0 About Invest stor or Relation ons s Unit (IRU) U) ABOUT THE - - PowerPoint PPT Presentation

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Published by Investor Relations Unit – Republic of Indonesia Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279) Dalyono (Fiscal Policy Office – Ministry of Finance) Subhan Noor (Debt Management Office - Ministry of Finance, Phone: +6221 381 0175) E-mail: contactIRU-DL@bi.go.id ABOUT THE REPUBLIC OF INDONESIA INVESTOR RELATIONS UNIT The Republic of Indonesia Investor Relations Unit (IRU) has been established as the joint effort between the Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and address concerns of investors, especially financial market investors. IRU is expected to serve as a single point of contact for the financial market participants. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is being administrated by the International Department of Bank Indonesia. However, investor relations activities involve a coordinated efforts which are supported by all relevant government agencies, i.e. Bank Indonesia, the Ministry of Finance, the Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of Industry, State Ministry of State Owned Enterprises, State Asset Management Company, and the Central Bureau of Statistics. IRU also holds an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices.

About Invest stor

• r Relation
• ns

s Unit (IRU) U)

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Table of Content

Executive Summary Preserved Macroeconomic Stability Improved International Perception and Rising Investment Prudent Fiscal Management Government Debt Performance

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Wide Range of Policy Reforms to Boost Economic Growth

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Executive Summary

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Executive ve Summa mary ry

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• Economic growth accelerated in the third quarter of 2015, with the trend projected to continue into the fourth quarter. Third quarter growth

was recorded at 4.73% (yoy), surpassing that posted last period at 4.67% (yoy). This was mainly due to stronger government consumption and investment, in line with significant progress in terms of government infrastructure projects.

• Sound non-oil and gas trade balance preserved the current account gains during the reporting period. The current account deficit in the

Indonesia Balance of Payments (BOP) stood at USD4.0 billion (1.86% of GDP) in Q3/2015, improving from USD7.0 billion (3.02% of GDP) in Q3/2014 and USD4.2 billion (1.95% of GDP) in Q2/2015.

• Rupiah rebounded after intense depreciatory pressures were felt in the third quarter. In Q3/2015, Rupiah depreciated on average by 5.35% (qtq)

to a level of Rp13,873 per USD due to external factors, namely concerns over the normalisation policy of the Federal Reserve as well as Yuan devaluation in China. Nonetheless, the Rupiah strengthened in October 2015 on positive sentiment for EM due to a dovish announcement relayed at the FOMC, coupled with optimism regarding the economic outlook of Indonesia after the Government released a series of policy packages and Bank Indonesia intervened on the foreign exchange market to stabilise the Rupiah.

• The Consumer Price Index (CPI) remains under control, experienced deflation in October 2015. Deflation was recorded at 0.08% (mtm) or 6.25%

(yoy) in line with volatile food deflation after foodstuff prices were corrected due to increased supply. Consequently, inflation from January to October 2015 stood at 2.16% (ytd) or 6.25% (yoy).

• Financial system stability remained solid, underpinned by a resilient banking system and relatively stable financial markets. Banking industry

resilience endured, with credit, liquidity and market risks well mitigated. In September 2015, the Capital Adequacy Ratio (CAR) remained significantly above the 8% minimum threshold at 20.4%, while non-performing loans (NPL) were low and stable at 2.7% (gross) or 1.3% (net).

• The BI Board of Governors agreed on 17th November 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility rate at 5.50%

and the Lending facility rate at 8.00%. The Board of Governors also decided to lower the primary reserve requirement in Rupiah from 8.0% to 7.50%, effective on 1st December 2015. Bank Indonesia considered that the macroeconomic stability has continued to improve, making room to maintain a loose monetary policy stance. Bank Indonesia believes that the 2015 inflation will be maintained at the lower end of the 4±1% inflation target, with the current account deficit is projected at 2% of GDP . With the lingering uncertainty in the global financial market, stemming mainly from the expected Federal Funds Rate (FFR) hike as well as the diversity of monetary policies from ECB, BoJ, and PBoC, Bank Indonesia will remain vigilant in loosening its monetary policy.

• On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal consolidation. Recent

policy reforms represent an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. The budget deficit for 2015 is projected at a safe level of 2.2% of GDP .

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Executive ve Summa mary ry

GDP Growth Inflation Balance of Payments 5

* Preliminary Figures

20 40 60 80 100 120 140

• 15
• 10
• 5

5 10 15 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2** 2010 2011 2012 2013 2014 2015 Current Account Capital & Financial Account Overall Balance Reserve Assets

• 0.7%

1.1% 1.8% 2.2% 2.2% (3.0) (2.5) (2.0) (1.5) (1.0) (0.5)

• 2010

2011 2012 2013 2014

Fiscal Surplus / (Deficit) (% of GDP)

Source: Bank Indonesia Source: BPS

5.7 5.5 6.3 6.0 4.6 6.1 6.5 6.0 5.6 5.0 4.7 4.7 4.7

• 1.0

2.0 3.0 4.0 5.0 6.0 7.0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Q1 2015 Q2 2015 Q3 2015

Fiscal Balance

Source: Bank Indonesia Source: BPS, Bank Indonesia

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Source: Ministry of Finance

Debt Composition Table of Debt to GDP Ratio Central Government Debt to GDP Ratio (% of GDP) Note: Using GDP at Current Market Prices [2010 Version] *) Preliminary Figures

Executive ve Summa mary ry

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2015 Policy y Summa mary ry

Government’s coordinated policy tools to promote growth through macroeconomic management

 Capital injection to state-owned companies, as agents

• f

development in supporting national priorities.  Optimizes Governments securities issuance from domestic sources to fulfill Budget need and uses foreign debts as complimentary.  Determines debt instrument by taken into account of market need in regard to market development and portfolio management.  Issues Retail Bond for instrument diversification and financial inclusion.  Optimizes foreign and domestic loan instrument to fulfill Budget need on capital expenditure.  Conducts active portfolio management of Government securities in

• rder to promote market liquidity and stability.

 Strengthens the function of Investor Relations Unit. Quality of Spending Financing and Debt Management Policy State Revenues Optimization Monetary Policy Mix  Bold and pre-emptive policy through BI Policy Rate, responsively adjusting to current macroeconomic condition.  Exchange rate flexibility to facilitate external adjustments.  Financial market deepening and capital flows management.  Accommodative measures of macroprudential policy.  Policy coordination with the government and financial stability forum.  Central bank cooperations, including second line of defences. 7  Fuel subsidy savings of IDR 211.3 trillion.  Reallocation of savings towards basic infrastructure (food security, connectivity and maritime) and social welfare.  Infrastructure expenditure is higher than energy subsidy.  Food security spending larger than energy subsidy.  Additional allocation for village funds.  Cashless smart cards system for better targeted subsidy.  Capital injection to SOEs. Strategies:  Improving compliance rate.  Closing tax leakage (especially VAT Refund).  Expanding tax base (Mapping Tax Payer).

Manageable Fiscal Deficit

 Fiscal deficit to be lowered from 2.2% of GDP to 1.9% of GDP.  Spacious fiscal room for maneuver to anticipate global uncertainty.

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Improved International Perception and Rising Investment

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Moody’s

Dec 2011 (affirmed Nov 2015) “The recent wave of reform initiatives by the government is likely to improve the business sentiment. The series of packages contain a number of measures with the potential in the longer run to significantly change the business environment, which can currently be characterised as difficult. The reform agenda may signal a structural change from a more nationalistic approach to economic policy of the recent past. Fitch expects annual real GDP growth to pick up to 5.3% in 2016 and 5.5% in 2017 from 4.8% in 2015..” Jan 2012 (affirmed Dec 2013) “Indonesia's rating is based on the country's resilient growth, low debt burden, favorable maturity profile, and high debt affordability. Indonesia has demonstrated resilience to large external shocks [with] sustainably high trend growth over the medium term. Prudent fiscal management has contained budget deficits and steadily reduced the government's debt burden over the past decade.” May 2015 “S&P outlook revision reflects S&P’s view of Indonesia's improved policy credibility stemming from initiatives to bolster monetary and financial sector management as well as economic performance. S&P expects these actions to improve Indonesia's growth prospects and external resilience. The ratings on Indonesia balance the country's low per capita income and developing policy and institutional settings against the improved credibility

• f its monetary policy, buoyant economic growth, and sound public

finances.”

BBB- / Stable Baa3 / Stable BB+ / Positive

Source: Moody’s, S&P, Fitch

Impro rovi ving g Intern rnation

• nal Percept

ption

• n:

: Acknowledg

• wledged

d by Rating g Agencies

S&P Fitch

Investment grade Positive Outlook Negative Outlook Stable Outlook Positive Watch Investment grade Investment grade

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Intern rnation

• nal inst

stitution

• ns

s outlook

• ok shows

s some

• ptimi

mism sm thou

• ugh

gh there is still downsi side de risk for r Indon

• nesi

sia in 2015 …

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IMF Article IV – Indonesia (March 2015) World Bank IEQ (Oct 2015)

“Indonesia’s prospects should improve as the domestic reform momentum gathers pace”

• Real GDP growth is projected to

tick up to 5.2 percent in 2015, with the output gap effectively closed based on staff’s latest estimates of potential growth.

• Headline inflation is expected to

decline in 2015, with reductions in retail gasoline and diesel prices under the new fuel price regime.

• The current account deficit is

projected to narrow slightly in 2015, mainly due to a reduction in net oil imports. Risk

• Downside risks emanate mainly

from external sources, but they could exacerbate strains in the banking system and corporate sector.

• Among the most significant risks,

a sharp slowdown in trading partner growth could dampen external demand and commodity prices. “Indonesia’s growth moderation has continued and an uncertain external environment has turned the

government focus to structural and fiscal reforms to raise investor confidence”

• Growth is grew at the moderate

pace of 4,7% (yoy) in Q2, the same rate as Q1.

• Widened current account deficit

to 2,1% in Q2 caused by weaker services and income account is considered as typical in the Q2 every year.

• The government starts housing

program as the result of better public spending. Risk

• The main risks to the outlook is

the possibility of larger than expected real sector spillovers from volatile financial markets.

• Low oil prices not only would

bring a benefit for Indonesia as a net oil importer, but also would put a significant strain on oil and gas-related fiscal revenue

Asian Development Outlook (Sept 2015)

“Stronger public investment is now seen to pull economy out

• f a slowdown that persisted in

the first half of 2015”

• GDP growth is forecast to recover to

4.9% this year and 5.4% in 2016

• Inflation is projected to subside to

average 6.7% in 2015 and 5.1 % in 2016.

• Exports are expected to improve in

2016 on better prospects for major industrial economies.

• To accommodate funding for

infrastructure the government widen its budget deficit to 2.2% of GDP from 1.9%.

• 2016 budget maintains an

expansionary fiscal stance and includes a more realistic revenue target and 2,1% fiscal deficit of GDP. Risk

• Downside domestic risks centers on

further delays in infrastructure investment which would damage growth and slowing progress on structural reform.

• External risks would be posed by

global financial market turbulence as Indonesia need to finance fiscal and external deficits.

OECD Economic Forecast (June 2015)

“…activity is projected to pick up later in 2015 and strengthen further in 2016…”

• …as public spending gathers

pace, confidence recovers and the expansionary impact of the depreciation of the rupiah takes hold.

• Inflation is now moderating, in

large part because of the fall in energy prices.

• Official interest rates are

assumed to remain unchanged through 2015 and then fall slightly in 2016.

• The abolition of fuel subsidies

has provided the necessary fiscal space for increased public infrastructure investment. Risk

• The exchange rate may remain

fragile as the external imbalance persists

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Preserved Macroeconomic Stability

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Econom

• mic Growt
• wth Picked Up in the Third

rd Quart rter r of 2015

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• Economic growth picked up in the third quarter of 2015 and was

projected to continue improving through the fourth quarter. The economy posted growth of 4.73% (yoy) in Q3/2015, outpacing the 4.67% (yoy) achieved in the previous period, in line with various indicators monitored by Bank Indonesia over the past few months. Such conditions pave the way for stronger economic momentum moving forward.

• The Government was inclined to consume and invest more,

which propelled growth during the reporting quarter as significant progress was made in terms of government-led infrastructure projects despite the wait-and-see attitude of private investors. Households, however, continued to consume tenaciously.

• From an external perspective, persistently low international

commodity prices, coupled with sluggish growth in trading partner countries, such as United States, China and Singapore, precipitated a deeper export contraction. On the other hand, import growth was maintained on the back of stronger domestic demand.

• Bank

Indonesia is satisfied that the current economic momentum will gain further traction in the fourth quarter as the government continues to expedite infrastructure projects that will attract more investment. Private investment was also predicted to increase in line with the policy packages released by the government, including deregulation to bolster the investment climate.

• Meanwhile, consumption was expected to surge as a result of

local elections to be held nationwide in December 2015. In addition, a looser macroprudential policy stance will also begin to catalyse economic activity in the final quarter of this year.

Economic Growth - Expenditure Side S e c t o r 2013 2014 2014 2015 I II III IV I II III Household Consumption 5.4 5.4 5.1 5.1 5.0 5.1 5.0 5.0 5.0 NPI Serving Household Consumption Expenditure 8.2 23.7 22.8 5.6 (-0.2) 12.4 (-8.3) (-7.9) 6.4 Gross Fixed Capital Formation 5.3 4.7 3.7 3.9 4.3 4.1 4.4 3.7 4.6 Government Consumption 6.9 6.1 (-1.5) 1.3 2.8 2.0 2.7 2.1 6.6 Exports of Goods and Services 4.2 3.2 1.4 4.9 (-4.5) 1.0 (-1.0) (-0.1) (-0.7) Imports of Goods and Services 1.9 5.0 0.4 0.3 3.2 2.2 (-2.4) (-7.0) (-6.1) GDP 5.6 5.1 5.0 4.9 5.0 5.0 4.7 4.7 4.7 Economic Growth - Supply Side S e c t o r 2013 2014 2014 2015 I II III IV I II III Agriculture, Forestry, and Fisheries 4.2 5.3 5.0 3.6 2.8 4.2 4.0 6.8 3.2 Mining and Quarrying 1.7 (-2.0) 1.1 0.8 2.2 0.5 (-1.5) (-6.2) (-5.6) Manufacturing 4.5 4.5 4.8 5.0 4.2 4.6 4.0 4.3 4.3 Electricity and Gas 5.2 3.3 6.5 6.0 6.5 5.6 1.7 0.8 0.6 Water Supply, Waste Management and Recycling 4.1 3.6 3.2 2.8 2.7 3.0 2.9 6.0 7.6 Construction 6.1 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 Wholesale and Retail Trade; Automotives 4.7 6.1 5.1 4.8 3.5 4.8 4.0 1.8 1.5 Transportation and Warehousing 8.4 8.4 8.5 8.0 7.1 8.0 6.3 6.5 7.1 Provision of Accommodation and Food & Beverage 6.8 6.5 6.4 5.9 4.9 5.9 3.6 3.9 4.5 Information and Communication 10.4 9.8 10.5 9.8 10.0 10.0 10.1 9.8 10.8 Financial Services and Insurance 9.1 3.2 4.9 1.5 10.2 4.9 7.6 2.5 10.4 Real Estate 6.5 4.7 4.9 5.1 5.3 5.0 5.3 5.0 4.8 Business Services 7.9 10.3 10.0 9.3 9.7 9.8 7.4 7.6 7.6 Administration, Defence, and Social Security 2.4 2.9 (-2.5) 2.6 6.9 2.5 4.7 6.6 1.2 Education Services 8.2 5.2 5.4 7.3 7.1 6.3 5.8 12.2 8.3 Health Services and Social Activities 7.8 7.7 8.5 9.9 6.1 8.0 7.3 8.2 6.5 Other Services 6.4 8.4 9.5 9.5 8.4 8.9 8.0 8.1 8.2 GDP 5.6 5.1 5.0 4.9 5.0 5.0 4.7 4.7 4.7

Economic Growth

Source: BPS, Bank Indonesia

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Sign gns s of Growth Pick-Up Up: : Fisc scal Spendi ding g Boosting Invest stmen ment and Retail Sales s Reboun

• und

Retail sales index has shown signs of improvement Indication of an improvement is reflected in the increase of motorcycle and car sales Cement sales increase significantly Rising Government’s investment on infrastructure construction

Total Construction, RHS Rp Trillion Source: BCI Asia (Aug 31st) * Q3: 50% of all stages assumed private and 70% of all stages public

13

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14 Source: Monev website, accessed on 1 Sept’15

• Up to 31 Aug 15, realization of budget absorption is 32.3% (18.4% increase from June and 11.9%

increase since July).

• Strategic infrastructure on the pipeline: Raknamo, Keureuto, Logung and Lolak Dams; Trans Sumatra,

Kertosono-Solo and Manado-Bitung Toll Road.

Budget Year 2015 as

• f 31 Aug 2015

Target 30.21% Realization 32.30%

Sign gnificant Growth in Fiscal Spendi ding

Stronger Disbursement Rate of Fiscal Spending Ministry of Public Works Budget Absorption Progress up to Aug 2015

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(-10.0) (-5.0) 0.0 5.0 10.0 15.0

4.6 4.8 5.0 5.2 5.4 5.6

I II III IV I II III IV I II III 2013 2014 2015

GDP (LHS) Household Consumption (RHS) Govt Consumption (RHS) Investment Export (RHS) Import (RHS)

Spatial GDP Growth

Sumatera GDP Growth 2014: 4.7% 2015Q1: 3.5% 2015Q2: 2.9% 2015Q3: 3.0% Java GDP Growth 2014: 5.6% 2015Q1: 5.2% 2015Q2: 5.1% 2015Q3: 5.2% Kalimantan GDP Growth 2014: 3.2% 2015Q1: 1.1% 2015Q2: 1.5% 2015Q3: -0.41% Sulawesi GDP Growth 2014: 6.9% 2015Q1: 7.3% 2015Q2: 8.6% 2015Q3: 8.2% Maluku & Papua GDP Growth 2014: 4.3% 2015Q1: 3.7% 2015Q2: 10.2% 2015Q3: 2.28% Bali & Nusa Tenggara GDP Growth 2014: 5.9% 2015Q1: 8.9% 2015Q2: 8.9% 2015Q3: 11.8%

Spatial GDP Growth Contribution

Java: 58.3%

Main Contributors to GDP Growth Shifting from Commodity-based economy

• In 3rd Quarter 2015, Indonesia booked 4.73% GDP growth (yoy),

slight increase from 4.67% in 2nd Quarter 2015.

• Majority of the growth was driven from Java island, contributed

58.3% of Indonesia’s GDP growth and at 5.2% (yoy).

• Growth in Java is higher than resource-rich regions such as

Sumatra and Kalimantan, given its high industrialization and larger consumption base

• Indonesia

continues to drive growth in resource-based industrialization to shift from commodity-based economy 2015Q3 GDP Growth: 4.73%

Source: Bank Indonesia

Source: BPS

Sumatera: 22.4%

Source: BPS

Maluku & Papua: 2.2% Sulawesi: 6.1% Kalimantan: 8.0% Bali & Nusa Tenggara: 3.1%

6.6 5.0

• 6.1
• 0.7

4.6

(%) (%)

Stron

• ng and Stabl

ble GDP Perform

• rmance

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The largest economy in South-East Asia A large, culturally diverse, young and vibrant workforce Large consumer base with fast growing spending power Increase in infrastructure investment to improve overall efficiency



According to McKinsey, Indonesia is projected to be the 7th largest economy in the world by 2030



5.9% average real GDP growth over the period 2008-2013

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Exports are 23.7% of GDP for the year of 2013, one of the lowest in Asia, creating low volatility in GDP



Foreign direct investment grew at an average rate of 21.1% from 2010-2013



4th most populous country in the world

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66.6% of the population is of working age(1) and 68.5% were 39 years and younger as of 2012

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Working population projected to grow at 0.7% compared to 0.5% CAGR for total population from 2012-2017



A high literacy rate of more than 90%

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~7mn people are expected to join the middle class each year

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Consumer expenditure has grown at a 12.3% CAGR from 2007-2012 and is expected to continue at a 9.1% rate from 2012-2017

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Disposable incomes are projected to grow at 12.1% from 2012-2017

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According to McKinsey, 135-170mn people will join the consuming class by 2030

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Announced an expansion of fiscal spending on infrastructure by 19.2% CAGR from 2012 to 2014

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Infrastructure investments are spread over Indonesia’s 6 economic corridors



Encompass various sectors such as seaports, roads, railways, airports, energy and many others



Government continues to align regional and national regulations to attract further private sector investors

(USD tn)

Nominal GDP – Strong Growth to Continue Middle Class Households Annual Budgeted Capital Spending

(IDR tn)

145.1 172.4 145.8 176.1 2012 2013 Realized 2014 Realized 2015 Budget

21,980 39,340 60,740

2007 2012 2017E

(‘000)

Demographic Dividend – Young Population 0.43 0.88 1.14 2007 2012 2017E

Male Female

The fundamental long term growth drivers for Indonesia remain strong – equipped with abundant natural resources, a young and technically trained workforce and a large consumer base with a fast growing spending power

Condu ducive Environ vironme ment Underpi rpinning g Growt

• wth

Funda damentals

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Globa

• bally Compe

peti titive and a Top Invest stme ment t Desti tinatio tion

17 Indonesia’s stage of development is categorized as efficiency-driven with a strong and well balanced performance across all 12 pillars of competitiveness

Source: The Economist – Asia Economic Outlook Survey 2015, January 2015

Indonesia is in the Top 40 of the Global Competitiveness Index (“GCI”) JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for business investment The Economist: Indonesia has taken over India in #2 Investment Destination in Asia since 2014

Source: Japan Bank for International Cooperation (“JBIC”) FY2014 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies

(1)

Total number of companies that responded was 499

No.(1) Country 2008(2) 2015(3) Institutions Infrastructure Macro-economic Environtment Health and primary education Higher education and training Goods market efficiency Labor market efficiency Financial market development Technological readiness Market size Business sophistication Innovation Score Score Score Score Score Score Score Score Score Score Score Score 1 Spain 29 33 3.9 5.9 4.0 6.2 5.1 4.3 4.0 3.8 5.6 5.4 4.5 3.7 2 Thailand 34 32 3.7 4.6 5.7 5.8 4.6 4.7 4.2 4.4 4.2 5.2 4.4 3.4 3 Indonesia 55 37 4.1 4.2 5.5 5.6 4.5 4.4 3.7 4.2 3.5 5.7 4.3 3.9 4 Turkey 63 51 3.8 4.4 4.7 5.7 4.6 4.5 3.5 3.9 4.1 5.4 4.1 3.4 5 Italy 49 43 3.4 5.4 4.1 6.3 4.8 4.3 3.5 3.2 4.9 5.6 4.8 3.9 6 South Africa 45 49 4.4 4.1 4.5 4.2 4.1 4.6 3.8 5.0 4.6 4.9 4.4 3.7 7 Mexico 60 57 3.3 4.2 4.9 5.7 4.0 4.2 3.8 4.2 3.8 5.7 4.2 3.4 8 Brazil 64 75 3.2 3.9 4.0 5.1 3.8 3.7 3.7 4.0 4.4 5.8 4.1 3.2 9 Philippines 71 47 3.8 3.4 5.7 5.5 4.5 4.2 4.1 4.2 3.9 4.9 4.3 3.5

Source: Global Competitiveness Index 2015-2016, WEF

(1)

Countries with sovereign ratings in the Baa1-Baa3 category and population larger than 40 million

(2)

Rank among 134 countries

(3)

Rank among 140 countries

SLIDE 19

Stron

• ng Invest

stment Underpi rpinned by Competiti titiveness ss and Stabi bility

Investment Realization Progress Q3-2015

• Investment Realization in Quarter III 2015 is Rp140.3 T, increases around 3.8% from Quarter II 2015 (Rp 135.1 T) or increases around 17.0% from

Quarter III 2014 (Rp 119.9 T). The value of investment is based on investment realization report from DDI and FDI companies (Oil and Gas, Banking, Non-Bank Financial Institution, Insurance, Leasing and Home Industry are excluded).

• Investment realization in January – September 2015 is Rp400.0 T, increases around 16.7% from that in January – September 2014 (Rp 342.7 T).
• Foreign Direct Investment realization in Quarter III 2015 based on sectors (five leading sectors) are: Electricity, Gas, and Water Supply (US$ 1064.94

million); Mining (US$ 907.74 million); Real Estates, Industrial Estates, and Office Building (US$ 820.08 million); Metal, Machinery, and Electronic Industry (US$ 723.92 million); and Chemical and Pharmaceutical Industry (US$ 578.24 million).

Source: BKPM

Source: BKPM *) 2015 Investment Target, BKPM’s Strategic Planning 2015-2019 **) Achievements January-September 2015 towards 2015 target

FDI by Sectors (Millions USD) 18

1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000

Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 1,646 1,094 1,053 872 1,136 1,046 908 590 611 507 619 644 286 573 778 1,287 482 593 534 201 421 515 21 133 37 105 186 511 468 999 345 486 413 578 399 460 684 929 765 610 724 606 422 574 460 582 373 526 685 560 559 505 395 777 710 564 442 129 1,065 161 189 296 221 297 174 214 1,436 1,154 197 283 2,160 374 496 711 762 1,442 896 1,070 1,187

Mining Other Primary Sector Food Industry Paper and Printing Industry Chemical and Pharmaceutical Industry Metal, Machinery, and Electronic Industry Transport Equip. and Other Transport Industry Other Secondary Sector Electricity, Gas, and Water Supply Trade and Reparation Transportation, Warehouse, and Telecommunication Other Tertiary Sector

QI- 2014 QII- 2014 QIII- 2014 Jan- Sep 2014 QI- 2015 QII- 2015 QIII- 2015 Jan- Sep 2015 Target 2015* Achiev ement ** DDI 34.6 38.2 41.6 114.4 42.5 42.9 47.8 133.2 175.8 75.8% FDI 72.0 78.0 78.3 228.3 82.1 92.2 92.5 266.8 343.7 77.6% TOTAL 106.6 116.2 119.9 342.7 124.6 135.1 140.3 400.0 519.5 77.0% 0.0 100.0 200.0 300.0 400.0 500.0 600.0

Trillion Rp

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19

Java is Still the Main Investm stment Destinati ation

• n

Realized Foreign Direct Investment (Jan – Sep 2015) Realized Domestic Direct Investment (Jan – Sep 2015)

Source: BKPM Source: BKPM

DDI and FDI by Economic Corridor Q3-2015 (Million USD)

Source: BKPM

Based on Economic Corridor, in January – September 2015 period the highest realization of DDI and FDI is located in Java Corridor. The further ranks of realization of the DDI is in Sumatera, Kalimantan, Sulawesi, Bali and Nusa Tenggara, also Maluku and Papua Corridor. The further ranks of realization of the FDI is also in Kalimantan, Sumatera, Sulawesi, Bali and Nusa Tenggara, as well as Maluku and Papua Corridor.

2,825 11,441 1,005 3,898 985 1,184 2,000 4,000 6,000 8,000 10,000 12,000 14,000 Sumatera Java Bali & Nusa Tenggara Kalimantan Sulawesi Maluku & Papua USD Million 30,555 76,344 1,492 16,235 7,559 1,104 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Sumatera Java Bali & Nusa Tenggara Kalimantan Sulawesi Maluku & Papua Rp Billion

SLIDE 21

6.25 5.02 18.25 6.95 9.83 5 10 15 20

Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep 2011 2012 2013 2014 2015

CPI (%, yoy) (RHS) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)

Inflation

• n Remains Under

r Control

• l

Disaggregation of Inflation

Source: BPS, Bank Indonesia

• The Consumer Price Index (CPI) recorded deflation of 0.08% (mtm) in October 2015, bucking the historical trend of inflation at this time of year. Actual

CPI recorded inflation, however, was on track with BI projections. Deflation stemmed from volatile foods, which continued to experience price corrections of various meats and chilli varieties. Consequently, headline inflation on an annualised basis from October 2014 – October 2015 was recorded at 6.25% (yoy), while year to date, inflation from January – October 2015 stood at 2.16% (ytd).

• Volatile food deflation was recorded at 1.22% (mtm), the highest level of deflation recorded in October for the past five years. Annually, however,

volatile food inflation was 6.95% (yoy). Deflation in October stemmed from persistent deflation of chicken meat, beef and various chilli varieties. Furthermore, core inflation and administered prices were both lower this month than historical trends. Core inflation hit 0.23% (mtm) or 5.02% (yoy) in line with modest rupiah appreciation, domestic economic moderation and anchored inflation expectations. Inflation of administered prices was recorded at 0.03% (mtm) or 9.83% (yoy) as a result of lower diesel prices and the lingering impact of a reduction in the price of 12kg canisters of LPG last September.

• Based on inflation through to October 2015, Bank Indonesia is satisfied that inflation in 2015 will come in at below 4%, supported by policy

coordination to control inflation nationally and locally. In addition, inflation through to October 2015 is also indicative of resilient price stability.

Consensus Forecast on Inflation

Source: Consensus Forecast

20

(%)

6.5 6.7 6.4 4.7 4.5 4.7 5.1 5.1 5.1 5.1 6.5 7.1 7.1 4.9 5.1 4.8 4.8 4.7 5.0 5.0

1 2 3 4 5 6 7 8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2015 2016 2017

CF Jun 2015 CF Sep 2015 (%)

CPI Oct-2015 mtm : -0.08% yoy : 6.25% ytd : 2.16%

SLIDE 22

21

• Indonesia’s overall balance of payments (BOP) in Q3/2015 recorded a deficit.

Although the current account (CA) deficit has lessen compared to the previous quarter, the smaller surplus of capital and financial account (CFA) was unable to fully

• ffset the CA deficit. Consequently, the official reserve asset positions at the end of

September 2015 dropped moderately to US$101.7 billion, equivalent to 6.8 months of imports and servicing public external debt, which is still well above international adequacy standards of three months.

• Current Account deficit performance continued to improve, supported by the

non-oil and gas trade balance. The CA deficit stood at USD4.0 billion (1.86% of GDP) in Q3/2015, improving from USD4.2 billion (1.95% of GDP) in the previous quarter. Improvement in the CA stemmed primarily from the non-oil and gas trade balance.

• Smaller services account deficit due to decline in transportation services (freight) in

line with fewer imports of goods and growing travel account surplus due to an increase in international visitors to Indonesia also buoyed the CA performance.

• The capital and financial account maintained a US$1.2 billion surplus in third

quarter despite growing uncertainty on global financial markets. The surplus shrinking from US$2.2 billion in Q2/2015. A portfolio investment deficit and smaller direct investment surplus were cited for the decline of the surplus

Balance of Payments s in Q3-2015

Balance of Payments Current Account Capital & Financial Account

SLIDE 23

• Non-oil and gas trade balance surplus increased as imports declined sharply by

18.2% (yoy) in line with dwindling domestic demand. On the other hand, exports of non-

• il and gas experienced a less pronounced decrease (11.0%, yoy) due to sliding

commodity prices, despite real growth of 4.5% (yoy).

• The movement pattern of non-oil and gas exports and imports contributed to raise the

trade surplus amounted to 2.8% compared to Q2/2015.

Balance of Payments s Q3 Q3-2015: : Curr rrent Account

• The oil and gas trade deficit remained relatively stable from the previous quarter as a

decline in the gas trade surplus was offset by a decrease in the oil trade deficit.

Trade Balance: Non-Oil & Gas Trade Balance: Oil & Gas

• Services account deficit was US$2,0 billion, lower than deficit of US$2.7 billion in Q2/2015. The

smaller deficit due to a decline in transportation services (freight) in line with fewer imports of goods as well as growing travel account surplus due to an increase in international visitors also buoyed current account performance.

• Primary income in Q3/2015 recorded a deficit of US$7.4 billion, higher than deficit of US$7.1

billion in Q2/2015. The higher deficit of primary income account was inline with the increase in direct investment income payments and portfolio investment income payments in public sector due to seasonal pattern.

• Secondary income in Q3/2015 recorded a surplus of US$1.2 billion, mainly supported by the net

surplus of the personal transfer. Current Account - Services, Primary Income, and Secondary Income

SLIDE 24

23

Balance of Payments s Q3 Q3-2015: : Capital & Financial Accou

• unt

Financial Account: Assets Financial Account Liabilities: Direct Investment

• On the assets side, Indonesia’s financial account charted a net
• utflows (deficit) of US$3.9 billion, similar to net outflows in

Q3/2014 and lower than net outflows of US$8,1 billion in Q2/2015. The decreases in net outflow was mainly due to lower placement of private sectors’ deposits abroad.

• Net inflows (surplus) of direct investment (liabilities side) in Q3/2015 stood at US$4.1 billion, 36.5% lower than net inflows in Q2/2015 of US$6,5 billion due to

slower economic growth. The lower surplus was mainly driven by higher external debt payments by affiliates companies as well as a decrease in inflows of direct investment equity.

• On directional basis, Foreign Direct Investment (FDI) in Q3/2015 increased from US$4.3 billion in Q2/2015 to US$5.0 billion. By sector, Manufacturing,

Agriculture, Fishery & Forestry, and Other Sector (incl. Services, Properties) were the main sectors attracting FDI inflows during Q3/2015 (73.0% of total FDI). While

• n the country of origin basis, the inflows of FDI were dominated by countries in the ASEAN region amounted to US$2.7 billion (53.5% of total FDI), followed by

Japan and Emerging Markets of Asia (incl. China).

SLIDE 25

24

Balance of Payments s Q3 Q3-2015: : Capital & Financial Accoun

• unt

Financial Account Liabilities: Portfolio Investment Financial Account Liabilities: Foreign Other Investment

• In the midst of global economic slowdown and the market speculation of increasing Federal Funds Rate (FFR) and global financial markets risk,

foreign portfolio investment in Q3/2015 experienced an outflows of US$1.5 billion, in contrast to foreign portfolio investment in Q2/2015 recorded net inflow of US$6.3 billion. This development was primarily due to the payments of bankers’ acceptance by some domestic banks and net selling of domestic equity and government securities.

• Other investment liabilities in Q3/2015 recorded a surplus of

US$2.4 billion, in contrast to the deficit of US$2.2 billion in Q2/2015. The surplus was affected by increasing of net drawing of trade credit in private sector and increasing of net drawing of external debt in public sector.

SLIDE 26

Continued d Pressu sure on Emergi ging g Markets s Curr rrencies

• The Rupiah rebounded at the beginning of October after intense depreciatory pressures were felt in September 2015. Rupiah appreciation stemmed from positive

sentiment regarding the possible delay of FFR hike and optimism concerning the domestic economic outlook after the government released a series of policy packages and Bank Indonesia intervened in the market to stabilise the exchange rate.

• The policy packages have spurred an influx of foreign capital to financial markets in Indonesia, which subsequently propped up the Rupiah by 9,3% (ptp, 13

October compared to the end of September).

• Previously, in September 2015, Rupiah depreciated point-to-point (ptp) by 4.1% and closed at Rp14,650 per US Dollar. Rupiah depreciation was lower compared to

Brazilian Real, Malaysian Ringgit, Turkish Lira, and South African Rand.

Movement of Rupiah International Reserves

25

IDR/USD Monthly Avg Quarterly Avg Data as of 30 October 2015 IDR/USD Source: Bank Indonesia Source: Bank Indonesia

• Indonesia’s official reserve assets position as of end October 2015 stood at US$100.7 billion,

lower than the end of September 2015 level registered at US$100.7 billion.

• This development was attributable to the use of foreign exchange for Government foreign

debt payments and to stabilise Rupiah exchange. It is in line with Bank Indonesia’s commitment which has and will be in the market in order to stabilize the Rupiah rate in accordance with the fundamental to support macroeconomic and financial system stability.

• With these developments, official reserve assets at the end of October 2015 can adequately

cover 7.1 months of imports or 6.6 months of imports and servicing of Government external debt repayment, well above the international standards of reserves adequacy at 3 months

• f imports. Bank Indonesia considers the position of official reserve assets has positive

impact on efforts to strengthen the resilience of the external sector and maintain the sustainability of Indonesian economic growth.

Billion USD

Source: Bank Indonesia

SLIDE 27

Monetary y Policy y Stance

BI Rate

Source: Bank Indonesia

• The BI Board of Governors agreed on 17th November 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility rate at 5.50% and the

Lending facility rate at 8.00%.

• The Board of Governors also decided to lower the primary reserve requirement in Rupiah from 8.0% to 7.50%, effective on 1st December 2015.
• Bank Indonesia considered that the macroeconomic stability has continued to improve, making room to maintain a loose monetary policy stance.

Bank Indonesia believes that the 2015 inflation will be maintained at the lower end of the 4±1% inflation target, with the current account deficit is projected at 2% of GDP .

• With the lingering uncertainty in the global financial market, stemming mainly from the expected Federal Funds Rate (FFR) hike as well as the

diversity of monetary policies from ECB, BoJ, and PBoC, Bank Indonesia will remain vigilant in loosening its monetary policy.

• In this respect, lowering the primary reserve requirement is expected to boost bank financing capacity to support escalating economic activity during

the third quarter and beyond.

• Moving forward, Bank Indonesia will consistently maintain coordination with the Government in order to reinforce the structure of the economy,

thereby facilitating stronger economic growth and preserving macroeconomic and financial system stability.

26

6.50 6.75 6.50 6.00 5.75 6.00 6.50 7.00 7.25 7.50 7.75 7.50

5.00 5.50 6.00 6.50 7.00 7.50 8.00

1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 1011 2010 2011 2012 2013 2014 2015

(%)

SLIDE 28

Solid d Financial System m Stabi bility

CAR Comfortably High, NPL Favorably Low Slowdown in Loan Growth Loan-to-Deposit Ratio Well Maintained Within the Target Range 27

• Financial system stability remained solid, underpinned by a resilient

banking system and relatively stable financial markets. Banking industry resilience endured, with credit, liquidity and market risks well mitigated.

• In

September 2015, the Capital Adequacy Ratio (CAR) remained significantly above the 8% minimum threshold at 20.4%, while non- performing loans (NPL) were low and stable at 2.7% (gross) or 1.3% (net).

• In terms of the intermediation function, credit growth was recorded at

11.1% (yoy), higher than that of the previous month, while deposit growth

• n September 2015 was recorded at 11.7% (yoy).
• Looking forward, credit growth is predicted to continue accelerating in line

with an increase in economic activity and the looser macroprudential policy stance adopted by Bank Indonesia, along with the lower primary reserve requirement.

Source: Bank Indonesia Source: Bank Indonesia

(YoY)

Source: Bank Indonesia

20.4 2.7 5 10 15 20 25 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 2013 2014 2015

Capital Adequacy Ratio (CAR) (RHS) Gross Non-Performing Loan (NPL)

(%) (%)

SLIDE 29

Prudent Fiscal Management

28

SLIDE 30

29

Fiscal Stimulus Budget Optimization Long Run Policies Budget Reforms New Challenges Structural Challenges Global Volatility Sustainable and Equitable Economic Growth Support Navigation Through Global Uncertainties Revenue Optimization Quality of Spending Sustainable Financing Maintain Purchasing Power Fiscal Incentives for Business Sector Other Policies Short Run Policies

Coordi dinated d Short Run and Long g Run Policies

29

SLIDE 31

30

Three Key Pillars s to a Sustainabl ble and Equitabl ble Growth

Objective: Creating a sustainable and equitable economic growth for Indonesia

Pillar I Revenue Optimization Pillar II Quality of Spending Pillar III Sustainable Financing

I.

Shift from commodity- based revenues

• II. Broaden tax coverage
• III. Improve tax compliance

and prevent leakages

• IV. Strengthen Taxation

institution

I.

Higher spending productivity

• II. Enhanced subsidy

scheme

• III. Empowerment of local

governments

I.

Secure budget financing

• II. Effective utilization of

domestic and international funding sources

• III. Financing schemes to

support infrastructure development program

Initiatives:

• Reinventing Policy
• e-Invoice
• Compliance Risk

Management

• Tax Amnesty
• Tax Administrative Reform
• Regulatory Reform
• Adjustment of non-taxable

income threshold

• Development of Semi-

Autonomous Tax Office Initiatives:

• Improve Government

procurement regulation.

• Continue Fuel Subsidy

Reform (re-allocate energy subsidy to productive spending) and maintain targeted subsidy scheme.

• Budgetary allocations for:
• Infrastructure Projects
• Social Welfare, and
• Cashless smart cards
• Village fund

Initiatives:

• Maintain manageable budget

deficit;

• Improve bilateral and

multilateral financing sources, including BSA and DDOs

• Increase financing

instruments.

• Increase capital injection to

SOEs to include SOEs in infrastructure development

Source: Ministry of Finance

30

SLIDE 32

Reduction

• n of Poverty

y Throu

• ugh

gh Condi dition

• nal Cash

Transf sfers

• The government will distribute “Family Welfare Card”, “Indonesia Smart Card” and “Indonesia Health Card” to 15.5 million poor families which are 25%
• f the population with the lowest socio-economic status
• For the first stage, Family Welfare Card and non-cash assistance through the Financial Services Digital, Indonesia Smart Card and Indonesia Healthy

Card will be distributed to 1 million of the 15.5 million families living in 19 districts / cities in 10 provinces across Indonesia

Program Indonesia Sehat

(Healthy Indonesia Program) – Free health insurance and medical benefits Organizers : Social Security Agency (BPJS) Service Coverage : Up to village level health units (“Posyandu”) Beneficiaries : Disadvantaged communities who have had “BPJS PBI card” plus groups with social welfare issues (PMKS) Benefits : Treatment and prevention

Program Indonesia Pintar

(Indonesian Smart Program) – Education subsidies for the poor and families near the poverty threshold Beneficiaries : Less capable students, PMKS school-age children, street children, child labor in Indonesia Distribution

• f Funds

: Savings / savings in a post

• ffice or a designated bank may

be withdrawn or to be kept Benefits :

 SD / MI amounting to

IDR225,000 / student / semester

 SMP / MTs of IDR375.000 /

student / semester

 SMA / SMK IDR500,000 /

student / semester

Program Keluarga Sejahtera

(Family Welfare Program) Bi-monthly credits for eligible families to offset increasing costs of living Beneficiaries : Underprivileged families throughout Indonesia. Extended to include

• rphanage, nursing

homes, and other social institutions Distribution of Funds : Savings / savings in a post

• ffice or a designated bank

may be withdrawn or be kept Benefits : IDR200,000 / family / month

Current administration has a renewed focus on reducing poverty – this will be achieved via conditional cash transfers 28

SLIDE 33

32

Allocation of Energy Subsidy Spending to Education, Infrastructure and Regional Development for Sustainable Economic Growth

408.5 424.8 290.3 313.5 664.6 782.2 137.8 121.0

100 200 300 400 500 600 700 800 900

2011 2012 2013 2014 2015 2016P

Education Infrastructure Regional Energy

IDR Tn

2015 Budget Energy Subsidy Spending: IDR 137.8 Tn Infrastructure Spending: IDR 290.3 Tn 2016 Proposed Budget Energy Subsidy Spending: IDR 121.0 Tn Infrastructure Spending: IDR 313.5 Tn

Source: Ministry of Finance

Central Government Expenditure: Continue budget efficiency framework Subsidy Policies

• Fuel Subsidy Policy: Continue “Fixed Subsidy” scheme to

Diesel and “Price Subsidy” for Kerosene and 3 kg LPG

• Electricity Subsidy Policy: Switch to direct subsidy scheme

given to small households (450 VA and part of 900 VA)

• Food Subsidy: Rice for targeted household (15.5 million

households)

• Subsidy for Fertilizer: Production price close to economic price

targeted volume of 9.55 million ton, with retail price to be adjusted to close price gap

• Interest Subsidy for SME credit: For selected sectors such as

agriculture, fishery, manufacturing and trade and including for migrant worker Regional Transfer Policy

• Formulate Transfer Fund nomenclature
• Enhance Special Transfer Fund (DTK)
• Optimize the implementation of reward and punishment to

regional Government Village Fund Policy

• Significantly Increase allocation compared to 2015
• To support growth equality and empowerment in village area

2016 Budget Key Policies Energy

• 12%

Education +4% Infrastructure +8% Transfer to Regional +17.5% 2016 Budget Allocation Plan Compared to 2015 Revised Budget

Budget Re-Al Alloc

• cation
• n to Sust

stainabl ble Econom

• mic Growt
• wth

32

SLIDE 34

33

Assumptions:

Period 2014 2015 2016 Proposed Budget Realized Revised Budget Latest Realization Growth (%) 5.0 5.7 4.71 5.3 Inflation (%) 8.4 5.0 YoY 6.832 4.7 YTD 2.242 Exchange Rate (USD/IDR, Average) 11,878 12,500 EOP 13,5343 13,900 YTD 13,3033 3-month-SPN (Treasury Bills) 5.8 6.2 5.92 5.5 Indonesia Crude Price (ICP) (USD / bbl) 97.0 60.0 52.22 50.0 Oil Lifting (thousand bbl / day) 793.5 825 756.64 830 Gas Lifting (thousand bbl / day oil equivalent) 1,224 1,221 1,1754 1,155

2015 Budget Key Focus 2016 Budget Key Focus

• Quality of Spending
• Fuel subsidy savings of IDR 211.3 Tn
• Re-allocation of savings to basic

infrastructure (food security, connectivity and maritime) and social welfare

• Additional allocation for village funds
• Capital injection to SOEs
• Revenue Optimization
• Improving tax compliance rate, closing

tax leakage and expanding tax base

• Financing Policy
• Lower fiscal deficit from 2.2% to 1.9%
• General Revenue and Expenditure Policies
• Continue Tax Extensification and Intensification program and improve tax compliance
• Drive priority program to improve growth quality such as the 20% allocation for education, maintain 5% health

allocation and increase regional and village fund allocation

• Subsidy Policies – More Targeted Program
• Targeted subsidy scheme and direct subsidy to small households
• Food & fertilizers subsidy and expand financing program for SMEs
• Continue to drive key development projects:
• Develop infrastructure for Food Security and Connectivity
• Improve the service and sustainability of national health, labor insurance program and sustainable social

protection program

• Financing Policies: Fiscal deficit at 2.1% and Debt/GDP at 26%

Notes: 1. As of 2nd Quarter 2015, 2. As of September 2015, 3. Up to 16 October 2015, 4. Average Dec 2014 – Aug 2015

Key Macroe

• econ
• nom
• mic Assu

sumpt ption

• ns

Source: Ministry of Finance, Bappenas

SLIDE 35

34

Projectio tion of Revise sed d Budget t 2015 Realizatio tion and 2016’s Budget

• The realization of income, expenditure, and financing in Semester II is expected to increase, an improvement from semester I;
• The financing gap will be covered with sources of financing that is considered safe, has low risk, and low cost

Items (IDR tn) 2014 2015 2016 Revised Budget 1st Semester Realization % of Revised Budget Revised Budget 1st Semester Projection % of Revised Budget 2nd Semester Prognosis % of Revised Budget Outlook Proposed Budget

• A. State revenue and grants

1635.4 712.7 43.6% 1,761.6 697.4 39.6% 952.3 54.1% 1649.8

1822.5

• I. Domestic revenue

1633.1 711.7 43.6% 1,758.3 697.2 39.7% 949.2 54.0% 1646.4

1820.5

1.Tax revenue 1246.1 537.5 43.3% 1,489.3 555.2 37.3% 811.8 54.5% 1367.0

1546.7

2.Non tax revenue 386.9 172.2 44.5% 269.1 142.0 52.8% 137.4 51.1% 279.4

273.8

• II. Grants

2.3 1.0 42.8% 3.3 0.2 5.8% 3.1 94.2% 3.3

2.0

• B. State expenditure

1876.9 759.9 40.5% 1,984.1 773.9 39.0% 1135.9 57.3% 1909.8

2095.7

• I. Central gov. expenditure

1280.4 468.7 36.6% 1,319.5 436.1 33.1% 809.4 61.3% 1245.5

1325.6

• 1. Ministries/Agencies

Spending 602.3 178.9 29.7% 795.5 208.5 26.2% 521.6 65.6% 730.1

784.1

• 2. Non-Ministries/Agencies

Spending 678.1 289.8 42.7% 524.1 227.6 43.4% 287.9 54.9% 515.5

541.4

• II. Transfer to region

596.5 291.2 48.8% 664.6 337.7 50.8% 326.5 49.1% 664.2

770.2

• C. Primary balance(1)
• 106.0

17.9

• 16.8%
• 66.8
• 2.2

3.3%

• 100.4

150.4%

• 102.6
• 88.2
• D. Overall balance (A - B)
• 241.5
• 47.2

19.6%

• 222.5
• 76.4

34.4%

• 183.6

82.5%

• 260.0
• 273.2

% deficit to GDP

• 2.4
• 0.5
• 1.9
• 0.7
• 1.6
• 2.2
• 2.15
• E. Financing

241.5 138.8 57.5% 222.5 194.0 87.2% 66.0 29.7% 260.0

273.2

• I. Domestic financing

254.9 162.2 63.6% 242.5 215.6 88.9% 28.1 11.6% 243.7

272.8

• II. Foreign financing
• 13.4
• 23.4

174.0%

• 20.0
• 21.6

10.8% 37.9

• 189.4%

163.0

0.4

Excess/Shortage Financing 0.0 91.6 0.0% 0.0 117.6

• 117.6
• Budget deficit expected to remain within safe and manageable threshold

34

SLIDE 36

Govern rnme ment t Has Various

• us Measures

s in in Place to Manage Budget Risks sks

Standby Loan (DDO) of USD 5 Billion Program Loan from Multilateral and Bilateral Natural Rate

• f Budget

Disbursement Accumulated Cash Surplus (SAL) Bond Stabilization Framework, such as: SOEs, Funds from Hajj Fund and BPJS New Issuance

• f Government

Bond

FISCAL BUFFER AND BUDGET RISK MITIGATION

...government is still committed to maintain fiscal prudence

SLIDE 37

Invest stmen ment is Still Showing wing a a Positiv tive Developm

• pment

Investment Climate Improvement:

One Stop Service (OSS) by BKPM

Conducted by electronically integrated system on investment information and licensing. Implementation

• f OSS in BKPM comes with online tracking system.

National Single Window for Investment (NSWi) or the Electronic Investment Licensing Service System (SPIPISE) was created to facilitate further OSS services. NSWi as an electronic basis for investment so that investors can obtain a variety of online licensing and non-licensing service.

Land Acquisition Bill

Provide certainty in Land Procuring for Public Infrastructure

• Project. The law sets a finite deadline to resolve all legal issues

in the event of objections to any land acquisition for infrastructure projects.

Special Economic Zone Fiscal Incentive

• Companies entitled for tax holiday or tax allowance
• Exemption for import duties, VAT and excise

Revision of investment negative list

In the effort to increase investment in Indonesia and to execute the ASEAN Economic Community (AEC), the Government of Indonesia had done amendments to the provision list of business fields closed and open with certain requirements in the field of investment (Investment Negative List /DNI)

Revision of Investment negative list One Stop Services (OSS) center as an integrated services to provide quick, simple, transparent, integrated license services Land acquisition bill and revision of government regulation on procurement Special Economic Zone Fiscal Incentive …Direct investment needs to be further improved to help finance the current account deficit 30

SLIDE 38

Genera ral Stra rate tegy gy for Debt Financing g 2015

1.

Optimizes Governments securities (SBN) issuance from domestic sources to fulfill Budget need and uses foreign debts as complimentary;

2.

Determines debt instrument by taken into account of market need in regard to market development and portfolio management;

3.

Issues Retail Bond for instrument diversification and financial inclusion;

4.

Optimizes foreign and domestic loan instrument to fulfill Budget need on capital expenditure;

5.

Conducts active portfolio management of Government securities through, among others, debt buyback and debt switch, in order to promote market liquidity and stability;

6.

Strengthens the function of Investor Relations Unit, among others, through the proactive dissemination of information, rapid and effective responses, and effective communication with investors and other stakeholders.

37

SLIDE 39

Govern rnme ment t Budget t FY 2015

38

In billion IDR

 Financing sources Revised Budget

2015 come from debt financing (85.78% from Government Securities, 9.62% from Loan) and the rest 4.61% from non debt financing.

 Stand-by loans are in place to

anticipate adverse situations.

SLIDE 40

Govern rnme ment Securi rities s Financing g (Gross)

• ss) 2015

39

Domestic: Auction:

 Conventional securities: 23 x  Islamic securities: 22 x

Non-Auction:

 Retail bonds: ORI + Sukuk Retail.

International Bonds:

 Issuance of International Bonds as complement to

avoid crowding out in domestic market and provide benchmark for corporate issuance, consist

• f USD, YEN or EURO global bonds

 Maximum issuance international bond 30% from

target gross

Issuance targets for GDS, Sukuk and ATM target:

 GDS (SUN): 75.9%  Sukuk: 24.1%  ATM for GS (SBN): 8.4 yr

 FR 69 – 5 Y  FR 70 – 10 Y  FR 71 – 15 Y  FR 68 – 20 Y

Benchmark Series for 2014 & 2015

1.90% 2.23%

Nominal 222,506.90 260,029.00 Additional Financing 37,519.00 Cash Financing 459,686 497,205

Government Securities (gross)

452,186 461,747

Domestic

339,269 348,756

Government Debt Securities

261,287 263,901

Sukuk

77,982 84,855

Global Bond

112,917 112,991

Government Debt Securities

86,495 86,569

Sukuk

26,422 26,422

External Loan

7,500 35,458

Budget Deficit

SLIDE 41

Improved Government Debt Position

40

SLIDE 42

41 Global Financial Crisis

Eurozone sovereign debt crisis

Yield of Benchmark Series

[In Percentage]

As of Oct 30, 2015

Seconda dary Market Perform

• rmance of Centra

ral Govern rnme ment Bonds

SLIDE 43

*Adjusted by changes in Cash Management & Debt Switch

Govern rnme ment Securi rities s Realization

• n

39

SLIDE 44

43 Source: Ministry of Finance [USD billion]

Outst standi ding of T

• tal Central Govern

rnme ment Debt

SLIDE 45

T

• tal Debt Maturi

rity y Profile as of End of Octobe ber, 201 2015

44 Maturity Profile of Central Government by Currencies (in trillion IDR) Maturity Profile of Central Government by Instruments (in trillion IDR)

Source: Ministry of Finance

SLIDE 46

45

Holders of Tradable Gov’t Domestic Debt Securities Foreign Ownership of Gov’t Domestic Debt Securities by Tenor

Source: Ministry of Finance

More Balance Ownership In Terms Of Holders And Tenors

Holders s of Tradabl ble Central Govern rnme ment Securi rities

SLIDE 47

46 Source: Ministry of Finance

Profile of Centra ral Govern rnmen ment Debt Securi rities

SLIDE 48

47 Debt Switch Program Buyback Program

[in billion IDR]

Debt Switch & Cash Buyback Progra ram

Source: Ministry of Finance

SLIDE 49

Maturi rity ty Profile of Trada dabl ble Central tral Govern rnme ment t Securi ritie ties s

as of the end of October, 2015

48

Source: Ministry of Finance

[IDR Trillion]

SLIDE 50

Daily Transa saction

• n & Offsh

shor

• re Ownersh

ship

49

Average Daily transaction Govt’ Bonds Net Buyer (Seller) Non Resident

Source: Ministry of Finance

[Trillion IDR]

as of the end of Octo tober er, , 2015

Average daily trading (IDR Trilion)

SLIDE 51

50

Source: Ministry of Finance

(in trillion Rp)

Ownersh ship p of IDR Trada dabl ble Central tral Govern rnment Securi rities

SLIDE 52

Wide Range of Policy Reforms to Boost Economic Growth

51

SLIDE 53

52

ECONOMIC POLICY PACKAGE 9 SEPTEMBER 2015

To propel the real sector in order to provide the foundation for economic growth

Encourage the competitiveness

• f national

industry

through deregulation and de- bureaucratization as well as law enforcement and business certainty

Accelerate the national strategic projects

through simplification of permits, land provision, accelerate the flow

• f goods and services, as well as

break down barriers

Boost investment in the property sector

encourage housing projects, particularly for low-income earners

• Amended 89 out of 134 regulations
• Drafting 2 Presidential Decree, 2

Presidential Instruction, 63 Minister Regulation and 5 other regulations

Economi

• mic Policy

y Package

SLIDE 54

53

Short t Run Policy Package I, II, and III

…to navigate uncertain global environment and to stimulate domestic economic growth Stimulus Package I: 9 Sep 2015

Cut Red Tapes Accelerate Strategic National Projects Boost Low Income Housing

• Rewriting 89 out of 154 regulations
• Deregulation policies such as relaxing visa

requirements, gas price adjustment for certain industries and enhancing cooperative function

• Simplification to obtain business

licenses and implementation of e-services

• Simplifying spatial license & land

accommodation

• Accelerating goods & service procurement

for the government

• Discretion in legal issue barriers
• Strengthen the role of regional heads to

accelerate national strategic project completion

• Promoting housing construction for low

income citizens

• Expanding opportunity for investments in

property sector

Stimulus Package II: 29 Sep 2015

Simpler Permit Requirements Tax Incentives Integrated Logistics Facilities

• Ease bureaucracy for investments via 3-hour

permit issuance program

• Faster process for tax allowance and

holiday for qualified investments to 25 days and 45 days, respectively

• Streamline permit requirements in

forestry sector from 14 to 9

• Elimination of VAT for transport industries

(train, shipping and air transport inc. spare parts)

• Reducing tax rate on deposits from export
• proceeds. 1-month deposit tax 10%, 3-

month 7.5%, 6-month 2.5% and more than 6- month 0%

• Facility incentive on integrated logistic

center

• Two facilities slated to be operational by end
• f 2015; Cikarang (Manufacturing) and

Merak (Fuels)

Source: Ministry of Finance

53

Stimulus Package III: 7 Oct 2015

Lower Fuel and Electricity Prices

• Lower retail fuel costs (jet fuel, LPG and

retail fuel)

• Decrease gas price for factories and

qualified industries

• Lower industrial electricity prices
• 3-hour turnaround for land availability
• Faster approval time for building, leasehold,

use right and land permits

Land Permit Simplification for Investment Activities Broadening of Small Business Credit Recipients

• Expanding criteria for allowed recipients to

include salaried workers

SLIDE 55

54

Short Run Policy Package IV, V, and VI

…to navigate uncertain global environment and to stimulate domestic economic growth Stimulus Package VI: 5 Nov 2015

Propel Rural Economies through Development in Special Economic Zones (SEZs)

• Tax holiday (reduce income tax) and tax allowance (reduce

net income and accelerate depreciation.

• No charges on value-added tax and luxury goods tax
• Import duty tariff require Certificate of Origin
• Foreigners allowed to have property
• Reduce tax on development and amusement in tourist areas
• Establish wage boards and specialized tripartite agencies
• Grant 30 days visitor visa which are extendable for 5 times
• SEZ administrator able to provide land services
• SEZ administrator able to issue principles and business permits
• Accelerating licensing process a max. of 3 hours
• Drafting government regulations (RPP) on water resources

utilization

• Drafting RPP on water supply systems (SPAM)
• Ensure that private entities do not dominate the whole SPAM

subsystem

• Private water supplier to meet their needs on its own.

Sustainable and Equitable Water Supply to the Community Simplifying Import Licensing for Pharmaceutical Raw Materials

• Simplifying the licensing process to only 5.7 hours
• Target 100% paperless

Stimulus Package IV: 15 Oct 2015

Fair, Simplified and Projectable Wage System

• Setting Provincial Minimum Wage

regulation

• Formula for setting minimum wage to

ensure simplified, stable and projectable yearly wage adjustments

• Government provides subsidy on small

business credit to stimulate credit growth in banking sector and affordability to applicants

• Expanding criteria for small business

credit to include:

• Micro, Small and Medium

enterprises in productive sectors (farming, fishery, manufacturing, creative business, trading and services)

• Overseas Indonesian workers with
• ccupation in formal sectors
• Family members of salaried workers
• Ex-Overseas Indonesian workers
• Overseas Indonesian workers with

terminated contract

Ease and Affordability of Small Business Credit

Source: Ministry of Finance

Stimulus Package V: 23 Oct 2015

Lower Asset Revaluation Tax

• Revaluation tax originally set at 10%
• Under new incentive, tax rates are cut

according to periods, detailed below:

• Revaluation period until 31 Dec

2015: tax rate at 3%

• Revaluation period until 30 Jun

2016: tax rate at 4%

• Revaluation period until 31 Dec

2016: tax rate at 6%

• Eliminating double taxation system

for Real Estate Investment Trusts (REITs)

• Encourage Indonesian property and

infrastructure companies to issue REITs in Indonesia

Eliminating Double Taxation for REITs

54

SLIDE 56

55 55

Stimulus to Enhance Household Purchasing Power

• Increase non-taxable income threshold to IDR 36.0 million (~USD 2,570) from IDR 24.3 million (~USD 1,671)
• Increase distribution of rice for low income household by two months, to 14 months
• Faster turnaround for drawdown and realization of village fund budget
• Provision of official guidance on realization of village fund on labor intensive sectors and projects
• Slated to provide IDR 4-5 Tn (~USD 286 – 357 million) in additional income and provides additional 800 thousand – 1

million workforce across Indonesia

Source: Ministry of Finance

Stimulus to Increase Incentive for Businesses

• Revision of Tax Allowance and Tax Holiday policies
• Levy of luxury tax (for houses, vehicles, airplanes and firearms) to provide

competitive advantage on domestic industries

• Support small business through interest rate subsidies in small business credit

(KUR). lowered to 12%, less than general SMEs credit rate

• Implementation of 4:1 Debt-Equity ratio for tax purposes to encourage capital

inflow and improvements in capital structure

• Construction of integrated logistic centers, in Cikarang (Manufacturing) and Merak

(Fuels)

• Higher threshold for property luxury tax to IDR 10 billion (~USD 714 thousand) for

apartments and IDR 20 billion (~USD 1.4 million) for landed houses

• Support export financing for domestic industries through Indonesia Exim

Bank via government capital allocation and National Interest Account

• Lower tax on asset revaluation. 3% tax before Dec 31st
• Remove double taxation for Real estate investment trusts (REITs)
• Lower tax on dollar deposit interest, especially for exporters
• Elimination of VAT levy on certain transportation industries (trains, river shipping

and airplanes, including spare parts)

Implemented

• Taxation Administrative and Regulatory Reform,

including amendment of Income Tax Law, VAT Law, General Tax Administration Law and regulation regarding Tax Amnesty

• Develop more Special Industrial Zones outside

Java with special incentives (tax allowance, tax holiday and elimination of customs fee)

• Support economic activities in Special Economic

Zones via longer tax holiday up to 25 years

• Revision on Ease of Import for Export

Destination (KITE) regulations by providing free import fee facilities and more efficient administration process

On Pipeline

Minist stry of Finance Policy Package ge

…comprehensive approach across sectors

SLIDE 57

56

Strengthening coordination amongst the National and Regional Inflation Control Teams to accelerate implementation of the national and regional inflation control

• roadmap. There are currently

more than 430 regional inflation control teams throughout Indonesia, each having a regional inflation roadmap. Strengthening Regional Economic and Financial cooperation between Bank Indonesia and the Government.

01

Strengthening inflation control and stimulating the real sector from the supply side.

02

Maintaining rupiah exchange rate stabilisation.

03

Strengthening liquidity management Rupiah, through Open Market Operations (OMO), in order to divert the daily liquidity to longer tenors

Changing the auction mechanism of Reverse Repo (RR) SBN from variable rate tender into fixed rate tender, adjust the pricing of RR SBN, and extend the tenor by issuing RR SBN 3 months Changing the auction mechanism of Certificates of Deposit of Bank Indonesia (SDBI) from variable rate tender into fixed rate tender, adjust the pricing of SDBI, and issue SDBI with 6 months tenor Reissue Bank Indonesia Certificates (SBI) tenor of 9 months and 12 months with a fixed rate tender auction mechanism as well as pricing adjustment Preserving foreign exchange market confidence by controlling currency volatility Maintaining market confidence in tradeable government securities (SBN) through purchases on the secondary market, while monitoring its impact on SBN availability in terms of inflow and money market liquidity.

Monetary y Policy y Package ge: : Septembe mber r I I

9th

th Septe

temb mber er 2015

SLIDE 58

57

04

Strengthening foreign exchange supply and demand management

Adjust the frequency of the auctions of Foreign Exchange (FX) swap from 2 times/week to 1 time/week Change the Foreign Currency Term Deposit (TD) auction mechanism from variable rate tender into fixed rate tender, pricing adjustment, and extend the tenor of up to 3 months; Lower the purchase limit of foreign currency by verifying the underlying documents from US$ 100,000 to US$ 25,000 per customer per month and requires the use of Tax Identification Number (NPWP)

05

Deepening the money market

Providing swap hedging facilities to shore up investment infrastructure and simultaneously strengthen foreign exchange reserve assets. Refining money market regulations covering all components of market development, including the instruments, players and infrastructure. Expediting the bank foreign debt approval process while adhering to prudential principles

Monetary y Policy y Package ge: : Septembe mber r I (continued) d)

9th

th Septe

temb mber er 2015

SLIDE 59

58

Maintaining Rupiah Exchange Rate Stability

The presence

• f

Bank Indonesia in the domestic foreign exchange market to stabilise the rupiah exchange rate was strengthened through intervention in the forward market. In addition to intervention in the spot market, Bank Indonesia also intervenes in the forward market to help balance supply and

• demand. Maintaining balance in the forward market is important to

alleviate pressures in the spot market.

Strengthening Rupiah Liquidity Management

Bank Indonesia reinforced rupiah liquidity management by releasing three-month Bank Indonesia Certificates of Deposit (SDBI) along with two-week reverse repo tradable government securities (SBN). The release of such open market operation instruments will absorb liquidity, prompting a shift towards longer tenor instruments, which should reduce the risk of excessive use of rupiah liquidity that could intensify pressures on the rupiah exchange rate.

Strengthening Foreign Exchange Supply and Demand Management

• Policy to manage supply and demand on the forward market was strengthened. The policy aims to encourage forward selling transactions
• f foreign currencies/rupiah and clarify underlying forward buys of foreign currencies/rupiah by raising the forward selling threshold that

requires an underlying document from US$1 million to US$5 million per transaction per customer and broaden the scope of underlying assets for forward sells to include domestic and offshore foreign currency term deposits.

• Foreign currency Bank Indonesia securities (SBBI) were also issued to back financial market deepening efforts, especially on the foreign

exchange market.

• The holding period of Bank Indonesia Certificates (SBI) was reduced from 1 month to 1 week in order to attract foreign capital inflows.
• Incentive was provided in the form of a reduction in the interest tax paid on term deposits for exporters depositing their FX earnings at

banks in Indonesia or converting the proceeds into rupiah as requested by the government. The policy is expected to keep FX earnings in the country for longer.

• BI ensured greater transparency and information availability when using FX by strengthening the FX flow report (LLD). In this case, LLD

participants are obliged to report their use of FX through supplementary supporting documentation for transactions of a certain value. The regulation is pursuant to Act No. 24 of 1999 concerning the Flow FX and the Exchange Rate System, where Bank Indonesia is authorised to request information and data regarding the flow of FX from residents.

Monetary y Policy y Package ge: : Septembe mber r II II

30 30th

th Septe

temb mber er 2015

SLIDE 60

59 59

As part of national efforts to reverse the recent economic slowdown, OJK has issued a series of financial sector policies. Such measures are directed to, among others, to maintain the level of household/private consumption and to support the Government’s infrastructure development.

• Banking sector: measure are focused on increasing bank

loans to MSMEs and housing financing – Adjustment of risk weighting for certain types of loans – Relaxation of requirements for debt restructuring

• Capital

market sector: Measures are focused

• n

supporting financing for housing and infrastructure, as well as developing SMEs through financing from the capital market – Development & expansion

• f

investment products – Development of municipal bonds – Unlocking opportunities for SMEs to go public

• NBFI sector: Measures are focused on fostering the

growth of multifinance companies and microfinance institutions – Relaxation of regulations on NPF in multifinance companies – Development of microfinance institutions – Establishment of a rating agency for MSMEs

• Relaxation of regulations on business

trust

• Preparation
• f

agricultural insurance scheme

• Revitalization
• f

venture capital, especially to finance start-up businesses

• Establishment
• f

financing industry consortium, especially to provide financing for creative industry, export-

• riented businesses, and MSMEs
• Empowerment of the Indonesia Export

Financing Agency (LPEI)

• Implementation of one-project concept

in assessing quality of loans

July 2015 October 2015

• Encourage individual foreign

currency account

• pening

for foreign residents – Opening an account up to $50,000

• nly

need to present a passport – Opening an account with

• ver than $50,000 will be

subject to simple customer due diligence process

• passport

and

• ther

supporting documents

September 2015

Financial Sector

• r Policy

y Package ges s to Boost Growt

• wth

Source: Financial Service Authority (OJK)

SLIDE 61

60

Yuan devaluation Package I Package II Package III

Rupiah Curr (Rp/1US$)

Source: Bloomberg

Composite Index BEI

Source: Bloomberg

Market participants began to welcome the Indonesian economic recovery efforts in addition to dynamic external conditions

Market’s Positive Signal to Policy Package

60

SLIDE 62

61

PPP Unit under Ministry of Finance will facilitate project development of PPP projects, by providing facilities such as Project Development Facilities (PDF), technical assistance, arrangement of guarantee with IIGF, and infrastructure funding with PT SMI and PT IIF. PPP Unit will also help capacity development for PPP and promotion of PPP projects Minister has approved the establishment of PPP unit, and the funding arrangement with donor and regulatory framework are under progress. KPPIP (The Committee for Accelerated Infrastructure Delivery) is a central government body that will coordinate the delivery of the government’s priority infrastructure projects, which consists of key government ministries related to infrastructure delivery, such as the CMEA, MoF, BAPPENAS and the BPN. KPPIP has established 22 priority projects for 2015 to be implemented. Establishment of PT SMI (Sarana Multi Infrastruktur), PT IIF (Indonesia Infrastructure Finance) to provide long-term financing Reform of National Land Agency (BPN), including establishment of special deputy for land acquisition acceleration and dedicated team for priority infrastructure projects, development of SOPs for every BPN activities etc.

To ensure sound implementation, some institutional reforms and new institutions have been established.

National Land Agency (BPN) Reforms Establishment of PPP unit under MOF Increased Fiscal Contribution by GoI through PT SMI, PT IIF, and IIGF Establishment of KPPIP

The government is also in the process of establishing more institutions to further accelerate infrastructure delivery

INSTITUTIONAL REFORMS

Initiatives s to accelera rate infra rast stru ructure developme pment throu

• ugh

gh reform

• rms

s (1/2) )

SLIDE 63

62

• The best example of a successful

implementation of the law is the city of Bojonegoro, where the civil society was socialized early to the law and where the land appraisal and compensation amount were attractive.

• Outcome: the overall land

acquisition process for the Java North Line Double Track Rail project took less than 2 years.

Neutral decision making regarding community rejection BPN as central agency in implementation of land acquisition More detailed regulation on implementation of land acquisition

One of the major reforms is the New Land Law No.2/2012:

Law No. 2 /2012 regarding Land Acquisition for Public Interest Presidential Regulation (PR) no 38/2015 regarding PPP Presidential Regulation (PR) no 39/2014 regarding the New Negative List of Investment The new law will ease land acquisition bottlenecks and disputes for infrastructure projects such as road, railway, station, port, airport, etc. The law regulates procedures of land acquisition, funding for land acquisition land appraisal, amount and types of compensations, objections and dispute settlements. The new President Reg. No. 30/2015 stipulates the role of private investors in contributing to land acquisition process. Government has revised the original regulation on PPP (Presidential Regulation no 67/2005) three times to accommodate more concerns regarding PPP development in Indonesia. For example, the revision accommodates foreign companies/investors in procurement of PPP projects, criteria and compensation for unsolicited project proposal, the need for fiscal support from Ministry of Finance. Government has revised the previous Negative list of investment to encourage more foreign businesses to take part in infrastructure development. For example, in transport sector, foreign ownership of seaport facility increased from 49% to 95% during PPP concession period. The government also allows 100% foreign

• wnership of power plant >10MW during PPP concession period (previously 95%).

Better Land Appraisal Team Appointment Less bureaucratic land right revocation process

Successful case of the implementation of the New Law

New Law no 2 / 2012

REGULATORY REFORMS

Minister of Energy & Mineral Resources Reg. No. 3/2015 regarding Procedure for Power Purchase This regulation allows for power purchase from mine mouth coal power plant, coal power plants, gas/micro gas power plants, and hydro power plants can be done with direct selection and direct appointment with the purpose to accelerate procurement process.

Initiatives s to accelera rate infra rast stru ructure developme pment throu

• ugh

gh reform

• rms

s (2/2) )

SLIDE 64

63

• 8. SHIA Express

Railway (Rp 24T)

• 9. West Semarang

Water Supply (Rp 765 M) 10.Balikpapan – Samarinda Toll Road (Rp 11,4T)

• 11. Manado – Bitung

Toll Road (Rp 4,3T)

OBC Develop ment Ready for PPP Tender Permit and Land Acquisition Financial Close* Construc tion**

• 1. New oil refinery (Rp 75 -

140T)

• 2. Jakarta Sewerage System

Zona 1 (Rp 7T)

• 3. Airport Revitalization

(brownfield)

• 4. Kuala Tanjung Int. Hub.

Seaport (Rp 30T)

• 5. Bitung Int. Hub. Seaport

(Rp 34T)

• 6. Panimbang – Serang Toll

Road

• 7. Upgrading existing

refineries (Cilacap, Dumai, Plaju, Balongan, Balikpapan)

• 12. HVDC (Rp 20T)
• 13. Indramayu Power Plant

(Rp 20T)

• 14. Sumatera Transmission

(Rp 35T)

• 15. MRT Jakarta South -

North (Rp 25T)

• 16. Sumsel 9, 10 Power

Plants

• 17. Central and West Java

500 kV Transmission Line

• 19. 4 sections of Trans

Sumatera toll road (Rp 30T) 20.Makassar – Pare Pare Railway (Rp 6,4T) 21.Water to Energy – Development of Hydro Power Plants Karangkates IV&V, Kesamben, and Lodoyo 22.NCICD Phase A (Rp 20T)

• 18. Sumsel 8 (One

package with Sumsel 8, 9, 10 with total investment value of Rp 54T)

• 19. Batang Power

Plant/Central Java Power Plant (Rp 40T), Target: October 2015

22 Priori

• rity

ty Projects ts With thin the Pipeline

SLIDE 65

64

No. PROGRESS (%) Progress Status Total Mining Permit (July 2015) Total No.

• f

Smelter

1. 6 – 10 Environmental Impact Analysis (AMDAL) 12 9 2. 11 - 30 Ground Breaking and Initial Construction Plant 18 15 3. 31-50 Mid-Plant Construction Phase 18 13 4. 51-80 Final Phase of Construction 9 9 5. 81-100 On Commissioning / Production Phase 28 25 Total 85 71

• 1. Processing & refinery facility plan based on progress
• 2. Processing & refinery facility plan based on

commodities

No. Commodities Total Mining Permit Total No. of Facilities 1. Nickel 42 35 2. Bauxite 11 6 3. Iron 8 8 4. Mangan 3 3 5. Zircon 13 11 6. Lead and Zinc 4 4 7. Kaolin and Zeolite 4 4 Total 85 71

Note: Total Mining Permit cooperating with smelter companies may change

Mining Sector

• r:

: Progress ss of Process ssing g and Refinery Facility y (1/3)

SLIDE 66

65

Nickel Smelter (Operational)

Company Name: Indoferro (Cilegon-Banten)

Iron Smelter (Operational)

Company Name : Delta Prima Steel (Tanah Laut-South Kalimantan)

Steel Smelter (Operational)

Company Name : Krakatau Posco (Cilegon- Banten) Company Name : Indotama Ferro Alloy (Purwakarta-West Java)

Mangan Smelter (Operational)

Mining Sector

• r:

: Progress ss of Process ssing g and Refinery Facility ty (2/3)

SLIDE 67

66

Nickel Refining Facility (NPI) Still On Progress

Company Name: Bintang Delapan Group (Morowali-Central Sulawesi)

Mining Sector

• r:

: Progress ss of Process ssing g and Refinery Facility y (3/3)

SLIDE 68

67

Cabinet Meeting Progress of 35,000 MW Debottlenecking through regulation:

• 1. Regulation No.1/2015 concerning

electricity supply cooperation and joint utilization of the electrical network among license holders.

• 2. Regulation No.3/2015, concerning

Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection and Appointment. Cabinet Meeting “There’s electricity crisis in Indonesia, requires construction of large capacity plant "

17 Dec ‘14 16 Mar ‘15 4 May ‘15 Jan ‘15

Launching 35.000 MW by the President in Goa Beach Sanden DIY. Average economic growth of 6.7 requires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)

Jan ‘15

Energy gy Sector

• r:

: 35,000 ,000 MW Progra ram has been launched