Economic Transformation Plan

8. Justifications (urgency) • Strengthening competition among (mainly) developing nations • Business as usual is no longer enough  • Reassessing our historical engine of growth • Smart and strategically resolving lack of infrastructure provisions  utilize more intensively other potential source of fundings (PPP, state owned companies, FDI’s) • Realign industrial policy based on nation’s strength at global economy  the winner at global value-chain ...

9. Vision and Targets for 2025 Notes: GDP(Nominal IMF-2008): US$ 512 billion. CBS’s estimate for 2009 is around US$ 500 billion This is according to AC Nielsen survey. An individu categorized as a middle class if their annual income minimum US$ 4.000 (2008) HDI is Human Development Index, which is annually surveyed by the UNDP EoDB is Ease of Doing Business (the World Bank) Non-official predictions.

10. The proposals : ... resulted from intensive dialogues and exhanges of commitments with various business communities Creating higher VA products Innovation boost Integration re-gional & sec-tor dev’t, SEZ. Clusters, etc. Demand driven, costumized incentives, stra-tegic initiative Economic Transformation Plan Government more as facilitator and catalyst Business as Usual time

11. Main Thrust .... Main Strategy Strategic Initiatives Inviting FDI’s from Partner Countries for large-scale investment Demand driven costmi- zed incentives SEZ in-dustry clusters, regional development Determining 6 Economic Development Corridors Strengthening National Connectivity Enhancing HRD and R&D capability Fast-track (& strategic) projects in 18 economic areas within 6 corridors Quick wins SEZ PPP facilitation on soft and hard infrastructure etc. Realign soft (laws, re- gulations etc.) & hard infrastructure (enablers) of national imporantance Nation-wide actions to revitalize facilitations for prioritized econ. activities Affirmative actions for economic development in remote areas Realign gov’t regular programs for social welfare

12. 18 Main Economic Areas Shipping Industry Telecom Industry Textile Industry Machinery Industry Food & Bev. Industry Sunda Strait Bridge For strategic fast-track projects Steel Industry Greater Jakarta Palm Oil Food Estate Includes staple food crops, cacao, sugar Rubber Tourism Oil and Gas Fisheries Developed integratedly within 6 economic corridors Coal Bauxite Nickel Copper

13. Investment opportunities

14. Sumatra Economic Corridor Sumatra (swarnadwipa) - land of the hope FTZ, collaborating with Singapore, Shipyard and petrochem clusters Kuala Tanjung International Hub Port Rubber and Palm oil industry cluster, SEZ North Sumatra Prov.: Own 17 % national fresh water reserve Palm oil industry cluster, SEZ • South Sumatra Prov.: • Own 183 TCF CBM (40% national reserve) • Own 52 bill ton of coal reserve (50% national reserve) Oil & Gas, Coal Gasification Cluster, SEZ Rubber estate nodes Sunda Strait National Strategi c Area Palm oil estate nodes Proposed locations of SEZ Industrial Area/Cluster Coal mining nodes Domestic ship route network Railway network Main trunk to outside corridor

15. Jawa Economic Corridor Metropolitan Surabaya Steel & Petrochem clusters Metropolitan Jakarta Petrochem Clusters Largest shipyard in Indonesia Food industry complexes Food industry nodes Textile indutry nodes Transport tool & machinery industry nodes Proposed location of SEZ Industrial areal/cluster Domestic ship route network Main trunk to outside corridor

16. Kalimantan Economic Corridor Oil & Gas based Industry clusters Future Coal Gasification clusters Aluminum industry cluster Steel industry Cluster Oil and Gas node Palm oil nodes Coal mining nodes Forestry node Proposed location for SEZ Industrial area/cluster Fishery node Domestic ship route network

17. Sulawesi – Nor. Maluku Economic Corridor Fisheries and Marine Tourism hub Eastern Indonesia Metropolitan Nickel industrial complex LNG based indust. complex Nickel processing node Foodcrops node Cacao and coconut node Proposed location for SEZ Fishery node Industrial area/cluster Domestic ship route network

18. Bali – Nusa Tenggara Economic Corridor 0,5 hour flight Komodo dragon island Lombok based hub Bali based hub Foodcrops nodes Mt. Bromo Kelimutu Volcano Wonders Livestock nodes Tourism activity nodes Fishery node Proposed location for SEZ Industrial area/cluster Domestic ship route network

19. Papua – Maluku Econoimc Corridor Raja Ampat Diving Spot Hydropower potentials ~ 10 – 15 GW Fisheries Cluster and Marine Tourism spoke Oil & Gas, Gold mining Clusters Large-scale Food crops and Energy Estate, SEZ Agriculture activity nodes Oil, Gas and Gold mining nodes Industrial area Domestic ship route network Main trunk to outside corridor

20. Government mega projects

21. Greater Jakarta: • ~ 60% of national export is originated from. • Concentration of > 30% of national motor vehicles. • Various infrastructure project (port – airport expansion, MRT’s, monorail, toll roads, sewerage, and flood control system, new capital city for central government. • Cost estimate: > US$ 50 billions . • Scheduled to be fully operational by 2020. • Sunda Strait National Strategic Area: • National vital as it links 2 of the most important islands. • Integrated area development: bridge + 2 areas in each side of the island. • Scheduled to be ground-breaking in the mid 2014. • Cost estimate: ~ US$ 30 billions. • Food & Energy Estate (Papua & Sulawesi): • Moderized farming for staple food and bio energy crops. At the later stage: processing center. • Consist of area close to 600.000 Ha’s . • Scheduled to be ground-breaking before end of 2012. • Cost estimate: ~ US$ 10 – 15 billions (from Papua food and energy estate project alone).

22. Revitalizing government facilitations

23. Establishing Special Economic Zone (SEZ): • Under Law 39/2009 • SEZ could be proposed by private sector (company) • Each economic activities entitles to an extensive tax and custom exemptions, as well as on non-fiscal insentives. • Exemption from ownership limitations regulation (negative list). • Specialized setup for labor relation institutions. • Tax holiday/allowance: • Tax holiday is entitled for pioneering industries (Gov’t Regulation 94/2010) • Tax allowance is entitled for national priority sectors and specialized promoted areas (Gov’t Regulation 62/2008)  for 23 sub-sectors (in 77 business fields) ranging from forestry, mining, estate crops, fisheries up to various manufacturing sub-sectors. • Amount of tax deduction is 30% of total investment value, charged in 6 year period. In addition : accelerated depreciation, very low income tax charged to foreign tax subject and loss compensation up to 10 years • Government Guarantee: • Regulated by Presidential Decree No. 78/2010 • Dedicated to guarantee various infrastructure project from many types of risks (including political risk)

24. Others: • Stronger/decisive land acquition law for development (forthcoming, ~mid 2011) • Very simple and standardized investment procedures (Investment Coordination Agency) – from central to local level. • Ever improving National single windows system for export and import purposes. • Substantial improvements in health and education infrastructure as well as R&D facilitations • Etc.

25. thank you Sunda Strait Bridge ~ 32km (artist impression)