Indonesia Offers Unique

Potential for Investors

November 2022

Wellington Capital
Advisory
 WE GUIDE INVESTORS IN LEVERAGING NEW
BUSINESS OPPORTUNITIES IN INDONESIA
Wellington is a fully-independent advisory firm, staffed by senior executives with extensive operational experience in Indonesia and offering a broad
spectrum of sector expertise. We guide domestic and foreign investors in addressing complex strategic and operational issues within their Indonesian
portfolio companies – both existing and potential enterprises.
We work closely with investors - and the management teams within their portfolio companies - in order to revitalize go-to-market strategies,
to improve operational performance and to drive sustainable enterprise value – and thereby ensuring their success in the largest economy in SE Asia.

10+
years
50+
years
USD1.5 30+
years
billion
In-Country Combined Partner Total Capital Referenceable
Operations Experience Advised Clients

CLIENTELES

2 Wellington Capital
Advisory
Investor focus is shifting rapidly from developed countries to emerging economies
Indonesia is increasingly seen as a high-potential market for investors. With total investment of USD 20 Bn in 2021,
Indonesia is ranked 9th amongst all developing countries in respect of aggregate FDI inflows
FDI Inflows by economic category (2016-2021) Top 10 FDI Inflows for developing countries (2021)
USD Bn USD Bn

2,500 USD China 181

746
(47%) 1,582 837
(53%)
Hong Kong 141
2,000
Singapore 99

1,500 Brazil 50

India 45
1,000
South Africa 41

Mexico 32
500
UAE 21
0 Indonesia 20
2016 2017 2018 2019 2020 2021
Saudi Arabia 19
World Total Developed economies Developing economies

Primary FDI Constraints Impact Most Affected

Economic sanctions between Russia and Ukraine
supporters

COVID-19 Geopolitical Supply shortages in energy and basic commodities

Pandemic Tension
Mostly impacting developed world
Broader macroeconomic impact and policy tightening (Europe and North America)
3 Wellington Capital
Advisory Source: UNCTAD
 Indonesia: GDP Growth (YoY) Indonesia GNI per Capita/
Indonesia: 8%
Income Thresholds (in USD)

Current Economic 6% Upper-middle threshold

4,000
Trends 4% Indonesia

2% 3,000
The Indonesia economy 0%
continues to exhibit robust 2,000
performance characteristics – -2%
Lower-middle threshold
in the face of global stagnation -4%
1,000
and enduring widespread
-6%
uncertainty.

1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
1Q20
2Q20
3Q20
4Q20
1Q21
2Q21
3Q21
4Q21
1Q22
2Q22
3Q22
4Q22 F
0
2000 2005 2010 2015 2020
Sustained GDP growth, a
stabilised inflation rate and the
realized direct investment flows
are all positive indicators for Inflation vs. Bank Indonesia (BI) Rate Realized Direct Investment - Quarterly
the remainder of 2022 and the (IDR Tn)
Inflation BI 7DRRR
transition to 2023. 7% 180 Domestic Direct Investments

6% 160 Foreign Direct Investments

However BI elected to raise the
level of base interest rates, in 5% 140
order to stabilize exchange 4% 120
rates and to keep inflation in 3%
100
check. This move was in 2%
80
response to the aggressive 1%
policy stance adopted by the 60
0%
US Federal Reserve.
Jul-18

Jul-19

Jul-20

Jul-21

Jul-22
40
Jan-18

Jan-19

Jan-20

Jan-21

Jan-22
Apr-18

Oct-18

Apr-19

Oct-19

Apr-20

Oct-20

Apr-21

Oct-21

Apr-22

Oct-22

2Q 8
3Q 8
4Q 8
1Q 8
2Q 9
3Q 9
4Q 9
1Q 9
2Q 0
3Q 0
4Q 0
1Q 0
2Q 1
3Q 1
4Q 1
1Q 1
2Q 2
3Q 2
22
1
1
1
1
1
1
1
1
2
2
2
2
2
2
2
2
2
2
1Q
4 Wellington Capital
Advisory
Source: Ministry of Investment, Bank of Indonesia (BI), Central Bureau of Statistics (BPS), IMF
Indonesia:
Economic
Policy Outlook
The weakening of the
Indonesian Rupiah (IDR)
is a consequence of the
strengthening of the benchmark
US dollar, due in turn to the
aggressive tightening of
monetary policy by the US
Federal Reserve.
Notably, the depreciation of the
Rupiah against the US dollar
occurring in 2022 is still less
pronounced (- 9%) than the
corresponding performance of
adjacent currencies such as the
Japanese Yen (JPY: - 18%)
and the Chinese Yuan
(CNY: -11%).
Source: Antara News, Medcom.id
5 Wellington Capital
Advisory
USD and local currencies YTD change (18 October 2022)
-18.02%
-10.94%
-10.73%
Note: A positive (negative) value for the foreign exchange rate indicates the appreciation (depreciation) of the local
currency against the benchmark US Dollar
Fiscal Perspective
q The government has set the 2023
Budget deficit limit at 3%
q The Budget deficit for 2023 is
being reduced to 2.84% - after
taking State budget requirements
and State revenue o ptimization
into account
q The government continues to
improve the effectiveness of
investment financing, especially
for State-owned Enterprises
(SOEs) and the Public Service
Agency (BLU)
Japan (JPY)
Philippines (PHP)
China (CNY)
-9.06% Eurozone (EUR)
-9.06% Indonesia (IDR)
-8.49% Malaysia (MYR)
-7.32% Thailand (THB)
-1.96% Singapore (SGD)
Monetary Perspective Trade Perspective
q Bank Indonesia (BI) is predicting q Indonesia’s trade balance posted a
that inflation levels will come close surplus of USD 5.67 billion in
to their initial prognosis of 3% October 2022, with exports reaching
(+/- 1%) in 2023 USD 24.81 billion and imports
totalling USD 19.14 billion
q The Consumer Price Index (CPI)
q The current trade surplus in for the
recorded in October 2022 was
lower than forecast and period January to October 2022
represented a month-on-month exceeds the corresponding trade
decline of 0.11%, surplus for 2021 (USD 35.42 billion)
q Indonesia recorded the largest
surplus in trading with India, USA
and China
Indonesia: Political and Socio-Economic Stability
Having secured political and social stability – coupled with macro-economic resilience - Indonesia is one of the most vibrant
democracies in East Asia Pacific. The Government has fostered the public perception of an assured low-middle income nation.
Political Transformation Index (2022) Rank Political Stability and Absence of Violence/Terrorism
(0 – 10) (0 – 138) Score
2.5 (-2.5 weak; 2.5 strong) Country (25Y change)
Singapore 7.05 21

Malaysia 6.24 43 1.5 Singapore (+0.38)

Indonesia 6.14 46 0.5

Malaysia (-0.43)
Vietnam (-0.64)
Philippines 5.59 60 -0.5 1996 2001 2006 2011 2016 2021 Indonesia (+0.62)
Thailand (-1.01)
Thailand 4.98 75 Philippines (-0.45)
-1.5

Vietnam 4.85 82
-2.5

q Since the 1998 Monetary Crisis (‘KrisMon’) - which heralded the Reformation era - Indonesia has undergone a major political transformation which is unique in Asia.
q Indonesia is now a thriving democracy with increasingly strong political institutions, a more liberated population and with a pathway to job-centred economic expansion
q The ‘Demographic Dividend’ - whereby the total working age group (people between 15 and 64 years old) comprises >70% of the total population - will remain until 2035

Indonesian Indonesian Monetary Crisis Asian Financial Crisis COVID-19 Pandemic

Independence 1998 2008 2020

1945 1966 1998 1999 2001 2004 2014 2024

President
Soekarno Soeharto B.J. Abdurrahman Megawati Susilo Bambang Joko
Habibie Wahid Soekarnoputri Yudhoyono Widodo
Old Order era New Order era Reformation era
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Advisory
Source: bti-project.org, World Bank
 Indonesia:
Sector-based Government Priority Sectors

Opportunities Sectors Incentives

Criteria
In an effort to stimulate more
q National strategic project 1. Export-oriented labor-intensive q Tax holidays
investors to contribute to industries (including healthcare q Tax inducements
q Capital intensive
Indonesia’s economic q Labor intensive industry) q Import duty exemptions
development, the government has q Advanced technology 2. Renewable energy q Non-fiscal incentives
pinpointed priority sectors for q Pioneer industry 3. Infrastructure
investment. q Export-oriented 4. Automotive (especially EV)
q Research, development, and 5. Tourism
Fiscal and non-fiscal incentives innovation focus 6. Value-added mining
have been formulated for existing
and intending investors. Note: Based on current Presidential Regulation No. 10 Year 2021

Based on current realization Top FDI Realization by Sectors

trends, the ‘down-streaming’ of Investment by sector | Jan to 2022 (USD Bn)
key commodity sectors - in
particular base metals and
Metal related industry, non-machine and equipment 8.75
processed metals (i) - is both a key
driver of economic transformation Mining 4.40
and a significant boost to
aggregate investment levels. Transportation, warehouse, and telecommunication 4.02

(i) Base metals and processed metals

account for ~15% of total investment in 2022 Utilities 3.72

Source: Ministry of Investment Residential, industrial estates, and offices 3.53

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Advisory
 Investment Agreements from G20:
Indonesia-related
USA
q USD 2.5 Bn – ExxonMobil and
Pertamina partnership
The primary focus of the Indonesia G20 Presidency comprises q USD 698 M – Millennium Challenge
post-Pandemic economic recovery with priority assigned to Program (MCC) for infrastructure
and transportation sectors
healthcare, digital transformation, and energy transition.
China
q USD 5 Bn – MoU partnership for for
electric vehicle development

Photo Source: G20.org

South Korea
q MoU : Green Infrastructure for New
Health Sector Economic Sector Energy Sector Capital City of Indonesia
Key Takeaways USD 1.5 B USD 81.6 B USD 20 B q MoU : MRT Jakarta Phase 4
Japan

52 Formal Declarations:
G20 Bali Leaders
Initiated
q MoC : the continuation MRT Jakarta

UK
East-West Line Phase 1

Initiated “Just Energy

501 Actionable Deliverables: Initiated q LoI : MRT Jakarta Development

“Resilience and Transition
incl. new project commitments, “Pandemic
Sustainability Partnership (JETP)” Turkey
project extensions, capacity Fund”
building, grant funding, Trust” for renewable
Program q Bi-lateral agreement :
investment programs, etc. under IMF energy transition Electric bus and Trans-Sumatra Toll
in Indonesia Road
8 Wellington Capital
Advisory Source: Tempo, CNN Indonesia, Kompas Photo Source:
Biro Setpres RI; AFP/Saul Loeb; REUTERS/Willy Kurniawan
 INDONESIA IS ADVANCING AT PACE
q Check out our viewpoints on current and emerging trends
q New business opportunities abound across multiple market sectors
q Comparative advantage flows from a clear understanding of industry dynamics

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Advisory
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Wellington Capital
Advisory