Market Outlook 2019

Keynote Speech
Ritz Carlton - 13 February 2019

INDONESIA INVESTMENT COORDINATING BOARD (BKPM)

Thomas Lembong
Chairman © 2019 by Indonesia Investment Coordinating Board. All rights reserved
Global financial conditions are expected to tighten
as monetary policy normalizes

Russia
Global growth is
predicted at...

1.7 1.6 3.7 3.5

1.8
Euro Area
2.9 Euro Area 1.6
2.5 US fiscal policy will subtract
6.6 6.2 momentum starting in 2020
United States
China
7.3
China will slow, reflecting weaker
ASEAN-5 credit growth and rising
7.5
trade barriers
5.1 5.1 Indonesia
1.3 Recent tightening in Indonesia was
India
2018 (%) 2.5 broadly appropriate to tackle risks
2019 (%)
Brazil Main issues in 2019: escalation of
trade war , rising Fed Rate and
weakening financial market
sentiment
The Investment Coordinating Board of the Republic of Indonesia
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Source: World Economic Outlook (January 2019)
Escalation of trade war between US – China
could cut global growth by nearly 1% WEO, October 2018

Countries that could benefit from import substitution by the US dan China
Aggregated Nomura Import Substitution Index (NISI) Score “Opportunity in Difficulty”
Malaysia
Japan trade war has prompted
Pakistan China based companies
Thailand
to shift out of China
Philiipines
Vietnam
to Southeast Asia and Mexico
Indonesia
Cambodia the important thing is the
Taiwan
Singapore
qualitative aspect of the
S. Korea relocation which is very
India positive for job creation and
Bangladesh balance of payment
0 2 4 6 8 10 12

Source: USTR, MOFCOM, UN Comtrade, ITC Trade Map, IMF, UNCTAD and Nomura Global Economics

The Investment Coordinating Board of the Republic of Indonesia

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3 Government focuses to mitigate impact of trade war..

1. Strengthen local industries

2. Curb raw material imported demands by developing
basic industries
3. Boost tourism by encouraging budget airlines to
expand and renovating airports across the
archipelago

Apart of that, government would give incentives to

manufacturers willing to move their plants from well-
developed West Java to less populous provinces like
Central Java, where labor and land costs are lower.
The Investment Coordinating Board of the Republic of Indonesia
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6 (Six) Promising Sectors in Indonesia
The main sectors for investment opportunities in Indonesia are infrastructure, manufacturing industry, maritime,
agriculture, tourism, and lifestyle industry

Digital economy , lifestyle, tourism will drive the

Indonesian economic growth.

The Investment Coordinating Board of the Republic of Indonesia

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 3 (three) sectors that will drive Indonesian economy

Tourism Digital Economy Lifestyle Ind.

Bain & Company: 49% of investors believed
Tourism is Expected to be the largest that Indonesia would be the second-hottest
contributor to the nation’s GDP. digital economy market in Southeast Asia in
Tourism’s Proportion to GDP (%) 2019, trailing just after Singapore.
(f) = forecasted
Source: Ministry of Tourism, 2017
McKinsey: Indonesia’s e-commerce sector
alone may grow at least sevenfold from $8
14% 15% billion last year to $55 billion by 2022.
13%
10% 11%
From 7 Unicorns in ASEAN,
4 are from Indonesia

2015 2016 2017 (f) 2018 (f) 2019 (f)

US$ 0,8 B
US$ 0,5 B
“On the next 20 years, one in new four US$ 1.1 B
jobs comes from tourism sector.” –
Chairman Lembong of BKPM, 2018 US$ 0,4 B
* Announced investment, data from BKPM, 2019

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Digital Economy for SMEs
Greater use of digital technologies can deliver significant benefits for SMEs

In 2017:
 Online sales growth in 24 out of 34 provinces
is outpacing online sales growth in Jakarta.
 At least 30% of this activity involves new
consumption, capturing previously untapped
needs.
 Up to 35 percent of online revenue is
generated by women, compared with 15
percent in offline retail.
 Consumers in non-Java regions are saving
from 11 to 25 percent.

In 2022:
 Online-commerce sales will grow eightfold
(USD 55 to USD 65 Billion)
 support up to 26 million full-time-equivalent
jobs (20% of the total workforce).

* e-tailing: electronic retailing

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Government Support
Government Role to Further Stimulate Startup Industry

• Increasing broadband access. Existing internet access in Indonesia remains relatively expensive and slow.
Increasing broadband access and the quality of service will encourage digital technology adoption by SMEs
and improve performance of existing technologies
• Helping all SMEs to be digital businesses. Many government agencies provide SME support programs,
including those targeted at increasing SME digital engagement. But they are often overlapping and limited in
scale
• Expanding e-payments. Improving trust in e-commerce payment platforms, increasing bankability of
Indonesian consumers and businesses and expanding alternative payment systems will increase the volume
of digital transactions
• Expanding access to finance. Digital SMEs need a mix of domestic and international sources of finance
which are currently barriers that reduce their potential for growth
• Expanding e-government services. Government services delivered through online platforms are more cost
effective and efficient. More online government services would build consumer confidence in online activities
and services over time.
Source: Deloitte, 2015
The Investment Coordinating Board of the Republic of Indonesia
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 THANK YOU
z
LET’S INVEST IN INDONESIA

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