Key Sectoral Opportunities

1/9/2015

 

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Key Sectoral Opportunities

 

1. Infrastructure


 
The Government of Indonesia is consistently sustaining the momentum of Public Private Partnership (PPP) development in order to accelerate the provision of infrastructure. The following projects summary are adopted from The PPP Book 2013, which is primarily intended to inform potential investors, lenders and contractors about the opportunities available in Indonesia to become a private partner in a PPP Project. The PPP Book is therefore the presentation of PPP opportunities in Indonesia to the world.
 The PPP Book now consists of 27 projects, arranged in three categories: potential, prospective, and ready for offer PPPs. In this 2013 edition there are 14 prospective projects and 13 potential projects. To date, 21 projects listed in previous books have already gone to tender. I trust the information presented in this book will provide useful references to any party involved in the development of PPPs in Indonesia.   
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The PPP Book is primarily intended to inform potential investors, lenders and contractors about the opportunities available in Indonesia to become a private partner in a PPP Project. The PPP Book is therefore the presentation of PPP opportunities in Indonesia to the world. The 2013 edition of the Book is richer in information than its, and now incorporates a description of recent regulatory changes and PPP development policy in Indonesia. 
Following a rigorous review and screening process in compliance with Bappenas Regulation 6/2012, the PPP Book now consists of 27 projects, arranged in three categories: potential, prospective, and ready for offer PPPs. In this 2013 edition there are 14 prospective projects and 13 potential projects. To date, 21 projects listed in previous books have already gone to tender. I trust the information presented in this book will provide useful references to any party involved in the development of PPPs in Indonesia.  
 
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2.  AGRICULTURE

 
Indonesia inherited vast and fertile land which makes it as a major global key producer of a wide variety of agricultural tropical products. We possesses 21.6 million hectares plantation area with total production approximately 35.6 million tonnes. Indonesia is one of the largest manufacturers of the products below:

o Palm Oil
o Rubber
o Cacao
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In 2012, agribusiness sector contributed 23.44 % of the total GDP of Indonesia. The plantation sub-sector (food crops, plantation crops and others) is the largest contributor at 77%.
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The increasing domestic demand for agricultural and forestry products is due to:

o Population Growth
o High Public Consumption
o Increasing number of middle class population

In addition, Indonesia is well known as a major exporter of plantation products, especially palm oil. Palm oil industries are benefited the most as result of increasing external demand and the wider sector participation in the global economy.

The Indonesian government has issued an incentive in the form of tax allowances, tax holiday and import duty exemption to increase private involvement in production and investment in the plantation sector.
 
Further information can be found at:
 
3.  ENERGY

 
Indonesia’s rapidly expanding economy has boosted domestic energy demand. Due to its vast potential of energy resources, Indonesia has become the main energy supplier for both neighboring countries and world’s major economic power such as Japan and China. However, the growing demand for domestic industry and household consumption makes the need for optimization more important. The government urges to find alternative energy sources and to improve value added of the raw material in order to develop downstream industry in Indonesia. These actions are to support the implementation of National Energy Policy (Law No. 4 Year 2009).
 
Indonesia offers abundance of prospective businesses to be developed, such as:
o    Identification of new oil and gas blocks,
o    Exploration activities of oil and gas sector,
o    Developing coal bed methane gas,
o    Generating renewable energy sources like geothermal in electricity generation,
o    Adoption of renewable energy to reduce oil dependency.

Below is data on natural resources potency in Indonesia.
 
 
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 Source: Coordinating Ministry For Economic Affairs RI, 2011
 
Indonesia concerns that the use of conventional energy leads to higher contribution to green house emissions. So that, the government reiterates its commitment to reduce global emissions in many international frameworks and also creating policy to increase the awareness of safety and clean environment in the factories.

Increasing Demand of Electricity
Indonesia’s coal production reached around 466 million tons in 2012. In terms of exports of thermal coal, Indonesia has emerged as the world’s top exporter due to its strategic location. Besides, Indonesia is a low-cost producer because of its low cost of labor and its geology, whereby much of the coal is found near the land’s surface. Most coal development activities take place in Province of Riau, Jambi, South Kalimantan, Central Kalimantan, and East Kalimantan.

Investment Opportunity to boost the Production of Oil and Gas
Transportation sector has the highest energy consumption. To meet this escalating demand, Indonesia suffers a decline in its oil production and as a result, Indonesia turned to be an oil importer since 2004. The government has taken several actions to encourage investments, such as scrapping the "capping of cost recovery" scheme under the Production Sharing Contract (PSC).
 
The government is also offering exploration rights and other incentives like, favorable tax treatment and better production split, in order to encourage more investments in this sector.

Coal
Electricity demand in Indonesia is growing at 7% annually as a result of increasing economic performance. In the next five years, it is even expected to grow by 9.2%. The government puts high priority to increase electrification rate by generating power plants, particularly on rural electrification projects. In 2012, the percentage of households with electricity in Indonesia was 76.56%, and 79.3% are targeting at the end of 2013. At the end of December 2013, the electrification ratio has exceeded the target of 80.51%.

Renewable Energy as a Future Energy Resources
Indonesia is striving to create a low-carbon economy and the government has taken a lead on committing to cut carbon emissions by 26% from business as usual case by 2020, without international support, and up to 41% with the help of international donors. In our national energy strategy, Indonesia has also committed to allocating 20% of the energy mix for renewable resources by 2025. Indonesia holds 40% of the world's total geothermal reserves, however currently only less than 4% is being developed, leaving the sector wide open for growth.
 
In the future, to prepare for fossil energy depletion and to support the national carbon reduction program, Indonesia must more actively engage in developing environment friendly energy supplies. The table below shows Indonesia’s renewable energy potential.
 
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Further information can be found at:
 

4.  INDUSTRY


 
POTENTIAL LOCATION
 
4 Petrochemical Industrial Clusters: 3 has been established, 1 is being developed
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Supply and Demand Petrochemical Industry in Indonesia
 
Table 1. Supply and Demand of Olefin 
 
S & D (thousand ton/yr)
2011
2012 Est
2013 Est
2014 Est
2015 Est
PE
Consumption
832
955
1,031
1,114
1,203
Local Supply
501
778
778
778
778
Import Supply
391
327
403
486
600
Export
80
85
150
150
175
PP
Consumption
1258
1,359
1,467
1,585
1,711
Local Supply
471
778
780
780
780
Import Supply
637
581
687
805
931
Export
0
0
0
0
0
PS
Consumption
141
152
164
178
192
Local Supply
80
80
80
80
80
Import Supply
61
72
84
98
112
Export
0
0
0
0
0
PVC
Consumption
536
579
625
675
729
Local Supply
400
400
400
400
750
Import Supply
136
179
225
275
-12
Export
0
0
0
0
12
PET
Consumption
400
432
467
504
544
Local Supply
400
400
400
400
400
Import Supply
0
32
67
104
144
Export
0
0
0
0
0
 
 
 
 
 
 
 
Further information can be found at:
http://www.bkpm.go.id/contents/general/21/industry-#.VK7MS8kV_cw