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

SLIDE 1

SLIDE 2

Published by Investor Relations Unit – Republic of Indonesia Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279) Abdurohman (Fiscal Policy Office – Ministry of Finance, Phone: +6221 384 6379) 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)

1

SLIDE 3

Table of Content

Exec ecut utive e Summa mmary Pre reser served ed Macroec econo nomi mic Stability ty Improved ed Intern ernati ational nal Percep epti tion n and Risi sing ng Invest estme ment nt Pruden ent Fisc scal al Manag nageme ement nt Governmen ernment t Debt t Performa manc nce

2

SLIDE 4

Executive Summary

3

SLIDE 5

Executive ve Summa mary ry

• Economic growth accelerated in Indonesia during the fourth quarter of 2014 in comparison to the preceding quarter, despite annual growth

for 2014 slowing down. The Indonesian economy achieved 5.01% (yoy) growth in the fourth quarter, up from 4.92% (yoy) in the previous period. Despite early signs of improvement during the fourth quarter of 2014, annual growth slowed in 2014 to 5.02%, which is lower than that posted in the preceding year, consistent with weaker global economic growth and macroeconomic stabilization policy. Stronger economic growth is projected in 2015, in the range of 5.4-5.8%, bolstered by expansive government investment as fiscal capacity expands to catalyze productive economic activity, including infrastructure development as approved in the 2015 budget.

• The Indonesia balance of payments (BOP) improved in the fourth quarter of 2014, primarily due to a smaller current account deficit. The

current account deficit totaled US$6.2 billion (2.81% of GDP) in the fourth quarter, down from US$7 billion (2.99% of GDP) in the third. A growing non-

• il/gas trade surplus, together with a decreasing oil and gas deficit, helped boost current account performance. Meanwhile, the financial and capital

account recorded a large surplus, backed predominantly by foreign direct investment (FDI) congruent with the positive perception investors hold concerning the domestic economic outlook. In January 2015, the trade surplus totaled US$0.7 billion, exceeding that posted in the preceding quarter, bolstered by a smaller oil and gas deficit.

• Inflation remained under control, thus supporting the prospect of achieving the 2015 inflation target, namely 4±1%. The Consumer Price

Index (CPI) experienced deflation of 0.24% (mtm) in January 2015 as a tangible outcome of lower fuel prices and less intense inflationary pressures on volatile foods. In addition, core inflation was controlled at a level of 0.61% (mtm) or 4.99% (yoy).

• Financial system stability was maintained with the support of steadfast banking system resilience and relatively sound financial market
• performance. Banking industry resilience remained solid with credit risk, liquidity risk and market risk well mitigated and the support of a healthy

capital base. At the end of the reporting quarter, the Capital Adequacy Ratio soared to 19.40%, well above the statutory minimum of 8%, while non- performing loans (NPL) were low and stable at around 2.0%.

• On 17th February 2015, the Bank Indonesia Board of Governors decided to lower the BI Rate 25 bps to 7.50%, with the Deposit Facility rate

also reduced 25 bps to 5.50% and the Lending Facility rate maintained at 8.00%, effective 18th February 2015. Such policy measures were instituted based on Bank Indonesia’s conviction that inflation will remain under control at the lower end of the 4±1% range in 2015 and 2016.

• Bank Indonesia will continue to strengthen its monetary and macroprudential policy mix, bolster the payment system and intensify

coordination with the Government in terms of controlling inflation, reducing the current account deficit and promoting structural reforms in order to support higher economic growth.

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

reform policy represents an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. 2015 revised budget deficit is projected at a safe level of 1.91% of GDP .

4

SLIDE 6

Executive ve Summa mary ry

GDP Growth Inflation Foreign Exchange Reserves Balance of Payments 5

* Preliminary Figures

SLIDE 7

6

Source: Ministry of Finance

Debt Composition Table of Debt to GDP Ratio Central Government Debt to GDP Ratio (% of GDP)

47.9% 52.6% 53.7% 54.9% 55.5% 53.2% 56.7% 55.9% 52.1% 47.4% 46.3% 45.1% 44.5% 46.8% 43.3% 44.1%

0% 20% 40% 60% 80% 100% 120% 2008 2009 2010 2011 2012 2013 2014 Jan-15 Domestic Debt Foreign Debt

33.0% 28.3% 26.2% 24.4% 24.0% 26.2% 24.7%

0% 5% 10% 15% 20% 25% 30% 35%

2008 2009 2010 2011 2012 2013 2014*

2008 2009 2010 2011 2012 2013 2014 GDP 4,954,028.9 5,613,441.7 6,422,918.2 7,427,086.1 8,241,864.3 9,083,972.2 10,542,700.0 Debt Outstanding (billion IDR) 1,636,740.7 1,590,656.1 1,681,656.5 1,808,946.8 1,977,706.4 2,375,495.5 2,604,932.6

• Domestic Debt (Loan+Securities)

783,855.1 836,308.9 902,823.4 993,038.2 1,097,993.2 1,263,928.6 1,477,516.7

• Foreign Debt (Loan+Securities)

852,885.6 754,347.2 778,833.1 815,908.6 879,713.2 1,111,567.0 1,127,415.8 Debt to GDP Ratio 33.0% 28.3% 26.2% 24.4% 24.0% 26.2% 24.7%

• Domestic Debt to GDP Ratio

15.8% 14.9% 14.1% 13.4% 13.3% 13.9% 14.0%

• Foreign Debt to GDP Ratio

17.2% 13.4% 12.1% 11.0% 10.7% 12.2% 10.7% End of Year

Executive Summary

SLIDE 8

2015 Policy y Summa mary ry

Government coordinates policy tools to stabilize growth with 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. Revenue and tax policy Financing and debt management policy Expenditure policy Monetary policy mix  Bold and pre-emptive policy through regulation of BI Policy Rate, responsively adjusting to current macroeconomic condition.  Exchange rate flexibility to facilitate external adjustments.  Financial market deepening and capital flows management.  Macroprudential and supervisory actions.  Policy coordination with the government and financial stability forum.  Central bank cooperations, including second line of defences. 7  Improvement of tax revenue administration.  Improvement of regulations related to tax revenues, especially

income tax, VAT, and VAT – Luxury Goods.

 Increase law enforcement conducted through intensification and

improved examination of the taxpayer and certain business sectors.

 Extending additional new tax subject and VAT Activities related to

‘Build Your Own’.

 Optimization of customs and excise policy implementation as it has

been presented in the State Budget 2015.

 Optimization of oil & gas lifting and cost recovery, as well as the

improvement of the system and administration of non-tax state revenues.  Increasing infrastructure spending to support growing economy.  Reduction of poverty through conditional cash transfers.  Increase the effectiveness of targeted subsidies.  Support the accelerated achievement of minimum essential force in national defense  Support the management of natural resources in improving food, water, and energy security.  Expanding access and quality of education.  Improve the implementation quality of the National Social Security System in terms of health and employment.  Minimizing the impact of uncertainty through the support of fiscal risk reserves.

SLIDE 9

Improved International Perception and Rising Investment

8

SLIDE 10

Mar-99 Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Aug-03 May-04 Feb-05 Nov-05 Aug-06 May-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Mar-13 Dec-13

Fitch

Mar-99 Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Aug-03 May-04 Feb-05 Nov-05 Aug-06 May-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Mar-13 Dec-13

S&P

Mar-99 Dec-99 Sep-00 Jun-01 Mar-02 Dec-02 Aug-03 May-04 Feb-05 Nov-05 Aug-06 May-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11 Jul-12 Mar-13 Dec-13

Moody's

Moody’s

Dec 2011 (affirmed Nov 2014) “The authorities' explicit and consistent preference for stability over economic growth since the "taper tantrum“ related market pressures in the summer of 2013 has strengthened their macro-economic policy track record. Real GDP growth continues to be high compared with peers. Fitch expects real GDP growth to bottom out at 5.1% in 2014, before gradually picking up to 5.4% in 2015 and 5.9% in 2016. This compares favorably with the 'BBB' category median of 3.0%. Moreover, GDP growth is much less volatile in Indonesia compared with peers.” 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.” 28 April 2014 “The sovereign credit ratings reflect the economy's low per capita income, a relatively weak policy environment, and rising external leverage from a moderate level. These rating constraints are weighed against the country's well-entrenched cautious fiscal management and resultant modest general government debt and interest burden, which make for a favorable debt profile.”

BBB- / Stable Baa3 / Stable BB+ / Stable

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

Baa3 B3 B2 B1 Ba3 Ba2 Ba1 CCC+ CCC

Positive Outlook Negative Outlook Stable Outlook Positive Watch

B- B B+ BB- BB BB+ BBB- CCC+ CCC B- B B+ BB- BB BB+ BBB- Caa1 Caa2

Investment grade Investment grade

9

SLIDE 11

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 …

10 `

IMF Staff Visit (December 2014) World Bank IEQ (December 2014)

“Sound macroeconomic management has bolstered policy credibility and external resiliency in Indonesia.”

• GDP growth is projected to be

sustained at 5.1 percent in 2015

• Recovery in investment

demand

• More buoyant manufacture

exports

• Inflation is expected to return to

2015 target band (4.0 ±1 percent) by the end of next year.

• Current account deficit is

projected to decline to around 2¾ percent of GDP in 2015, supported by rising manufacture exports as well as a lower oil import bill. Risk

• Global headwinds from

weakening commodity prices and tightening financial conditions.

• Slowdown in emerging market

trading partners and surges in global financial market volatility.

“The World Bank projects a moderate near-term growth

• utlook for Indonesia of 5.1-

5.5 %”

• Fuel subsidies adjustment in

November 2014 suggests the new government’s commitment and willingness to address many of Indonesia’s long-standing structural priorities.

• The growth in economic activity

was moderate in the third quarter

• f 2014 due to weaker

investment and exports while private consumption has continued to support growth.

• The Rupiah has depreciated

further against the US dollar since July, but strengthened in real effective terms through October. Risk

• Slower projected global recovery

could weaken commodity price trajectory in the next few years.

• Several implementation

challenges faced by the new government, including a complex domestic political environment.

Asian Development Outlook (December 2014)

“GDP growth decelerated further to 5.0% in the third quarter of 2014”

• Private consumption remained

robust as expected, however gross fixed investment and net exports contributed less to GDP growth than in the second quarter.

• Investment recovery following

the elections has been slower than anticipated, and recovery in export markets remains uncertain.

• The effect of higher

administered prices on inflation is expected to be short-lived, and the rate should taper toward the end of 2015. Risk

• Downside risks to this outlook

center on further deterioration

• f export performance and

changes in market sentiment that cause capital outflows

OECD Economic Forecast (November 2014) “Growth is projected to remain moderate through 2015 before picking up somewhat in 2016…”

• …due largely to an

acceleration in investment and firming consumption.

• Economic growth has

continued to slow as investment and exports have softened, although household consumption is holding up.

• The current account has

widened again, and the rupiah has depreciated as a result.

• The recent second round of

cuts in fuel subsidies lift headline inflation, but core measures should remain well anchored, Risk

• Risks to the outlook are

mainly on the external side.

SLIDE 12

Preserved Macroeconomic Stability

11

SLIDE 13

Domest stic Economi mic Adjust stmen ment Continues

• The Indonesian economy recorded 5.01% (yoy) growth in Q4-2014, accelerating from 4.92% (yoy) in the preceding period. Consequently, the

economy grew at 5.02% in 2014, which is in line with Bank Indonesia’s previous projection.

• Robust economic growth in Q4-2014 was achieved on the back of stronger domestic demand, predominantly in the form of construction

investment and government consumption. Meanwhile, resilient household consumption endured despite moderating slightly in line with economic stabilization policy.

• From an external standpoint, a deep contraction was felt in terms of export performance, decelerating to 4.53% (yoy) due to weak demand from

emerging market countries and lower commodity prices.

• Stronger economic growth is projected in 2015, in the range of 5.4-5.8%, bolstered by expansive government investment as fiscal capacity expands

to catalyze productive economic activity, including infrastructure development as approved in the 2015 budget.

12

Economic Growth - Expenditure Side S e c t o r 2012 2013 2013 2014 2014 I II III IV I II III IV Household Consumption 5.5 5.5 5.2 5.4 5.4 5.4 5.4 5.1 5.1 5.0 5.1 Gross Fixed Capital Formation 6.7 6.5 6.4 6.7 12.8 8.2 23.7 22.8 5.6 (-0.2) 12.4 Government Consumption 4.5 3.0 3.2 12.4 7.9 6.9 6.1 (-1.5) 1.3 2.8 2.0 Exports of Goods and Services 1.6 3.5 2.1 1.3 9.4 4.2 3.2 1.4 4.9 (-4.5) 1.0 Imports of Goods and Services 8.0 2.9 0.9 4.9 (-0.9) 1.9 5.0 0.4 0.3 3.2 2.2 GDP 6.0 5.6 5.6 5.5 5.6 5.6 5.1 5.0 4.9 5.0 5.0 Economic Growth - Supply Side S e c t o r 2012 2013 2013 2014 2014 I II III IV I II III IV Agriculture, Forestry, and Fisheries 4.6 4.2 4.6 3.5 4.6 4.2 5.3 5.0 3.6 2.8 4.2 Mining and Quarrying 3.0 0.9 0.7 2.7 2.7 1.7 (-2.0) 1.1 0.8 2.2 0.5 Manufacturing 5.6 4.7 5.4 3.7 4.2 4.5 4.5 4.8 5.0 4.2 4.6 Electricity and Gas 10.1 9.8 4.7 2.4 4.4 5.2 3.3 6.5 6.0 6.5 5.6 Water Supply, Waste Management and Recycling 3.3 3.5 3.6 4.7 4.5 4.1 3.6 3.2 2.8 2.7 3.0 Construction 6.6 5.4 6.3 6.5 6.2 6.1 7.2 6.5 6.5 7.7 7.0 Wholesale and Retail Trade; Automotives 5.4 3.0 4.8 4.9 6.1 4.7 6.1 5.1 4.8 3.5 4.8 Transportation and Warehousing 7.1 7.4 8.9 8.3 8.9 8.4 8.4 8.5 8.0 7.1 8.0 Provision of Accommodation and Food & Beverage 6.6 7.0 7.0 6.9 6.3 6.8 6.5 6.4 5.9 4.9 5.9 Information and Communication 12.3 10.6 11.4 10.1 9.5 10.4 9.8 10.5 9.8 10.0 10.0 Financial Services and Insurance 9.5 13.2 11.0 9.2 3.5 9.1 3.2 4.9 1.5 10.2 4.9 Real Estate 7.4 8.9 7.7 5.4 4.3 6.5 4.7 4.9 5.1 5.3 5.0 Business Services 7.4 7.8 7.6 8.2 8.0 7.9 10.3 10.0 9.3 9.7 9.8 Administration, Defence, and Social Security 2.1 1.6 (-2.1) 6.4 3.8 2.4 2.9 (-2.5) 2.6 6.9 2.5 Education Services 8.2 11.7 3.2 8.6 9.4 8.2 5.2 5.4 7.3 7.1 6.3 Health Services and Social Activities 8.0 6.9 5.2 8.3 10.7 7.8 7.7 8.5 9.9 6.1 8.0 Other Services 5.8 5.6 5.6 6.2 8.2 6.4 8.4 9.5 9.5 8.4 8.9 GDP 6.0 5.6 5.6 5.5 5.6 5.6 5.1 5.0 4.9 5.0 5.0

SLIDE 14

Source: KPMG, Ernst and Young, Jefferies Economist Intelligence Unit, Ministry of Finance, BPS and CIA World Factbook (1) Working age defined as being between 15-54 years old

13

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



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



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



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%



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



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



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



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



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



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

SLIDE 15

Globa

• bally

y Compe petitive ve and a Top Invest stme ment Desti tinatio tion

Source: Global Competitiveness Index 2014-2015, WEF

(1)

Countries with sovereign ratings in the Eaa1-Baa1 category and population larger than 40 million

(2)

Rank among 144 countries

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

Indonesia is in the Top 40 of the Global Competitiveness Index (“GCI”) JBIC: Indonesia lost to India by a narrow margin, though it continued to be rated highly. The Economist January 2015: 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

14

Rank

(1)

Country 2008

(2)

2014

(2)

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 35 3.8 6.0 3.8 6.3 5.2 4.3 3.9 3.8 5.4 5.4 4.4 3.7 2 Thailand 34 31 3.7 4.6 6.0 5.8 4.6 4.7 4.2 4.6 3.9 5.1 4.4 3.3 3 Indonesia 55 34 4.1 4.4 5.5 5.7 4.5 4.5 3.8 4.5 3.6 5.3 4.5 3.9 4 Turkey 63 45 3.9 4.6 4.8 5.8 4.7 4.6 3.5 4.2 4.3 5.3 4.3 3.4 5 Italy 49 49 3.4 5.4 4.1 6.4 4.8 4.3 3.3 3.3 4.8 5.6 4.8 3.7 6 South Africa 45 56 4.5 4.3 4.5 4.0 4.0 4.7 3.8 5.4 3.9 4.9 4.5 3.6 7 Mexico 60 61 3.4 4.2 5.0 5.7 4.0 4.2 3.7 4.1 3.6 5.6 4.1 3.3 8 Brazil 64 57 3.5 4.0 4.5 5.7 4.9 3.8 3.8 4.3 4.2 5.7 4.3 3.3 9 Philippines 71 52 3.9 3.5 5.8 5.4 4.4 4.3 4.0 4.4 3.8 4.7 4.3 3.5 18.3 24.3 29.6 30.3 31.3 32.2 33.3 36.2 41.2 41.3 42.1 57.9 59.9 71 10 20 30 40 50 60 70 80 Taiwan Japan Myanmar South Korea Hong Kong Australia Philippines Thailand Singapore Vietnam Malaysia India Indonesia China % of surveyed who plan to invest in each country

Rank 2013 2014 Country / Region

• No. of Companies(1)

Percentage Share (%) 2 1 India 229 45.9 1 2 Indonesia 228 45.7 4 3 China 218 43.7 3 4 Thailand 176 35.3 5 5 Vietnam 155 31.1 7 6 Mexico 101 20.2 6 7 Brazil 83 16.6 10 8 USA 66 13.2 9 9 Russia 60 12.0 8 10 Myanmar 55 11.0

SLIDE 16

Stron

• ng Invest

stment Underpi rpinned by Competiti titiveness ss and Stabi bility

Investment Realization Progress Q4-2014

• Investment Realization in Jan-Dec 2014 is Rp463.1 trillion, an increase around 16.2% from the same period in previous year (Rp398.6 trillion). The

value of investment is based on investment realization report by the DDI and FDI companies (Oil and Gas, Banking, Non-Bank Financial Institution, Insurance, Leasing and SMEs are excluded).

Source: BKPM Source: BKPM *)Revised 2014 Investment Target, BKPM’s Strategic Planning 2010 – 2014 **) Achievements January – December 2014 towards 2014 target

FDI by Sectors (Millions USD)

• Foreign Direct Investment realization along the year 2014 based on sectors (five leading sectors) were: Mining (US$ 4.67 billion); Food Industry (US$

3.14 billion); Transportation, Warehouse, and Telecommunication (US$ 3.00 billion); Metal, Machinery, and Electronic Industry (US$ 2.47 billion); and Chemical and Pharmaceutical Industry (US$ 2.32 billion).

15

SLIDE 17

16

Java is Still the Main Investm stment Destinati ation

• n

Realized Foreign Direct Investment (Jan – Dec 2014) Realized Domestic Direct Investment (Jan – Dec 2014)

Source: BKPM Source: BKPM

DDI and FDI by Economic Corridor Jan-Dec 2014 (Million USD)

Source: BKPM

Based on Economic Corridor in January – December 2014 period, the highest realization of DDI and FDI was located in Java Corridor.

SLIDE 18

Decreasi sing g Pressu sure of Inflation

• n

Disaggregation of Inflation

Source: BPS, Bank Indonesia

• Consumer Price Index (CPI) in January 2015 records deflation of 0.24% (mtm), which results from deflation of administered prices and decreasing

pressure of inflation of volatile food prices. Annual inflation is recorded 6.96% (yoy).

• The administered prices record a significantly high deflation in January by 3.51% (mtm). Annually, the inflation of administered prices is recorded

12.31% (yoy). Deflation of administered prices results from the Government’s policy to adjust the fuel prices and inner city transport tarriff.

• Inline with the deflation of administered prices, the pressure of volatile food inflation also decreases to 0.55% (mtm) or 8.35% (yoy) from 3.53% (mtm)
• r 10.88% (yoy) in the previous month.
• Actual core inflation is still relatively controlled at the level of 0.61% (mtm) or 4.99% (yoy), supported by lower external and domestic pressures.
• Bank Indonesia will continue to strengthen coordination with the central and local government in terms of managing inflation of volatile foods and

administered prices in order to ensure attainment of the inflation target of 4.0± 1% in 2015.

Consensus Forecast

Source: Consensus Forecast

17

SLIDE 19

• Indonesia's Balance of Payments (BOP) posted a US$2.4 billion surplus in Q4/2014. The

BOP surplus was supported by capital and financial account surplus of US$7.8 billion, which exceeded current account deficit of US$6.2 billion (2.81% of GDP). The Q4/2014 BOP surplus in turn increased reserve assets from US$111.2 billion at the end of Q3/2014 to US$111.9 billion at the end of Q4/2014 (equal to 6.4 months of imports and servicing of government external debt repayment).

• The BOP in 2014 improved significantly on account of effective synergy of stabilization

policy adopted by Bank Indonesia and the Government. BOP in 2014 recorded a surplus of US$15.2 billion, as against a deficit of US$7.3 billion in 2013. This improvement was supported by shrinking current account deficit and rising capital and financial account surplus.

• Amid slower than expected global economic recovery, the current account performance
• improved. The current account deficit in Q4/2014 was lower than the deficit of US$7.0 billion

(2.99% of GDP) in Q3/2014. This improvement was mainly driven by increased trade surplus in line with a rise in non-oil & gas trade surplus and decline in oil and gas trade deficit. However, the current account deficit in Q4/2014 was bigger than the deficit of US$4.3 billion (2.05% of GDP) in the same period in 2013, primarily due to weak performance of non-oil & gas exports and widened oil & gas trade deficit .

• For the whole 2014, current account improved with deficit amounted to US$26.2 billion

(2.95% GDP), lower than US$29.1 billion (3.18% GDP) in 2013.

• Investors'

positive perception

• n

Indonesia’s economic prospect and remained attractive yields encouraged foreign capital influx that could fully financed the current account deficit. In Q4/2014, the capital and financial account surplus was supported by inflows of Foreign Direct Investment (FDI) and other investment surplus sourced from withdrawal of domestic private sector's deposits abroad and corporates’ foreign loans. However, the surplus was lower than that in Q3/2014 amounted to US$14.7 billion due to foreign capital outflows from Rupiah portfolio instruments in December 2014 triggered by rising investor concerns related to the planned Fed Fund Rate hike following release of improved US economic data.

• The capital and financial account surplus in 2014 amounted to US$43.6 billion, an increase

from US$22.0 billion in 2013. Higher surplus was boosted by positive investor confidence in Indonesia's economic outlook.

Balance of Payments s Record

• rded

d a Surpl plus s in Q4-2014

SLIDE 20

• Trade surplus increased from US$1.6 billion in Q3/2014 to US$2.4 billion in Q4/2014 on account of

higher non-oil & gas trade surplus and widened oil & gas trade deficit.

• Non-oil & gas exports increased as exports

grew (1.4%, qtq) higher than imports (0.2%, qtq). The export growth was supported by increased demand, especially for vegetable oil and manufactured products, amid slump in the global commodity prices.

Balance of Payments s Q4 Q4-2014: : Curr rrent Account

• In oil & gas front, although oil import volume increased, oil & gas trade deficit shrank as a result of

continuing drop in world crude oil price.

• For 2014, trade surplus reached US$6.9 billion, increased from US$5,8 billion in 2013 supported by

higher non-oil & gas trade surplus. Trade Balance: Non-Oil & Gas Trade Balance: Oil & Gas

• Compared to Q3/2014, services account deficit increased as surplus in travel services narrowed

following its seasonal pattern. Services account deficit in 2014 was US$10.5 billion, smaller than US$12.1 billion deficit in 2013, primarily due to lower freight payments following subdued imports

• In the same period, the primary income account deficit increased from hikes in interest payments
• f foreign loans following its scheduled. The deficit for the whole 2014 also larger than that in 2013 as

payments for dividends and interests on inter-company loans and domestic debt securities increased inline with surged inflows of foreign capital.

• Meanwhile, secondary income surpluses in Q4/2014 and 2014 was higher than those in the

previous period mainly contributed by the increase in net income of personal transfers. Current Account - Services, Primary Income, and Secondary Income

SLIDE 21

20

Balance of Payments ts Q4 Q4-2014: : Capital & Financial Accou

• unt

Financial Account: Assets Financial Account Liabilities: Direct Investment

• On the assets side, Indonesia’s financial account charted net inflow of

US$1.0 billion in Q4/2014, in contrast with deficit US$3.9 billion in Q3/2014 primarily due to withdrawal of private sector’s deposits abroad as well as receipts from trade receivables.

• For 2014, financial assets posted net outflow of US$12,0 billion, lower than

US$15,5 billion net outflow in 2013 as Indonesia’s direct investment assets slowed and portfolio investment assets decreased.

• Direct investment inflows (liability side) in Q4/2014 remained in surplus of US$5.5 billion. However, these inflows was lower than that in the previous quarter

(US$8,2 billion) in line with slowing economic growth (2.1%; qtq). For the whole 2014, direct investment inflows grew 9.7% to reach US$25.7 billion.

• On directional basis, Foreign direct investment (FDI) during Q4/2014 decreased US$4,7 billion from US$7,6 billion in Q3/2014. By sector, manufacturing,

agriculture, fishery & forestry, and financial intermediaries (incl. Insurance) were the main sectors attracting FDI inflows during Q4/2014. While based on the country

• f origin, the inflows of FDI were dominated by countries in the ASEAN region, followed by Japan and Emerging Markets of Asia (incl. China). FDI for 2014 amounted

to US$22.3 billion, higher than US$18.9 billion in 2013.

SLIDE 22

21

Balance of Payments s Q4 Q4-2014: : Capital & Financial Accoun

• unt

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

• Foreign portfolio investment charted a tiny outflows in Q4/2014 due to foreign capital outflows

from rupiah portfolio instruments in December 2014 triggered by elevated investors’ worries related to the planned Fed Funds Rate hikes.

• For the whole 2014, foreign portfolio investment inflows reached US$23.4 billion, almost double than US$12,1 billion inflows recorded in 2013.
• Other investment liabilities in Q4/2014 charted US$1.3 billion surplus,

lower than the surplus of US$4.3 billion in the previous quarter. The decreased surplus was mainly influenced by withdrawal of nonresident deposits in domestic banks and increased payments of other liabilities.

• For the whole 2014, other investment liabilities registered US$6,9

billion surplus, increased from US$2.6 surplus in 2013 primarily due to higher net drawings of private sector’s foreign loans.

SLIDE 23

Exchange ge Rate In Line With th Funda dame mental tals

• The rupiah depreciated in line with broader US dollar appreciation. In Q4-2014, the rupiah sank on average by 3.9% (qtq) to a level of Rp12,244 per US dollar. An

increasingly solid US economy precipitated US dollar appreciation against all global currencies.

• Pressures on the rupiah persisted into January 2015 as the US dollar continued to appreciate in light of the ECB’s plan to loosen its monetary policy stance, which was

repeated in a number of other countries.

• On average, the rupiah depreciated 1.21% (mtm) to a level of Rp12,581 per US dollar.
• Bank Indonesia considers the recent rupiah fluctuations beneficial in terms of the current account deficit through lower imports, in particular of consumer goods, as

well as greater export competitiveness, especially of manufacturing exports.

Movement of Rupiah International Reserves

22

• Indonesia's official reserve asset position as of end-January 2015 reached U.S.$114.2

billion, up from the end of December 2014 level of U.S.$111.9 billion.

• Increasing reserves were mainly attributable to receipts of the global bonds issued by

Government, foreign currency deposits of banks at Bank Indonesia, Government’s oil and gas export proceeds, and other Government revenue in the form of foreign currency that exceed the needs of Government external debt payments.

• Official reserve assets at the end of January 2015 can adequately cover 6.8 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.

SLIDE 24

Monetary y Policy y Stance

BI Rate

Source: Bank Indonesia

• The Bank Indonesia Board of Governors, convened on 17th February 2015, lower the BI Rate 25 bps to 7.50%, with the Deposit Facility rate also reduced 25

bps to 5.50% and the Lending Facility rate maintained at 8.00%, effective 18th February 2015.

• Such policy measures were instituted based on Bank Indonesia’s conviction that inflation will remain under control at the lower end of the 4±1% range in

2015 and 2016. The current policy direction is consistent with Bank Indonesia’s efforts to reduce the current account deficit to a more sustainable level.

• Bank Indonesia perceives that with approval of the 2015 budget, government-led fiscal stimuli and structural reform policy will catalyze stronger and

higher quality economic growth.

• Bank Indonesia will continue to strengthen its monetary and macroprudential policy mix, bolster the payment system and intensify coordination with the

Government in terms of controlling inflation, reducing the current account deficit and promoting structural reforms in order to support higher economic growth.

23

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 10 11 12 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 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 2010 2011 2012 2013 2014 2015

(%) (%)

SLIDE 25

Solid d Financial System m Stabi bility

• Banking industry resilience remained solid with credit risk, liquidity risk and

market risk well mitigated and the support of a healthy capital base.

• In January 2015, the Capital Adequacy Ratio soared to 19.50%, well above

the statutory minimum of 8%, while non-performing loans (NPL) were low and stable at around 2.2%.

• In terms of the intermediation function, credit growth decelerated to 11.6%

(yoy) from 13.2% (yoy) at the end of the third quarter in line with ongoing economic moderation. Meanwhile, deposit growth in December 2014 was 12.3%, down from 13.3% in the preceding quarter.

• In line with an expected economic upswing, deposit and credit growth are

projected to accelerate respectively to 14-16% and 15-17%.

• On the other hand, capital market performance improved as the IDX

Composite continued to rally.

CAR Comfortably High, NPL Favorably Low Slowdown in Loan Growth Stock Market Strengthened 24

SLIDE 26

Prudent Fiscal Management

25

SLIDE 27

Improvin ing Budget Structure e

Manageable Fiscal Deficit Quality of Spending Sustainable Revenue Source

• Develop effective taxation policy and

tax administration

• Focus not only on the corporate but

also on personal income tax & improve value added tax system.

• Provide fiscal incentive for investment

with better targeted system

• Change subsidy paradigm

Shift from price (commodity) subsidy to targeted subsidy system

• Reallocate budget to productive spending,

such as infrastructure and direct assistance.

• Prioritize basic infrastructure to support

food security, agriculture and fisheries sectors as well as job creation.

• Provide a greater room on our fiscal to anticipate the uncertainty

coming from global economic development.

• Encourage private

sector to help infrastructure development, among

• ther through PPP

scheme

SLIDE 28

Spendi ding g Re-Al Allocation

• n T
• Achieve

ve Greater r Productiv tivity

Infrastructure Plan 2015-2019

New Sea Ports - 24 Sea Port Development - 59 Pioneer Cargo Ships New Airports - 15 Airport Infrastructure Development Airplanes - 20 Rail lines - 2,159 km Intra City Rail Lines - 1,099 km New Roads - 2,650 km Highway - 1,000 km Road Maintainance - 46,770 km Bus Corridors - 2

Source: Ministry of Finance

• Kartu Indonesia Pintar

(Indonesian Smart Card) - Education subsidies for the poor and families near the poverty threshold

• Kartu Keluarga Sejahtera

Bi-monthly credits for eligible families to offset increasing costs of living

• Kartu Indonesia Sehat

(Indonesian Health Card) - Free health insurance and medical benefits

Reduction of poverty through conditional cash transfers Ahead of the fuel subsidy hike, a systemic change in the provision of subsidies to the communities in need was implemented.

IDR Tn % Total Spending

1 2 3

91.3 84 114.2 145.5 155.9 206.6 9.7 8.3 8.8 9.8 9.0 11.0 6 8 10 12 50 100 150 200 250 2009 2010 2011 2012 2013 2014 Infrastructure Spending (LHS) % Total Spending (RHS)

Source: Bappenas

SLIDE 29

Indon

• nesi

sian 2014 Revise sed d State Budget Realization

• n

28

Source: Ministry of Finance *IDR/USD Rate as of 31 December 2014 (1) Represents revenues less expenditures excluding interest expenditures



In the 2014 revised budget, the deficit will target 2.4% of GDP



A decrease in tax revenue will be

• ffset by the increase in non-tax

revenue, mainly through the

• ptimization of revenue from

natural resources



The government will implement several crucial measures:



Expenditure is cut by around IDR 43tn (from the original budget) in order to meet the budget ceiling deficit (3% of GDP for Central and Local Government budget)



Electricity tariff will be gradually adjusted to reduce the energy subsidy



Subsidized fuel consumption volume is revised down through, among others items, conversion and consumption control policies



Greater focus on regional budget, as ‘transfer to region’ increased along with fund sharing allocation to region



Domestic financing is expected to play an even more prominent role than originally expected in closing the budget deficit

Items 2014 Budget 2014 Revised Budget 2014 Realization (Oct 31,2014) IDR tn US$bn* % of GDP IDR tn US$bn* % of GDP IDR tn US$bn* % of 2014 Revised Budget

• A. State revenue and grants

1,667.10 134.01 16.10% 1,635.40 131.46 16.30% 1,218.70 97.97 74.50%

• I. Domestic revenue

1,665.80 133.91 16.10% 1,633.10 131.28 16.20% 1,216.40 97.78 74.50% 1.Tax revenue 1,280.40 102.93 12.40% 1,246.10 100.17 12.40% 906.6 72.88 72.80% 2.Non tax revenue 385.4 30.98 3.70% 386.9 31.10 3.80% 309.9 24.91 80.10%

• II. Grants

1.4 0.11 0.00% 2.3 0.18 0.00% 2.2 0.18 95.80%

• B. State expenditure

1,842.50 148.11 17.80% 1,876.90 150.88 18.70% 1,412.70 113.56 75.30%

• I. Central gov. expenditure

1,249.90 100.47 12.10% 1,280.40 102.93 12.70% 930 74.76 72.60%

• 1. Personnel

263 21.14 2.50% 258.8 20.80 2.60% 203.4 16.35 78.70%

• 2. Goods & Services and

Capital* 399.8 32.14 3.90% 356 28.62 3.60% 184.5 14.83 51.83%

• 3. Interest payments

121.3 9.75 1.20% 135.5 10.89 1.30% 113.3 9.11 83.60%

• 4. Subsidies

333.7 26.82 3.20% 403 32.40 4.00% 354.6 28.5 88.00%

• 5. Grants

3.5 0.28 0.00% 2.9 0.23 0.00% 0.3 0.02 10.90%

• 6. Social expenditure

91.8 7.38 0.90% 96.7 7.77 0.90% 71.7 5.76 74.20%

• 7. Other expenditure

36.9 2.97 0.40% 27.9 2.24 0.30% 2.3 0.18 8.40%

• II. Transfer to region

592.6 47.64 5.70% 596.5 47.95 5.90% 482.7 38.8 80.90% Primary balance(1)

• 54.10
• 4.35
• 0.50%
• 106.00
• 8.52
• 1.10%
• 80.80
• 6.5

76.20% Overall balance (A - B)

• 175.40
• 14.10
• 1.70%
• 241.50
• 19.41
• 2.40%
• 194.10
• 15.6

80.40% Financing 175.4 14.10 1.70% 241.5 19.41 2.40% 250.1 20.1 103.60%

• I. Domestic financing

196.3 15.78 1.90% 254.9 20.49 2.50% 275.8 22.17 108.20%

• II. Foreign financing
• 20.9
• 1.68
• 0.20%
• 13.4
• 1.08
• 0.10%
• 25.7
• 2.07

191.30%

SLIDE 30



Economic growth



Lower global growth outlook leads to slower domestic growth, mainly due to exports and capital flows



Impact of government’s effort in easing Current Account pressure and maintaining stability



Inflation rate in a downward trend



Fiscal, Monetary, and Real Sector policies coordination among Government and Central Bank to reduce inflationary pressures and maintain a conducive macroeconomic condition



The increase of agriculture productivity will allow food supply sufficiency and avoid commodity and food price fluctuations



Exchange rate and interest rate revised according to the global and domestic financial market



Liquidity tightening and tapering policy in US



Capital outflow from EM to US economy



Competition and liquidity tightening resulted in the hike in interest rates, even within domestic Indonesian economy



Oil and gas lifting revised down due to technical issues and production delays in Cepu and other new oil blocks Macroeconomic Assumptions 2014 2014 Revised Budget 2015 Budget 2015 Revised Budget Growth (%) 6.0 5.5

5.8 5.8

Inflation (%) 5.5 5.3

4.4 5.0

Exchange Rate (IDR/US$) 10,500 11,600

11,900 12,200

Interest Rate (3 month Govt Bond, %) 5.5 6.0

6.0 6.2

ICP (US$/barrel) 105.0 105.0

105.0 70.0

Oil and Gas Lifting

• a. Oil lifting (Mil bbl/day)

0.870 0.818

0.900 0.849

• b. Gas lifting (Mil bbl/day

eopd) 1.240 1.224

1.248 1.177

Macroe

• econ
• nom
• mic Assu

sumpt ption

• ns

s Require Adjust stme ments s to Reflect Recent Econom

• mic Developm
• pments

29

Budget Assumptions

SLIDE 31

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.

 In the proposed Revised Budget 2015

(RAPBN-P 2015), deficit is narrowing from 2.21% to 1.91% of GDP

• To maintain resilience and fiscal sustainability

 Despite lower budget deficit, net debt in

2015 is higher

• Government injects equity to SOE’s to

increase their capacity to support the achievement of the national priority agenda  Stand-by loans are in place to anticipate

adverse situations.

• A. Total Revenue

1,793,588.9 16.1 1,761,642.8 15.1

• B. Total Expenditure

2,039,483.6 18.3 1,984,149.7 17.0 Interest Payment 151,968.3 1.4 155,730.9 1.3

• C. Primary Balance

(93,926.4) (0.8) (66,776.0) (0.6)

• D. Deficit

(245,894.7) (2.2) (222,506.9) (1.9)

• E. Financing

245,894.7 2.2 222,506.9 1.9

• I. Non Debt

(8,961.2) (0.1) (56,874.0) (0.5)

• II. Debt

254,855.9 2.3 279,380.9 2.4

• 1. Government Securities (Net)

277,049.8 2.5 297,698.4 2.5

• 2. Loan (Net)

(22,193.9) (0.2) (18,317.5) (0.2)

• i. Foreign Loan (Net)

(23,815.1) (0.2) (20,008.1) (0.2) Disbursement 47,037.1 0.4 48,647.0 0.4

• Program Loan

7,140.0 0.1 7,500.0 0.1

• Project Loan

39,897.1 0.4 41,147.0 0.4 On Lending (4,319.4) (0.0) (4,471.9) (0.0) Foreign Loan Principal Payment (66,532.8) (0.6) (64,183.2) (0.5)

• ii. Domestic Loan (Net)

1,621.2 0.0 1,690.6 0.0 Disbursement 2,000.0 0.0 2,000.0 0.0 Domestic Loan Principal Payment (378.8) (0.0) (309.4) (0.0) Assumptions : GDP (trillion IDR) (Y.o.Y) 11,146,943.0 11,700,808.0 Growth (%) 5.8 5.7 Inflation (%) y-o-y 4.4 5.0 3-month-SPN (%) 6.0 6.2 IDR/USD (average) 11,900 12,500 Budget % to GDP Revised Budget % to GDP 2015 Description

Govern rnme ment Budget FY 2015

SLIDE 32

31

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

• ut in domestic market and

provide benchmark for corporate issuance, consist of USD, YEN or EURO global bonds Maximum issuance international bond 22.6% from target gross Issuance targets for GDS, Sukuk and ATM target:

– GDS (SUN): 79.9% – Sukuk: 20.1% – ATM for auctions: 8.2 year

Front Loading strategy:

• in the first semester is

targeted at 63%.

• for domestic issuance is also

targeted at first semester at 59%

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

Benchmark Series for 2014 & 2015

Govern rnme ment Securi rities s Financing g (Gross)

• ss) Revise

sed d Budget 2015

SLIDE 33

Financing g Realization

• n FY 2014

32

In billion IDR

Note: *) Based on DMFAS

Budget Revised 2014 Realization ao Dec 2014*) Percentage Realization Debt Financing 253,724 250,607 98.8% Cash Debt 281,883 282,745 100.3% Govt Securities (net) 264,984 264,978 100.0% Govt Securities (gross) 428,135 428,129 100.0% Redemption (161,800) (161,800) 100.0% Buyback (1,351) (1,351) 100.0% Program Loan 16,900 17,767 105.1% Non-Cash Debt (28,159) (32,138) 114.1% Project Loan 36,246 29,135 80.4% External Loan 33,823 28,628 84.6% Domestic Loan 2,423 507 20.9% Repayment (64,405) (61,273) 95.1%

SLIDE 34

Improved Government Debt Position

33

SLIDE 35

2 4 6 8 10 12 14 16 18 20 22

Apr'08 Jul'08 Oct'08 Jan'09 Apr'09 Jul'09 Oct'09 Jan'10 Apr'10 Jul'10 Oct'10 Jan'11 Apr'11 Jul'11 Oct'11 Jan'12 Apr'12 Jul'12 Oct'12 Jan'13 Apr'13 Jul'13 Oct'13 Jan'14 Apr'14 Jul'14 Oct'14 Jan'15

5Y 10Y 15Y 20Y

6.82 (5Y), 7.01 (10Y), 7.26 (15Y), 7.37 (20Y)

[In Percentage]

As of Jan 30, 2015

Yield of Benchmark Series

Global Financial Crisis

Eurozone sovereign debt crisis

Source: Ministry of Finance, Bloomberg

Seconda dary Market t Perform

• rmance of Central

tral Govern rnme ment Bonds

SLIDE 36

*Adjusted by changes in Cash Management & Debt Switch

*(Million IDR) Budget 2015*

Realization (ao Jan 30, 2015)* % Realization to Budget 2015

Government Securities Net 277,049,800 84,862,000 30.63% Government Securities Maturing in 2015 153,612,324 6,875,000 4.48%

• Buyback

3,000,000

• 0.00%

Issuance Need 2015* 430,662,124 91,737,000 21.30% Government Debt Securities (GDS) 82,672,000 Domestic GDS 32,300,000

• Coupon GDS

21,300,000

• Conventional T-Bills

8,000,000

• Private Placement

3,000,000

• Retail Bonds
• International Bonds

50,372,000

• USD GMTN

50,372,000

• Euro GMTN
• Samurai Bonds
• Government Islamic Debt Securities

9,065,000 Domestic Government Islamic Debt Securities 9,065,000

• IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based Sukuk)

9,065,000

• Retail Sukuk
• Global Sukuk
• Govern

rnme ment Securi rities s Realization

• n

SLIDE 37

36 Source: Ministry of Finance

[in percentage]

[USD billion]

68.91 68.59 63.09 62.02 62.25 66.69 65.02 68.65 68.51 63.76 58.28 54.18 53.94

76.64 71.29 70.51 82.34 85.26 82.78 104.20 118.39 130.97 140.75 136.27 155.23 160.08

• 50

100 150 200 250

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jan 30, 2015

Loan Government Securities

Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Jan 30, 2015 Loan 47% 49% 47% 43% 42% 45% 38% 37% 37% 31% 30% 26% 25% Government Securities 53% 51% 53% 57% 58% 55% 62% 63% 63% 69% 70% 74% 75%

Outst standi ding of T

• tal Central Govern

rnme ment Debt

SLIDE 38

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

20 40 60 80 100 120 140 160 180 200 220 240 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041-2060

Foreign Domestic

20 40 60 80 100 120 140 160 180 200 220 240 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041-2060

Gov't Securities Loan

44.1% 55.9%

Foreign Domestik

T

• tal Debt Maturi

rity y Profile as of January y 201 015

SLIDE 39

38

Holders of Tradable Domestic Government Securities Foreign Ownership of Gov’t Domestic Debt Securities

Source: Ministry of Finance

Continued increasing proportion of foreign ownership of Indonesian Government securities.

10% 12% 8% 5% 6% 7% 7% 7% 6% 6% 5% 5% 5% 5% 5% 5% 8% 3% 5% 5% 4% 5% 3% 3% 3% 4% 4% 4% 4% 4% 18% 17% 16% 13% 11% 15% 15% 15% 16% 15% 15% 15% 16% 15% 14% 21% 25% 28% 32% 38% 34% 33% 33% 33% 34% 34% 34% 33% 34% 34% 46% 38% 45% 44% 41% 40% 41% 41% 42% 43% 42% 43% 42% 43% 43%

30.53%30.80% 32.98% 32.54% 33.64%34.59% 35.72% 35.66% 36.33%36.81%37.30% 37.80% 39.41% 38.13% 40.25%

• 15.00%

5.00% 25.00% 45.00%

0% 20% 40% 60% 80% 100%

Dec-10 Dec-11 Dec-12 Dec-13 Mar-14 Apr-14 May-14 June 14 July 14 Aug 14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15

>10 >5-10 >2-5 >1-2 0-1 % Foreign Ownership to Total (RHS) 33.88% 36.63% 36.53% 33.70% 31.04% 29.95% 35.59% 32.58% 30.49% 33.76% 30.83% 29.81% 30.53% 30.80% 32.98% 32.54% 38.13% 40.25%

Dec-10 Dec-11 Dec-12 Dec-13 31-Dec-14 30-Jan-15

Foreign Holders Domestic Non-Banks Domestic Banks

Holders s of Tradabl ble Central Govern rnme ment Securi rities

SLIDE 40

39 Source: Ministry of Finance

GOVERNMENT DEBT SECURITIES (GDS) Dec-12 Dec-13 Mar-14 Jun-14 Sep-14 Oct-14 Dec-14 Jan-15

• 1. Domestic Tradable GDS

IDR 757,231 IDR 908,078 IDR 975,977 IDR 1,030,301 IDR 1,089,951 IDR 1,104,898 IDR 1,099,257 IDR 1,125,557

• a. Zero Coupon

IDR 24,083 IDR 34,050 IDR 40,300 IDR 42,600 IDR 36,100 IDR 40,100 IDR 39,950 IDR 41,950

• 1. Government Treasury Bills

IDR 22,820 IDR 34,050 IDR 40,300 IDR 42,600 IDR 36,100 IDR 40,100 IDR 39,950 IDR 41,950

• 2. Zero Coupon Bond

IDR 1,263 IDR - IDR - IDR - IDR - IDR - IDR - IDR -

• b. Government Domestic Bonds

IDR 733,148 IDR 874,028 IDR 935,677 IDR 987,701 IDR 1,053,851 IDR 1,064,798 IDR 1,059,307 IDR 1,083,607

• 1. Fixed Rate *) +)

IDR 610,393 IDR 751,273 IDR 812,922 IDR 864,946 IDR 931,096 IDR 942,044 IDR 945,964 IDR 970,264

• 2. Variable Rate *)

IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 IDR 113,344 IDR 113,344

• 2. Promissory Notes to Bank Indonesia **) ***)

IDR 240,144 IDR 234,870 IDR 233,505 IDR 232,033 IDR 230,600 IDR 230,162 IDR 229,054 IDR 227,942

• 3. SPNNT

IDR - IDR - IDR - IDR - IDR - IDR - 4 Retail Saving Bonds IDR - IDR 2,391 IDR 2,391 IDR 2,391 IDR 2,391 IDR 2,391 5 Total GDS (1+2+3+4) IDR 997,376 IDR 1,142,948 IDR 1,209,483 IDR 1,264,725 IDR 1,322,942 IDR 1,337,451 IDR 1,330,702 IDR 1,355,890

• 5. Total Government International Bonds *)

USD 22,950 USD 27,140 USD 30,190 USD 29,190 USD 29,190 USD 29,190 USD 29,190 USD 33,190 155,000 ¥ 155,000 ¥ 155,000 ¥ 155,000 ¥ 155,000 ¥ 155,000 ¥ 155,000 ¥ 155,000 ¥ 1,000 € 1,000 € 1,000 € 1,000 €

• 6. TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption))

IDR 1,219,302 IDR 1,473,757 IDR 1,553,769 IDR 1,632,413 IDR 1,712,219 IDR 1,722,464 IDR 1,725,118 IDR 1,805,804 GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS)

• a. Domestic Tradable GIDS

IDR 63,035 IDR 87,174 IDR 96,764 IDR 101,329 IDR 109,444 IDR 111,509 IDR 110,704 IDR 118,894

• a. Fixed Rate *)++)

IDR 62,840 IDR 78,541 IDR 92,409 IDR 95,894 IDR 99,504 IDR 99,969 IDR 99,969 IDR 108,034

• b. Zero Coupon

IDR 195 IDR 8,633 IDR 4,355 IDR 5,435 IDR 9,940 IDR 11,540 IDR 10,735 IDR 10,860

• b. Domestic Non Tradable GIDS

IDR 35,783 IDR 31,533 IDR 35,533 IDR 35,533 IDR 35,197 IDR 33,197 IDR 33,197 IDR 33,197

• c. Government International Islamic Bonds
• 1. Fixed Rate *)

USD 2,650 USD 4,150 USD 4,150 USD 3,500 USD 5,000 USD 5,000 USD 5,000 USD 5,000

• 7. TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption))

IDR 88,660 IDR 137,758 IDR 144,090 IDR 143,220 IDR 170,504 IDR 171,919 IDR 172,904 IDR 182,019

• 8. TOTAL GOVERNMENT SECURITIES

IDR 1,343,746 IDR 1,643,048 IDR 1,733,393 IDR 1,811,166 IDR 1,917,920 IDR 1,927,579 IDR 1,931,218 IDR 2,021,020 Notes:

• Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds)
• *) Tradable
• **) Non-Tradable
• +) Including ORI (IDR Billion))

IDR 34,153 IDR 43,882 IDR 43,882 IDR 43,882 IDR 43,882 IDR 54,098 IDR 54,098 IDR 54,098

• ++) Including Sukuk Ritel/SR (IDR Billion)

IDR 28,989 IDR 35,924 IDR 47,906 IDR 47,906 IDR 47,906 IDR 47,906 IDR 47,906 IDR 47,906

• Exchange Rate Assumption (IDR/USD1)

IDR 9,670 IDR 12,189 IDR 11,404 IDR 11,969 IDR 12,212 IDR 12,082 IDR 12,440 IDR 12,625

• Exchange Rate Assumption (IDR/JPY1)

IDR 111.97 IDR 116.17 IDR 111.65 IDR 118.15 IDR 111.70 IDR 110.43 IDR 104.25 IDR 106.99

• Exchange Rate Assumption (IDR/EUR1)

IDR 15,495 IDR 15,222 IDR 15,133 IDR 14,307

• Since October 2006, government and the Central Bank committed to replace interest payment of Promissory Notes to Bank Indonesia (SU-002 & SU-004) with new bond (SU-007) and omitted

indexation of SU-002 & SU-004

Profile of Centra ral Govern rnmen ment Debt Securi rities

SLIDE 41

40

Debt Switch Program Buyback Program

[in billion IDR]

Auction Date Auction Frequency Source Bonds Tenor Series Offer Received Offer Awarded 2005 1 9 series 7,721 5,673 2006 12 7 up to 21 series 54,177 31,179 2007 9 12 up to 21 series 30,681 15,782 2008 2 21 up to 31 series 7,490 4,571 2009 6 24 up to 28 series 8,663 2,938 2010 6 11 up to 28 series 8,349 3,920 2011 4 22 up to 27 series 3,080 664 2012 4 10 up to 20 series 23,126 11,859 2013 5 7 up to 13 series 7,222 1,976 2014 4 9 up to 12 series 10,591 5,944 2015

• Total

161,100 84,506

Auctions Direct Transactions 2003 2

• 8,127

2004 1

• 1,962

2005 4

• 5,158

2007 2

• 2,859

2008 3

• 2,375

2009 1 1 8,528 2010 10 3 3,201 2011 2 8 3,500 2012

• 6

1,138 2013

• 5

1,551 2014

• 3

1,351 2015

• GRAND TOTAL

39,750 Frequencies Year Volume (IDR billion)

Debt Switch & Cash Buyback Progra ram

SLIDE 42

41 Source: Ministry of Finance

[IDR Trillion] 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 TOTAL 122. 95.3 97.8 90.6 129. 78.8 82.7 102. 86.1 162. 52.8 19.6 45.1 50.2 67.4 25.6 27.1 42.8 47.8 76.5 20.2 4.11 35.4 40.9

• 2.75

13.5 40.4 28.8 36.5 SUKUK USD

• 12.6

18.9

• 12.6
• 18.9
• SUKUK IDR

28.8 14.9 20.4 8.71

• 3.97
• 1.22
• 1.55
• 3.79
• 2.18
• 4.11

10.1

• 2.75
• 9.93
• SUN JPY
• 3.74

6.42

• 6.42
• SUN EUR
• 14.3
• SUN USD

12.6 11.3 19.4 23.9 25.2 25.2 31.5 25.2 31.5 25.2 25.2

• 20.2
• 18.9

25.2

• 28.4

18.9 25.2 SUN IDR 81.5 69.0 57.9 45.3 81.1 43.2 36.8 56.6 54.5 117. 26.0 19.6 41.4 50.2 67.4 23.5 27.1 42.8 47.8 76.5

• 6.40

15.6

• 13.5

12.0

• 11.2
• 20.00

40.00 60.00 80.00 100.00 120.00 140.00 160.00 180.00

Maturi rity y Profile of Trada dabl ble Centra ral Govern rnme ment Securi rities s

as of the end of Janu nuar ary 2015

SLIDE 43

42

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

Source: Ministry of Finance

Average daily trading (IDR Trilion)

(1.49) (29.29) 1.69 (4.99) 8.06 13.11 (8.99) (2.27) 4.15 (4.37) (0.08) 10.13 (1.41) 7.83 9.35 19.52 0.68 2.68 8.44 (0.88) 17.97 4.22 (19.98) 2.81 (1.76) 10.13 23.98 6.08 (0.37) 4.82 16.49 15.77 16.10 20.15 6.43 14.67 15.95 13.17 12.49 21.34 (19.84) 39.48

(0.15) (0.10) (0.05) 0.00 0.05 0.10 (40.00) (30.00) (20.00) (10.00) 0.00 10.00 20.00 30.00 40.00 50.00

Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15

Capital Inflows Capital inflows over total foreign holders

5.73 5.31 5.82 7.83 10.31 6.62 7.10 8.42 7.45 6.44 9.27 8.61 8.45 8.23 7.91 10.91 0.38 0.41 0.96 0.57 1.27 1.18 0.35 0.91 1.04 0.79 0.36 0.41 0.39 0.98 0.76 1.14 3.07 6.30 9.39 8.69 7.90 7.13 6.95 6.19 8.59 10.76 11.49 9.93 8.81 9.12 8.80 7.45

• 5.00

10.00 15.00 20.00 25.00 Triliun OUTRIGHT BANKS REPO BI REPO

Daily Transa saction

• n & Offsh

shor

• re Ownersh

ship

SLIDE 44

43

Source: Ministry of Finance

(IDR Trillion)

` Banks 299.66 36.73% 335.43 33.70% 359.99 33.56% 355.58 31.42% 420.50 35.06% 407.58 33.38% 375.55 31.04% 372.66 29.95% Govt Institutions (Bank Indonesia*) 3.07 0.37% 44.44 4.47% 30.44 2.84% 51.19 4.52% 0.00 0.00% 0.38 0.03% 41.63 3.44% 38.37 3.08% Non-Banks 517.53 63.09% 615.38 61.83% 682.31 63.60% 724.86 64.05% 778.90 64.94% 812.93 66.58% 792.78 65.52% 833.42 66.97% Mutual Funds 43.19 5.27% 42.50 4.27% 44.15 4.12% 45.80 4.05% 46.11 3.84% 45.46 3.72% 45.79 3.78% 47.16 3.79% Insurance Company 83.42 10.17% 129.55 13.02% 141.28 13.17% 151.36 13.38% 154.09 12.85% 150.78 12.35% 150.60 12.45% 149.95 12.05% Foreign Holders 270.52 32.98% 323.83 32.54% 360.91 33.64% 403.59 35.66% 447.37 37.30% 481.20 39.41% 461.35 38.13% 500.83 40.25% Foreign Govt's&Central Banks** 50.06 6.10% 78.39 7.88% 86.09 8.03% 93.59 8.27% 100.57 8.38% 102.61 8.40% 103.42 8.55% 104.66 8.41% Pension Fund 56.46 6.88% 39.47 3.97% 39.66 3.70% 38.95 3.44% 42.63 3.55% 42.48 3.48% 43.30 3.58% 43.00 3.46% Securities Company 0.30 0.04% 0.88 0.09% 0.83 0.08% 0.96 0.08% 0.99 0.08% 0.89 0.07% 0.81 0.07% 0.65 0.05% Individual 32.48 3.26% 45.75 4.27% 31.42 2.78% 28.88 2.41% 31.91 2.61% 30.41 2.51% 28.35 2.28% Others 63.64 7.76% 46.68 4.69% 49.72 4.64% 52.78 4.66% 58.83 4.90% 60.21 4.93% 60.51 5.00% 63.49 5.10% Total 820.27 100% 995.25 100% 1,072.74 100% 1,131.63 100% 1,199.39 100% 1,220.90 100% 1,209.96 100% 1,244.45 100% 1) Including ownership of SBSN (government sukuk). 2) Foreign are consisted of Private Banking, Fund/Asset Management, Securities, Insurance, Pension Fund. 3) Others are consisted of Corporation, Individual, Foundation. *) Since February 8th, 2008, repo transaction of Government Securities to Bank Indonesia was included. **) Since November 21, 2014, foreign government(s) was included to the same category as foreign central bank(s). Jan-15 Dec-14 Nov-14 Mar-14 Dec-13 Dec-12 Jun-14 Sep-14

In the end of January 2015, foreign investor ownership record the highest percentage, showing their increasing appetite on the Indonesia’s government securities.

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