0 About t Invest stor or Relatio tions s Unit t (IRU) U) - - 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) 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 t Invest stor

• r Relatio

tions s Unit t (IRU) U)

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Table of Content tent

Exec ecut utive e Summa mmary Pre reser served ed Macroec econo nomi mic Stability ty Improved ed Intern ernatio ational nal Percep epti tion n and Risi sing ng Investme estment nt Pruden ent Fiscal scal Manag nagement ement Govern ernmen ment t Debt t Performanc mance

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Executive Summary

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Executive Summary mary

• Economic adjustment continued with moderating growth. Economic growth in Q3-2014 recorded at 5.01% (yoy), lower than 5.12% (yoy) posted in

the preceding quarter. For 2014, the domestic economy is expected to expand in line with the projection of 5.1-5.5%, with a tendency towards the lower range since global economic growth is not as strong as previously estimated. However, in 2015, economic growth is projected to accelerate to 5.4-5.8%. In a departure from conditions in 2014, on top of strong household consumption, expanding government consumption and investment in line with greater fiscal capacity to support productive economic activities, including infrastructure development, will catalyse high economic growth

• Indonesia's trade balance showed improvement during 2014, supported primarily by an increase in non-oil & gas trade balance surplus.

Imports declined in line with slowdown domestic demand, the rupiah exchange rate undulated in accord with its fundamental value and the oil price

• dropped. Exports weakened in line with slower global economic recovery, especially China and slump in main commodity export prices. Even though it

declined, exports of some manufacturing products tend to improve in line with US recovery. Cumulatively, up to November 2014, the trade balance in 2014 is in much better shape than that of in 2013.

• The fuel subsidy adjustment in November 2014 has put upward pressure on inflation level, with Bank Indonesia perceived the inflation rate to

peak in December 2014. Consequently, CPI inflation rose to 2.46% (mtm) & 8.36% (yoy) in December 2014, rising from 1.50% (mtm) & 6.23% (yoy) in the preceding month. Inflation of administered prices escalated to 17.57% (yoy), while volatile food inflation increased to 10.88% (yoy). In contrast, core inflation was relatively well managed at 4.93% (yoy). Nonetheless, stable core inflation and a declining international oil price have reassured that inflation will remain under control within its target corridor of 4±1% in 2015.

• The ongoing economic rebalancing process are not compromising financial system stability. Banking system remained resilient with sufficient

capital and well-mitigated risks. Meanwhile, the capital market performed well in December 2014, substantiated by gains in the IDX composite index.

• The Bank Indonesia Board of Governors, convened on 15th January 2015, decided to hold the BI rate at 7.75%, with the Lending Facility and

Deposit Facility rates to remain at 8.00% and 5.75% respectively. The policy is consistent with efforts to control inflation towards its target corridor of 4±1% in 2015 and 2016, as well as manage the current account deficit to a more sustainable level.

• 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 continues to perform prudent fiscal management in 2014 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. 2014 budget deficit is at a safe level of 2.46% of GDP , decreasing to 1.91% of GDP in 2015.

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Executive Summary mary

GDP Growth Inflation Foreign Exchange Reserves Balance of Payments 5

* Preliminary Figures

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Source: Ministry of Finance

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

Executive Summary

Notes:

• * Preliminary Figures

2007 2008 2009 2010 2011 2012 2013 2014*) GDP 3,957,400.0 4,954,028.9 5,613,441.7 6,422,918.2 7,427,086.1 8,241,864.3 9,083,972.2 10,137,213.0 Debt Outstanding (billion IDR) 1,389,415.0 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)

737,125.5 783,855.1 836,308.9 902,823.4 993,038.2 1,097,993.2 1,263,928.6 1,477,516.7

• Foreign Debt (Loan+Securities)

652,289.5 852,885.6 754,347.2 778,833.1 815,908.6 879,713.2 1,111,567.0 1,127,415.8 Debt to GDP Ratio 35.1% 33.0% 28.3% 26.2% 24.4% 24.0% 26.2% 25.7%

• Domestic Debt to GDP Ratio

18.6% 15.8% 14.9% 14.1% 13.4% 13.3% 13.9% 14.6%

• Foreign Debt to GDP Ratio

16.5% 17.2% 13.4% 12.1% 11.0% 10.7% 12.2% 11.1% End of Year

35.1% 33.0% 28.3% 26.2% 24.4% 24.0% 26.2% 25.7%

0% 5% 10% 15% 20% 25% 30% 35% 40%

2007 2008 2009 2010 2011 2012 2013 2014*

53.1% 47.9% 52.6% 53.7% 54.9% 55.5% 53.2% 56.7% 46.9% 52.1% 47.4% 46.3% 45.1% 44.5% 46.8% 43.3%

0% 20% 40% 60% 80% 100% 120% 2007 2008 2009 2010 2011 2012 2013 2014*) Domestic Debt Foreign Debt

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2014 Policy y Summa mary ry

Government coordinates policy tools to stabilize growth with macroeconomic management

 Daily monitoring of market and yield movements.  Improving coordination amongst policy makers to stabilize the broader financial system.  Prioritize funding from domestic market and financial institutions.  Focus on financial inclusiveness of government securities access to wider retail investors.  Active government bonds portfolio management.  Deepening cross currency swap arrangements with regional

Central Banks to implement foreign exchange market intervention. Revenue and tax policy Financing and debt management policy Expenditure policy Monetary policy mix

 Preemptive and bold increase of BI Policy Rate to 7.75%, an

increase by 200 bps since June 2013.

 Exchange rate flexibility to facilitate external adjustments.  Financial market deepening and capital flows management.  Macroprudential and supervisory actions, eg LTV to property and

automotive sectors, external debt regulation for non-bank corporation.

 Policy coordination with the government and financial stability

forum.

 Central bank cooperations, including second line of defences.  Enlarging taxbase by focusing on mining, plantation, property and

trade sector.

 Improving tax administration system to increase tax compliance.  Improving tax regulation in order to give certainty, fairness and

reasonable treatment.

 Extensification of high-income and middle individual taxpayers.  Optimization of data from the national tax census.  Strengthening law enforcement for tax evasion.  Stimulating the economy through an increase in capital expenditure

for infrastructure to improve competitiveness & production capacity.

 Improve government spending quality through efficiency measures as well as the strengthening of expenditure allocation of productive expenditure.  Support the implementation of effective and efficient government, the 2014 election and the National Social Security System.  Support the implementation of development programs to achieve the goals of economic growth, poverty reduction and the reduction

• f unemployment and increase the capacity of mitigation and

adaptation to climate change and disaster.  Financial management strengthening within the framework of fiscal decentralization to strengthen the financial capacity and reduce fiscal disparities among regions/ local governments. 7

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Improved International Perception and Rising Investment

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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 roving g Inter ternatio tional Percepti ption:

• n:

Acknowledg

• wledged

d by Rati ting 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

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Inter ternatio tional inst stitutio tions s outl tloo

• ok shows

ws some

• ptimi

mism sm thou

• ugh

gh there is still downsi side de risk for r Indonesi

• nesia in 2015 …

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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.

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Preserved Macroeconomic Stability

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Domest stic Economi mic Adjust stmen ment Conti tinues

• Economic growth in Q3-2014 achieved 5.01% growth (yoy), lower than 5.12% (yoy) growth in the preceding quarter. However, it is in line with BI

projection of 5.1-5.5% in 2014.

• The slowing down economy was attributed to contraction on exports, primarily stemming from weaker exports of primary goods. Meanwhile,

manufacturing exports consistently improved.

• Government consumption was limited due to budget cuts. Nonetheless, the economy was driven by solid performance in household consumption.
• Investments remained weak triggered by weaker performance of non-building investment, in line with contracted capital goods import.
• in 2014, on top of strong household consumption, expanding government consumption and investment in line with greater fiscal capacity to

support productive economic activities, including infrastructure development, will catalyse high economic growth.

• In 2015, stronger economic growth is forecasted to be in the 5.4-5.8% range.

Economic Growth - Expenditure Side S e c t o r 2012 2013 2013 2014 I II III IV I II III Private Consumption 5.3 5.2 5.1 5.5 5.3 5.3 5.6 5.6 5.4 Government Consumption 1.3 0.4 2.2 8.9 6.4 4.9 3.6 (-0.7) 4.4 Gross Fixed Capital Formation 9.7 5.5 4.5 4.5 4.4 4.7 6.0 5.2 4.0 Exports of Goods and Services 2.0 3.6 4.8 5.2 7.4 5.3 (-0.4) (-0.8) (-0.7) Imports of Goods and Services 6.7 0.0 0.7 5.1 (-0.6) 1.2 (-0.7) (-5.1) (-3.6) GDP 6.3 6.0 5.8 5.6 5.7 5.8 5.2 5.1 5.0 Economic Growth - Supply Side S e c t o r 2012 2013 2013 2014 I II III IV I II III Agriculture 4.2 3.7 3.3 3.3 3.8 3.5 3.2 3.4 3.7 Mining and Quarrying 1.6 0.1 (-0.6) 2.0 3.9 1.3 (-0.3) (-0.2) 0.3 Manufacturing 5.7 6.0 6.0 5.0 5.3 5.6 5.1 5.0 4.6 Electricity, Gas, and Water Supply 6.2 7.9 4.0 3.8 6.6 5.6 6.3 5.8 6.2 Construction 7.4 6.8 6.6 6.2 6.7 6.6 6.5 6.6 6.3 Trade, Hotels, and Restaurant 8.1 6.5 6.4 6.1 4.8 5.9 4.8 4.5 4.2 Transportation and Communication 10.0 9.6 10.9 9.9 10.3 10.2 10.2 9.5 9.0 Financial, Real Estate, and Business 7.1 8.2 7.7 7.6 6.8 7.6 6.2 6.2 6.0 Services 5.2 6.5 4.5 5.6 5.3 5.5 5.7 5.7 6.5 GDP 6.3 6.0 5.8 5.6 5.7 5.8 5.2 5.1 5.0 12

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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

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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



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 Environme ronment t Underpi rpinning g Growt

• wth

Funda damental tals

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Globa

• bally Compe

peti titive and a Top Invest stme ment t 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 2014

Indonesia is in the Top 40 of the Global Competitiveness Index (“GCI”) JBIC: Indonesia is the #1 Promising Country/Region for Business Development Over the Medium Term (Next 3 Years) The Economist: Indonesia has taken over India in #2 Investment Destination in Asia in 2014

Source: Japan Bank for International Cooperation (“JBIC”) FY2013 Survey Report on Overseas Business Operations of Japanese Manufacturing Companies

(1)

Total number of companies that responded was 488

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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

Rank Country / Region

• No. of Companies

(1)

Percentage Share (%) 2012 2013 3 1 Indonesia 219 44.9 2 2 India 213 43.6 4 3 Thailand 188 38.5 1 4 China 183 37.5 5 5 Vietnam 148 30.3 6 6 Brazil 114 23.4 7 7 Mexico 84 17.2 10 8 Myanmar 64 13.1 8 9 Russia 60 12.3 9 10 USA 54 11.1

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Stron

• ng Invest

stment Underpi rpinned by Competiti titiven veness ss and Stabi bility ty

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).

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Java is Still the Main Invest stment t Desti tinatio tion

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.

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T empora

• rary

y Rise se in Inflati tion

• nary

y Pressu sure

Disaggregation of Inflation

Source: BPS, Bank Indonesia

• Inflation in 2014 remained under control amidst intense pressures from administered prices and volatile foods.
• The fuel subsidy adjustment in November 2014 has increased the average fuel price which in turn put upward pressure on inflation level. The impact,

however, is perceived to be temporary and controlled, lingering for around three months and peaking in December 2014.

• Consequently, CPI inflation rose to 2.46% (mtm) & 8.36% (yoy) in December 2014, rising from 1.50% (mtm) & 6.23% (yoy) in the preceding month.

Inflation of administered prices escalated to 17.57% (yoy), while volatile food inflation increased to 10.88% (yoy). In contrast, core inflation was relatively well managed at 4.93% (yoy).

• Bank Indonesia is assured that inflation will remain under control within its target corridor of 4±1% in 2015, supported by stable core inflation and a

declining international oil price that is projected to contribute to deflation. In order to safeguard attainment of the inflation target, Bank Indonesia will continue to bolster coordination with the central and local governments through national and regional inflation controlling teams in order to manage food inflation and administered prices.

Consensus Forecast

Source: Consensus Forecast

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Oil & Gas Trade Surpl rplus s Contin tinued

• The decreasing international oil price and government subsidy reforms has improved the oil and gas account. In contrast, non-oil/gas imports were

expanding as the government ramps up infrastructure projects.

• The current account deficit decreased in comparison to the previous quarter as manufacturing exports surged and imports declined in line with weak

domestic demand.

• The capital and financial account recorded a substantial surplus, backed by positive growth in terms of foreign direct investment and portfolio
• investment. Solid investment performance was bolstered by the positive perception of investors concerning the domestic economic outlook along

with attractive returns.

Trade Balance November 2014 Balance of Payment Q3-2014

Trade Balance Non-Oil & Gas Trade Balance Oil & Gas Trade Balance Total US$ Million

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Exchange ge Rate In Line With th Funda dame mental tals

• Rupiah depreciation against the US dollar in the fourth quarter of 2014 was due to US dollar appreciation against nearly all global currencies after the

release of improved US economic data as well as the planned hike to the Fed Fund Rate.

• Meanwhile, against other currencies, such as the yen and euro, the rupiah appreciated relatively strongly despite remaining competitive with trading

partner countries.

• Point-to-point, Rupiah in December 2014 has depreciated by 1.48 (mtm) and 1.74% (yoy) in 2014 to a level of Rp12,385 per US dollar.
• Bank Indonesia will continue to maintain Rupiah stability in accordance with its fundamental value, thereby supporting macroeconomic stability as well

as controlled economic rebalancing in a sounder and more sustainable direction.

• Relatively stable exchange rate is also reflected in the increasing trend of FX reserves. (US$111.9 Billion or equal to 6.5 months of imports and official

debt repayment).

Apr./Depr. of Regional Currencies International Reserves 19

SLIDE 21

Moneta tary Policy Stance

BI Rate

Source: Bank Indonesia

• The Bank Indonesia Board of Governors, convened on 15th January 2015, decided to hold the BI rate at 7.75%, with the Lending Facility and Deposit Facility

rates to remain at 8.00% and 5.75% respectively. An overall assessment of domestic economic performance in 2014 along with the economic outlook for 2015 and 2016 indicate that such policy is consistent with efforts to control inflation towards its target corridor of 4±1% in 2015 and 2016, as well as manage the current account deficit to a more sustainable level.

• The Indonesian economy is expected to improve further with robust domestic economic growth and maintained macroeconomic stability, supported by

global recovery momentum and ongoing structural reforms to reinforce national economic fundamentals.

• 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.

6.50 6.75 6.50 6.00 5.75 6.00 6.50 7.00 7.25 7.50 7.75

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 2010 2011 2012 2013 2014 2015

(%) (%)

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Solid d Financial Syste tem m Stabi bility ty

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

market risk well anticipated, underpinned by support from solid capital structure, CAR above the minimum level of 8% (19.6% as of November 2014) and gross NPLs managed at comfortably safe level below 5% (2.4% as of November 2014). Credit growth eased from 21.4% (yoy) in December 2013 to 11.8% (yoy) in November 2014, in line with moderating domestic demand.

• The IDX Composite closed higher at 5,226.95, up by 22.3% compared to

the position at the end of 2013. During 2014, the index peaked at its highest level at 5,246.48 (8 September 2014) owing to highly optimistic investors over the Indonesian economy.

CAR Comfortably High, NPL Favorably Low Slowdown in Loan Growth Stock Market Strengthened 21

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Prudent Fiscal Management

22

SLIDE 24

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 …better fiscal profile through improved budget structure

SLIDE 25

Spendi ding g Re-Al Allocatio tion T

• Achieve

ve Greater ter 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

…renewed focus on 1) Infrastructure and 2) Poverty Reduction

SLIDE 26

Indonesi

• nesian 2014 Revise

sed d State te Budget t Realizatio tion

25

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 27



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

Macroeco

• econom
• mic Assu

sumpti ptions

• ns Require Adjust

stme ments ts to Reflect t Recent t Econom

• mic Developm
• pments

ts

26

Budget Assumptions

SLIDE 28

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.

27

SLIDE 29

Govern rnme ment t Budget t FY 2015

In billion IDR Note: *) Subject to Parliament Approval

In the proposed Revised Budget of 2015 (RAPBN-P 2015), deficit is narrowing from 2.21% of GDP to 1.91% of GDP

 To maintain resilience and fiscal

sustainability

Despite lower budget deficit, net debt in 2015 is slightly higher

 Government injects capital 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 1,768,970.7 14.9

• B. Total Expenditure

2,039,483.6 18.3 1,994,888.7 16.8 Interest Payment 151,968.3 1.4 155,388.2 1.3

• C. Primary Balance

(93,926.4) (0.8) (70,529.8) (0.6)

• D. Deficit

(245,894.7) (2.2) (225,918.0) (1.9)

• E. Financing

245,894.7 2.2 225,918.0 1.9

• I. Non Debt

(8,961.2) (0.1) (65,474.6) (0.6)

• II. Debt

254,855.9 2.3 291,392.6 2.5

• 1. Government Securities (Net)

277,049.8 2.5 308,321.1 2.6

• i. Issuance

430,662.1 3.9 462,433.0 3.9

• ii. Principal Refinancing and

(153,612.3) (1.4) (154,111.9) (1.3)

• 2. Loan (Net)

(22,193.9) (0.2) (16,928.5) (0.1)

• i. Foreign Loan (Net)

(23,815.1) (0.2) (18,619.1) (0.2) Disbursement 47,037.1 0.4 49,232.9 0.4

• Program Loan

7,140.0 0.1 7,320.0 0.1

• Project Loan

39,897.1 0.4 41,912.9 0.4 On Lending (4,319.4) (0.0) (4,395.7) (0.0) Foreign Loan Principal Payment (66,532.8) (0.6) (63,456.3) (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 11,881,207.0 Growth (%) 5.8 5.8 Inflation (%) y-o-y 4.4 5.0 3-month-SPN (%) 6.0 6.2 IDR/USD (average) 11,900 12,200 Proposed Revised Budget*) % to GDP 2015 Description % to GDP Budget

28

SLIDE 30

Govern rnme ment t Securi ritie ties s Financing g (Gross)

• ss) 2015

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 of USD, YEN or EURO global bonds Maximum issuance international bond 20% from target gross Issuance targets for GDS, Sukuk and ATM target:

– GDS (SUN): 81.7% – Sukuk: 18.3% – ATM for auctions: 8.7 year

Front Loading strategy:

• in the first semester is

targeted at 57%.

• for domestic issuance is also

targeted at first semester at 54%

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

Primary Dealers

1. Citibank N.A 2. Deutsche Bank AG 3. HSBC 4.

• PT. Bank Central Asia, Tbk

5.

• PT. Bank Danamon Indonesia, Tbk.

6.

• PT. Bank Internasional Indonesia, Tbk

7.

• PT. Bank Mandiri (Persero), Tbk

8.

• PT. Bank Negara Indonesia (Persero), Tbk

9.

• PT. Bank OCBC NISP, Tbk
• 10. PT. Bank Panin, Tbk
• 11. PT. Bank Rakyat Indonesia, Tbk
• 12. PT. Bank Permata, Tbk
• 13. PT. Bank CIMB Niaga, Tbk
• 14. Standard Chartered Bank
• 15. JPMorgan Chase Bank NA.
• 16. PT. Bahana Securities
• 17. PT. Danareksa Sekuritas
• 18. PT. Mandiri Sekuritas
• 19. PT. Trimegah Securities, Tbk

Benchmark Series for 2014 & 2015

29

SLIDE 31

Improved Government Debt Position

30

SLIDE 32

2 4 6 8 10 12 14 16 18 20 22

Apr'08 Jun'08 Aug'08 Oct'08 Dec'08 Feb'09 Apr'09 Jun'09 Aug'09 Oct'09 Dec'09 Feb'10 Apr'10 Jun'10 Aug'10 Oct'10 Dec'10 Feb'11 Apr'11 Jun'11 Aug'11 Oct'11 Dec'11 Feb'12 Apr'12 Jun'12 Aug'12 Oct'12 Dec'12 Feb'13 Apr'13 Jun'13 Aug'13 Oct'13 Dec'13 Feb'14 Apr'14 Jun'14 Aug'14 Oct'14 Dec'14

5Y 10Y 15Y 20Y

7.62 (5Y), 7.81 (10Y), 8.14 (15Y), 8.27 (20Y)

Seconda dary Market t Perform

• rmance of Centr

tral Govern rnme ment t Bonds

[In Percentage]

As of Dec 31, 2014

Yield of Benchmark Series

Global Financial Crisis

Eurozone sovereign debt crisis

Source: Ministry of Finance, Bloomberg

31

SLIDE 33

Govern rnme ment t Securi rities ties Realizati tion

• n

*Adjusted by changes in Cash Management & Debt Switch

*(Million IDR) Revised Budget 2014*

Realization (ao Dec 31, 2014)* % Realization to Revised Budget 2014 Remaining target*

Government Securities Net 264,983,700 264,978,114 100.00%

• Government Securities Maturing in 2014

163,151,013 163,151,013 100.00%

• Buyback

1,350,968 1,350,968 100.00%

• Issuance Need 2014*

428,134,713 428,129,127 100.00% 5,586 Government Debt Securities (GDS) 352,588,379 Domestic GDS 284,376,795

• Coupon GDS (Auction, Private Placement)

199,870,000

• Conventional T-Bills (Auction, Private Placement)

48,500,000

• SPNNT 20140303

12,400,000

• Retail Bonds

23,606,795 International Bonds 68,211,584

• USD Global Bonds

48,466,366

• USD Domestic Bonds

3,985,450

• Euro Denominated Bonds

15,759,767

• Samurai Bonds
• Government Islamic Debt Securities

75,540,748 Domestic Government Islamic Debt Securities 57,794,345

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

38,471,000

• Retail Sukuk

19,323,345 Global Sukuk 17,746,403

32

SLIDE 34

Financing g Realizati tion

• n FY2014

In billion IDR

Budget Revised 2014 Realization ao Dec 29, 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%

Note: *) Based on DMFAS

33

SLIDE 35

Outs tstandi tanding of T

• tal Centr

tral Govern rnme ment t Debt

Source: Ministry of Finance

[in percentage]

[USD billion]

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

34

SLIDE 36

T

• tal Debt

t Maturi rity ty Profile as of Decembe ber r 31, 201 2014

35 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 2042-2060

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 2042-2060

Gov't Securities Loan

43.3% 56.7%

Foreign Domestik

SLIDE 37

Holders s of Tradabl ble Centr tral Govern rnme ment t Securi ritie ties

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% 8% 3% 5% 5% 4% 5% 3% 3% 3% 4% 4% 4% 4% 18% 17% 16% 13% 11% 15% 15% 15% 16% 15% 15% 15% 16% 15% 21% 25% 28% 32% 38% 34% 33% 33% 33% 34% 34% 34% 33% 34% 46% 38% 45% 44% 41% 40% 41% 41% 42% 43% 42% 43% 42% 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% 0.00% 20.00% 40.00%

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

>10 >5-10 >2-5 >1-2 0-1 % Foreign Ownership to Total (RHS)

33.88% 36.63% 36.53% 33.70% 31.04% 35.59% 32.58% 30.49% 33.76% 30.83% 30.53% 30.80% 32.98% 32.54% 38.13%

Dec-10 Dec-11 Dec-12 Dec-13 31-Dec-14

Foreign Holders Domestic Non-Banks Domestic Banks 36

SLIDE 38

Profile of Centr tral al Govern rnme ment Debt Securi rities

Source: Ministry of Finance

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

• 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

• a. Zero Coupon

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

• 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

• 2. Zero Coupon Bond

IDR 1,263 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

• 1. Fixed Rate *) +)

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

• 2. Variable Rate *)

IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 IDR 122,755 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

• 3. SPNNT

IDR - IDR - IDR - IDR - IDR - 4 Retail Saving Bonds IDR - 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

• 5. Total Government International Bonds *)

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

• a. Fixed Rate *)++)

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

• b. Zero Coupon

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

• 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

• 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

• 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

• 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 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

• ++) 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

• 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

• 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

• Exchange Rate Assumption (IDR/EUR1)

IDR 15,495 IDR 15,222 IDR 15,133

• 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

37

SLIDE 39

Debt Switch & C Cash Buybac ack Program ram

Debt Switch Program Buyback Program

[in billion IDR] 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 GRAND TOTAL 39.750 Frequencies Year Volume (IDR billion) 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 Total 161,100 84,506

38

SLIDE 40

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

as of the end of Decemb ember er, , 2014

Source: Ministry of Finance

[IDR Trillion] 2014 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

• 121. 79.5

88.4 54.0 90.1 90.6 75.1 65.8 99.9 85.0 44.1 27.5 19.6 44.3 50.7 19.9 25.6 27.1 42.8 47.8 16.3 19.5 4.11 34.8 40.0

• 13.5

39.4 22.9 3.75 SUKUK USD 7.92

• 12.1

18.2

• 12.1
• SUKUK IDR

15.9 18.9 14.9 1.17 8.71

• 0.58
• 1.22
• 1.55
• 2.93
• 2.18
• 4.11

10.1

• 4.68
• SUN JPY
• 4.07

6.97

• 6.97
• SUN USD

28.0 12.1 10.9 14.5 23.1 24.3 24.3 30.4 24.3 30.4

• 19.5
• 18.2

24.3

• 27.4

18.2

• SUN IDR

69.7 48.4 62.5 38.3 46.1 43.9 43.2 35.3 55.1 54.5 44.1 26.0 19.6 41.4 50.7 19.9 23.5 27.1 42.8 47.8 16.3

• 6.40

15.6

• 13.5

12.0

• 3.75

(15.00) 5.00 25.00 45.00 65.00 85.00 105.00 125.00

39

SLIDE 41

Daily Transa sactio tion & Offsh shor

• re Ownersh

ship

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

Source: Ministry of Finance

[Trillion IDR]

as of December 31, 2014

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)

(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

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

Capital Inflows Capital inflows over total foreign holders

40

SLIDE 42

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

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% 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% 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% 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% 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% 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% 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% 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% 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% 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% 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% 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) 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). Dec-14 Nov-14 Mar-14 Dec-13 Dec-12 Jun-14 Sep-14

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