Beyond the Pandemic: The Great Transformation in

General Army (Ret) Luhut Binsar Pandjaitan Coordinating Minister for Maritime and Investment Affairs January 5, 2021

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Background: The Pandemic and Its Effects Then, COVID-19 Came and Infected More than 80 Million People in the World Until Now

Global Case: Fatality: 83,910,386 1,839,660

CFR: 2.19%

Indonesia Case: Fatality: 772,103 22,911 (1% of total) (1% of total)

CFR: 3%

Source: WHO, MoH

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 3 Resulting in Global Recession

Economic Growth (%YoY) 10 7 7 6 6 6 6 7 7 5 5 5 6 5 4.9 5 4 4 5 3.2 3.0 3.1 3.7 3 3 3.3 2.6 3 2.2 2 2 2 2 2 2 1 1 2 1 1 #N/A 0.4 0 1 #N/A 0.6 0 -0.6 -0.3 -2.5 -5 -3.5 -2.8 -5.3 -6.8 -7.0 -10 -9.0

-15 -13.3 -14.0 -20 1Q2019 2Q2019 3Q2019 4Q2019 -25 -23.9 1Q2020 2Q2020 3Q2020 -30 China Indonesia India Vietnam Taiwan EU US

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Indonesia Similarly Experiences Contractions

Growth YoY (%) Growth (%YoY) 2018 2019 2020 Based on Expense 10% 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q 4Q FY 1Q 2Q 3Q GDP 5.1 5.3 5.2 5.2 5.2 5.1 5.1 5.0 5.0 5.0 3.0 -5.3 -3.5 5% Domestic Demand 6.4 6.6 6.2 5.7 6.2 3.9 4.1 3.3 3.3 3.6 2.6 -6.2 -5.4 Consumption 4.8 5.2 5.2 5.1 5.1 5.3 5.7 4.6 4.2 4.9 2.7 -5.7 -2.4 0% Private 5.0 5.2 5.0 5.1 5.1 5.0 5.2 5.0 5.0 5.0 2.8 -5.5 -4.0 -3.5% Non Profit 12.5 14.9 13.8 7.1 11.9 -7.5 -6.8 -8.3 -8.0 -7.7 -2.2 -17.0 -21.9 -5% Public 2.7 5.2 6.3 4.6 4.8 5.2 8.2 1.0 0.5 3.2 3.7 -6.9 9.8 -5.4% Gross Fixed -10% 7.9 5.8 6.9 6.0 6.6 5.0 4.6 4.2 4.1 4.4 1.7 -8.6 -6.5 Capital Formation -10.8% Inventory (inc. 20.5 34.7 17.7 -14.4 32.3 -27.0 -19.2 -28.0 71.5 -35.6 9.2 6.6 -67.8 -15% Discrepancy)

Net Export -46.8 -55.9 -41.2 -87.1 -51.1 97.5 111.2 148.4 2329.3 167.8 19.3 40.0 61.2

1Q2019 2Q2020 2Q2018 3Q2018 4Q2018 2Q2019 3Q2019 4Q2019 1Q2020 3Q2020 Export 5.8 7.5 8.3 4.6 6.5 -1.6 -1.7 0.1 -0.4 -0.9 0.2 -11.7 -10.8 1Q2018 GDP Domestic Demand Export Import 12.5 14.9 13.8 7.1 11.9 -7.5 -6.8 -8.3 -8.0 -7.7 -2.2 -17.0 -21.9

In general, the economy contracted by -3.5% yoy in 3Q from -5.3% yoy in 2Q. From the domestic side, domestic demand contracted less at -5.4% yoy from - 6.2% yoy with surge in government spending. From the external side, net exports increased as imports contracted far above exports. Source: BPS, calculated COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 5 There Are Signs of Second Wave which Could Hinder the Current Uptrend Update

South Asia, South East Asia

Indonesia (772,103 Cases) 10,000 8,000 6,000 4,000 2,000 -

Source: WHO, MoH COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 6 84% of Cases are from 13 Most Impacted Provinces

Cases by Province 250

200 191

150 89 87 86

Thousand Cases 100

50 33 28 25 24 19 19 18 16 13 13 12 10 10 9 8 7 7 6 6 6 4 4 4 4 3 3 3 3 2 2

0

Bali

Riau

Aceh

Papua

Jambi

Banten

Maluku

EastJava

Lampung

Bengkulu

WestJava

Gorontalo

DKIJakarta

RiauIslands

WestPapua

CentralJava

DIYogyakarta

NorthMaluku

WestSulawesi

SouthSulawesi

NorthSulawesi

WestSumatera

EastKalimantan

SouthSumatera

NorthSumatera

BangkaBelitung

CentralSulawesi

WestKalimantan

SouthKalimantan

NorthKalimantan

CentralKalimantan

EastNusa Tenggara

SouthEast Sulawesi WestNusa Tenggara Total Cases Active Cases

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 7 Therefore, COVID-19 Response is Focused for Most Affected Provinces

Downstream Target : Increase in Upstream Target : Reduction in Daily New Cases Recovery Rate and Reduction in Mortality Rate 8 Provinces: DKI Jakarta, , , , South Kalimantan, South Sulawesi, , and Bali. Additions: and Aceh

Strategy #I: Behavior Change and Early Detection of Strategy #2: Makeshift Centralized Isolation Strategy #3: Standardizing Clinical Covid-19 transmission Facilities Management of COVID-19

1. Encouraging people’s compliance to health 1. Centralized isolation facilities are 1. Improving clinical management of protocols through: provided for asymptomatic and mild Covid-19 patients, through a. Massive and systematic campaign for patients to reduce hospital occupancy and standardizing treatment guideline, health protocols in the community prevent household transmission. written by the MoH, 5 professional engaging various stakeholders. organizations, and BUMN hospital b. Disciplinary operations (operasi 2. Every city that has a high number of team. yustisia) to enforce people’s compliance confirmed cases should provide to health protocols. centralized isolation facilities, equipped 2. Ensuring each hospital handling Covid- with adequate health support for 19 patients has adequate bed capacity, 2. Improving targeted testing and tracing. handling asymptomatic and mild patients. medical supplies and equipment to carry out the clinical guidelines.

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 8 Highly Impacted Provinces Contribution to National Number Update As Per 4 Jan 2020 National Contribution National Contribution

70,000 Other Provinces 8 Provinces: 72.0% 8 Provinces: 76.0% 5 Provinces: 17.3% 5 Provinces: 6,6% 5 Provinces (Riau, Aceh, Sumbar, Kaltim, Papua) Positivity Rate: 15,8% Positivity rate: 22,5% 234,688 60,000 256,718 238,679 8 Provinces (DKI Jakarta, Jabar, Jatim, Jateng, Sulsel, 247,678 244,839 240,231 234,303 Sumut, Bali, Kalsel) 233,054 230,528 52.884 Case Tested 204,523 48.696 48.997 50,000 194,884 195,707 182,009 188,689 182,754 9,200 42.867 42.587 157,762 163,809 10,509 9,117 3,471 40,000 37.673 8,364 8,924 3,451 31.847 4,046 30.107 8,073 29.801 29.446 5,853 3,319 30,000 27.893 28.452 28.220 27.612 25.973 5,682 24.995 5,026 4,611 4,878 4,199 4,202 5,194 4,388 4,863 21.921 2,678 4,290 4,515 4,973 4,935 6,089 5,973 6,743 20,000 4,325 5,732 6,270 3,634 40,213 4,426 36,429 4,544 34,141 28,650 30,344 25,401 10,000 18,862 20,714 21,192 17,992 18,756 18,686 17,526 17,089 16,479 17,257 13,743

- 9 Sep - 16 Sep - 23 Sep - 30 Sep - 7 Okt - 14 Okt - 21 Okt - 28 Okt - 4 nov - 11 Nov - 18 Nov - 25 Nov - 2 Des - 8 9 Des - 16 Des - 23 Des - Last 7 15 Sep 22 Sep 29 Sep 6 Okt 13 Okt 20 Okt 27 Okt 3 Nov 10 Nov 17 Nov 24 Nov 1 Des Des 15 Des 22 Des 29 Des Days

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Mortality and Recovery Rate Update National National As Per 4 Jan 2020 Contributions Contributions Other Provinces 8 Provinces: 77.8% 8 Provinces: 77.0% 5 Provinces: 13.4% 5 Provinces: 3.3% 5 Provinces (Riau, Aceh, Sumbar, Kaltim, Papua) 1.446 1.459

8 Provinces (DKI Jakarta, Jabar, Jatim, Jateng, Sulsel, 260 288 Sumut, Bali, Kalsel) 1.146 1.111 85 48 970 184 919 221 872 106 188 79 764 773 778 218 735 707 718 114 64 130 653 140 634 632 112 615 99 156 112 149 59 135 122 124 1,101 1,123 192 132 124 118 112 112 106 811 856 668 572 618 589 505 482 456 471 503 455 450 400 385

9 Sep - 16 Sep - 23 Sep - 30 Sep - 7 Okt - 14 Okt - 21 Okt - 28 Okt - 4 nov - 11 Nov - 18 Nov - 25 Nov - 2 Des - 8 9 Des - 16 Des - 23 Des - Last 7 15 Sep 22 Sep 29 Sep 6 Okt 13 Okt 20 Okt 27 Okt 3 Nov 10 Nov 17 Nov 24 Nov 1 Des Des 15 Des 22 Des 29 Des Days

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Omnibus Law, Business Licensing and Creation of Sovereign Wealth Fund Indonesia Needs Strategy to Boost Investment and Industrialization

Background Strategy General Timeline

1. COVID-19 Pandemic 1. Timely and targeted stimulus: 2020 – Passing Boost  Impact to health: • Social Safety Net for Omnibus consumption law and govt mortality rate & vulnerable people spending increasing hospital • Aid for SME burden • Help for larger corporation  Impact to economy: 2. Support for export-oriented halted activities 2021 – Implemen- Boost investment: ting investment • Omnibus Law Omnibus 2. Previous deindustrialization • Creating downstream law trend industrialization policies • Investing in key areas such as healthcare and green 2022 Economy recover, economy start to move back to 3% GDP deficit

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 12 Implementation of the Omnibus Law will Simplify Overlapping Regulations

The Omnibus method simplifies the process and increases productivity in drafting regulations

Benefits of Application of the Omnibus Law Dipangkas Omnibus Law as a 1. Eliminate overlaps strategy for between PUUs; Disederhanakan regulatory reform so 2. Change process efficiency that the arrangement / revocation of PUU; Diselaraskan is carried out 3. Eliminating sectoral egos. simultaneously on many laws and regulations There are 8,451 central The consequences of implementing the Omnibus Law: government regulations and 15,965 regional regulations 1. The existing law is still valid, except for some articles (legal material) that have been replaced or that describe the complexity declared invalid. of regulations in Indonesia. 2. The existing law is no longer enforced, if the article (legal material) that is replaced or declared invalid is the core of the law (Source:MoLHR,23Jan2020)

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 13 Business Licensing is One of Key Changes in Omnibus Law

1 Simplification of doing Business 52 Laws (770 Articles) Consist of ESG, building and location permit, IMB & SLF, etc 2 Investment Requirement 13 Laws (24 Articles) Limited business(Kegiatan Usaha Tertutup); Priority List 3 Manpower 3 Laws (55 Articles) Labor, severance pay, foreign workers, outsource, expatriates, etc 4 Ease, Protection and Empowerment of Micro, SMEs 3 Laws (6 Articles) Collaboration, processing partnership, incentive, etc Ease of doing business 9 Laws (23 Articles) 5 Immigration, patent, village-owned enterprises, monopoly, etc Supports for Researchand Innovation 6 2 Laws (2 Articles) Development of Export, special assignment for SOEs/Private companies

7 Government Administration to Support Job Creation 2 Laws (14 Articles) Discretion, NSPK (standard), system and electronic docs Omnibus Law would amend 79 Laws 8 Sanctions 49 Laws (295 Articles) 1,244 Articles Administrative sanctions, warning, suspension 9 Land Procurement 2 Laws (11 Articles) Land procurement, Forestry

10 Central Government Investment and Ease for National Strategic Project 2 Laws (3 Articles) Establishment of Indonesia SWF, permit simplification 11 Economic Zone 5 Laws (38 Articles) SEZ: one stop service, Industrial Area, Special facility for SEZ

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 14 Simplification of Licensing through Risk- Based Method

Risk-based licensing (Articles 9, 10, 11 of Omnibus Law)

1 Low-risk Registration of business registration number (NIB) 2 Medium Risk

Standard certification required The standard certification includes a declaration by the business that it has - Low-Medium Risk in addition to NIB fulfilled the required standards, which includes environmental standards

- Medium-High Risk Standard certification whereby the declaration of fulfilling required standards by the business is verified by a due diligence process conducted by the government.

3 High-Risk Government licence is required Amdal is a prerequisite for the issuance of this licence, which is required in addition to the NIB for business operations to begin.

With risk-based licensing, business licensing in low to low-medium industries would be freer from regulatory hindrance

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 15 Environmental Approvals will Still Be Needed Especially for High Risk Businesses

Business Permit Process

UU 32/2002 (36-40) OMNIBUS LAW (13,21,22)

Request Environmental Approval Environmental approvals* *Risk-based licencing

Environmental assessment report Business permit By integrating the environmental approval into (AMDAL or UKL-UPL business permit, the Omnibus Law stipulates the revocation of the business permit and halting of operations in the event of a breach Environmental approval of environmental commitment/regulation such as : - Providing incorrect data AMDAL /UKL-UPL Environmental permit - Failure to commit to the requirements stated in AMDAL/UKL-UPL

Business permit

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 16 Omnibus Law and the Establishment of Indonesia Sovereign Wealth Fund • Established by Indonesian law as a sui generis Indonesian legal entity • Mandate: • Asset optimization (e.g., shares in SOEs, fixed assets, operating assets) through corporate actions • Attract investments by co-investing with both overseas and local partners Theme and Mandate • Play active role in Improving Indonesian investment climate

• Management of the entity in majority professional • Management of the Institution’s asset is fully conducted by the management of the Institution based on the principle of good, and accountable governance. Governance • Audit of the management and financial accountability by public accounting firm

• Asset management activity (transfer asset, dissolution of asset) • Cooperation with the third party by establishing fund and sub fund • Independency of asset management (investment decision) Investment Activities • Public and private equity, project financing, debt instruments • Key sectors of Indonesian economy (selection of priority socio-economicinvestments) • Investment horizon: medium-to-long term Investment Universe And • Geography: domestic in its inception with the possibility to go overseas Strategies • Obtain board-level positions to oversee operations and significant value-add for the economy

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Investments in Indonesia Will Be Made Through Indonesia Investment Authority

The Fund seeks to raise an initial capital of USD 5 Bn for early development 2 Government Initial focus for thematic Indonesian Government fund Regulations for LPI has been passed Investment Indonesia Sovereign Wealth Fund Management Anchor Investor(s) – international and (Lembaga Pengelola Investasi/LPI) Agreement domestic funds

Domestic and Foreign Master Fund Investor Manager

Directly to thematic funds, portfolio companies, and / or asset / project level Master Fund Limited Partnership Agreement Limited Partnership Agreement

Infrastructure Energy and Resource Health Tourism Technology Ibu Kota Baru

. Toll roads . Oil & Gas reserves . Hospitals . Tourism SEZ . Digital lending . Contractor . Airports . Pharmaceutical . Hotel chains . Payments . Utilities . Seaports . Commerce . Land & building

COORDINATING MINISTRY FOR MARITIME AND 18 INVESTMENT AFFAIRS REPUBLIC OF INDONESIA Investment Focus to Generate Big Bang for the Buck

Health Sector Increasing autonomy in the health sector, to prevent shortage of medicine and other medical essential supply

Downstream of Natural Resource To improve Indonesia economic complexity and reduce dependency on volatile natural resource prices

EV Battery Development Development using nickel and cobalt, two of main EV battery cathode components

Green Economy New and renewable energy, EV, REDD+ projects, etc

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 19 Downstream Mineral Policy and EV Battery Development Nickel-Focused Downstream Policy Has Born Fruit; Jump in Iron and Steel Export

Indonesia Export Rank 10M2018 10M2019 2019 10M2020 Top Export in 10M2020 (USD Bn) 1 Mineral Fuel and Oil Mineral Fuel and Oil Mineral Fuel and Oil Mineral Fuel and Oil Mineral Fuel and Oil 20.56 2 Animal or Vegetable Oils Animal or Vegetable Oils Animal or Vegetable Oils Animal or Vegetable Oils Electrical Machinery and Electrical Machinery and Electrical Machinery and Animal or Vegetable Oils 15.75 3 Equipments Equipments Equipments Iron and Steel Iron and Steel 9.64 Vehicles Other Than Vehicles Other Than Vehicles Other Than Electrical Machinery and Electrical Machinery and 4 Railway Railway Railway Equipments Equipments 8.26

Pearls, Precious Stones 7.88 5 Rubber and Articles Iron and Steel Iron and Steel Pearls, Precious Stones Vehicles Other Than Vehicles Other Than Railway 5.86 6 Pearls, Precious Stones Pearls, Precious Stones Pearls, Precious Stones Railway Nuclear Reactors, Boilers, Rubber and Articles 5.07 7 Machinery Rubber and Articles Rubber and Articles Rubber and Articles Nuclear Reactors, Boilers, Machinery 4.67 Nuclear Reactors, Boilers, Nuclear Reactors, Nuclear Reactors, 8 Iron and Steel Machinery Boilers, Machinery Boilers, Machinery Footwear 4.34 9 Ores, Slag, and Ash Clothing (Not Knitted) Clothing (Not Knitted) Footwear Pulp & Paper 3.86 Miscellaneous Chemical 10 Products Pulp and Paper Footwear Pulp and Paper Source: BPS via CEIC COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 21 Iron and Steel Export Surpassed Vehicle Export in 11M2020

With the current trajectory, iron and steel export in 2020 could reach around USD 10 Bn.

Indonesia Export to the World 12

10 9.64 USD USD Bn 8 8 8 7 7 6 6 6 6 5 5

4 3 2 2 1 1

0 2014 2015 2016 2017 2018 2019 11M2020 Iron and Steel Vehicle (2-,4-wheeler and parts)

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 22 After Focusing on Nickel Processing to Stainless Steel, Indonesia Has Opportunities to Process Nickel to Lithium Battery Component

Nickel Alloy Concentrate Nickel Sulphide Metal Chemicals Ores Matte Battery Nickel ore FeNi Stainless Saprolite Steel Nickel Pig Iron Laterite Ores

Nickel Limonite MHP / MSP Battery cathode

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 23 Mapping for Mineral Downstreaming in EV Development

Tin Solder Carbon Steel and Alloy Materials

Automotive Iron Ore parts Stainless Steel

Nickel Cathode

Lithium-ion battery cathode Electric Vehicle

Aluminium Sheet Lithium-ion Battery

Current Collector Copper Cathode

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 24 Indonesia Has Enough Reserves to Become A Key Player in EV Battery Industry

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 25 EV Battery Increasingly Need Nickel

COORDINATING MINISTRY FOR MARITIME AND INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 26 Prospective Partners in EV Battery Ecosystem Development

Proposal Coverage Full end to end – in line with gov’t Full end to end – in line with gov’t Mostly aligned with gov’t, need more Project Scale and Mostly aligned with gov’t, need more discussion on charging station and ESS, off Schedule discussion on charging station and recycling, off taker guarantee taker guarantee

Financial and Solid financial condition, need clarification on Need more study, no detailed calculation yet Investment cell to pack, recycling, charging station and ESS Extensive incentives needed, in discussion Most required incentives covered by existing Incentive stage with related ministries regulations

Risk Identification Most risks have been identified, need more Most risks have been identified, need more study in charging station and ESS study in charging station and ESS ESS, Charging Illustration of full end MHP Ni, Co Precursor/ Cell, Modules Nickel Ore Stations & Recycling Sulphate Cathode & Packs to end ecosystem PQS

COORDINATING MINISTRY FOR MARITIME AND Source: Ministry of SOE 27 INVESTMENT AFFAIRS REPUBLIC OF INDONESIA 27 Thank You

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