Indonesia Update W4 February 2024

Overview

The government of Indonesia is targeting the country’s ICOR score to reach 4 from the existing 6. The Incremental Capital Output Ratio (ICOR), which reflects the efficiency of investment in the country, shows the relationship between an increase in capital expenditure including infrastructure and economic growth. ICOR 6 means that every 1% increase in economic growth requires a 6% increase in infrastructure investment. Meanwhile, a number of developed countries have ICORs below 3. ICOR reduction is key to the inflow of Foreign Direct Investment into the country.

Latest Update

Java

Rapid Digitalization Development in Malang
- Singhasari SEZ is the first SEZ for Tourism and Digital Technology Development approved in year 2021, spanning 44.8 Ha of area, advancing digital ecosystem with two primary clusters: Animation and Film Factory (AFF) and the newly launched Coding Factory, inaugurated by East Java Deputy Governor Emil Elestianto Dardak on February 12, 2024.
- AFF has incorporated more than 20 creative studios and engaged more than 500 creative workers, including animators. Meanwhile, Coding Factory, is a digital cluster involving 200 software developers and engineers.
- As a concrete step to support digital downstream, a Collaborative Research Center (CRC) in Artificial Intelligence (AI) and Machine Learning has been established in collaboration with Brawijaya University, and development of Human Development Zone (HDZ) that provides educational solutions collaborating with Kings’ College London (KCL) for digital class.

New Warehouse at Krakatau II Industrial Park
- Krakatau Cilegon Industrial Estate has a flat land contour covering Industrial Estate I with an area of 550 hectares and Industrial Estate II with an area of 75 hectares.
- PT Krakatau Sarana Properti (KSP) held a launch event for a new warehouse in Block C in Krakatau Industrial Estate II on 21 February, 2024.
- The warehouse, located on Jl. Bali Krakatau II Industrial Estate, was built as many as 4 units with a size of 24m x 66m, and the area per warehouse reached 1,584 m².
- The opening of 4 new warehouses in Block C increases the total warehouse to 63 units across Krakatau Industrial Estate I and II.

18 Corporations Applying for Tax Holiday
- A total of 18 corporate taxpayers running businesses in Special Economic Zones (SEZs) have applied for corporate income tax (PPh) tax holiday discount facility.
- Nine companies have been approved, while another nine are under review. The approved companies include: PT Kawasan Industri Kendal, PT Masterkidz Indonesia, PT Maju Bersama Gemilang, PT Eclat Textile, PT Sinar Harapan Plastik, PT Auri Steel Metalindo, PT Borine Technology Indonesia, PT Golden Textile Indonesia, and PT BSN Technologies Indonesia. The companies receiving the tax holiday is based in KEK Kendal, Central Java.
- Business Indonesia highlighted that the nine companies receiving the SEZ tax holiday mark the first utilization of this incentive in Special Economic Zone, signaling a positive outlook for future This comes despite the Fiscal Policy Agency’s (BKF) 2022 Tax Expenditure Report estimates the absorption of the SEZ tax holiday to be zero until 2025

Outside Java

Inauguration of Makassar New Port (MNP)
- After being developed since May 2015, the National Strategic Project, Makassar New Port in Makassar City, was finally inaugurated by President Jokowi on February 22, 2024. The modern port project cost an investment of IDR 5.4 trillion, and is the biggest port after Tanjung Priok.
- MNP is built in three stages and will end in The development project was fully financed by PT Pelindo.
- The President hopes the MNP, which has a capacity of up to 5 million TEUs per year from previously only 750,000 TEUs per year, can compete with large ports in other countries.

Battery Factory Built in Morowali
- Build in 2013, Indonesia Morowali Industrial Park (IMIP) located in Central Sulawesi is a collaboration between Bintang Delapan Group from Indonesia and Tsingshan Steel Group from China, with a total area of 5000 Ha, and currently preparing expansion to reach 6000 Ha to cater the growing demand and manage the dry- stacked waste from the nickel processing companies in the complex.
- IMIP is recorded as the nickel-based industrial estate with the longest industrial chain in the world.
- There are news that battery factory will be build in Morowali area in This plan was confirmed by Hamid Mina, President Director of IMIP, through a collaboration with China. No details are available, except that IMIP has prepared the plot of land for the construction site of the factory.

Flash News

Potential Expansion of Harga Gas Bumi Tertentu (HGBT) After 2024
- The Minister of Energy and Mineral Resources (MEMR) is still reviewing the continuation of HGBT for recipient industries after 2024. Secretary General of the MEMR Dadan Kusdiana, said that his ministry is coordinating intensively with the Ministry of Industry regarding the possibility of further allocation of cheap gas next year.
- The HGBT policy currently only applies to seven types of industries, namely Fertilizers, Petrochemicals, Oleochemicals, Steel, Ceramics, Glass, and Rubber Gloves. The policy is regulated by Minister of Energy and Mineral Resources Regulation 15/2022. Minister of Industry (MOI) requested an expansion of the recipients of the HGBT policy, which is currently set at US$ 6 per MMBTU after 2024, hoping all industrial sectors can access gas at a more affordable price.

Green Super Grid System Planning
- Rencana Usaha Penyediaan Tenaga Listrik (RUPTL) for 2021-2030 will include a transmission network project called the Supergrid Electricity Network.
- PLN will gradually build a Green Enabling Super Grid that connects Sumatra-Java (2029), Kalimantan-Java (2036), and Sumba-Bali-Java (>2040), so that the location of large-scale renewable energy sources in remote areas can be channeled to existing and future electricity demand centers.
- This Green Enabling Super Grid makes Indonesia’s electricity system, which was previously separated between islands, connected to each other and able to increase the use of baseload renewable energy to 32 GW.
- This effort is able to increase Indonesia’s renewable energy portion to 75% by
- PLN also is also developing an end-to-end smart grid consisting of Smart Power Plant, Smart Transmission, Smart Control, Center, Smart Distribution and Smart This effort will increase the use of variable renewable energy in Indonesia from 5 GW to 28 GW.

BYD’s Investment Plan
- According to previous reports, as of 2023, BYD had over 570,000 employees
- The brand aims to increase its research and development (R&D) team, which today sits at over 90,000 engineers. In recent years, it has launched multiple sub-brands catering for the more luxury markets.
- BYD has been exploring to building multiple international factories to produce battery based EVs. Factories in North America and Europe are on the cards after plans to expand in Asia are already underway with factories coming online in Thailand in the coming months.
- BYD also plans to build factories in Indonesia by collaborating with local partners across different sectors; BYD said that its factory in Indonesia will be built incrementally, by finding the right partner. Before tapping into the Indonesian market, BYD conducted comprehensive studies on Indonesia’s automotive market. Testing was carried out using the TransJakarta bus fleet and Blue Bird taxis, enabling BYD to encounter diverse road conditions, weather variations, load considerations, and distinct driving styles of the drivers.
- The penetration of battery electric vehicles (BEVs) in Indonesia remains low, accounting for only 1 percent of the total market, which is below the global average of 14 percent and the ASEAN average of 2 percent.

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REFERENCES

- Skylight Analytics Hub
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- https://www.tribunnews.com/properti/2024/02/21/pt-ksp-luncurkan-gudang-baru-di- kawasan-industri-krakatau-ii
- https://datacenter.ortax.org/ortax/berita/show/18792
- https://www.jawapos.com/ekonomi/014364692/diresmikan-presiden-jokowi-makassar- new-port-jadi-hub-logistik-terbesar-di-indonesia-timur
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- https://finance.detik.com/industri/d-7151546/pabrik-baterai-mau-dibangun-di-morowali- truk-listrik-diuji-coba
- https://ekonomi.bisnis.com/read/20240223/44/1743617/esdm-masih-kaji-kelanjutan- harga-gas-murah-industri-hgbt-setelah-2024
- https://bisnis.tempo.co/read/1837134/kemenperin-tegaskan-perluasan-industri- penerima-harga-gas-khusus-tak-bebani-industri-migas
- https://bit.ly/NewsUpdate19022024
- https://thedriven.io/2024/02/21/byd-to-boost-massive-research-and-development-team- after-applying-for-48000-patents/
- https://otomotif.kompas.com/read/2024/02/21/173100915/bangun-pabrik-di-indonesia- byd-gandeng-banyak-perusahaan-lokal#google_vignette
- https://jakartaglobe.id/business/byd-set-to-enter-indonesian-electric-vehicle-market

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