Guidelines for German Investors

HOW TO DO BUSINESS IN INDONESIA

Facilities Strategic Location Cost of Doing Business Open and Liberal Market Economy Trend of German Investors in Indonesia

MESSAGE OF WELCOME The Republic of Indonesia and the Federal Republic of Germany have been bound over the years by a spirit of friendship, cooperation and mutual respect. Upon this solid foundation, the Government as well as the people of the two countries nurtured and cultivated their relations extending to all fields of interaction to the benefit of all involved. With this fortunate background, also business and entrepreneurial relations between the two countries flourished. For Indonesian businessmen, Germany represents a source of technological and other know-how besides being a major market in particular with respect to their endeavors to expand their activities in the European Union. In turn, for German entrepreneurs and businessmen, Indonesia represents not only a vast market for their products. Indonesia moreover offers with its abundant skilled labor force and raw materials as well as its well developed infrastructure and conducive economic climate an ideal location for investment in many fields of business enterprise. The strategic location of the country in the crossroad in Southeast Asia also contributes to the viability of establishing businesses there.

In this vein, it pleases me very much to present to you the book How to do Business in Indonesia published by the Embassy of the Republic of Indonesia in Berlin in cooperation with the Investment Coordinating Board of the Republic of Indonesia. I sincerely hope that the compilation of opportunities open for foreign investors described in the book will be a guideline and at the same time an incentive for you to consider Indonesia as your favored location for investment undertakings. I herewith invite you to invest in Indonesia and wish you all the best and success. Berlin, 12 October 2009

EDDY PRATOMO Ambassador of the Republic of Indonesia for the Federal Republic of Germany

FOREWORD It is such a great pleasure that the Indonesian Embassy in Berlin, Germany, has initiated the idea to bring forward the book of How to do Business in Indonesia as quick and simple investment guidelines for German investors. Despite the fact that there is a number of investment-related guidelines available, it is assured that this book is useful in providing information about investment regulations and facilities in Indonesia. This book also contains a number of potential investment opportunities and investment-related website links that might interest German business community in particular. This book is not intended as a primary source of Indonesian investment yet it provides data and information revealing Indonesia as a promising and potential investment destination. Germany has a major role in Indonesian investment. It ranked 11th in Indonesia investment realization as of February 2009. The fact has proven that both Indonesia and Germany have been sharing close relations especially in trading and investments. In closing, this book is expected to be beneficial in enriching points of view in regards to investing in Indonesia. To get further information, investors may want to contact the embassy or our available offices to proceed with the whole investment procedures.

Thank you and welcome to the country where business opportunities await you. Jakarta, 12 October 2009

The Investment Coordinating Board of the Republic of Indonesia

How to do Business in Indonesia Table of Contents Page I. II. Indonesia at a Glance About Indonesia 1. Geography 2. The People 3. Government and Politics 4. Bilateral Relations between Indonesia and Germany 5. Key Economic Indicators Why Indonesia 1. Large Population 2. A Vast and fertile land rich in natural resources 3. Large numbers of Small and Medium Enterprises 4. Strategic location: vital international transport routes 5. Open and liberal market economy 6. Free foreign currency exchange system 7. Competitive investment incentives 8. FDI Confidence Index 9. List of German Investors in Indonesia 10. Testimonials Other Advantages 1. Trend of German Investment in Indonesia 2. Investment Policies Features of the New Investment Law Number 25/2007 3. Negative List on Investment 4. Immigration Service Facilities 1 3 4 4 4 4 5 7 7 7 7 8 8 9 9 12 12 16 18 18 21

III.

IV.

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5. Industrial Estates and Bonded Zones 6. Facilities 6. a. Infrastructure Facilities 6. b. Business Facilities 7. Cost of Doing Business 8. Application of Foreign Investment 9. List of Public-Private Partnerships Projects in Indonesia 9. a. Project Ready for Offer 9. b. Priority Projects 9. c. Potential Projects 10. Planning Document of Public Private Partnerships V. Contacts A. List of Important Related Websites B. Related Regulations on Investment

27 33 33 35 37 42 46 46 46 46 47 48 48 51

I. Indonesia at a Glance Indonesia, with its population of almost 230 million people, more than 17,000 islands, hundreds of ethnic groups and languages, as well as its strategic geographic location, occupies a significant place in Southeast Asia. Increasingly, Indonesia plays a prominent role in global politics, highlighted most recently by its participation in the G-20 summit meeting in London. The contribution of Indonesia to the global efforts to address the current world financial crisis also testifies to the international recognition of its positive economic developments, which brings it in line with Brazil, Russia, India and China (BRIC) as a new economic power. In line with the progressive economic policy, several measures were enacted in the past to facilitate foreign direct investment in Indonesia in a number of sectors. This policy was stressed most recently by the introduction of the New Law on Investment No. 25/2007 which further contributes to creating conducive atmosphere for investment. In order to create a sound economic development, the government has also change the mindset to the new Indonesia which is pro business, pro growth, pro job creation and pro poor. Emphasis on transparency and accountability such as zero tolerance towards corruption, good governance and efficient economy has also become a stressing points of the government. Moreover, Indonesia is a major regional player in the region which could be seen in its active role in some regional organizations like ASEAN, SWPD, APEC and ARF. In the context of ASEAN, the recent inclusion of Japan, China and South Korea (ASEAN + 3) in the regional political round adds added weight to the role of Indonesia. 1

With the success of the ongoing reform efforts of its political structure, Indonesia is now the third largest democracy in the world. The national parliamentary and presidential elections conducted peacefully and orderly in April and July 2009 testified to the maturing democratic conscience among the population. Also in terms of culture, Indonesia is destined to become a magnet of world attention. Indonesia is the largest Muslim country in the world with Muslims accounting to almost 86% percent of the population, of whom the vast majority are moderate both in practice and outlook. As a multireligious, multi-ethnic and a multi-cultural country, Indonesia attaches great importance to a harmonious coexistence of different religious faiths as well as ethnic and cultural groups. The Obama administration has designated Indonesia the worlds largest Muslim-populated country and third largest democracy as a key partner in the administrations Muslim outreach. US State Secretary Hillary Clinton during her visit to Indonesia in February 2009 said that Indonesia could be seen as an example of success in combining Islam, democracy, modernity and progress of the role of women.

II. About Indonesia Map of Indonesia

Source : BKPM

1. Geography a. Land area: 2 million sq. km (736,000 sq.mi.) (16th largest country) b. The worlds largest archipelago with more than 17,000 islands: 6,000 are inhabited: 1,000 of which are permanently settled. c. Climate: tropical; cooler in the highlands 16350C (77-900F) d. Humidity: 80-900% 2. The People a. Population: 230 million (fourth-most populous country) b. Ethnic: 300 ethnic groups with 700 languages and dialects c. National language: Bahasa Indonesia d. Religion: 87% Islam (worlds most populous Muslim-majority), 6% Protestant, 3% Catholic, 2% Hindu, 1% Buddhist 3. Government and Politics a. Form: unitary republic with a presidential system b. Since 2004, president (as head of government and head of state) and vice president are directly elected. c. General election on April and July 2009 has re-elected Dr. Susilo Bambang Yudhoyono as President with new Vice President Prof.Boediono. d. Multi-party system 4. Bilateral Relations between Indonesia and Germany a. Political Relations Ever since the opening of diplomatic relations in 1952, the Indonesian-German bilateral relations have proceeded on positive and friendly terms. Indonesia sees Germany as an important partner both on a bilateral level and with regard to its relations with the European Union.

This has been indicated among others by the exchange of visits at the levels of the Head of State/Government, ministerial and of senior officials as well as exchange of visits among members of parliaments of both countries. b. Economic Relations Currently, some 250 German companies do business in Indonesia, many with their own production facilities. In 2007, the volume of trade between the countries increased by 9.3%, to EUR 4.737 billion, compared with EUR 4.333 billion in 2006, with a larger surplus of EUR 1.565 billion in Indonesias favour (2006: EUR 1.28 billion). In 1999, the German Industry and Trade Centre (German Centre Indonesia) was opened in the satellite city Bumi Serpong Damai (approx. 35 km west of Jakarta). The Centre provides production and office space complete with the necessary infrastructure and state-of-the-art communications. 5. Key Economics Indicators Items GDP growth Per Capita Income Reserve Interest Rate Foreign Debt Ratio Inflation Rate Inflation Target 2008 6.1% Rp.21,7 million (US$ 2.271,2) US$ 51,6 Billion (Dec) 8.75% 30.7 % 11.06 % 6.04% (May 09 : May 08) 0.10% (Jan-May) 4,5% (1%) 5 US$ 57.87 Billion(May) 7. 50 % 2009 3.5 4.5% (target)

Investment Realization (Jan Dec)

US$. 17.13 Billion (up 20.5 %) 7.8 million (7%) - target

Unemployment 9.53 million (growth) (8.46%)

III. Why Indonesia 1. Large population Indonesia is literally a giant. Its market alone exceeds some 230 million people, making it the fourth largest country in the world in terms of its population after China, India, and the United States. Business should cater the needs of 65 million households. About 138 million or about 60 percent live on the island of Java, the most densely populated island in the country. Those numbers also translate into a vibrant labor force of skilled and educated workers. 2. A vast and fertile land rich in natural resources The second reason why Indonesia is a perfect place for business is its vast and fertile land that enriches its natural resorces. Ranked as the 16th largest country in the world, Indonesia, with its tropical climate and humidity, is rich in natural resources. Indonesias crude palm oil is ranked as the best in the world, while its tin, cocoa and copper occupy the 2nd position. Other natural resources such as nickel, gold and coopper are ranked 5th, 7th and 8th,respectively, as well as numerous marine resources. 3. Large numbers of Small and Medium Enterprises With the abundance of its natural resources and the quality of its fertile land at hand, the business people in Indonesia have remarkably utilized those advantages by establishing small and medium enterprises within various sectors.

The staggering number of 42 million people, of which mostly are dominated by local private business entrepreneurs, have built their small and medium enterprises while managing to make millions of profit. This fact shows that the economy in Indonesia is not solely run by giant business companies, but also by simple local businessmen who have started with few pennies and turned them into businesses worth thousands of dollars. 4. Strategic location: vital international transport routes Indonesia is located between 2 continents (Asia and Australia) and 2 oceans (Pacific and Indian) which puts it in a strategic location for international transport routes. One of the most important transport routes vital for international transport and used by international shipping for business purposes is the Malacca strait. Malacca strait lies between Malaysia and Indonesia (Sumatera island). Many ships navigagte through the Malacca strait en route to Australia and other Asia countries. 5. Open and liberal market economy The Free Trade Area regulation will be applied within six years in the ASEAN region which will also include Indonesia. The Free Trade Area will usher in the market economy in Indonesia with its open and liberal policies. Every sector in Indonesia is open for investment. With the simplification of rules and regulations, Indonesias market economy will be openly accessible for foreign investors.

6. Free foreign currency exchange system In the case of business profits in particular, a foreign investor will be able to transfer the profit of his business in Indonesia straight to his homeland and convert into the currency of his homeland without any involvement by the central government. This is one of the advantages for foreign investors as there will be no complicated procedures in receiving their profits in the currency of their country. With respect to the foreign exchange systems, the central government of Indonesia does not restrict investments with regulations with the view to ease the process. 7. Competitive investment incentives A. Indonesia offers investment incentives to any investors that expand its business or effect new investments in Indonesia. Investors receiving facilities must meet at least one of the following criteria: a. employment of local labor force b. involvement of high priority scale c. involvement of infrastructure development d. technology transfer e. pioneering of new energy f. domiciling in remote, deserted, border or any other areas deemed necessary

g. preservation of the environment h. conducting research, development and introducing innovation i. entering into partnership with micro, small and medium businesses or cooperatives using capital goods or machinery or equipment produced domestically 9

j.

B. Incentives for investors may be given in the form of: a. Net income tax deduction up to a certain level of investment made within a certain period. b. Import duty holiday or reduction for imported capital goods, machinery or equipment domestically unavailable for production. c. Import duty holiday or reduction for raw materials or support materials for production within a certain period and with certain conditions. d. Value added tax holiday or postponement for imported capital goods or machinery or equipment domestically unavailable for production within a certain period e. Accelerated depreciation amortization; and f. or

Property tax reduction especially for certain business sectors in certain region, area or zone.

Apart from the facilities mentioned earlier, investors are given facilities in obtaining: a. Land rights b. Immigration service facilities c. Import approval facilities These three facilities will be elaborated in the later sections. C. Land rights In land ownership, following facilities are given to investors: a. Right to Cultivate (HGU) for 25 years and it can be extended for another 25 years and renewed for another 35 years. 10

b. Right to Build (HGB) for 30 years and it can be extended for another 35 years and renewed for another 20 years. c. Right to Use (HP) up to 25 years and it can be extended for another 20 years and renewed for another 25 years. D. Imports Permit Facilities Imports permit facilities are given for goods with several conditions as stated below: a. Goods which are allowed to be imported as stated in the trading goods regulations. b. Goods which do not have negative impacts to health, safety, security, environment, and the moral of the nation. c. Goods destined to be relocated to Indonesia from companies in foreign countries. d. Capital goods or materials for the purpose of ones own productions. Import Duty (Minister of Finance Decree No. 135/KMK.05/2000 and its Amendments) a. The final tariff maximum 5% for equipments and raw materials imported in the framework of development of investment projects b. Import duty tariff of 5% or lower listed in the Indonesian Custom Tariff Book; the effective tariff shall be those in BTBMI. c. Import duty is levied on import for a period of 2 years starting from the date of stipulation of the decision on relief of import duty.

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8. FDI Confidence Index Foreign Direct Investment (FDI) Confidence Index 2007 (ATKEARNEY Survey 2007) The Top 25 Most Attractive FDI Destination 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. China India U.S.A U.K Hong Kong Brazil Singapore United Arab Emirates Russia Germany Australia Vietnam France 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. Canada Japan Malaysia Gulf Countries South Africa Mexico Turki Indonesia Polandia Middle Asia South Korea Czech Republic

9. List of German Investors in Indonesia

Logo Company's Name Adidas Indonesia Address Plaza DM, 14th floor Jl. Jend. Sudirman Kav.25 Jakarta 12920 Summitmas II, 20st floor Jl. Jend. Sudirman Kav. 61-62 Jakarta 12190 Business Line Footwear, apparel, sourcing

PT. Asuransi Allianz Utama Indonesia

General insurance

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PT. Bayer Indonesia

MidPlaza I, 12th-15th floor Jl. Jend. Sudirman Kav. 10-11 Jakarta 10002 Wisma GKBI, 21st floor Jl. Jend. Sudirman 28 Jakarta 10210 Wisma Standard Chartered, 11th floor Jl. Jend. Sudirman Kav. 33 A Jakarta 10220 Deutsche Bank Bldg, 18th floor Jl. Imam Bonjol No. 80 Jakarta 10001 Soewarna Business Park Blok A Lot 8 Soekarno Hatta Int'l Airport Jakarta 19110

Production of pharmaceutical and Over the Counter Medicine (OTC), crop science Distributor of BMW group products (cars, spare parts, accessories) Manufacturer of pharmaceutical

PT. BMW Indonesia

PT. Boehringer Ingelheim

PT. Daimler Chrysler Distributio n Indonesia PT. DHL Danzas Air & Ocean Indonesia

Automotive with brands Mercedes-Benz, Chrysler, and Jeep Logistics worldwide, freight forwarding and logistics solutions, supply chain management, warehousing and distribution Manufacturing and trading of lubricants

PT. Fuschs Indonesia

Jl. Jababeka VI SFB Blok J 6 KL Cikarang Industrial Estate Bekasi 17530

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Lufthansa

Bank Panin Pusat, 2nd floor Jl. Jend. Sudirman No.1 Jakarta 10270 Jl. T.B. Simatupang No.8 Pasar Rebo Jakarta 13760

Flights

PT. Merck Tbk

Manufacturing pharmaceutical products, pharmaceutical raw materials and marketing pharmaceutical s. Food supplements, chemicals, cosmetics Cellphone manufacturer

PT. Siemens Indonesia

Siemens Business Park Jl. M.T. Haryono Kav. 58-60 Jakarta 12780 Jl. Siliwangi, Pasar Kemis, Km 1 Desa Keroncong Kecamatan Jatiuwung Tangerang 15000 VW Centre Jl. Raya Pluit Selatan No. 8A Jakarta 14440 Plaza Mutiara, Lt. II, Suite 1101 Jl. Lingkar Mega Kuningan Kav. E 1.2 No. 1 & 2 Jakarta 12950

PT. Osram Indonesia

Electronics/ele ctric parts supplier

PT. Car And Cars Indonesia (Volkswage n AG) PT. Kosmindo (Wella AG)

Volkswagen cars

Hair cosmetics

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PT. BASF Indonesia

Plaza GRI 10th and 11th floor Jl. Rasuna Said Blok X-2 No.1 Kuningan Jakarta 12950 Bina Mulia 2 Bldg. 3th floor Jl. H.R. Rasuna Said Kav. 11 Jakarta 12950 Deutsche Bank Bldg, Jl. Imam Bonjol No. 80 Jakarta 10310

Producer and distributor for chemical product

PT. Beiersdorf Indonesia

Production and sales of branded consumer goods (HANSAPLAST & NIVEA) Banking

Deutsche Bank AG

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10. Testimonials The relationship between the Federal Republic of Germany and the Republic of Indonesia is sealed by friendship, honour and trust. We share great values of the principles of democracy, Angela Merkel (Chancellor of Germany, congratulations for President Susilo Bambang Yudhoyono on his second election, July 28th 2009-Republika Newsroom) We believed that any crisis in Indonesia will recover rapidly. That's why Indonesia is a potential market for Asia Pacific, Peter Landsiedel (CEO DHL Danzas Air & Ocean Asia Pacific on DHL Asia Pasific Media Tour 2004-Bisnis Indonesia) Indonesia has always been our important market. We have production facilities in Indonesia because the local market is growing, Matthias Luehrs (Director of Marketing and Sales Mercedes Benz for Middle and Eastern Europe, Africa, and Asia, February 7th 2009www.tempointeraktif.com) We are sure that this year, sales in Indonesia would surpass last years sales by net EUR 144 million Helman Trisakti (Head of Energy Automation Tower Transmission Distribution Division, PT 2009Siemens Indonesia, May 27th www.kapanlagi.com)

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Indonesia is my second country. I love Indonesian mountains very much. We have mountains in Germany, but its different in Indonesia, Jens Reisch (President Director PT Allianz Group Indonesia also a mountain hiker, February 1st 2007-www.detikfinance.com) We urge the Indonesian Government to see Germany as one of the most potential European countries because now, Germany sees Indonesia as one of the attractive countries in Asia beside India, Chris Kanter (President of Econid, November 2nd 2007www.detikfinance.com) For the objective to offering a meetingpoint and information-pool, the German Centre Indonesia is an innovative way of supporting business between Indonesia and Germany. Its purpose is to provide tailormade support, especially to small and medium-sized companies from Germany and to cut back financial risks during the start-up period, Gnther H. ttinger (Minister President of the State of BadenWrttemberg-www.germancenter.co.id)

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IV. Other Advantages 1. Trend of German Investment in Indonesia a. Investment Realization 2005 2008 (US$ Billion)

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b. Balance of Trade between Indonesia and Germany 2004 2008 (US$ Thousand)
Source : Statistic Central Board

19

German Exports and Imports Indonesia largely exports textiles, vegetable oil and fat, furnitures, shoes, radio devices, television and hi-fi, and telecommunication devices to Germany. While Germany mainly exports machineries, vehicles, chemicals, metals, foodstuffs, and textiles, particularly various kinds of machineries, such as telecommunication devices, mining and construction machines to Indonesia.
www.bkpm.org/ekonomi.htm

c. Rank of Investment Realization by Countries

(Period of 1 January 1990 31 January 2009)

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German Investment Realization by Sector

(Period of 1 January 1990 31 January 2009) No Sector Projects Value
(in thousand US$)

1 2 3

4 5 6 7

Metal and Machinery Industry Chemical and Pharmaceutical Industry Transport, Storage & Communication Industry Non-Metal Mineral Industry Trade and Reparation Construction Real Estate, Industrial Estate & Office Building Textile Industry Other Services Logistic Services

43 32 6

379.627 318.103 195.363

2 68 5 1

158.054 89.653 57.478 36.250

8 9 10

6 29 6

31.638 30.244 27.264

2. Investment Policies Features of New Investment Law Number 25/2007 Equal Treatment No Minimum Capital Requirement Free Repatriation of Investment & Profit Legal Guarantee Dispute Settlement Investment Services

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3. Negative List on Investment Based on Presidential Regulation No: 111/2007 dated 27 December 207 concerning the Amendment to Presidential Regulation No: 77 / 2007 on Business Fields Closed and Open with Conditions to Investment, it can be mentioned among others as follows: Business Fields Absolutely Closed to Investment are among others: Gambling/casino, chemical industry potentially damaging to the environment and alcoholic beverage industry. List of Business fields open to investment with conditions, among others: a. Reserved for micro, small and mediumsized enterprises, and cooperatives Public transportation (route and non route), public shipping, Tobacco drying and processing industry. b. Partnership Industry of nails, nuts and screws, industry of component and spare parts for motor driver, industry of pumps and compressors, industry of component and equipment of two and three wheeled motor vehicles, industry of bicycle and pedicab component and spare parts.

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c. Capital Ownership Pharmaceutical industry (max 75%), clinic specialized medical services (max 65%) and foreign exchange bank (max 99%). d. Certain location Breeding and cultivation of more than 125 pigs must be in line with regional regulation. e. Special permit Radio active mineral mining equipped with recommendation from BATAN (National Atom Agency), narcotic pharmaceutical wholesaler and pulp industry. f. 100% domestic capital Pharmaceutical wholesales, raw material pharmaceutical and public drugstore. g. Capital ownership and location Private hospital (max 65%) in Medan & Surabaya, Nursing services (Max 49%) and supporting health services (rental medical equipment) (max 49%) in all locations (no conflict with regional regulation). h. Special permit and capital ownership Raw material industry for explosives (ammonium nitrate) (max 49%), explosives industry and component for industry demands (max 49%) and plantation and/or processing industry of palm products above 25 ha and/or above certain capacity in accordance with 23

ministerial regulation of agriculture No.26 of 2007 and/or its amendment (max 95%). i. 100% Domestic capital and special permit Weapons, ammunition, detonator and war equipment.

*For more information on open and/or closed business fields, please refer to the book of Criteria and Requirements for the Determination and List of Business Fields Closed and Open with Conditions to Investment, which are available in BKPM office or can be requested through the Indonesian Embassy.

4. Immigration Service Facilities Foreign investors are granted facilities in terms of immigration services, such as: a. Two-year-limited investors. stay for foreign

b. Facilitating foreign investors (who have lived in Indonesia for two years continuously and who had been given two-year-limited stay) by granting them a permanent stay permit in Indonesia. c. Multiple re-entry facilities for investors with limited-stay permit with the expiry of one year, and are granted maximal 12 months as of the limitedstay-permit is given.

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d. Multiple re-entry facilities for investors with limited-stay permit with the expiry of two years, and are granted maximum 24 months as of the limitedstay permit is given. e. Multiple re-entrance facilities for investors with permanent-stay permit, and are granted maximum 24 months the longest as of the limited-stay permit is given. f. The facilities for a limited stay permit given to foreign investors as stated in point a and b are effected by the Directorate General of Immigration in accordance with the recommendation of the Indonesian Investment Coordinating Board.

Visa on Arrival Visa on Arrival available at following airports of entry

NO 1 2 3 4 5 6 7 8 9 PROVINCE DKI Jakarta East Java Bali Yogyakarta Central Java West Java North Sumatera Riau Island West Sumatera NAME OF AIRPORT Soekarno-Hatta CGK Juanda SUB Ngurah Rai DPS Adi Sucipto JOG Achmad Yani SRG Husein Sastranegara BDO Polonia MES Raja Haji Fisabilillah and Kijang Airport TNJ Minangkabau PDG

25

10 11 12

South Sumatera South Sulawesi East Kalimantan

Sultan Mahmud Badaruddin II PLM Sultan Hasanuddin UPG Sepinggan, Balikpapan BPN

Source: PT Angkasa Pura 2, Indonesia

www.angkasapura2.co.id

Visa on Arrival available at the following sea port of entry*

CITY Batam PROVINCE Riau SEA PORT Sekupang, Batu, Ampar, Nongsa, Marina,Teluk Senimba, and Batam Center Bandar Bintang Telani Lagoi and Bandar Sri Udana Lobam Belawan Sibolga Yos Sudarso Tanjung Balai Karimun Tanjung Pinang Teluk Bayur Tanjung Priok Tanjung Mas Padang Bai and Benoa Tenau Maumere

Tanjung Uban Belawan Sibolga Dumai Tanjung Pinang Padang Jakarta Semarang Kupang Maumere

Riau

North Sumatra North Sumatra Riau Riau Riau West Sumatra DKI Jakarta Central Java Bali East Nusa Tenggara East Nusa Tenggara

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CITY Bitung Makasar Pare-pare Jayapura

PROVINCE North Sulawesi South Sulawesi South Sulawesi Papua Bitung

SEA PORT

Soekarno-Hatta Pare-pare Jayapura

5. Industrial Estates and Bonded Zones Industrial Estates Industrial estates are available in almost all provinces of Indonesia. The large scale industrial estates can be found among others in Jakarta, West Java (Bekasi), Banten (Tangerang, Serang), Central Java (Semarang), East Java (Surabaya, Gresik, Sidoarjo, Pasuruan, Probolinggo), and Riau (Batam Island). 5.1 Industrial Estate in Jakarta a. Pulogadung Industrial Estate Pulogadung Industrial Estate is owned by the Government of the Republic of Indonesia and the Provincial Government of DKI Jakarta. It has a total area of approximately 500 Ha. It is the first industrial estate in Indonesia providing major products and services where Land Source : BKPM Parcel can be sold as well as Standard Factory Building (SFB), Small Scale

27

Industry Facilities (SSIF), including Warehouse and Office Buildings, can be leased. German Companies, such as K.D. Feddersen & Co Uberseegesellschaft mbH and PT. Dian Graha Elektrika (Siemens Distributor) are located in this industrial estate. 5.2 Industrial Estate in West Java a. Jababeka Industrial Estate The Jababeka Industrial Estate, located in Cikarang, Bekasi, is the first modern Indonesian eco-industrial estate under a technical cooperation program collaboratively established by Indonesia's Ministry of Environment and the Federal Republic of Germany. It spans 1,570 hectares and contains more than Source : BKPM 1000 local and multinational corporations from 23 countries, including German companies such as PT. Burgmann Source : BKPM Indonesia, PT. Festo, and PT. Fuchs Indonesia.

b. MM 2100 Industrial Estate Located at Cibitung, Bekasi, MM2100 Industrial Estate is a fully integrated industrial estate developed by PT. Megalopolis Manunggal Industrial Development (MMID) established in 1990 by two well regarded corporations : Marubeni Corporation of Japan and Manunggal Group of 28

Indonesia. With 805 ha land and more than 170 manufacturing and supporting companies, MM2100 Industrial Town is one of the best value industrial estate in Indonesia.

Source : BKPM

5.3 Industrial Estate in Banten a. Krakatau Industrial Estate Krakatau Industrial Estate is located in the Industrial Land, surrounded by hills and ocean. Source : BKPM Located in + 571 hectares of plain, more than 300 hectares have been occupied by 70 national and multinational companies, including one of the big German Companies, Source : BKPM Siemens. b. Modern Cikande Industrial Estate The Modern Cikande Industrial Estate (MCIE) was established in 1991.It has been occupied by more than 100

29

tenants of both local and foreign companies. The total area of MCIE is 900 ha, of which approximately 400 ha has been developed. A good qualityinfrastructure with complete facilities and greenery landscape are the right place for the factory.

Source : BKPM

5.4 Industrial Estate in Central Java a. Terboyo Industrial Estate Terboyo Industrial Estate is located in Semarang with a total industrial area of 300 ha. It has been occupied by more than 150 local and foreign companies. It is also strategically located near Tanjung Mas harbour which supports export and import activities.

Source : BKPM

5.5 Industrial Esatates in East Java a. Rungkut Industrial Estate Rungkut industrial estate has a total area of 245 ha. It has been occupied by more than 300 local and foreign companies. 30

Its facilities located strategically in Surabaya near the Tanjung Perak harbour and the Juanda airport makes Rungkut Industrial Estate the biggest and the most famous industrial estate in East Java.

Source : BKPM

b. Pasuruan Industrial Estate Rembang Pasuruan Industrial Estate Rembang has 500 ha of industrial estate designed and partially implemented to offer fully developed plots to large, medium and small scale manufacturing enterprises. There are also SME workshop facilities, an Industrial Service and Engineering Centre, including Export Processing Zone (EPZ) to render business support services, technological advice and assistance in fostering supply and service linkages between large/medium and medium/small industrial enterprises.

Source : BKPM

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5.6 Industrial Estate in Riau a. Batamindo Industrial Estate Batamindo Industrial Estate, which has a total area of 320 ha, is the pioneer industrial park in Batam and its success single-handedly transformed the economy of the island. It attracts global manufacturers, creating employment for more than 60,000 workers and contributes significantly to the countrys non-oil and gas exports.

Bonded Zones Foreign Investment (PMA) as well as Domestic Investment (PMDN) Companies, Limited Companies of Non PMA/PMDN and Cooperatives with legal status are able to obtain approval as an Operator of Bonded Zones and Companies Operating in Bonded Zones. Operator of a Bonded Zone (Penyelenggara Kawasan Berikat/PKB) shall be a limited company, a cooperative with legal status or a foundation which owns, controls, manages and provides facilities and infrastructure in the interest of other parties in the Bonded Zone he operates on the basis of an agreement. Meanwhile, Companies Operating in the Bonded Zone (Pengusaha Didalam Kawasan Berikat/PDKB) shall be limited companies or Cooperatives engaged in the processing of goods and materials in a Bonded Zone. Operators of Bonded Zone (PKBs) are located in Jakarta (Cakung, Marunda and Tanjung Priok operated by government), Bogor, Purwakarta, Karawang, Semarang, Pasuruan, Medan, Mojokerto, 32

Bintan Island, Aceh, and Batam Island and 426 Companies Operating in Bonded Zone (PDKBs). 6. Facilities

6. a. Infrastructure Facilities 6.a.1. Electricity Installed capacity In 2005, installed capacity and the generating units of the state-owned electricity enterprise/PLN as Holding and sister companies totaled 29,147.06 MW. Total installed capacity comprised of Steam power plants 10,865 MW, Combined cycle power plants 6,655.97 MW, Diesel power plants 3,338.04 MW, Hydropower plants 4,405 MW, Gas turbine power plants 2,783.63 MW, and Geothermal power plants 1,087 MW. PLN total production (includes purchasing from outhouse sourcing) in 2005 obtained 101,282 GWh. Electric power purchased from outhouse is 26,087 GWh. 6.a.2. Electric Power Selling Total electric power selling is 6,93% of the total with electric power selling to industrial group increased 5,27%, while from commercial selling registered the most growth with 11,57%. Meanwhile, household, street lighting, social & government has respectively increased 6, 73%, 8, 64%, 8,58%, and 4,92%.
(Source: www.esdm.go.id)

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6.a.3. Telecommunication Telecommunication services are provided by state-owned enterprises, consisting of PT.Telkom, which provides domestic telephone and telegraph services, and PT. Indosat which provides international telecommunication services. Further information could be accessed at:
www.telkom.co.id

6.a.4. Transportation Road Total of Indonesian road network is 268,030 km including 103,430 km of roads in Sumatera, 54,301 km in Java, and 5,653 km in Bali. Most cities in Java, Sumatera, Sulawesi and Bali are connected by highways or secondary roads. Nearly 90% of passenger transport and 50% of cargo transport are conducted by road. Trunk roads are well developed and new toll highways are being developed by private-sector investments. Railway Indonesia has a total length of railway track of 6,482 km in Java and Sumatera. Railways are used for freight transportation and longdistance passenger services. In the Jakarta-Bogor-Tangerang-Bekasi (Jabotabek) region, railway is used for commuter services.

34

Seaport Please refer to page 15 for Visa on Arrival information. Airport Please refer to page 15 for Visa on Arrival information.

6. b. Business Facilities 6.b.1. Banking, Insurance and Leasing Bank Indonesia (BI) as an independent state institution is fully autonomous in formulating and implementing each of its task and authority as stipulated in the new Central Bank Act, Law No. 23/1999. With regard to foreign investment, Bank Indonesia plays the following roles:
a. Issuing a letter of clearance for final draft loan agreement of Foreign Direct Investment (FDI) companies. Monitoring the FDI accounts. Ensuring that the capital for FDI projects originates mostly from offshore. Registering all offshore loans received by FDI companies.

b. c.

d.

To support business activities in Indonesia, there are several foreign banks operating in Indonesia, among them ABN AMRO Bank, American Express Bank, Bank of America NA, Citibank NA, Deutsche Bank AG, JP.Morgan Chase Bank, Standard Chartered Bank, The Bangkok Bank Comp.

35

Ltd., the Bank of Tokyo-Mitsubishi Ltd., the Hong Kong and Shanghai Banking Corp. There are 5 (five) state-owned banks, namely PT. Bank Ekspor Indonesia (Persero), PT.Bank Mandiri (Persero), PT.Bank Negara Indonesia (Persero),Tbk., PT. Bank Rakyat Indonesia (Persero), and PT.Bank Tabungan Negara (Persero). In addition, there are 36 National Currency Private Banks, 40 Non National Currency Private Banks, 26 Regional Development Banks, and 24 Joint Ventures Banks. Other financial institutions include 176 national and international insurance companies and 145 leasing companies. 6.b.2. Stock-markets According to the Law concerning the Capital Market, guidance, regulation, and day-to-day supervision of capital market is provided by the Capital Market Supervisory Agency (Badan Pengawas Pasar Modal/Bapepam). Also, it implements an orderly, fair, and efficient capital market activity and protects the interest of investor and public. 6.b.3. Representative Office A foreign company is allowed to establish a representative office in Indonesia in one of its province capitals. Its activity is limited to supervising and coordinating the business of its principal and branches. This office is not allowed to make any business

36

transactions with companies or persons in Indonesia either for export or import or domestic trading. The representative office could obtain work permits for expatriate managers and multiple entry visas for its expatriate personnel as well as exemption from exit-tax (SKFLN).

7.

Cost of Doing Business Standard cost of investment in Indonesia including visa on arrival, corporate administration tariff, tax rates, regional minimum wage rates, work overtime and overtime wage rate, water tariff, electricity base tariff, telephone service tariff, internet tariff. a. Corporate Administration Tariff Corporate Administration Tariff
Name 1. Ordering Corporate Name 2. Corporate Bodies Establishment and Changing Tariff Rp. 350,000,Rp. 1,000,000,-

Source: The Ministry of Justice and Human Rights

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b. Tax Identification Number (NPWP) The tax office requires all individual residents in Indonesia to have their own personal tax numbers (Nomor Pokok Wajib Pajak/NPWP). This regulation includes expatriates, with the exception for minors who are too young to work. In 2000, the tax office stepped up the drive to require all expatriates in Indonesia to register with the tax office and obtain their separate individual/personal tax number (NPWP) and make monthly taxes payment.
Source: The Directorate of Tax, The Ministry of Finance.

c. Tax Rates Tax rate applicable to entities as resident Taxpayers and permanent establishment:
Taxable Income Brackets Rp 50.000.000 (fifty million rupiahs) or less Rp 50. 000.001 (fifty million and one rupiahs) 100.000.000 (one hundred million rupiahs) Over Rp 100.000.000 (one hundred million rupiahs) Tax rate 10%

15%

30%

Profit after income tax of a permanent establishment in Indonesia shall be subject to additional tax of 20 % (twenty percent or based on tax treaty), except if the profit is re38

invested in Indonesia, it will be governed by the decree of the Minister of Finance. Tax rate applicable to a non-resident Taxpayer other than a permanent establishment in Indonesia : (or based on tax treaty)
Income Dividends Interest, including premiums, discounts, swap premiums and compensation in accordance with a loan guarantee Tax Rates 20% 20%

d. Provincial Minimum Wage Rate 2009

No Province 1 North Sumatera 2 DKI Jakarta 3 4 5 6 7 8 9 10 11 12 13 14 15 East Kalimantan Banten South Sulawesi Riau Islands West Sumatera West Nusa Tenggara South Sumatera Bali Yogyakarta West Java Central Java East Java North Sumatera Euro/Month 84.9 75.7 67.6 65.0 64.1 63.2 62.3 58.9 58.4 53.8 49.6 44.5 40.7 40.4 84.9

Source: Ministry of Manpower and Transmigration Republic of Indonesia

www.nakertrans.go.id

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e. Water Tariff Water Tariff/m3 From January 2007

No 1 2 Customer Classification Classification IV A Classification IV B Tariff (In Euro) 0.68 0.88

Classification IV A: Embassies, Foreign Representative Offices, Commercial Private Institutions, Non-Star Hotels, Medium Enterprises, Home Medium Enterprises, etc. Classification IV B: Star Hotels, Banks, Service Stations, Trading Companies, Food and Drink Factories, Textiles Factories, Storages, etc.
Source: PT PAM Indonesia
www.pamjaya.co.id

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f.

Electricity Base Tariff

ELECTRICITY BASE TARIFF Power Block Loading Cost (Rp/kVA) 2200 VA I : 0-196 kWh II : > 196 kWh 2200 VA s/d 14 kVA I-2 > 14 kVA s/d 200 kVA I : 080JN 32.200 455 460 II : >80 JN WBP LWBP I-3 > 200 kVA 0 -350JN Block WBP > 350JN Block WBP Block WBP 14 > 30.00 kVA 27.000 434 29.500 Kx439 439 439 32.500 Kx 440 32.000

User Categories

Usage Cost (Rp/kVA) 455 460

Sources: State Electricity Company /PLN (2008)

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8.

Application of Foreign Investment Investment Approval Stage 1. All types of business fields are open to investment, except the business fields closed or open with conditions to investment.

2. An investor should first look at the list of business fields as stated in Presidential Regulation Number. 77/2007 and 111/2007. 3. Foreign investment approval should be issued in Indonesia by the Investment Coordinating Board (BKPM) in Jakarta. However, for foreign investment projects located in Bonded Zones, investors should submit the application to BKPM through the respective Bonded Zone Authority. 4. Foreign investment application documents are to be submitted to the BKPM and it will be evaluated in terms of their compliance with various aspects such as sectors policies and finance. If further clarifications are still required, a letter will be sent to the investor concerned to request the necessary additional data and information. 5. Following the evaluation process, the Chairman of BKPM will issue the investment approval.

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6. The entire process would take maximum of 10 (ten) working days.

7. Upon the issuance of the investment approval, a foreign investment company can be legally established through the execution of the articles of incorporation in notary deed form. 8.a. Application and Approval Procedures at BKPM Flow of New Direct Investment Application Approval

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*MODEL I forms are available in BKPM office and can be downloaded from BKPM website: www.bkpm.go.id The Investment Coordinating Board (BKPM) is a Non Department Government Agency serving under and responsible directly to the President of the Republic of Indonesia and led by a Chairman. Its office is located in Jakarta, the capital city of the Republic of Indonesia, at Jalan Gatot Subroto No: 44, Jakarta Selatan, Indonesia 12910. 8. b. Application and Approval Procedures in Bonded Zones 1. To apply for a new investment approval for projects located in Bonded Zones, foreign investment applicants must complete and submit 2 (two) copies of form Model 1/PMA to BKPM through the corresponding Bonded Zone Authority where the project will be located. 2. The required documents attached to the applicant's form as enclosures are similar to those required in the procedures above mentioned. 3. To implement the approved investment projects that are located in Bonded Zones, investors are not required to apply for any further implementation licenses such as location permit, building construction permit, nuisance act permit, land title, etc.

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8. c. Application and Approval in Integrated Economic Development Zones 1. The application for investment located in Integrated Economic Development Zones also referred to as Kawasan Pengembangan Ekonomi Terpadu (KAPET), shall be submitted to the Managing Board of KAPET concerned either for Domestic or Foreign Investment. The Managing Board of KAPET shall evaluate applications for new Foreign Investment located in the KAPET and the resulting application will be submitted to the Chairman of BKPM. 2. The Managing Board of KAPET will evaluate new investment applications, applications for expansion and modification the context of Foreign Investment located in the Integrated Economic Zone. 3. After that, the Managing Board of KAPET submits result of the evaluation to the Chairman of BKPM who will then issue an approval of the application and notify the applicant through the Managing Board of KAPET. 4. The Managing Board of KAPET will evaluate applications for investment implementation permits and issue the approval of the applications.

Source : BKPM

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9.

List of Public-Private Partnerships (PPP) Projects in Indonesia 9. a. Projects Ready for offer are among others:
No. Sector/Subsector Power Railways Toll Road Quantity Project Cost (US$ 000) 2,000,000 1,440,000 1,000,000

1 2 3

2 2 3

9. b. Priority Projects are among others:

No. 1 2 3 Sector/Subsector Toll Road Water Supply Solid Waste and Sanitation Quantity 8 8 2 Project Cost (US$ 000) 2,474,000 500,000 120,000

9. c. Potential Projects are among others:

No. 1 2 3 Sector/Subsector Toll Road Railways Power Quantity 21 13 7 Project Cost (US$ 000) 11,774,000 10,520,000 1,695,000

The complete list of projects is available at

www.bkpm.go.id

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10.

Planning Document of Public-Private Partnerships in Infrastructure Provision

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V. Contacts A. List of important related websites 1. Indonesian Representative in Germany Indonesian Embassy in Berlin
www.indonesian-embassy.de

Indonesian Consulate General in Frankfurt

www.indonesia-frankfurt.de

Indonesian Consulate General in Hamburg

www.kjrihamburg.de

2. Investment Coordinating Board A-Z information and business details about administration and procedures to invest in Indonesia.
www.bkpm.go.id

Investment opportunities in regional areas in Indonesia, supported by the list of important phone number, facsimile and address of Governors offices and Regional Investment and Promotion Boards.
www.regionalinvestment.com

3. Bank of Indonesia Information about currency and monetary policy.

www.bi.go.id

4. Department of Foreign Affairs Site information about Indonesias relations with other countries, bilateral and multilateral.
www.deplu.go.id

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5. Department of Trade Important site for investors to consult current statistics of Indonesian trade and main commodities.
www.depdag.go.id

6. Directorate General for Immigration, Department of Law and Human Rights : Site containing regulations and procedures for investor to submit immigration paper.
www.depkumham.go.id

7. Directorate General of Tax Government site for information about tax rates.
www.pajak.go.id

8. Indonesian Chamber of Commerce Indonesian businesses association list which will enable investors to contact and correspond.
www.kadin-indonesia.or.id

9. German Indonesia Center The objective of the German Centre is to provide comprehensive support to small and medium-sized German companies establishing their own bases in promising markets. Through the combination of office space, services and rapid access to networks, companies can quickly and cost-efficiently enter the new markets. Furthermore, the German Business community becomes more visible in the respective host country and synergy effects can be achieved.
www.germancenter.co.id

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10.

German Embassy in Jakarta Information about representative of German government in Indonesia.

www.jakarta.diplo.de

11.

EKONID, the German-Indonesian Chamber of Commerce and Industry Officially recognized agency to promote bilateral business relations between Germany and Indonesia. EKONID is a non-profit membership organization. Members of EKONID are German, Indonesian and international companies, economic associations, organizations and private individuals. In more than 30 years, EKONID has developed itself into a provider of a wide range of services, far surpassing its original trade promotion objectives.
www.ekonid.com

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B. Related Regulations on Investment 1. 2. Law No.25/2007 : Investment Law Regulation Head of Investment Coordinating Board No.1/P/2008 on Second Amendment to the Decree of the Head of Investment Coordinating Board Number 57/SK/2004 on Guideline Income Tax Facility For Investment In Certain Business Fields And/Or Certain Regions (Alteration GR No. 1 Year 2007) The Presidential Regulation of the Republic of Indonesia No.76/2007 regarding the Criteria and Establishment of Closed Business Line and Open Business Decree of Director General for Custom No.Kep-02/BC/1999 on procedures of granting exemption for importing machines, goods and material by industry/ industry services. Government regulation No. regarding the Industrial Zone. 24/2009

3.

4.

5.

6.

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layout and design - atni

EMBASSY OF THE REPUBLIC OF INDONESIA Lehrter Str. 16-17, 10557 Berlin, Germany Phone : +49-30-478070 Fax : +49-30-44737142 eMail : info@indonesian-embassy.de www.indonesian-embassy.de in coordination with

INVESTMENT COORDINATING BOARD REPUBLIC OF INDONESIA Jl. Gatot Subroto No. 44 Jakarta 12190, Indonesia www.bkpm.go.id