Indonesia : the Archipelago Economy

«Indonesia: the «Indonesia: the Archipelago Economy»Archipelago Economy»

Mr. Luca Vianelli, Partner and Managing DirectorMr. Luca Vianelli, Partner and Managing DirectorMDA CONSULTING S.E.A. – BANGKOK MDA CONSULTING S.E.A. – BANGKOK

““Strategy is important but execution is everything”Strategy is important but execution is everything”

““ASEAN: lo sviluppo dei mercati mondiali ASEAN: lo sviluppo dei mercati mondiali passa passa per il sud-est asiatico”per il sud-est asiatico”

Confindustria Vicenza, 19Confindustria Vicenza, 19thth December 2012 December 2012

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AGENDAAGENDA

1.1. Facts of IndonesiaFacts of Indonesia

2.2. Strategic Sectors FocusStrategic Sectors Focus

3.3. Trade Statistic with ItalyTrade Statistic with Italy

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Facts of IndonesiaFacts of Indonesia

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• Country name: Republic of Indonesia

• Capital city: Jakarta - 24 Million inhabitants (2010)

• Total Area: 1,904,569 km2 - World ranking 16

• President: Susilo Bambang Yudhoyono (since October

2004)

• Population: 240,271,522 (July 2009 est.) – World ranking: 4

• Language: Bahasa Indonesia, English, Dutch and local

dialects

• Currency: IDR (Indonesian Rupiah)

• Religion: Islam (majority), Christian, Catholic, Buddha,

Hindu – Indonesia is the largest Muslim country in the

world

Indonesia at a GlanceIndonesia at a Glance

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Indonesia and ASEANIndonesia and ASEAN

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Sound Economic Fundamentals

• GDP size of over US$ 800 billion in 2011, Indonesia is the largest economy in Southeast Asia;

• Indonesia’s economy grew by 4.5% in 2009, 6.1% in 2010, 6.2% in 2011, and 6.3 in 2012 (average from 2000-2010 is 5,2%); 

• GDP Standard deviation annualized (2000-2010): 0,86%

• Inflation rate (2011): 8,4

• Share of debt to GDP: 25%

• Private consumption accounts for 70% of GDP;

• Nominal per-capita GDP is expected to quadruple by 2020;6

Source: McKinsey Global Institute

2012 Actual Figures

• Indonesia is 16th largest economy in the world;

• 45 million members of the consuming class;

• 53% of the population in cities producing 74% of the GDP;

• 55 millions skilled workers in the Indonesian economy;

• USD 0,5 trillion market opportunity in consumer services,

agriculture and fisheries, resources and education;

7Source: McKinsey Global Institute

2030 Projected Figures

• 7th largest economy in the world (10th in 2020);

• 135 million members of the consuming class;

• 71% of the population in cities producing 86% of the GDP;

• 113 millions skilled workers needed;

• USD 1,8 trillion market opportunity in consumer services,

agriculture and fisheries, resources and education;

8Source: McKinsey Global Institute

Dynamic Demographic Base

• Over 50% of the population (240 million people) is under 29

years old and lives in the urban area;

• Education spending accounts for 16% of total government

expenditures, higher than any other sector, and university

graduates are trained in technical fields such as finance and

economics (28%) or engineering and sciences (27.5%);

• Labor cost is relatively low compared to neighboring

countries;9

Emerging Urbanization

• Jakarta

• Gretear Jakarta: Bogor, Bekasi and Tangerang;

• Medan, Bandung, Surabaya;

• Pakanbaru, Pontianak, Karawang, Makassar, Balikpapan

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Emerging Digital & Tech Driven Nation

• 220 Millions of mobile subscribers;

• Internet annual growth rate is 20% in average: 2016 shall

reach 100 million people;

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Abundant Natural Resources

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Renewable Energies

• Indonesia is rich in non-renewable energy (coal), renewable

energy (geothermal and hydro power), and agricultural products

(palm oil, cocoa and rubber).

• Natural resource-based export has expanded to 52.7% of total

share in 2010 from 50.3% in 2009.

• Development potential is far from saturated, particularly in

renewable energy.

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Major Challenges

• Productivity

• Inequalities as uneven distribution of growth

• Infrastructure ‘s system as bottle neck

• Skilled labor availability

• Corruption

• Red tape

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Strategic Sectors FocusStrategic Sectors Focus

1.1. AgricultureAgriculture

2.2. EnergyEnergy

3.3. Renewable EnergiesRenewable Energies

4.4. InfrastructuresInfrastructures15

AgricultureAgriculture

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Agriculture: Sector SnapshotAgriculture: Sector Snapshot

• Contribution to GDP: 15.3% (2010)• Contribution to Exports: 3.17%• Number Employed: 41 million (2010)• Main Products: Palm Oil, Rubber, Cocoa,

Cassava, Coffee, Tea, Tobacco, Rice.

• Main Export Markets: China, USA, Japan, Singapore, Korea, EU.

• Changes to the Negative Investment List for 2010 have opened up parts of the agricultural sector that were previously closed to foreign investment.

• For example, investors can now own up to 49% in staple crop plantations over 25 hectares such as soybeans, sweet potato, rice and cassava;

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Agriculture: World Palm Oil Production Agriculture: World Palm Oil Production (2009)(2009)

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Agriculture - Palm Oil Plantation PlanAgriculture - Palm Oil Plantation Plan

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Source: Oil Palm Business Association

The 2007’s EU directive that makes mandatory to use at least 10% of biofuel in transportation by 2020 is also contributing to the growing demand.

Demand for exports is being driven by China and India’s rapid growth for use as edible oils in foodstuffs and for bio-fuel production.

Agriculture – Palm Oil Agriculture – Palm Oil

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• Indonesia is the world’s 2nd largest natural rubber exporter after Thailand, while having the largest area of rubber plantations.

• Demand is predicted to reach 16.2 million MET by 2020 up from 11.2 million MET for 2011 (International Rubber Study Group).

• Consumption of national production is currently only at 15%.

Agriculture – RubberAgriculture – Rubber

• Investors may own up to 95% of a 25 hectare or more plot of land for cultivation and integrated downstream facility; this includes sheet rubber, thick latex and the crumb rubber industry.

(as per the Negative Investment List 2010)

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• Indonesia is the world’s 3rd largest cocoa exporter for 18% of global market share with 470,000 MET produced in 2010.

• Demand is arising out of increased confectionary and chocolate consumption from markets such as China and India as well as the European Union.

• Indonesia’s cocoa production is concentrated in Sulawesi where 63% of the country’s raw cocoa is produced.

• The value added chain in cocoa is a priority area for the government with the target of $6.25 billion USD in export value by 2025.

• The target of 1 million MET annual output over the period 2013-2014 requires investments and meet

Agriculture – CocoaAgriculture – Cocoa

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EnergyEnergy

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Energy – Sector SnapshotEnergy – Sector Snapshot

Contribution to GDP: 11% (2010)Imports: $2.36 billion (2010)Proven Oil Reserves: 4.2 billion barrels (end 2010)Proven Gas Reserves: 108.4 trillion cubic feet Proven Coal Reserves: 5529 million METProven potential in Geothermal Energy: 27 GWProven potential in Hydropower: 75 GWOther Energy Sources: Coal Bed Methane, Biomass, Solar, Sea Current EnergyCurrent Energy Mix:

Oil 47.6%, Coal 26.3%, Gas 21.4%, Hydro 3.2%, Geothermal 1.5% (2010)

Relevant Law : Energy Law No.30/2007 Setting the National Energy Policy on course to secure energy security and pursue greater reliance on renewable energy by providing incentives for its development.

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Energy Mix: 2010 vs. 2025Energy Mix: 2010 vs. 2025

Source: PLN

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Energy - Coal’s volumes prodictionsEnergy - Coal’s volumes prodictions

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Energy - Countries Ranked for Coal Energy - Countries Ranked for Coal (2009)(2009)

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Renewable EnergyRenewable Energy

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• Indonesia is the 2nd largest producer of coal bed methane (CBM) after China with reserves of 453 trillion cubic feet;

• Indonesia has the largest proven global reserves of CBM with the main sources being located in Kalimantan, South Sumatra and Riau.

• Production targets are set at 500 tcf (2015) and to 900 tcf (2020);

• The first CBM fed power plant located in East Kalimantan will come on stream in 2011 (operated by PT Ephindo in a consortium with GE).

• 5 further work areas are also expected in 2011.

• Pricing of CBM power for the domestic market is at $0.27 USD per kwh; 50% lower compared to diesel. PLN forecasts that CBM could produce as much as 2000 MW of power for the country by 2015.

Energy – Coal Bed Methane (2010)Energy – Coal Bed Methane (2010)

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Energy – Bio-ethanol PlanEnergy – Bio-ethanol Plan

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Energy – Biodiesel PlanEnergy – Biodiesel Plan

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Renewable Energy PotentialRenewable Energy PotentialEnergy Resource Potential in Indonesia:

Major Islands Geo Thermal Hydro Biomass

  Mwe MW MWJava 3086 54 13622Bali 226 20 347Sumatra 5433 5489 6433Kalimantan - 6047 6231

Sulawesi 721 4479 5337Nusa 645 292 1174Tenggara - - -Maluku 142 217 1093Papua   24974 6814Total 10027 41436 41651* total geothermal potential: installed, reserve, and resources  for electricity is around 20,000 MW Source: DESDM, RUKN (National Electricity Master Plan), 2004

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InfrastructuresInfrastructures

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Infrastructure: Sector SnapshotInfrastructure: Sector Snapshot

Contribution to GDP: 6% (2010) Existing Road Network: 476,337 km (2009)Existing Railway Network: 4,800 kmNumber of Airports: 187 (local and international)Number of Commercial Sea Ports: 111 

Main Government Bodies: Ministry of Transport, BAPPENAS, Ministry of Public Works, Ministry of State Owned Enterprises through Directorate General of Highways, the Indonesian Toll Road Authority.

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Indonesia’s vast size stretching over 5,000 km across the equator and being made up of over 17,000 islands has made the development of an efficient national transport network a challenge and priority.

Infrastructure - ChallangesInfrastructure - Challanges

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•Rail – Accounts for less than 10% of passenger and less than 1% of freight transport. Jakarta is the largest city in the world without proper intra-city rail;

•Roads - 35% of subnational roads and 10% of national roads are classified as “Heavily Damaged”; subnational roads are 92% of network; •Ports - Indonesia has only 2 international hub ports; no investment for 25 years;

Source: Glendale Partners

The 6 Economic CorridorsThe 6 Economic Corridors

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Infrastructure – Seaport Future ProjectsInfrastructure – Seaport Future Projects

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Trade with ItalyTrade with Italy

Interscambio Italia-IndonesiaInterscambio Italia-Indonesia

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Export dall’ItaliaExport dall’Italia

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Import dall’IndonesiaImport dall’Indonesia

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• Eni – Saipem

• Perfetti Van Melle

• Lotto Sport Italia

• Gruppo Mastrotto

• Sacmi - Sicem – Smalticeram

• Zambon

Italian Companies Doing Business Italian Companies Doing Business in Indonesiain Indonesia

MDA S.E.A. CONTACTSMDA S.E.A. CONTACTS

MDA Consulting S.E.A. Co. Ltd.MDA Consulting S.E.A. Co. Ltd.Bangkok ThailandBangkok ThailandSuite 504 Tonson BuildingSuite 504 Tonson Building

50 Soi Tonson Ploenchit Road50 Soi Tonson Ploenchit RoadBangkok 10330Bangkok 10330

Tel: Tel: +662 6522447 +662 6522447 Fax: Fax: +662 6522448+662 6522448

Email: Email: [email protected] site: Web site: www.mda.co.th

““Strategy is important but execution is everything”Strategy is important but execution is everything”43

Population’s Growth ProjectionPopulation’s Growth Projection

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