August gust 202 020 About t Invest estor or Relati lations - - PowerPoint PPT Presentation

August gust 202 020

Republic ublic of Indon

• nesi

esia

Main intain inin ing Stabil ilit ity y and S d Supporti ting Growt wth, Mit itig igat atin ing g Covid id-19 9 Ris isk

1

About t Invest estor

• r Relati

lations

• ns Uni

Unit t of the Repub ublic lic of Indonesi esia

Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between 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 to address concerns of investors, especially financial market investors. As an important part

• f

its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes 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. Published by Investor Relations Unit – Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Rosita Dewi (International Department - Bank Indonesia, Phone: +6221 2981 8279) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +62213510714) Phone: +62213510714) E-mail: contactIRU-DL@bi.go.id This Presentation Book also can be downloaded from: http://www.bi.go.id/en/iru/presentation/red/Default.aspx

2

What’s New in This Edition

GDP Q2-2020 Reali alizatio ion

…page 43-45

Authorities’ Concerted Efforts towar ard Covi vid-19 and Its Progress ess

…page 7

Bank Indones

• nesia

ia Boar

• ard

d of Meetin ting Decisio ision

…page 92

Fiscal l Polic icy Up Updat ates es

…page 55-68

Financi ancing Polic icy Up Updat ates es

…page 69-70

Fitch Affir irmed med Sovereign ign Cred edit it Rating ing Indones donesia ia at BBB/Sta /Stable le Outloo look

…page 11-27

3

Overvie view

1 2 3 4 5 6

Instit ituti tional

• nal and Govern

ernance nce Effec ecti tiven enes ess: : Ac Accele elera rated ed Reform rms Agen enda da with Instit ituti tional

• nal Improvem

emen ent Econom nomic ic Factor: Stable le Growth h Prospects ects Amid id Temporary

• rary Moderat

ration ion External nal Factor: tor: Improved

• ved Extern

rnal al Resilience lience Fiscal l Performa

• rmanc

nce and Flexib ibilit ility: : The Design gn of

• f Econom

nomic ic Recovery

• very Program

ram Commit itmen ent t to Sustainab inabilit ility and Climate ate Change ge Mitigati igation

• n

Moneta tary ry and Financi ncial al Factor: tor: Credib ible le Moneta tary ry Polic icy Track k Recor

• rd

and Favou

• urab

rable le Financi ncial l Sector tor

7

Progres ressiv ive Infras rastruct ructur ure e Develop velopmen ent: t: Strong ng Commit itmen ent t on Accelera elerati tion

• n
• f
• f Infras

astr tructure ture Provis ision ion

Ins nstit itution utional al an and d Govern ernmen ment t Effectiv ectiven eness: ess: Accel celer erat ated ed Ref eform

• rms Age

genda da wit ith Instit itution utional l Impr mprovem emen ent

Sec Section tion 1

5

Improving ving Global al Percepti eption

• n

…with recent impr mprovem ements ents on corrup upti tion n percept ption

• n inde

dex x and governa rnanc nce e indica dicator

• r

1. Source: World Economic Forum – The Global Competitiveness Report 2019; 2. Source: World Bank – Doing Business 2020 Report; 3. Source: World Bank – The Worldwide Governance Indicators 2019 Update; 4. Source: Transparency International – Corruption Perceptions Index 2019 Report

World ldwid ide Govern ernance e Indica icators tors3 Ease se of Doing ing Busine iness ss2 Globa

• bal Competiti

petitiven enes ess s Index ex1 Corru ruption ption Perceptio ception Index ex4

Higher rank is better Higher score is better Higher rank is better (rankings at the time of annual report publication) Higher rank is better 41 36 45 50 20 30 40 50 60 70 80 90 Rank India Indonesia Philippines Bulgaria Colombia 91 72 73 73 20 40 60 80 100 120 140 160 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Indonesia India Philippines Bulgaria Colombia

*New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long-term growth.

52 28 59 51 43 46 15 30 45 60 2010 2011 2012 2013 2014 2015 2016 2017 2018 Voice and Accountability Political Stability/Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption 38 40 41 41 36 34 42 43 36 37 30 32 34 36 38 40 42 44 2012 2013 2014 2015 2016 2017 2018 2019 Indonesia India Philippines Bulgaria Colombia

6

Continuou tinuous s Improvem ement nt of Investmen estment t Clima imate e

…another

• ther leap on Indonesia’s Rank on Ease of Doing

ng Busines ness (EODB)*

EoDB DB 2020 Rank EoDB DB 2019 Rank Change e in Rank EoDB DB 2020 Points ts EoDB DB 2019 Points ts Change e in Points ts

Ove verall rall 73 73 73 73 69.6 .6 68.0 .0 1.6 Startin ting g a busines ess 140 40 134 134 6 81.2 1.2 81.2 1.2 0.0 Dealing ling with Constr truct uction ion Pe Permit its 110 112 2 66.8 .8 66.6 .6 0.2 Gett tting ing Electri tricit ity 33 33 33 33 87.3 .3 86.4 .4 0.9 Registerin ering g Proper erty ty 106 100 6 60.0 .0 61.7 .7 1.7 Gett tting ing Credit it 48 48 44 44 4 70.0 .0 70.0 .0 0.0 Prot

• tecti

ting ng Minor

• rit

ity Inves vestor

• rs

37 37 51 51 14 70.0 .0 63.3 .3 6.7 Paying ing Taxes 81 81 112 31 75.8 .8 68.0 .0 7.8 Trading ing Acros

• ss Borders

116 116 67.5 .5 67.3 .3 0.2 Enfor

• rcing

ing Contrac racts 139 139 146 7 49.1 47.2 .2 1.9 Resolvin lving g Insolv lven ency 38 38 36 36 2 68.1 67.9 .9 0.2

• Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB
• Structural reforms will continue including in the budget and real sectors

Source: World Bank * Higher rank is better, EoDB 2020 was published in October 2019

7

BBB / Stable Baa2 2 / Stable BBB / Negati tive

Feb 2020, Rating g Affi firm rmed at Baa2/St Stabl ble “The affirmation of the ratings is underpinned by a number of credit strengths – including Indonesia’s robust and stable growth rates and a low government debt burden, preserved by consistent fiscal discipline and emphasis on macroeconomic stability – as well as persistent credit challenges.” Apri ril 2020, Rating g Affi firm rmed at BBB, Outloo

• ok Revi

vise sed from

• m Stabl

ble e to Nega egative ve “The affirmation reflects Indonesia’s stable institutional settings, strong growth prospects, and historically prudent fiscal policy

• settings. The negative outlook reflects S&P expectation that

Indonesia faces additional fiscal and external risks related to the COVID-19 pandemic in the next 24 months .” Augu gust st 2020, Rating Affi firm rmed d at BBB/St Stabl ble The affirmation of the rating is underpinned by a favorable medium- term growth outlook and a low government debt burden compared with “BBB” category peers.

BBB+ BBB+ / Stable

January ry 2020, Rating Upgra grade ded at BBB+/St Stable “The ratings mainly reflect the country’s solid domestic consumption-led economic growth, restrained budget deficit and public debt, and resilience to external shocks supported by flexible exchange rate and credible monetary policies and accumulation of foreign exchange reserves. Since its previous rating review, JCR has been paying particular attention to the continuing reform initiatives pushed by the administration of President Joko Widodo and the content and progress of the economic policy taken by his second administration which took office in October

• 2019. Among the reform agenda, infrastructure development has continued to progress faster than JCR had

expected.”.

Indone nesia sia Has s Been Rated ed as Investmen stment t Grade de Countr ntry sinc nce e 2017

BBB+ / Stable

March 2020, Rating g Upgra graded ded at BBB+/St Stabl ble “The upgrade reflects the firm implementation of policies to strengthen economic growth potential on the back of a solidified political foundation. As the global spread of the novel coronavirus could strain growth in the Indonesia economy, the government and the central bank are working to shore up the economy and maintain macroeconomic stability. Given the country’s underlying economic strength which remains intact, R&I expects the economy to start to recover if the epidemic is brought under control”

8

Con

• nce

certed ed Effor

• rts

ts to

• Mitigat

tigate Covi vid-19 9 Risk

General al Measures ures

Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. Extension of the emergency status for COVID-19 until 29th May 2020. Permission for civil servants to work from home, while maintaining the continuity of public services. Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols.

5 3 2 1

Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities.

6

Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds.

4

Conducting Rapid Test in 17 provinces with positive patients

• f Covid-19.

7

Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. Establishment of Contingency Plans in the regions level.

12 10 9 8

Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production.

13

Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations.

11

Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel.

14

9

Government ernment Measur asures es to

• Mitigat

tigate e Covid vid-19 Risk

Fisc scal and Non Fisc scal al Stimuli muli

Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. Increased disbursements of the Noncash Food Assistance Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. Provided incentives for domestic and international travellers. Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020.

6 4 2 1

Reduced the air passenger service fee (PSF) by 20% for March-May 2020.

5

Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities.

7

Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion.

3

Non Non-Fisc iscal Stimuli li

Relaxation of Income Tax (PPh Article 21). Relaxation of Income Tax on Imports (PPh Article 22). Relaxation of Value Added Tax (VAT) Restitution.

4 2 1

Relaxation of Income Tax (PPh Article 25).

3

Reduce and simplify restrictions on export activities to maintain export performance and competitiveness.

1

Reduce and simplify restrictions on import activities to ensure the availability of raw materials.

2

Fiscal l Stimul muli i Phase e 2 Fiscal l Stimuli li Phase e 1

10

Bank Indonesia’s Meas easure ures to

• Miti

tigat gate Covi vid-19 9 Risk

To mainta ntain n Monet etary y and Fina nanci ncial Mark rket t Stability

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms Reducing the foreign currency reserve requirement ratio for conventional commercial banks from 8% to 4%, effective 16th March 2020. Reducing the rupiah reserve requirement ratio by 50bps for banks engaged in export-import financing activity in coordination with the Government. Expanding the types of underlying transactions available to foreign investors as hedging alternatives against rupiah holdings in Indonesia.

4 3 2

Measu asures s Launched hed on March 2, 2020 Measu asures s Launched hed on March 18-19, , 2020

1

Source: Bank Indonesia

Global investors may utilise global and domestic custodian banks for investment activity in Indonesia.

5

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- month tenors from three times per week to daily auctions in

• rder to ensure adequate liquidity.

Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings.

5 3 2 1

Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors.

6

Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market.

4

Strengthening payment system policy to support COVID-19 mitigation efforts .

7

11

Main Programs

• grams & Strat

rategies egies in Facing ng the Covid id-19 Pa Pandemic demic

Source: Coordinating Ministry for Economic Affairs

• Overcoming/suppressing

viruses and anticipating new cases

• Expanding testing,

quarantine and treatment capacity and health protocols

• Get medicine, and do

research

• Increase capacity and

services in the health sector

• Planning vaccine

production and distribution

• Support and help the

community

• Support and help

affected businesses to re-open and expand

• Priority for job creation,

assistance, upskill

• Maintaining the

availability of liquidity and financial system safety nets

• Public infrastructure

investment, both hard and network infrastructure

Maintain aining ing Livelih elihood

• ods

Maintainin aining g Life e (Healt alth) h)

Covid id-19 9 Hand ndling ling Task k Force ce Nationa ional l Econo nomic mic Recover

• very

y & Transf nsfor

• rmati

mation

• n Task

sk Force ce

MAIN PROGR GRAMS

1

Safe Indonesi nesia – Indonesian are Safe From

Covid-19

2 Healthy Indonesi

nesia – Health Service Reform

Based On Mutual Cooperation

3 Powerful

ul Indonesi nesia – People's Purchasing

Power Improvement Program

4

Growing Indonesi nesia a – Program For Increasing

State Revenue

5

Work rking ng Indonesi nesia – Workforce Acceleration

Program

Two Strat ategi gies s Facing ng the Covid-19 9 Pan Pandemic

12

COVID ID-19 9 Ha Handl ndling ng and d National ional Eco conomic

• mic Reco

cover ery y Commit mittee: ee:

Integrating Economic and Health Policies

Source: Coordinating Ministry for Economic Affairs

Policy Committee

(Chairman: Coordinating Minister of Economic Affairs)

COVID-19 Handling Task Force

(Chairman: Head of BNPB)

National Economic Recovery and Transformation Task Force

(Chairnan: Vice Minister BUMN I)

PRESIDENT

• Presiden Joko Widodo has signed Presidential Regulation No.82/2020 on the Covid-19 Response and National Economic Recovery Committee, enacted on

July 2020

• The government hopes that all efforts and steps in formulating and implementing programs and policies can be carried out in a more coordinated and

integrated manner, so that they can accelerate national economic recovery and save the economy from potential economic crises.

Chair airman an Coordinat inating ng Minis ister of

• f Economic

ic Affair airs Vice Chairman I Coordinating Minister for Maritime and Investment Vice Chairman II Coordinating Minister for Politics, Law and Security Vice Chairman III Coordinating Minister for Human Development and Culture Vice Chairman IV Minister of Finance Vice Chairman V Minister of Health Vice Chairman VI Minister of Home Affairs Chief Executive Minister of State-owned Enterprises Executive Secretary I Raden Pardede Executive Secretary II Secretary of Economic Affairs

COMMITT MMITTEE E COMPOS OSIT ITION ION

TASKS

Preparing strategic policy recommendation s to the President Integrate and determine the steps for implementing strategic policies and the necessary breakthroughs Monitor and evaluate the implementation of strategic policies

13

Illust ustration ration of Health lth And Economic nomic Recover ery y In One Wheel

Gas s Pedal

Step ep on The Gas!

• Social Safety Net
• Real Sector Safety Net

Oi Oil/Gas as

• Source of funding
• Make sure the drain is

smooth and doesn't leak

Brake

• Health Safety Net

Need to step ep on the brakes to suppre ppress (contai tain) n) the covid-19 9 conta tagio gion

Need ed:

: Brake e flui uid

• Medicine
• Health Workers
• Vaccine

Strong

• ng

Brak ake

SEATB TBELT:

: Driver safety while driving

• Financial Sector Safety Nets

Source: Coordinating Ministry for Economic Affairs

14

Econom

• mic

ic Recover ery and Covid vid-19 Handlin ndling g Requir uires es a Medium um- Term rm Plan n (up up to 2023/202 024) 4)

Source: Coordinating Ministry for Economic Affairs

15

Commi mmitt ttee's ee's Prior iorit ity y Polic licies/Pr ies/Program

• gram

1.

• 1. Health

althy Ind ndone nesia sia 2. 2. Work rking ing Indone nesia sia 3. 3. Growing ing Indone nesia sia

Socio-economic Transformation. Don't waste the opportunity to carry out this post- pandemic transformation Public trust  Activity increases  Public consumption increases Drivi ving ng invest stment ent  Capacity utilization incre creases ases Main n Key Purchasing power of the middle to lower class increased  Public consumption incre creases ses Creati ting jobs Driving ving investme estment nt Capacity utilization incre creases ases

Source: Coordinating Ministry for Economic Affairs

16

Main Program

• gram Polic

licy y Matrix rix: : Timetable table and Inten ensit sity

Source: Coordinating Ministry for Economic Affairs

17

The Lates est t Programs

• grams under

er Nation ional al Economic nomic Recover ery

Wage Subsidy Assistance Program (BSU) for Workers (Private Employees):

• Wages under IDR. 5 million, who

are under pressure due to Covid- 19,

• Active workers (paying dues) BPJS

TK, the process of cleansing BPJS TK data as much as 15.7 million *.

• Payment of IDR 600,000 per

month for 1 worker for 4 months in 2 stages (Q3 and Q4).

• An expansion program for

providing loans to households and victims of layoffs with an interest of 0% using an expanded KUR scheme

• The initial stage is with a

target of reaching 2 million customers by 2020. With an estimated loan ceiling

• f IDR 6-10 million.

Escalation

• f

labor-intensive programs (mainly PUPR, Agriculture, Rural). The Labor Intensive Program, which is already running, can soon be expanded in intensity, so as to reduce unemployment pressure and increase people's income and purchasing power

Source: Coordinating Ministry for Economic Affairs

18

Government ernment Suppor

• rt

t for

• r MSMEs

Es Durin ing g the he Covi vid-19 9 Pan Pandem emic

In the form of relaxation of asset quality assessments, postponement of principal & interest subsidies, low-interest working capital loans guaranteed by Askrindo and Jamkrindo, tax incentives for MSMEs borne by the government, and Productive Presidential Assistance for Micro Enterprises

MSMEs CREDIT RESTRUCTURING WORKING CAPITAL CREDIT

GUARANTEE Placement of Rp30 Trillion Government Funds at Bank Himbara LOW INTEREST According to POJK No. 11/POJK.03/2020 & 14/POJK.05/2020 ASSET QUALITY ASSESSMENT KUR Super Mikro : Loan up to IDR 10 million

• Interest subsidy will be 19%, debtors pays 0%

interest from Aug – Dec 2020. KUR MKM (SMEs): Loan up to Rp10 million up to IDR 500 million

• Postponement of installments and a 6% interest

subsidy for the period from Apr-Dec 2020 to 0%.

• Loan > Rp500 million up to IDR 10 billion
• Postponement of installments and interest

subsidies from 3% to 3% for the period Apr-Jun 2020 and interest subsidies from 2% to 4% for the period Jul-Sep 2020. UMi, Mekaar, Pegadaian (Pawnshop)

• Postponement of principal installments and interest

subsidies for 6 months from Apr-Sep 2020

• Fintech Loan, Co-op, Farmers, LPDB, LPMUKP,

UMKM PEMDA

• Relaxation is given a 6% interest subsidy for 6

months

1

POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES

2

Asset Quality Arrangement: Loans ≤ IDR 10 billion can be based

• nly
• n

the accuracy

• f

principal / interest payments Restructurisation: The credit quality for affected debtors is determined to be current since restructuring The restructuring is carried

• ut without a ceiling limit /

type of financing

3

MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). Income Tax for MSMEs is borne by Government

5

Direct assistance to 12 million Micro-Business Actors in the amount of IDR 2.4 million per recipient MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE

6

OTHER SUPPORT

Government support in the form of guarantees by Askrindo and Jamkrindo

4

Source: Coordinating Ministry for Economic Affairs

19

Integration egration of Various ious Types s of Social al Assis sistanc tance e and Finan ancing cing for Sup uper er Micro

• and

nd MSMEs Es is Cont ntinu inually ally Enc ncou

• uraged

raged

• Super micro, micro and small businesses that are un-bankable have begun to be empowered by the Government with the Productive Presidential Assistance &

Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR.

• KUR Super Micro scheme, people enjoy loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and

medium enterprises (UMKM) is given a subsidy of 6% until 31 Dec 2020 CSR Rolling softloan Subsidizedloan

A

Fully commercialloan

B

Special schemeof commercialloan

C D E

Commercial Financing Patterns

Partnership and Community Development Program (PKBL) & Private CSR

People's Business Credit (KUR) Regular Commercial

Private PKBL & CSR Funds Interest Subsidy from the Government

Government Guarantee

Facilities

MSMEs Financing Business Ability

Unbanked

Mekaar UMi BWM LPDB*

Bankable

Social grants

KUR Super Micro

Social Assistance

F

Productive Presidential Assistance & Pre- employment Card

Market Mechanism

Source: Coordinating Ministry for Economic Affairs

*Fostering Prosperous Family (Mekaar), Micro Waqf Bank (BMW), Ultra Micro (UMi), Revolving Fund Management Agency (LPBD)

20

Exit it Strat rategy egy

The Urgency of Exit Strategy for Indonesia

Source: Coordinating Ministry for Economic Affairs

The Indonesian economy is experiencing very heavy pressures, both in the supply side (business, industry - production) and in the demand side (people's purchasing power - consumption) Health Issues  Potential Economic and/or Financial Crisis  Potential Social Problems. New ew Norm

• rmal

al is a Scenario to Maintain a Balance between Health Aspects that must be safeguarded, and Social-Economic Aspects that must continue to maintain welfare (livelihood) The New Normal al Scenar nario io is is implem lemen ented ed by by:

• Data-based Public Health Indicators:
• Epidemiology
• Public Health Surveillance
• Health Care Facilities

which becomes a Neces essary ry Condit ition ion that must be met.

• Requires readiness from the Public Sector to be opened :
• Health protocol (SOP) in each public sector
• Community awareness, compliance and discipline

New Normal l Imple lementa ntati tion n in Indone nesia sia

The e possib ibili ility of shiftin ing comm

• mmunit

ity grou

• ups

due e to prolo

• longed

ed loc

• ckdown

Vulner nerable le commu munit nity Low

• w saving

Inform

• rmal

al sector

• r

Poverty y Line

Poor

• r People

le

Inform

• rmal

l sector

• r

56.50% or 74.03 million Indonesian work in informal sectors with an average income of USD 100 – 200 per month. Savings and the accumulation of wealth to survive (especially informal workers) are very small

• The fiscal capacity of the state is very limited
• The Government is unable to fund all communities affected by COVID-19.

Social Aid is prepared within a limited period (3 months, 6 months)

21

New Normal mal

Achieving Productive and Safe Indonesia from Covid-19

Source: Coordinating Ministry for Economic Affairs

• Covid

id-19 Cases ► A declining number of cases, number of suspects, and deaths within 14 days ► Rt < 1

• Monit

itori

• ring

g of the virus s / P Public ic Healt lth ► The number of tests and contact tracing increases (not

• nly in big cities but also in regions)

► The application of the use of masks is increasingly expanded (mask for all)

• Health

th servic ices es capacit ity ► Medical personnel, PPE ► Availability of drugs, ICU room, ventilator

• Business

ess secto tor r prepara rati tion

• n

► Establishing new SOPs/guidelines at work (temperature measurement, masks at work, distance keeping, etc.)

• Public

lic Respons nse ► Discipline the application of new protocols for activities ► Submission of information that is accurate, official and transparent by the government to the public

Necess ssary y Conditi ditions ns New Prot

• toc
• col (General

al)

Make sure to clean your hands with soap and clean water Wear a mask when doing activities outside (mask for all) Apply physical distancing (1.5 - 2 m) Self-isolation if exposed to positive cases and illness Temperature check-in each building Under the Decree of the Minister of Health (KMK) number HK.01.07 / MENKES / 328/2020, the new protocol includes:

22

Econ

• nom
• mic

ic Activiti tivities es Bega gan n to

• Rise

e Fol

• llo

lowing wing the he Nationa ional l Econ

• nomic
• mic Reco

covery y and New w Nor

• rmal

mal Prog

• grams

ms

Started June 2020, a number of indicators began to show positive signals of improvement in economic activity such as manufacturing PMI, Consumer Confidence Index, Retail Sales and Car Sales, Business Activity Survey, and Consumer Price Index

27,5 46,9 25 30 35 40 45 50 55

Indonesia Manufacturing PMI

77,883,8 86,2 70 80 90 100 110 120 130 140

Consumer Confidence Index

• 59,1
• 100,0
• 80,0
• 60,0
• 40,0
• 20,0

0,0 200 400 600 800

Vehicle Sales

Motorcycle Sales (thousand) Car Sales (%YoY) - rhs

• 13,1
• 5,1
• 15,00
• 10,00
• 5,00

0,00 5,00 10,00 15,00

Business Activity Survey

• 20,6
• 12,3
• 25
• 20
• 15
• 10
• 5

5 10 15

Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20f

Retail Sales Growth (%YoY)

1 1,5 2 2,5 3 0,1 0,2 0,3 0,4 0,5

Jan Feb Mar Apr Mei Jun Jul Ags Sep Okt Nov Des

2020 (%, yoy) 2018 2019 2020

Core Inflation

Source: Coordinating Ministry for Economic Affairs

23

Protocols cols in Every y Economic

• mic-Socia

Social l Sect ctor

• r

Source: Coordinating Ministry for Economic Affairs

Sec ector

• r

Prot

• toc
• col

Impo mportan tant Point

GENERA RAL

Decree of the Minister of Health (KMK) number HK / 01.07 / MENKES / 328/2020 about Covid-19 Prevention and Control Guidelines in Office and Industrial Workplaces in Supporting Business Sustainability in Pandemic Situations Regulate:

• Rules at Work
• Rules for Workers
• Alleged

Covid-19 Management (OTG, PDP, ODP,

• r

Confirmation)

• Coordination between workplace and Regional Government

INDUSTRY

Minister

• f

Industry Circular No.4 / 2020 about Implementation of Factory Operations in the Corona Virus Disease-19 Public Health Emergency Regulate:

• Rules for Industrial Estates
• Rules for Workers
• Cleaning and Disinfection Guide
• Social Distancing Guide

TOURIS RISM

Standard Operational Procedure (SOP) is in the process of harmonization with the Task Force Arranging SOPs for Hotels, Homestay, Restaurants, Travel Attractions, Art Venues, Film Production, TV Coverage

TRANSP SPOR ORTATION ION

Transportation Minister Regulation No.18 of 2020 about Transportation Control in order to Prevent the Spread of Covid-19 Virus Regulate:

• Transportation control for the whole region
• Transportation control in areas designated as PSBB (Large-

scale Social Restrictions)

• Transportation control for homecoming activities in 2020

TRADE

• SOP
• n

Health Protocol for Modern and People’s/Traditional Market and Retail - Ministry of Trade

• Protocol
• n

Prevention

• f

Covid-19 Distribution in Shopping Centers - Source: Association of Indonesian Shopping Center Management Regulate:

• Rules in the Market Environment
• Rules for Traders and Management
• Rules for Consumers
• Operating Time

24

Govern ernment ment Measure ures s to Mitigat igate e Covid id-19 Risk

Government Regulation In UU 2/2020, Previously Perppu No.1 2020

Source: Coordinating Ministry for Economic Affairs

Regulat ates es two topi pics: s: (1) Nationa nal Budget t (APBN) and (2) Fina nanci ncial Sector

• r Policy

Natio ional al Budget t (APBN) N)

1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Lending to LPS. 5. Issuance of SUN and SBSN can be purchased by BI, BUMN, coIDRorate investors and / or retail investors. 6. Use of alternative budget sources for example SAL, education endowment funds, and funds managed by the Public Service Agency. 7. Taxation Policy: a) Decrease in CoIDRorate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19.

Finan ancial ial Sect ector

• r Polic

icy

1. Improved Coordination among KSSK members 2. Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys SUN on the primary market, lending to LPS and OJK may request a merger or consolidation of Financial Services Institutions. 3. Foreign exchange management (LLD) management for residents 4. Increase public confidence without causing moral hazard.

25

Govern ernment ment Measure ures s to Mitigat igate e Covid id-19 Risk

Budget Refocusing Policy

Source: Coordinating Ministry for Economic Affairs

I. I. Pr Pres esid ident ntial Regula latio ion (Perp rpres res) No No 7/2020 2020 on

• n Tas

askforce to to Mana nage CO COVID-19 19 Outb tbrea eak → Rene newed th through Pres eside dentia ial Regula lation (Per erpr pres es) No No 9/2020 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources II. II. Pr Pres esid ident ntial Ins nstru ruction

• n (In

Inpres res) No No 4/2020 2020 con

• ncern

rning Refocus using of

• f Activiti

ties es, Reallo locatio ion of

• f Minist

istry/Agency Bud udget, and nd Pr Procurem ement nt of

• f Goods
• ds an

and Ser ervices es in in th the Framework of

• f Mitiga

gatin ing COVID-19 19 Outbreak ak and Min inis istr try of

• f Fin

inance Circula lar (SE) E) No No 6/2020 on

• n Ref

efoc

• cusing

ng Acti tivity and nd Reall ealloc

• cation
• n of
• f Mini

Ministry/Agen ency Budge udget in in the the Frame ramework of

• f Miti

Mitigati ting CO COVID ID-19 19 Outbre Outbreak ak 1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak in accordance with COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly, simply and accountably) III. I. Poli

• licy to

to sup uppor

• rt ef

effor

• rts to

to adj adjus ust region regional allo allocat ations ns and and relax relax trans transfers rs for

• r handli

handling Co Covid vid-19 19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation (Permendagri) 20/2020 on acceleration of COVID-19 Mitigation in the Scope of Regional Government

• IV. Govern

rnmen ent Regulat ation

• n Num

umber er 23 23 of

• f 2020 for Im

Imple lemen entat ation of

• f the Nati

tional al Econ

• nomic Recover

ery Pr Progr gram in in the Cont ntext of

• f

Sup Suppor

• rti

ting St Stat ate Fi Finan nancial al Poli

• licies

es for

• r Han

Handli dling Cor Corona

• na Virus

irus Dise isease ase 2019 (CO COVID ID-19 19) and and / or

• r Fac

acin ing Threa hreats ts that that Harm Harm Nati tion

26

Apart t from financial ancial suppo port, t, affected d MSME work workers are also encourage aged d to take advant antage age of the pre re-empl ployme yment nt card progra ram

Train aining ing Fee e Assistan istance: IDR1.000.000 Train aining ing Incen entiv tives: es: IDR600.000/month for 4 months Total tal benefit efits s per benefic eficiary: iary:

IDR3.550.000 550.000

1 2 3

Job b Surve vey Incen entiv tives: s: IDR50.000/survey for 3x survey

Target Beneficiaries and the realization Initi tial l sche heme

The target et recip ipie ient nt is 2 million lion people le

Covid Scheme me

• Job seekers
• Workers / Laborers affected by layoffs
• Workers who need increased competence

Target get recip ipient ient +/- 5.6 .6 million lion people le Priorit ritiz ize e :

• Employees who are laid off / laid off *
• Affected UKM actors

Realiz lization ion Within in 5 Months nths

>13 13

Million lion regis istrants rants

• f 513 Districts / Cities

>1,4

Million lion recip ipien ients ts Pre-employment Card

506 506 thousand

and

490 490 thousand

and Participants complete the training Participants have received incentives

*To be more precise on target, data from Ministries / Institutions including BPJS Ketenagakerjaan is needed

Source: Coordinating Ministry for Economic Affairs

27

Fiscal cal Incentiv tives: es:

Super Deduction For Research & Development

Source: Coordinating Ministry for Economic Affairs

Subje ject

Object ct

Domestic coIDRorate taxpayers who carry

• ut

certain research and development (R&D) activities in Indonesia. Certain R&D activities in Indonesia, the costs of which are charged within a certain period.

Amount unt of facilit ities es (pro roposed) posed)

Stages es RPMK Real Cost 100% Addit ditional ional:

• Commercialisasion

100%

• Registration of Intellectual Property Rights (IPR) in the form of

Patents or Plant Variety Protection Rights (PVT) in the country 50%

• Registration of IPR abroad / product innovation

25%

• Collaboration with government / private R&D institutions

25% Tot

• tal

al 300%

The The Go Governme ment develo elopin ing a su super de deduction ion tax ax sc scheme me to to pr provi vide de busin sines esse ses wi with in incen centiv tives es to to condu

• nduct res

esear arch an and de developmen elopment in in the the hopes of

• f spurrin

ing innovat ation ion

Income

• me Tax Law

w (Law w No.7/ 7/1983 1983 jo. . Law

• No. 36/201

2018)

Law No.

• No. 45/20

/2019

Article 35: Matters that have not been sufficiently regulated by law are further regulated by Government Regulation Article 29C:

• Facility for reducing gross income for domestic

taxpayers condu

• nducti

ting ng cer ertain ain res resear earch and and develop velopmen ent activities in Indonesia

• The maximum gross income reduction facility is

300% of the cost

• Further arrangements through technical regulations

Tec echn hnical ical Regulati lations (RP RPMK MK)

In the process of coordinating the drafting of the Minister of Finance Regulation (IDRMK) with the Ministry of Finance, the Ministry of Research and Technology, and the Ministry of Industry

28

Medium um-Term erm Nation ional al Developm lopmen ent t Plan n (RP RPJM JMN) 2020-2024

President’s Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based

• n Mutual

ual Coopera rati tion". n".

Source: National Development Planning Agency

1

Improvin ing the Qualit ity of the Indon

• nesia

esian Labou

• ur

Force ce

2

Achiev ievin ing Produ

• ducti

ctive, e, Indepen dependen ent t and d Comp mpetit etitiv ive e Eco conomic mic Struct cture

3

Atta tain inin ing Equitabl quitable and Pros

• sperou

perous Nati tion

• nal

Develop elopme ment

4

Achie ieving ing Sust staina inable Enviro ironment mental Climat ate

5

Devel elop

• ping

ing Cultu tural Prog

• gres

ess Reflecti ting g the Nation ion's Personalit ity

6

Develop evelopin ing a Dignified ed and Trust stwor worth thy y Lega egal Sys ystem em Free Free from

• m Cor
• rruption

7

Protect

• tectio

ion of All All Nati tion

• ns and

and Prov

• vision

sion of Secu curit ity y to All Citizen ens

8

Attain ining Good

• d,

, Ef Effecti ective, e, and and Reliable Govern ernance

9

Achie ieving ing Synerg ergy y of Gov

• vern

ernmen menta tal Framewo mework with the Region

• nal Governmen

ent Stren ength then ening ing Econ conomi

• mic

c Resi esilien ence ce to Achie ieve Superio perior Econ

• nomi
• mic Growth
• wth

Devel elop

• ping

ing Mor

• re

e Remo mote Region gions to to Reduce e Econ

• nomi
• mic Gaps

ps and Improv

• ve Equa

qualit ity Impr prov

• vement

ment of Qualit ity and Compet mpetit itiv ivenes ess of the e Labour Force ce Enga gaging ing in Menta tal Revolu evoluti tion and Cultu ture e Devel elop

• pmen

ment Stren ength then ening ing Infrastructu cture e to

• Supp

pport

• rt Econo

conomi mic Devel velopm pmen ent t and Improv prove Basi sic Services ces Conse servati tion

• n of Enviro

ironmen ment, t, Supp pporti ting Clima mate te Change, e, and Enhanci cing Disa saster ter Resil silie ience ce Enhanci cing Polit itical, ical, Lega egal, Defen ense e and Stab ability ty and Transformi

• rming Public

ic Servi vice ces

1

HR HR Develo lopmen ent

2

Infrastruc ucture Develo lopmen ent

3

Regulat lation ion Simp mplif ific ication

• n

5

Econom

• mic

c Tran ansformation

• n

4

Simplifi lifica cation ion of Bureau aucr cracy cy

Presid esident‘s Missions Top 5 Presid esidentia tial l Prio ioriti ities s 7 7 RP RPJM JMN N De Development Agenda

29

Simplify plifying ing Regulat ulations ions throu

• ugh

gh Omnibu ibus s Laws

Omnibus us Laws Group p a D Diverse Range of Issues sues into Legisl slati tion, n, Aimed d at Creati ting ng Jobs and Empoweri ering ng SMEs. s.

Source: Coordinating Ministry for Economic Affairs

Financial Sector1 T axes

Investment

Labour

Omni Omnibus Law Pri riori

• rity Sect

ctors

• rs

1) Simplification ofLicensing 2) Investment Requirements 3) Employment 4) Ease, Empowerment and Protection of MSMEs 5) Ease of Doing Business 6) Research and Innovation Support 7) Government Administration 8) Imposition of Sanctions 9) Land Acquisition 10) Government Investment and Projects 11) Economic Zone

11 Cluster ters s of Omnibu bus s Law Cipta Lapa pangan Kerja (Job Creati tion

• n)

) 6 Pillars of Omnibus Law w Perpa pajakan (Taxa xati tion

• n)

1) Investment Funding 2) Territorial System 3) Personal Taxpayer 4) Taxpayer Compliance 5) Equity of Business 6) Taxation Facility  Following the inauguration of his second presidential term in October 2019, President Joko Widodo announced his administration’s plans to continue regulatory reform by focusing on initiatives such as developing a dynamic and qualified workforce, promoting industry cooperation through technology, further enhancing infrastructure development and economic reform as well as simplifying regulations and bureaucracy.  To achieve such ends, President Widodo’s Government subsequently prepared three bills of omnibus laws, namely an omnibus bill on job creation, an omnibus bill on development and strengthening the financial sector and an omnibus bill on tax provision.  Omnibus laws refer to laws that group diverse and unrelated issues which are drawn into a bill which is accepted in a single vote by a legislature.

30

The Economic

• mic Policy

icy Pa Packages ages

“To improve national industry competitiveness, export and investment to generate significant economic growth”

Phase e III I (7 Oct t ’15) Financial services facilitation, export financing and elimination of business unnecessary burden Phase e IV (15 Oct t ’15) Social safety net and betterment of people welfare Phase e V (22 Oct t ’15) Improving industry and investment climate through tax incentives and deregulation on sharia banking

Harmoni nizing ng Regul ulat ation

• ns

Simplifying g Bureau eaucrat atic Proc

• ces

ess Ensurin uring g Law Enfor nforceab eability

Phase e VI (5 Nov ’15) Stimulating economic activities in border areas and facilitating strategic commodities availability Phase e I (9 (9 Sept pt ’15) Improving national industry competitiveness Phase e II (29 Sept ’15) Easing permit requirement and simplifying export proceeds requirement Phase se VII I (7 De Dec ’15) Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals Phase se VIII II (21 De Dec ’15) Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries Phase se IX (27 Jan ’16) Accelerating electricity generation, stabilizing meat prices and improving rural–urban logistics sector Phase e X (11 Feb ’16) Revising the Negative investment List and improving protection for SMEs Phase se XI (29 29 Mar ’16) Stimulating national economy through facilitation to SMEs and industries Phase e XII II (28 28 Apr’16) Improving Indonesia’s rank on Ease of Doing Business (EODB) Phase e XIII I (24 Aug ’16) Low Cost Housing for Low-Income Communities Phase e XI XIV (10 Nov ’16) Roadmap for E-commerce

Source: Coordinating Ministry for Economic Affairs

Phase e XV (15 Jun ’17) Improving logistics In addit ition

• n to the 16 Policy

icy Packages kages, , on Augus ust 31, 2017 7 the Gover ernment nment has issued sued a Presi sident ential ial Regulat ulation ion No.91/2017 1/2017 for enhanc ancing ing busines siness s license cense service ice stand ndard ard Phase e XVI (1 (16 Nov ’18) Improving the competitiveness and domestic economy

31

Enhan ancing cing Busin ines ess s License nse Servic ice e Stand andar ard

Presi side dent ntial al Regulati ation n to Ac Accelerat rate Ease of Doing ng Busi siness ness has been launche ched

Source: Coordinating Ministry for Economic Affairs

Policy cy Goals

1 2 3 4 5 6

Improve efficient, streamlined, & integrated business license service standards Accelerate the business licensing process Provide business licensing process assurance in terms of the costs and lead times Increase coordination & synergy between central & regional government Overcome the barriers to doing business in Indonesia Implement integrated licensing process (single submission)

Main Policy cy

Forming a Task Force to identify &

• vercome the end-to-end licensing

barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing

Business license regulatory reforms Implementation of the Single Submission system

1st

st Phase

2nd

nd Phase

Note: 1st and 2nd Phase are implemented in parallel

32

Improving ing Invest estment ment Climat mate

Online e Single le Submiss missio ion (OSS) Has Been en Launched hed.. ...

Source: Coordinating Ministry for Economic Affairs

OSS is a web eb-base based d busines iness s licensin sing system tem intende ded d to cut the red ed tape e invo volv lved d in obtainin taining business s permit mits and integ egrated ated betwe tween en the centr tral al gove vernme ment t and regio ional al admin ministra stratio ions

Lorem Ipsum Suitable for all category, Enviro ironment ment & Forest stry ry Secto tor Electr tric icit ity Secto tor Public lic Works & Housing ng Sector tor Health th Sector

• r

Indus ustry ry Sector tor Marine ne & Fishery ery Secto tor Medic icine ine & Food d Sector

• r

Transporta

• rtation

ion Secto tor Trade e Sector tor Infor

• rmation

ation & Commun unic icati ation

• n

Secto tor Other r Sector

• r

Secto tors rs The Adva vanta tage ge of Using g OSS Business licenses can be secured in under an hour Standardized business licenses are available Ellectronically integrated The whole licensing process is monitored by the Task Force More practical Accessible at anytime and anywhere

33

(Pusat Logistik Berikat/PLB) is a facility provided by Ministry

• f

Finance as part

• f

the implementation of the 1st Economic Policy Package. PLB facility aims to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and medium industries; increase investment; and to make Indonesia to become a logistics hub in Asia Pacific.

To To dat ate, e, 52 Bond

• nded

ed Log Logis istic tic Cen enter er has has be been en lau launche hed to to suppor

• rt var

ario ious us industries stries.

Improving ving Investmen stment t Clima imate

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil il and ga gas, s, and mining ing indus ustry Food d & beverages verages indus ustry Auto- motive ive indus ustry ry Pe Personal

• nal

care/ home care e industry Textile ile (cott

• tton
• n)

indus ustry Small ll and mediu ium m indus ustry y Synthet thetic ic textile le (chem emic ical al substanc ances) industry. .

Bonded Logistic Center

Heavy vy Equip uipmen ent t indus ustry Defen ence indus ustry Aircraf raft t MRO RO indus ustry

34

Improving ving Investmen stment t Clima imate e

…revising the Negative Investment List

Before

Cold storage ge Restaurants, s, Bars Pharmace ceutica ical l Raw Materia ials ls Manufact cturing Sports Center, Film Proces essi sing g Lab, Crumb Rubber

Revision ision of "Partn tnership ip" catego egory y to refer to partn tners ership p with Micro,

• , Small and

Medium m Ente terprises ses (MSMEs) s) Grandfath ther er Law: w: If a parti ticu cular sector tor is tightened tened in future, e, existi ting g foreign gn invest estor r does s not t need to compl ply y with tighter ter stake Key Reforms ms in Negative e Foreign ign Investmen estment t List st Stren ength then en implementa mentati tion

• n of nega

gati tive investmen estment t law throu

• ugh active

ive roles es from ministr strie ies, s, agen encie ies s and regiona ional gov

• vernments

ments

100% 49% 100% 51% 100% 85% 100% 95% 100% 33% 67% 51% 67% 67% 55% 67% 65% 67%

Distrib ibutio ion, Warehousi sing Priva ivate e Museum, m, Caterin ing, g, apparel el Manufact cturing, g, Exhibit bitio ions s & Conventio ions Toll l Road Operator

• r,

Teleco comm mmunica icatio ion Testin ing g Company Consult ltancy cy for Construct ctio ion1 Teleco comm mmunica icatio ion Provi vider er with Integrated ed Service ices Profess essio ional l Train inin ing, g, Golf Course Management, Air Transp spor

• rt Support Service

ices, s, Travel el Bureau

After Before After Before After Before After Before After Before After Before After Before After Before After Before After 33% 49%

Introduc roduction tion of New Foreign reign Owners ership ip Regula lati tion

• n for Stra

rategi tegic c Sectors ctors Source: Investment Coordinating Board (BKPM)

35

97,6 94,3 191,9 20 40 60 80 100 120 140 160 180 200 220 240 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2 FDI DDI TOTAL

Investment estment Realization lization (Q2-20 2020) 0)

IDR tn

2013 2014 2015

Direct rect Inves estm tmen ents ts

2016

Mining ing Housi sing, g, Industria strial l Esta tate, te, and Offic ice e Build lding ing Food

• d Industry

try Electrici ectricity ty, , Gas, s, and Water ter Supply pply US$526.2 26.2 mn mn US$1,326.8 ,326.8 mn mn US$504.3 04.3 mn mn US$391.6 91.6 mn mn US$1,463.1 ,463.1 mn mn US$648.5 48.5 mn mn Transpo porta rtation tion, , Ware rehouse, , and Telec ecom

• mmunica

cation tion

31. 1.7%

US$346.5 46.5 mn mn

11. 1.4% 8.3% 41. 1.8% 55.9% 15.3% 54.7% Investme stment nt Realizat zation

Top p 8 FDI I Reali lizatio zation by Sectors tors (Q2-2020 vs Q2-2019) 2019)

Source: Investment Coordinating Board (BKPM), compared to Q2-2019 period

2017

Rp145.4 5.4 T Rp159.4 9.4 T IDR97 97.6tn .6tn 434 434,463 463

9.6% 15.6% .6%

7% 1. 1.4%

Q1-2016 Q1-2017 Q2-2019 Q2-20 2020 20 Q1-20 2016 Q1-2017 Q2-2019 Q2-20 2020 20

*

* * person

• n

37 375,982 ,982 IDR21 210.7tn 0.7tn

4.3%

Q2-2019 Q2-20 2020 20

IDR191 91.9tn .9tn IDR98 98tn tn IDR94 94.3tn .3tn Chem emica cal l and Pharm rmaceu ceutic tical l Industry stry Meta tal, , Except ept Mach chine inery ry, , and Equipm ipmen ent Industry stry

2018 2019

Oth ther er Services ces US$263.4 63.4 mn mn

23.5%

2020

Decrea reasi sing Decrea reasi sing

IDR112.7tn

Decrea reasi sing

36

1st

st Semest

mester er 2020 Invest estment ment Reali lizat zation

(excluding the upstream oil and gas sector and financial services)

Source: Investment Coordinating Board of the Republic of Indonesia

49.3%

2020 INVESTMENT REALIZATION TARGET

IDR817.2 T

Investment Realization (1st Semester 2020)

IDR402.6 T

Domestic Investment (PDMN)

IDR207.0 (51.4%)

Foreign Investment (PMA)

IDR195.6T (48.6%)

Indonesian Workers’ Absorption (1st Quarter 2020)

303,085

(2nd Quarter 2020)

263,109

37

1st

st Semest

mester er 2020 Invest estment ment Reali lizat zation n Development lopment

(excluding the upstream oil and gas sector and financial services)

Source: Investment Coordinating Board of the Republic of Indonesia

Java IDR208.9 T (51.9%) Outside Java IDR193.7T (48.1%)

East Java IDR51T (12.7%) West Java IDR57.9T (14.4%) DKI Jakarta IDR50.2T (12.5%) Central Java IDR27.8T (6.9%) Riau IDR22.8T (5.6%) Others IDR192.9 T (47.9%)

By Geography By Sector

IDR208.9 T (51.9%) IDR10.2 T (2.5%) IDR33.6 T (8.3%) IDR34.2 T (8.5%) IDR97.4 T (24.2%) IDR18.3 T (4.6%)

Top 5 Investors (by country)

(in USD million)

1.076,0 480,0 604,2 634,1 1.285,9 2.723,3 Lainnya Malaysia Jepang Hongkong, RRT R.R. Tiongkok Singapura

Singapore Malaysia Others

4,673.4 2,426.5 795.6

Investment Distribution By Location 34.4% 17.9% 8.9% 5.9% 19.7% 13.2%

Tertiary IDR220.9T(54.9%) Secondary IDR129.6T(32.2%)

Primary IDR52.1T (12.9%)

China Hong Kong Japan

1,797.1 1,213 2,677.6

38

Poten enti tial al Investmen stment t Realization lization Reaches hes IDR 708 T T

Source: Investment Coordinating Board of the Republic of Indonesia

IDR14.0T Compa panie ies s that t had been n fa facilita cilitated: ed:

PT Sumber Mutiara Indah Perdana (SMIP)

IDR 211.9T IDR61.2T IDR39.2T IDR21.7T IDR9.5T

(Tanjung Jati Power)

IDR38.0T

Bengkulu Electric Power

IDR5.2T IDR1.8T

(Galempa Sejahtera Bersama) IDR2.0T

IDR1.8T IDR1.8T

Others

IDR1.4T IDR1.1T IDR 708T

Potential Investment Realization

±Rp 410T (58%)

The potential value facilitated Indonesian government does not only facilitates large investment issues, but also medium & small investments

Klat laten en, , Centr tral Java Dumai ai, , Riau Solving stalled investment issues is one strategy to attract investors

39

Strat rategy egy to Maintain ntain Investmen estment t Clima imate e Durin ing g COVID VID-19 Pa Pandem emic ic

Source: Investment Coordinating Board of the Republic of Indonesia

Investmen estment t inquir quiries es fa faci cilit itat ation

• n of existi

sting ng operati ting ng compani nies es Investmen estment t pot

• tent

ntia ial fa facil ilita tati tion

• n from existin

sting g compa pani nies es not

• t yet

et been en execu cuted ed Bring g in new investmen estments ts

1

Providing incentives for existing companies’ expansion

2 3 4

40

Investment estment Realization lization Facilitation litation Servic vices es During ing COVID ID-19 Pa Pandemic ndemic

Source: Investment Coordinating Board of the Republic of Indonesia (BKPM)

1

Compa panie ies s Operati ration

• n Suppor
• rt

Optimizing facilitation for companies that accelerate the development and operation of business activities through the issuance of letters of support to companies while still observing the COVID-19 protocol

2

Visa Recommen

• mmendat

ation ions s for Compa pany Leaders

Providing Visa recommendations for foreign companies’ leader visit to related to their industry exploration /relocation and company operations. Including to obtain an entry permit / visit visa during large scale social restriction (PSBB).

3

Visa recommen mmendations dations for foreign ign skilled ed worker ers

Providing Visa recommendations for foreign skilled workers who will enter the country related to their investment realization / implementation

4

Escor

• rti

ting ng Existin ting Inves estm tment nt Realization ization

Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation

5

Optimi imizat ation ion of Busi sine ness ss Licensi nsing ng Services ices

BKPM continues to provide business licensing services amid the COVID-19 Pandemic. The average business license issued during the pandemic both online and offline is 4000-5000 permits per day.

Econom

• nomic

ic Factor

• r:

Stable le Growth wth Prospect spects Amid id Tempo empora rary y Mode derati tion

• n

Se Section tion 2

42

Condu duciv cive e Envir ironmen

• nment

t

Un Under derpinn inning ing Stable ble Growth wth Fun undamen damental tals s Am Amid d Tempora porary y Modera derati tion

• n

Larges gest Economy in South h East Asia 4th Most Populous us count ntry in the World ld; 64% in produc uctiv ive age Manag ageab eable le Inflat flation ion Rate Rising ing Middle le Clas ass and Afflue luent nt Customer ers

From commod

• dity

ty-based sed to manufactu cturing and service ce sectors tors via infrastr structu ture developme

• pment

From consu sumpti mption

• n-led to invest

estme ment-led growth

• wth

via a stron

• nge

ger manufactu cturin ing sector tor and more investmen estment t initiatives iatives Polici cies es to mainta tain in purch chasin sing g power er to stimu mulate te domesti estic c economy

• my in the midst

t of weaken ening ing macroe

• econ

conomic ic condit ition

• ns

Budget et reform m as a a part t of larger ger economi

• mic

c reform initiative iative Tax base e to be broadened ed from m

• ne reduce

e dependen ency cy on commod moditi ties es Fuel subsi sidie ies s sign gnifican icantl tly y reduce ced and spen ending redirec ected ted to more prod

• ducti

tive e alloca cati tion

• n

Pruden ent t debt managem gemen ent

Refo form rm-Or Orien iented ed Admin inis istra ration ion

Three e main sources ces of financing ing for investm estmen ent t needs: s: State te and region

• nal budget,

et, State te Owned ed Ente terprises ises and PPP Conti tinuing ing from 2015 15 polic icy, y, infrastr structu ture will be high gher than fuel subsid sidy Fiscal and non

• n-fisca

iscal incenti tives es to attra tract ct infrastru tructu cture e investmen estment t and promote mote PPP Infra rastru tructure cture spend ending ing focuse sed on basic ic infrastru tructu cture e proj

• jec

ects ts

Large e and Stable table Econ

• nomy
• my

Consis sisten tent Budget et Refor form New w Economic

• nomic

Structure High Infrastructu astructure Inve vest stme ments ts

43

Indonesia’s GDP Growth Momentum Moderated

Grow

• wth

th Prospe spect Stron

• ng

g GDP DP Growt

• wth1

%

Institution stitutions 2020 20 GDP P growth

• wth

(%YoY

• Y)

2020 Budget (Presidential Regulation 72/2020)

• 0,4-1,0

Bank Indonesia 0,9-1,9 World Bank (GEP June 2020) 0.0 ADB (ADOS June 2020)

• 1.0

Consensus Forecast (August 2020)

• 1.5

Favou

• ura

rabl ble GDP P Growt

• wth Compa

pared red to Peers rs2

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – April 2020; * indicates estimated figure %

• Indonesia’s economy contracted 5.32% (yoy) in Q2/2020 period after expanding 2.97%

(yoy) in Q1/2020. The recent contraction is consistent with global economic weaknesses stemming from the COVID-19 pandemic as well as containment measures in the form of large-scale social restrictions to break the domestic chain of transmission. Through its policy mix, Bank Indonesia will continue to strengthen synergy with the Government and

• ther relevant authorities in order to ensure the effectiveness of various policies

implemented to build economic recovery momentum

• Domestic economic growth has declined across all GDP components from the expenditure
• side. Household consumption contracted 5.51% (yoy) compared with positive 2.83% (yoy)

in the first quarter of 2020. Likewise, investment posted an 8.61% (yoy) contraction, down from 1.70% (yoy) in the previous period. Muted government stimuli in line with seasonal trends have also fed through to a 6.90% (yoy) contraction of government consumption, falling steeply from 3.75% (yoy) in the first quarter of 2020. In addition, exports experienced an 11.66% (yoy) contraction in the reporting period due to the shrinking global economy and sliding international commodity prices. Mirroring domestic demand and exports, imports recorded a 16.96% (yoy) contraction in the reporting period.

• All economic sectors experienced a contraction in the second quarter of 2020, excluding

Information and Communications; Water Supply; Health, Education and Financial Services; as well as Agriculture. Economic moderation has primarily been driven by Transportation and Storage, Trade and Accommodation, as well as Manufacturing. In contrast, the Information and Communications sector posted stronger growth in line with greater uptake

• f digital media in response to Work From Home (WFH) and School From Home (SFH)
• protocols. Furthermore, the Agricultural sector has been boosted by the ongoing harvesting

season.

4,23 1,87 7,43 5,03 0,50 8,20 5,91 0,65 7,62

• 6,00
• 4,00
• 2,00
• 2,00

4,00 6,00 8,00 10,00 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021* Bulgaria Colombia India Indonesia Philippines

0,0 3,8 3,3 (2,1) (0,2) 3,7 3,3 (1,7) (0,4) 4,0 3,1 (1,8) (0,3) 4,0 3,2 (1,7) (0,4) 4,2 3,1 (1,7) (0,5) 4,2 3,1 (1,7) (2,4) (4,2) 5,1 4,9 4,9 5,0 4,8 4,7 4,8 5,2 4,9 5,2 5,0 4,9 5,0 5,0 5,1 5,2 5,1 5,3 5,2 5,2 5,1 5,1 5,0 5,0 3,0 (5,3)

• 7,0
• 5,0
• 3,0
• 1,0

1,0 3,0 5,0 7,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2014 2015 2016 2017 2018 2019 2020 QoQ YoY

44

GDP Growt wth Brea eakdo kdown

GDP DP Growth th by Sector ctor (%, YoY)

Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008)

GDP DP Growth th Base sed on Expenditure itures (%, YoY)1

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4

• Tot. Q1

Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2

• HH. Consumption

5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 4.9 5.0 4.9 5.0 4.9 5.0 5.2 5.0 5.1 5.1 5,0 5,2 5,0 5,0 5,0 2,8

• 5,5

Non profit HH. consumption (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 5.3 6.9 8.1 8.8 8.6 10.8 9.1 17,0 15,3 7,4 3,5 10,6

• 5,1
• 7,8

Government consumption 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 5.2 6.3 4.6 4.8 5,2 8,2 1,0 0,5 3,2 3,7

• 6,9

Gross Fixed Cap. Formation 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 7.9 5.8 6.9 6.0 6.6 5,0 4,6 4,2 4,1 4,4 1,7

• 8,6

Exports (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (1.7) 8.4 2.7 16.5 8.4 8.9 5.8 7.5 8.3 4.6 6.5

• 1,6
• 1,7

0,1

• 0,4
• 0,9

0,2

• 11,7

Imports (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 (2.4) 4.8 0.2 15.4 11.9 8.1 12.5 14.9 13.8 7.1 11.9

• 7,5
• 6,8
• 8,3
• 8,0
• 7,7
• 2,2
• 17,0

GDP 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5,1 5,1 5,0 5,0 5,0 3,0

• 5,3

2020 By expenditure 2015 2016 2017 2018 2019 Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4

• Tot. Q1

Q2 Q3 Q4 Tot . Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Agriculture, forestry, and fishery 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3.4 4.7 3.6 3.8 3.9 1,8 5,3 3,1 4,3 3,6 0,0 2,2 Mining and Quarrying 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 (1. 3) 2.1 1.8 0.0 0.7 1.1 2.6 2.7 2.2 2.2 2,3

• 0,7

2,3 0,9 1,2 0,4

• 2,7

Manufacturing 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4.6 3.9 4.4 4.2 4.3 3,9 3,5 4,1 3,7 3,8 2,1

• 6,2

Construction 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 6.0 7.0 7.0 7.2 6.8 7.4 5.7 5.8 5.6 6.1 5,9 5,7 5,6 5,8 5,8 2,9

• 5,4

Wholesale and Retail Trade, Repair of Car and Motorcycle 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5.0 5.2 5.3 4.4 5.0 5,2 4,6 4,4 4,2 4,6 1,6

• 7,6

Transportation and Storage 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8.5 8.7 5.7 5.5 7.1 5,5 5,9 6,7 7,6 6,4 1,3

• 30,8

Information and communication 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 10. 5 11.1 8.8 8.3 9.6 7.8 5.1 8.1 7.1 7.0 9,1 9,6 9,2 9,7 9,4 9,8 10,9 Financial service 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 8.9 6.0 5.9 6.1 3.8 5.5 4.3 3.1 3.1 6.2 4.2 7,2 4,5 6,1 8,5 6,6 10,6 1,0 Other Services* 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 6.0 4,6 5.4 6.2 6.7 6.4 6.2 6,8 7,3 6,4 6,2 6,7 4,6

• 6,3

GDP 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5,1 5,1 5,0 5,0 5,0 3,0

• 5,3

By sectors 2015 2016 2017 2018 2019 2020

45

Majorit

• rity

y of Regions gions Experienced perienced Economic nomic Growt wth h Contract traction ion

Source: Central Bureau of Statistics of Indonesia (BPS), calculated

• Majority of provinces recorded a negative growth with the deepest contraction in Java and Balinusra region. The only two provinces of Papua and West Papua

grew positively.

• The contraction in economic growth in various regions was influenced by lower domestic demand as a result of the large-scale social restrictions, amidst

limited local Goverment fiscal stimulus. Nevertheless, a positive net exports recorded in several provinces on the back of positive growth in the mining sector.

A WIDES DESPREA READ D ECONO ONOMIC MIC GROWTH H CONT NTRACT CTION ION IN THE E SECO COND ND QUAR ARTE TER R OF 2020

Exter ernal l Factor: r: Impr mproved ed Exter ernal Res esil ilie ience ce

Se Sect ction ion 3

47

Ext xtern ernal al Sector tor Remains ains Resili silien ent t Suppor

• rted

ted by Adequate uate Reserve erves s and nd Sound und Balance ance of Paymen yments ts

Current ent Accoun unt Deficit within hin Safe Thresh eshold ld Balanc lance e of Payment nts Portrait ait Remain ains Sound Substant antial al FX Reserves es to Mitiga igate Externa nal l Challe alleng nges es Trade Balanc lance Maint ntain ains A Surplus lus

Source: Bank Indonesia Source: Bank Indonesia Source: BPS * Preliminary Figure ** Very Preliminary Figure

2015: Surplus us US$7.59bn 2013 2013: Deficit (US$4.10bn) n) 2014 2014: Deficit (US$2.37bn) n) 201 2016: : Surplus us US$8.83b 3bn 2017: Surplus us US$11.83bn bn

Source: Bank Indonesia

US$bn 2015 2015: CA Defici cit (US$17. 17.5bn) n) 2013: 2013: CA Defici cit (US$29. 29.1bn) n) 2014: 2014: CA Defici cit (US$26. 26.7bn) n) 201 2016: CA Defici cit (US$16. 16.9bn) n) 201 2017: CA Defici cit (US$16. 16.2bn) n)

2018: Deficit (US$8.65bn) n)

2018: 2018: CA Defici cit (US$30. 30.6bn) n)

2019: Deficit (US$3.24bn) n)

2019: 2019: CA Defici cit (US$30. 30.4bn) n)

2020: Surplus us (US$8.7bn) n)

2020: 2020: CA Defici cit (US$6. 6.6bn) n)

FX Reser serves as of June 2020: US$135.1 .1 bn n (Equ

• quiv. to 8.6 mont
• nths

s of import rts s + servi vicing g of govern

• vernmen

ent debt bt)

3,26

• 3,00
• 2,00
• 1,00

0,00 1,00 2,00 3,00 4,00 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 2013 2014 2015 2016 2017 2018 2019 2020 OG Non-OG Total 8,6

• 1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 50 60 70 80 90 100 110 120 130 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 2013 2014 2015 2016 2017 2018 2019 2020 FX Reserves (LHS) Month of Import & Debt Service (RHS)

Month US$bn

40 80 120 160

• 15
• 10
• 5

5 10 15 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4TotalQ1 Q2 Q3 Q4 Q1 Q2 2012 2013 2014 2015 2016 2017 2018 2019* 2020** Current Account Capital and Financial Account Overall Balance Reserve Asset (rhs)

US$bn US$bn

• 4,5
• 4,0
• 3,5
• 3,0
• 2,5
• 2,0
• 1,5
• 1,0
• 0,5

0,0

• 12
• 10
• 8
• 6
• 4
• 2

2 4 6 8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015 2016 2017 2018 2019* 2020** Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs)

US$bn

48

Exch change ange Rate e In Line e with h Fundame ament ntals als

Movem emen ent t of Rupia iah Rupia iah Exch change ge Rate te Fared red Rela lative tively Well ll Compared red to Peers ers

IDR/US$

Rupiah exchange rates remain under control with well-functioning market mechanisms, despite depreciation at the beginning of July 2020 as a result of global financial market uncertainty. In July 2020, the rupiah depreciated 2.36% (ptp) or by 2.92% on average compared with the level recorded in June 2020, stoked by concerns over a second COVID-19 wave, the global economic recovery

• utlook and increasing global financial market uncertainty due to a furtherance of

geopolitical tensions between the United States and China. Similar concerns persisted into August 2020, with the rupiah succumbing to pressures and depreciating 1.65% (ptp) or 1.04% on average compared with the level recorded in July 2020 as of 18th August 2020. Therefore, the rupiah has lost 6.48% (ytd)

• f its value compared with the level recorded at the end of 2019.

Moving forward, Bank Indonesia expects potential rupiah appreciation considering the currency is fundamentally undervalued, supported by low and controlled inflation, a narrow current account deficit, attractive domestic financial assets for investment and a lower risk premium in Indonesia. In addition, stronger indications of economic recovery in the second semester of 2020 also support the prospect of a stronger rupiah. To support exchange rate policy effectiveness, Bank Indonesia continues to maintain adequate liquidity in the money and foreign exchange markets, while ensuring robust market mechanisms.

Source: Bank Indonesia

Rupia iah Exch change ge Rate te Volati latilt lty

YTD 20 2020 20 vs vs 201 019 14845 14798 14134 14254 14120 14064 14352 14893 14581 14.141 14.381 14.220 14.031 14.232 14.113 14.006 13.714 15.179 15.711 14.855 14.105 14.530 14.682 13.000 13.500 14.000 14.500 15.000 15.500 16.000 16.500 17.000 18-Sep 8-Oct 28-Oct 17-Nov 7-Dec 27-Dec 16-Jan 5-Feb 25-Feb 17-Mar 6-Apr 26-Apr 16-May 5-Jun 25-Jun 15-Jul 4-Aug 24-Aug 13-Sep 3-Oct 23-Oct 12-Nov 2-Dec 22-Dec 11-Jan 31-Jan 20-Feb 11-Mar 31-Mar 20-Apr 10-May 30-May 19-Jun 9-Jul 29-Jul 18-Aug IDR/USD Quarterly Average Monthly Average

data as of August 18th, 2020

• 0,45

2,85 1,04

• 1,51
• 2,14
• 2,36
• 3,07
• 1,51
• 5,07
• 2,83
• 13,66
• 13,33
• 20,64

5,70 4,18 2,88 0,56

• 1,44
• 2,26
• 2,32
• 4,50
• 4,57
• 6,48
• 19,46
• 19,72
• 25,68
• 30,0
• 25,0
• 20,0
• 15,0
• 10,0
• 5,0

0,0 5,0 10,0 EUR PHP JPY CNY SGD MYR KRW THB INR IDR TRY ZAR BRL point-to-point average

data as of August 18th, 2020 18,1 17,0 16,1 7,0 5,4 6,2 6,1 5,0 25,6 32,6 16,1 20,4 9,6 4,8 12,5 9,2 16,34 10,10

• 5

10 15 20 25 30 35 ZAR BRL TRY IDR THB PHP INR MYR 2019 YTD 2020 Average YTD 2020 Avg 2019

%

data as of August 18th, 2020

49

Ample le Line nes of De Defense nse Against nst Ext xtern ernal al Shocks ks



Ample level of FX reserves to buffer against external shock



FX Reserves as of of July 2020: US$135.1 bn

South Korea rea



Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2020

Australia ralia



Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018

Chiang ng Mai i Initiativ iative e Mult ltilater ilaterali liza zation ion (CMIM IM) ) Agreeme eement nt



Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement



Came into effect in 2010 with a pool of US$120 bn



Doubled to US$240 bn effective July 2014

Japan



Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2018



The facility is available in USD and JPY

IMF Global al Financ ancial ial Safety ety Net t - GSFN



Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem



Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)

Bilat ateral eral Region ional al Global al FX Reserve

Ampl ple e Reserv erves es Swap p Arra range gemen ent

Source: Bank Indonesia

ASEAN Swap p Arrangemen ngement (ASA)



Entitled to a maximum swap amount of USD600 million under ASA



The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million



Doubled to USD2 billion in 2005

Singap gapore

• re



Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2019

China



Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in November 2018

Malaysia ia



Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019

50

Solid lid Polic licy y Coordination dination

In Managing ging Financi ncial al Markets ts Volat atility ility

Source: Ministry of Finance Firs rst t Line of Defense State’s Budget Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) State te Owned ed Enterp terprises ises (BUMN)’s Budget Related SOEs (min. level Aware) Social cial Secu curit ity y Orga ganizin izing g Agency (BPJS)’s Budget BPJS (min. level Aware) Second Line of Defense State’s Budget

State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis)

Gov’t Securities Crisis is Managem agemen ent t Protoc

• col
• l (CMP)
• Indicato

tors rs:

• Yield of benchmark series;
• Exchange rate;
• Jakarta Composite Index;
• Foreign ownership in government securities
• Policie

licies s to address the crisis at every level :

• Repurchase the government securities at secondary market
• Postpone or stop the issuance

Bond Stabil iliz izati ation

• n Framew

ewor

• rk

The e enact ctmen ment of Law No. 9/2016 regarding g Prev even ention and Mitiga gation of Financi cial l Syst stem em Crise ses as a legal foundation for the government to serves at the time of financial crisis in the form of Financi cial l Syst stem em Stabil bility Commi mmittee ee (KSSK SK) KSSK K member mbers: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP)

CMP

Implementing Bond Stabilization Framework (BSF)

BSF

51

56,3 42,7 36,1 22,2 76,2 56,6 53 35,3 24,7 93,9 53,6 48,7 36,3 24,2 86,1 20 40 60 80 100 Bulgaria Colombia Indonesia Philippines Uruguay 2021F 2020F 2019

Stren rengt gthen ened d Priv ivat ate e Ext xter ernal al Debt t Risk sk Managem ement nt

Regu gulati tion

• n Key Points

ints Phase 1 Jan 1,2015 2015 – Dec 31,20 2015 15 Phase 2 Jan 1,2016 2016 – Dec 31,20 2016 16 Phase 3 Jan 1, 2017 17 & & beyond

Object ect of Regul egulation

• n

Governs all Foreign Currency Debt Hedgi dging g Ratio < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** Liqu quidity y Ratio (< 3 months) 50% 70% Credi edit Rating Not applicable Minimum rating of BB- Hedgi dging g transaction

• n to meet

eet hedge ge ratio not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanction

• n

As of Q IV-2015 Applied Extern ernal Debt ebt/GDP (%)

Debt Burden n Indic icat ator (Externa nal l Debt/GDP) Remains ains Compar arab able le to Peers Rating ing

Encou coura ragi ging Corpora porates tes Compli pliance ce on Hedgi ging Ratio tio & Liquid quidity ity Ratio tio

Source: Bank Indonesia

Liquid uidit ity Ratio io* Hedgin ging Ratio io*

*Data as of Q4 2019, with total population 2.585 corporates

Regulat ulation n on Prudentia ential l Principle le in Manag aging ing External nal Debt

Source: Bank Indonesia

Source: Moody’s Credit View Fundamental Data, July 2020

2.342; 90.6% 243; 9.4%

≤ 3 months

2.425; 93.8% 160; 6.2%

> 3 - 6 months

2.277; 88.1% 308; 11.9% Comply Not Comply

52

Health althy Ext xternal ernal Debt t Composition

• sition

Extern ernal l Debt bt Structure cture

Source: Bank Indonesia, External Debt Statistics of Indonesia, Aug 2020 *Provisional Figures **Very Provisional Figures

The e Structure cture of Extern ernal l Debt bt is Dom

• min

inated ted by Long-Term erm Debt bt Extern ernal l Debt bt Remains ins Managea geable le Extern ernal l Debt bt to GDP DP Ratio tio & Debt bt to Export rt Ratio tio

% % % Million USD 42,6 41,4 47,4 50,0 53,6 55,8 54,1 50,5 48,8 50,4 50,8 49,9 50,0 49,8 49,4 50,1 52,7 51,9 51,8 51,2 57,4 58,6 52,6 50,0 46,4 44,2 45,9 49,5 51,2 49,6 49,2 50,1 50,0 50,2 50,6 49,9 47,3 48,1 48,2 48,8 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private External Debt Public External Debt 18,3 21,2 20,7 21,7 21,2 20,2 17,9 17,1 15,6 16,0 16,1 15,7 14,1 15,7 14,6 14,6 15,6 15,1 15,7 15,5 81,7 78,8 79,3 78,3 78,8 79,8 82,1 82,9 84,4 84,0 83,9 84,3 85,9 84,3 85,4 85,4 84,4 84,9 84,3 84,5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Short Term External Debt Long Term External Debt

11,5 17,1 11,3 12,0 5,4 10,2 5,9 3,0 10,1 6,5 8,1 9,9 10,4 7,5 0,6 5,0 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000 External Debt External Debt Growth (rhs) 121,8 114,9 101,0 113,8 123,1 139,5 168,4 176,1 168,0 160,8 168,5 172,1 177,3 183,3 177,8 197,5 31,8 26,5 25,0 27,4 29,1 32,9 36,1 34,3 34,7 36,0 36,8 36,5 36,2 36,1 34,5 37,3 5 10 15 20 25 30 35 40 80 100 120 140 160 180 200 220 Axis Title External Debt / Export Ratio (rhs) External Debt / GDP Ratio

53

Managea geable ble Ext xtern ernal al Debt t Profile ile

Shor

• rt term non-ban

ank corp rpor

• rat

ate e debt (non

• n affiliation)

) represe sents only ly 9.1% 1% of tot

• tal private

e externa nal l debt

Private Short-Term1 Private Non-Bank External Debt Position

Affiliation Non Affiliation

US$158.5bn

• r

75.7%

• f Private Ext.

Debt US$18.8bn

• r

9.0%

• f Private
• Ext. Debt

US$13.0bn

• r

6.2%

• f Private
• Ext. Debt

US$19.0bn

• r

9.1%

• f Private
• Ext. Debt

Public Long Term 1 Private Bank

US$32.0bn

• r

15.3%

• f Private
• Ext. Debt

US$209.3bn

• r

51.2%

• f total
• Ext. Debt

US$50.8bn

• r

24.3%

• f Private
• Ext. Debt

External Debt Position as of June 2020

1 Based on remaining maturity

Source: External Debt Statistics of Indonesia, August 2020

US$408.6bn

US$199.3bn

• r

48.8%

• f Total Ext.

Debt

Fi Fiscal Per erforma

• rmance

nce and F d Flexib ibil ilit ity: The De e Desig ign of Econom

• nomic

ic Rec ecover ery y Progr gram am

Se Sect ction ion 4

55

Covid id-19 Handling dling Focus s In Indon

• nesi

esia

Pushing the economic stability with Protecting people’s health and saving lives, maintaining purchasing power, and business continuity

Mainta tainin ining health th/ public ic safet ety Mainta tainin ining the househ ehold ld consu sumptions tions Preventin ing g Bankrupt kruptcy

Additional Groceries (basic food) Additional pre-work cards Electricity tariffs exemption Additional Family Hope Program (PKH) beneficiaries

MAINTAIN IN THE CONSUMPTIO IONS NS MAINTAIN IN THE PRO ROUDC DCTIVIT VITY

Tax Incentives Customs and excise incentives Providing leniency requirements of credit / financing / funding for MSMEs Providing payment relief for MSMEs Decreasing in benchmark interest rates Decreasing in Reserve Requirement Tax Incentives Customs and excise incentives Simplification & reduction of ber of import & export restrictions Accelerating the export-import process for Reputable Traders Improvement & acceleration of export-import services and supervision through the National Logistic Ecosystem (NLE)

EXPORT RT – IMPORT RT SUPPORT RTS

The polic icy measu sures s for handlin dling and recovering ing the economy are focused d at improving ing the deman and side, , and many target t vulnerable ble communities ities and MSMEs Es

Source: Ministry of Finance

56

The Governmen rnment t of f Indonesia’s Relief Program Budget

To deal with health, social protection, and support of MSMEs, the business world, and local governments

Source: Ministry of Finance

NATIO IONAL ECONOMIC IC RECOVER VERY PROGRAMS (PEN)

• Conditional Cash

Transfer Program IDR37.40T;

• Basic Foods

IDR43.60T;

• Social Assistance -

Jabodetabek IDR6.80T;

• Social Assistance –

Non - Jabodetabek IDR32.40T;

• Pre-Working

IDR20.00T;

• Electricity Discount

IDR6.90T;

• Logistical / Foods /

Basic Foods UDR25.00T;

• Village Fund - Cash

Transfer IDR31.80T

• Government-Borne

Income Tax IDR39.66T;

• Income Tax

Exemption on Import IDR14.75T;

• Tax Deduction

IDR14.40T;

• VAT Return

IDR5.80T;

• Corporate IT Rate

Reduction IDR20.00T; &

• Other Stimulus

IDR26.00T

• Labor Intensive-

Fund Placement IDR3.42T;

• State Equity

Participation (PMN) IDR20.50T;

• Working Capital

Investment IDR29.65T

• Line Ministries labor

Intensive Program IDR18.44T;

• Housing Incentives

IDR1.30T;

• Tourism IDR3.80T;
• Regional Incentive

Fund (DID) IDR5.00T;

• Physical Special

Allocation Fund Reserve IDR8.70;

• Regional Loan Facility

IDR1.00T; &

• Diversification

Reserve IDR58.87T

• Interests Subsidy

IDR35.28T;

• Fund Placement

IDR78.78T;

• Guarantee Return

IDR5.00T;

• Working Capital

Guarantee (Stop Loss) IDR1.00T;

• Government-Borne

Final Income Tax IDR2.40T; &

• Investment

Financing to Cooperatives IDR1.00T

• Expenditure for

Covid-19 Handling IDR65.80T;

• Incentives for

Paramedic IDR5.90T;

• Death

Compensation IDR0.30T;

• National Health

Insurance Fee IDR3.00T;

• Covid-19 Task

Force IDR3.50T; &

• Tax Incentives in

Health IDR9.05T

Social al Protect ctio ion Busine siness s Ince centive ives Corporat rate Finan nancin ing Secto toral ral & Regio ional nal Gov’t SMEs Healt alth

IDR203.90 .90 T T IDR120.6 .61 T T IDR53.5 .57 T T IDR106.11 T T IDR123.46 .46 T T IDR87.55 .55 T

COVID-19 Handling Costs

IDR695.2 695.2 T

57

National ional Economic

• mic Recover

ery y Progr gram am (PE PEN) N)

Comprehensive coverage to mitigate the impact of COVID-19 on the economy

Source: Ministry of Finance

Demand Side

IDR DR205.20 05.20 T

Supply Side

IDR DR402.45 02.45 T

Households

Conditional Cash Transfer Program , Basic Foods, Social Assistance - Jabodetabek, Social Assistance Non-Jabodetabek, Pre-Working, Electricity Discount, Logistic/Foods/Basic Foods, Village Fund - Cash Transfer, Housing Incentives – Low Income Households IDR205.2T

MSMEs

Interest subsidy, Fund Placement for SMEs, Fee for Guarantee Services (IJP) expenditure,Tax incentive, Working Capital Guarantee (Stop Loss), Investment Financing to Cooperatives through Cooperatives and SMEs Revolving Fund IDR123.46T

CORPORATION

Fund Placement for labor intensive restructuring, State Equity Participation (PMA) and Debt Securities to State- Owned Asset Management Company, Tax Incentives, Labor Intensive program, Physical-Specific Allocation Fund reserve, Tourism Incentives IDR169.97T

SOEs

State Equity Participation (PMA) and Working Capital Investment IDR12.0T

Regional Government

Regional Incentive Funds For Economic Recovery, Loan to Regional Government IDR15.00T

Diversification Reserve

IDR58.87T

PEN Funding IDR 607.65 65 T

58

Perppu 1/2020 0 (Con

• nver

erted ed To Law 2/2020) 0) as A Legal Basis is for Governme ernment nt

In Taking Quick and Extraordinary Steps in Overcoming the Impact of the Covid-19 Pandemic and National Economic Recovery

Source: Ministry of Finance

Refoc

• cusin

sing and and realloca reallocation ion policies policies by suspending non- priority activities, such as official travel and other activities that cannot be carried out in the Covid-19 period. Providin ding st stim imulu lus, s, both in the form of additional spending, tax incentives, and government investment for

• r

handlin dling Covid id-19 19 and the the Nation ional al Economi mic Recover ery

Extraor

• rdin

dinary y Government Policy

Perppu 1/2020 concerning State Financial Policy and Financial System Stability for Handling Covid-19 Pandemic and / or in the framework of Facing Threats that Harm National Economy and

• r Financial System Stability stipulat

lated into Law 2/2020 2020

Perp rpres res 54/2020

Deficit icit

5.07% 7% GDP

Perp rpres res 72/2020

Deficit icit

6.34 34% % GDP PERPPU U 1/20 2020 20

(31st March 2020)

State Budg dget 2020

Deficit icit

1. 1.76% PDB

UU 2/20 2020 20

(18th May 2020)

Un Unde dertaking king Strateg egic ic Policie cies Lega gal Basis is

The budget has been revised twice to the latest of Presidential Decree 72/2020, which has incorporated the national economic recovery initiation

59

PROGR GRESS SS OF COVID-19 & NATI TION ONAL AL ECON ONOM OMIC C RECO COVER ERY (PEN) PROGRAM GRAM: EXPENDI NDITU TURE RE SIDE

HE HEALTH SO SOCIAL PROTECTI TION

49. 49.70%

SE SECTORAL L AND AND LOCA CAL L GO GOVT VT

Tot

• tal di

disbursed IDR DR87.85 T

 Middle income group incentives  needs further design program  The acceleration of completing KPM data does not overlap with social assistance  Batch 4 of Pre-Employment Card Program has restarted

Tot

• tal di

disbursed IDR DR11.18 T

13.9 13.98%

Spe pendin ing de detai ails ls:  Central and Regional Health Incentives IDR1.86 T  Healthcare Benefit for the Death of IDR21.60 billion  Covid-19 task force (distribution) IDR3.2 T  Incentives for import and VAT for Health IDR2.26 T  Low disbursement  requires a shifting program

Tot

• tal di

disb sburse sed IDR DR7.20 20 T

Real alizat ation

• n as of

f 20th

th Aug

g 2020 20

Spending details  Labor Intensive KL IDR9.01 T  DID for Economic Recovery IDR654.9 Billion  Physical DAK IDR328.8 billion  MSMEs support IDR2.4T

13.1 13.10%

Source: Ministry of Finance

60

MSME CORPORATE FINANCING BUSINESS INCENTIVES Tax x inc ncenti tives is less ess op

• pti

timal

14.30%

Tot

• tal di

disbursed RP RP32 32,51 51 T

• Soon

will be utilized for SOE injections

• The guarantee for labor-intensive

corporate loans will begin soon

0 %

Details:

• Timing of PMN realization and credit

guarantee

• The labor-intensive corporate loan

guarantee is ready to be implemented Allo located at IDR DR120.61 T Disb sburs rsement IDR1 DR17.23 T  Needs further socialization,  Stimulus is expected to be fully utilized as economic regains

• Remain

low disbursement  needs program evaluation Real aliz izat atio ion Detai ails ls:

• Fund placement: IDR 41.2T
• LPDB investment financing: IDR 1 T
• Government bourne for MSMEs’ Income

Tax for : IDR 0.27T

• Interest: Subsidy for MSMEs IDR 2.16T

37.20%

Realization as of 20th Aug 2020

PROGR GRESS OF COVID ID-19 & NATI TION ONAL L ECON ONOM OMIC C RECO COVER ERY Y (PEN) N) PROGRA GRAM: EXPENDIT DITURE RE SIDE

Source: Ministry of Finance

61

STRATEGY TO SPUR RECOVERY THROUGH FISCAL POLICIES

PEN PROGRAM EXECUTION & ACC CCELERATION

• The existing program that already has State

Budget Allocation (DIPA) needs to be accelerated and the accuracy of targeting continues to be improved at the next stage of distribution

• The new program that data and delivery

mechanism are available will be executed.

• New proposed programs that are not

supported by valid data, and require complex regulatory changes, should be diverted to existing implemented programs

Q3 2020 is the key to avoid a recession; optimizing the role of government is important to stimulate the economy

STRENGTHENIN ING GOV OVERNMENT CON CONSUMPTION (G) Per ersonnel l sp spendin ing as as an an instr trument to en encourage grow rowth:

• Accelerated disbursement of salaries

13

• Acceleration spending to support new

work patterns (WFH, WFS)

• Reallocation to support the

digitalization of the bureaucracy;

• Shifting capex that is difficult to

execute to a faster disbursement (aim to support the infrastructure for digitalizing public services).

• Relaxation of goods and services

procurement policies

• STRATEGY  Accelerate social

assistance spending

• Modification of social protection

spending THROUGH several options: increasing the amount and frequency, and extending period.

• This can be done through the

addition of a social protection program index that is relatively implementable (PKH, Basic Food Aid, Cash Transfer etc.)

STR TRENGTHENING THE THE CONSU NSUMPTION (C) C)

11 12 13

62

1. The utilization of food reserve/logistic fund 2. Social Security programs for middle income class 3. Extension period of Electricity bill Discount 4. Additional Electricity bill Discount New proposals that have been budgeted:

1. Islamic Boarding School/Pesantren assistance for implementation of health protocols and online learning 2. Rice aid for Family Hope Program beneficiaries 3. Cash transfer IDR500K for 9Mio Basic Food beneficiaries and non PKH

NEW PROPOSAL FOR THE USE OF COVID-19 HANDLING COSTS

As the efforts to boost economic growth in the second semester

Health Social Securities

Sectoral & Regional Gov’t

Business Incentives

1. Incentives for Medical and Non-Medical Personnel:

• Incentives

extension up to Dec 2020

• Reward for

Incentives for Medical and Non- Medical

2. Support for Hospitals by accelerating the procurement process for medical stuff and claim for hospitalization costs 3. New Normal Socialization 4. Covid-19 Vaccine Supplies 1. Support for MSMEs (IDR2.4Mio per recipient) 2. Support for worker affected by Covid-19 (IDR600K/month for 4 months for those who registered in BP Jamsostek with salaries below IDR5Mio) 3. Buying Local Product Program for supporting the MSMEs and cashback program for MSMEs’ consumers Note: The new proposal programs are funded by expansion reserves and unused government borne taxes 1. Exemption from applying the minimum account provisions for customers with electricity consumption below the minimum account 2. Exemption from social, business and industrial customer expense / subscription fees

63 2018 18 2019 19 2020 20 Real alizat ation

• n
• f July 31

% of Budget et Gr Growth h (%) Budg dget et Real alizat ation

• n
• f July 31

% of Budget et Gr Growth h (%) Budg dget et Real alizat ation

• n
• f July 31

% of Budget et Gr Growth h (%) Revenu enue 994. 4.6 52.6 16.5 2165. 65.1 1052. 52.4 48.6 5.8 1699. 99.9 922. 2.2 54.3

• 12.

2.4% 4% Domes estic Reven enue ue 991. 1.3 52.4 16.2 2164. 64.7 1052. 52.1 48.6 6.1 1698. 98.6 919. 9.8 54.1

• 12.

2.6% 6% Taxat ation Reven enue 780. 0.1 48.2 14.6 1786 86.4 810. 0.6 45.4 3.9 1404 04.5 711 711 50.6

• 12.

2.3% 3% Tax Revenue 687.2 48.3 14.3 1577.6 705.4 44.7 2.7 1198.8 601.9 50.2

• 14.7%

Custom and Excise 92.9 47.9 16.4 208.8 105.2 50.4 13.2 205.7 109.1 53 3.7% Non Tax Revenue 211.3 76.7 22.7 378.3 241.5 63.8 14.3 294.1 208.8 71

• 13.5%

Gr Gran ant 3.3 276. 6.7 325. 5.1 0.4 0.4 85.4

• 88.

8.8 1.3 2.5 189. 9.2 525. 5.0% Expen pendi ditur ure 1145. 45.7 51.6 7.7 2461. 61.1 1236. 36.3 50.2 7.9 2739. 39.2 1252. 52.4 45.7 1.3% 3% Cent ntral al Go Gover ernm nment nt Expen penditur ure 697 697 47.9 15.3 1634. 34.3 761.3 1.3 46.6 9.2 1975. 75.2 793. 3.6 40.2 4.2% 2% Ministerial Expenditure 375.9 44.4 14.3 855.4 419.8 49.1 11.7 836.4 419.6 50.2 0.0% Non Ministerial Expenditure 321.1 52.9 16.4 778.9 341.4 43.8 6.3 1138.9 374 32.8 9.5% Regi giona nal Tran ansfer er and d Vi Villag age e Fund nd 448. 8.6 59.6

• 2.3

826. 6.8 475.1 5.1 57.5 5.9 763. 3.9 458. 8.8 60.1

• 3.4%

4% Regional Transfer 412.8 58.5

• 2.5

756.8 433.2 57.2 4.9 692.7 410.9 59.3

• 5.1%

Village Fund 35.9 59.8 0.1 70 41.9 59.8 16.8 71.2 47.9 67.3 14.3% Primar ary Balanc nce

• 4.6

5.3

• 94.

4.2

• 20.

0.1

• 25.

5.3 125. 5.7 449. 9.6

• 700.

00.4

• 147.

47.4 Surpl plus/ s/(Deficit)

• 151

51 46.3

• 28.

8.1

• 296

96

• 183.9

83.9 62.1 21.8 1039. 39.2

• 330.

30.2 31.8 to GDP

• 1.02
• 1.8
• 1.16
• 6.34
• 2.01

Fina nanc ncing ng 212. 2.3 65.1

• 26.

6.9 6 233.6 3.6 78.9 10 10 1039. 39.2 503 503 48.4 115. 5.3%

2020 Budget Realization as of July 2020

• State revenue reached IDR922.2 T (54.3% of the target or contracted at 12.4% [yoy]) due to the higher utilization of tax incentives.
• State expenditures reached IDR1,252.4 T (45.7% of the target or grew 1.3%), prioritized for handling Covid-19 and PEN.
• The deficit per July 2020 was still on-track reached 2.01% of GDP

64

EF EFFE FECT CTIVENESS OF F CONTR NTROLL LLING COVI VID-19 19 ACC CCELE LERATION ECONO NOMIC RESTORATI TION (PEN PEN) EXI EXIT STR TRATEGY MI MIDDLE LE INC NCOME TR TRAP AP ANT ANTICIPATING UNCE NCERTAINTY FI FISC SCAL FLEXIBI FLEXIBILITY TY (PRU PRUDENT & SU SUSTAINABL BLE)

ACCELERATING ECO CONOMIC RECOVERY AND STRENGTHENING REFORM

FISCAL POLICY DIRECTION IN 2021

Responding changes in economy, challenges, and support development targets

65

Poverty ty lev evel

9. 9.2 2 – 9. 9.7% 7%

Unemplo loyment Rate ate

7. 7.7 7 – 9. 9.1% 1%

GINI I Ratio atio

0. 0.37 377 – 0. 0.37 379

HD HDI

72 72.78 78-72.95 95

Grow rowth: :

4.5 – 5.5 %

Infla latio ion: :

3.0%

Exchange ra rate tes: :

Rp14.600/USD

10 10-year Gov’t Bond:

7.29%

ICP CP (Oil Oil Pric rice):

US$45 per barel

Oil il Li Lifti ting:

705 thousand barrel/day

Gas as Li Liftin ting: :

1,191 thousand barrel

(equal oil per day)

DEVEL ELOP OPMENT MENT TARGET ET

DEF EFICIT

REV REVENUE EXP EXPENDIT ITURE

FINA FINANCING

Penerimaan Perpajakan Non n tax Revenu enue

Cen Central Go Govern rnment Spe Spendin ding Regio iona nal l Transfer and and Vil Villag lage Fund Fund

1,7 ,776.4 2,7 ,747.5 97 971. 1.2

1.6 1.618,1 1,951.3 796.3

29 293. 3.5

(5.50% .50% PDB DB) Gr Gran ant 0,9

Tax x Revenue

1,481.9 .9

(971.2)

Macroeconomic Assumption and Budget Proposal for 2021

Expansive-consolidative fiscal policy for the acceleration of Economic Recovery and strengthening the reforms

66

ALLOCATIONS FOR CONTROLLING COVID-19 AND 2021 PEN

IDR35 356.5T 5T

IDR IDR25.40T

HEALTH MSM SME

SOC SOCIA IAL PROTECTIO ION COR ORPORATE FI FINANCE

BU BUSI SINESS IN INCENTIVE

SECTORAL AND LOCAL GOV’T

• 1. Regular KUR interest subsidy
• 2. Financing Support to MSME
• 3. Placement of funds in banking
• 4. Loss Limit Guarantee
• 5. PEN Financing Reserve
• 1. PMN to Guarantee Institution

(LPEI)

• 2. PMN to SOEs carrying out

assignments (HK, ITDC, Pelindo III, KIW)

• 3. Guarantee of backstop loss limit
• 1. Tax borne by the government
• 2. 22 Import Income Tax

Exemption

• 3. Preliminary VAT refund
• 1. Tourism Support
• 2. Food security
• 3. ICT development
• 4. Loans to the regions

5. Industrial Area 6. PEN Expenditure Proposal 7. Labor intensive program

• 1. PKH 10 million KPM
• 2. SEMBAKO Card 18.8 million KPM
• 3. Pre Work
• 4. Village Fund (BLT Desa and

supporting BUMDes)

• 5. Cash Social Assistance 10 million KPM

@ IDR 200 thousand for 6 months

• 1. the COVID-19 vaccine
• 2. Immunization, Lab, R & D
• 3. Reserve

BPJS Contribution Assistance for PBPU / BP

ID IDR48.80T ID IDR110.20T ID IDR14.90T ID IDR20.40T

IDR136.70T

Gaining the momentum for economic recovery

67

St Strengthening the he qu quality of

• f

edu ducation thro hrough incr ncreasing PISA SA scores s and nd str trengthening Early y Childhood Edu ducation (PAUD) adm dminist stration and nd increas asing g teac acher competences

EDUCATION (IDR549.5T)

Suppo pporting ing socia ial l prot rotec ection ion refo form m  compre mprehen hensiv ive e socia ial l prot rotec ection ion system em based ed on the life e cyc ycle le and d antic icipa ipating ng the e aging ing popul pulat atio ion

SOCIAL PROTECTION (IDR419.3T)

Incre reas ase food

• d prod
• duc

uction ion and d suppo pport econo nomic mic recov

• ver

ery thro rough ugh revit italiz lizin ing the nation

• nal

l food

• d

system em and d devel elop

• ping

ng Food

• d Estat

ate

FOOD SECURITIES (IDR104.2T)

Accelerating he health recovery y du due to

• Covid-19, implementing

Nati tional Health Insu nsurance (JKN) N) reforms and nd pr preparing Health Se Security ty Preparedness ss

HEALTH (IDR169.7T)

Prov rovis ision ion of infr fras astruc uctur ure e for r basic ic serv rvic ices es, , impro mprovin ing g conne nectivit ity, , and nd suppo pportin ing g econ

• nom
• mic

ic recov

• ver

ery, , and nd continui nuing ng pendin nding g prior riority progr rograms ms

INFRASTRUCTURE (IDR414.0T)

STRATEGIC POLICY IN 2021

Supporting the accelerated recovery and the economic transformation

Op Optimiz imizin ing the e use of

• f ICT

T to suppo port and d impro mprove the qualit ality of

• f public

blic serv rvic ices es (eff ffic icien iency, , conv nvenie enienc nce and d accele elera ratio ion) n)

ICT (IDR30.5T)

Encou

• uragin

ging g the e rec ecov

• ver

ery of the e tour uris ism m sector

• r with

h a focus us on 5 areas reas and d devel elop

• pin

ing g a PPP PP schem eme

TOURISM (IDR13.9T)

11 12 13 14 15 16 17

68

• Fiscal policy in 2021: "Expansive-Consolidative"

in the context of Accelerating Economic Recovery and Strengthening Reforms "

• 2021 Budget Deficit: 5.5% of GDP for counter

cyclical measures, with prudent and sustainable management of debt;

• Controlling COVID-19 in the health sector as the

key to accelerating economic recovery;

• Continuing the social safety net program to

normalize the purchasing power of the poor and vulnerable (PKH, Food Cards, Cash Social Assistance, Pre-employment Cards);

SUMMARY (BUDGET PLAN 2021)

Accelerating Economic Recovery and Strengthening Reforms

• Continue the national economic recovery program to

encourage the business, MSMEs and corporates;

• The 2021 budget plan is an instrument to accelerate socio-

economic recovery and to address structural challenges (competitiveness, production capacity and utilization of the demographic bonus) in order to avoid middle income trap;

• Reforms to a better Indonesia: An improved health and

social protection system, an education system that supports superior and competitive human resources, taxation that supports the business sectors and compatible with ICT-based economic activities, and budgeting reforms that focus on priorities, based on results and strengthening quality control of regional transfer

69

Stat ate e Budget t Post stur ure Amendmen ndment t 2020 2020

As a response to development needs for handling of pandemic COVID-19

Law (UU) No.20/2019

• Deficit 1,76%

Presidential Regulation (Perpres) No.54/2020

• Deficit 5,07%

Presidential Regulation (Perpres) No.72/2020

• Deficit 6,34%

The Law on State Finance (Law No.17 of 2003) stipulates that the budget deficit is limited to a maximum of 3% of GDP and the amount of Government debt is a maximum of 60% of GDP. With extraordinary and very urgent conditions, the State Budget deficit policy exceeds the 3% limit, through the enactment of Perppu No.1 / 2020 (becoming Law No.2 / 2020). The magnitude of the 2023 state budget deficit will return a maximum of 3%. Responding to the development needs of the Covid-19 pandemic handling and to maintain the economy and financial system stability, including running the National Economic Recovery Program (PEN).

Deficit icit 1,76% Deficit icit 6,34% Changes es Budget Deficit IDR 307,22 T IDR 1.039,22 T IDR 732,00 T ▲

Source: Ministry of Finance

70

Finan ancin cing g Strat trategy egy 2020

Opportu tunistic, istic, Measured ed, , and Prude dent t Finan ancin ing g Strat ategie egies s to suppor

• rt

t State Revenue e and Expend enditu iture e Budget et (APBN) 2020 020 in acceleratin lerating g the handling dling of COVID ID-19 9 and prot

• tec

ecting ing the econom

• my

y from m the threat at of crisi isis

Source: Ministry of Finance

Budget Financing 2020

Prioritize SBN publishing through market mechanisms

Optimization of Debt and Non-Debt Financing Sources Flexibility of adding SBN

Non-Debt Financing Sources

• SAL

SAL

• Government Endowment Fund Post
• Fund sourced BLU

LU

Cash Loan Flexibility

Upsize Program Loans from Development Partners, both bilateral and multilateral,

• ex. World Bank, ADB, AFD, KfW,

JICA, EDCF, and AIIB

1 3 4 5

• Upsize the issuance of Domestic SBN and Foreign

Denominated SBN (USD10 -12 billion) with regard to financial market conditions

• Open opportunity for Private Placement requests from

SOE/Institution

• ex. LPS, BPKH, and others

Bank Indonesia support as a last resort / back stop financing source

71

Govern ernment ment Securi riti ties es

For 2nd Semester according to Presidential Regulation 72/2020

Source: Ministry of Finance

Gover ernme ment t Securiti ities es (GS) (gross

• ss)

IDR R 900.4 .4 T

Auction Retail GS for BI Special Scheme Private Placement

Foreign Denomina- ted GS

The government can issue SBN for financing the PEN program purchased by Bank Indonesia in the primary market (Article 21 PP 23/2020). SKB between the Government & BI phase I has been agreed and carried out since the SBN auction April 21, 2020. As of June 2020, BI's total purchases of IDR 30.3 T *) Phase II SKB has been signed, will be implemented in stages according to the real needs of financing

*) exclude auction on June 30, 2020, which was part of the receipt of 2020 2nd Semester financing

With the purchase of SBN to BI through a private placement of IDR397.56 T, the supply of SBN to the market in the Second Semester of around IDR453 T is still quite reasonable:

Plans for project foreign activities / 2020 in the amount of IDR29,5 T

• Project loan plans for 2nd semester IDR24,2 T

Planned withdrawal of 2020 program loans totaling USD 7.3 billion.

• Withdrawal of 2nd Semester program loans in the amount of eqv.

USD5.5 billion.

72

Bur urden den Shar aring ing Schem heme e Betw etwee een n Ministr try y of Finance ance and Bank nk Indo done nesia sia

Based on Usage Group: Public Goods vs Non-Public Goods

IMPACT CT LOADS S COVID ID-19 19 IDR90 R903,4 ,46 T Public lic Goods ds IDR 397.5 .56 T Non-Publi Public Goods ds IDR 505.9 .90 T

Healt lth IDR 87.55 5 T Socia ial l Protection ection IDR 203.90 90 T Sectoral

• ral K/L,

/L, Local Govt IDR 106.11 11 T Micro cro small ll and Mediu ium Enterpris erprises es (MSM SME) E) IDR R 123.4 .46 T Corpora poratio tion Non-MSM SME IDR R 53.5 .57 T Oth thers ers IDR R 328.8 .87 T The Covid-19 impact burden consists of expenses for Public Goods and Non-Public Goods with different Burden Sharing Schemes for each usage group.

Burden den Sharin ring Scheme

• 1. Public

lic Good

• ds

Covered by BI with rate based on BI Reverse repo 3M Issuance specifically to BI through private placement

• 2. Non-Publ

ublic ic Good

• ds:

:

• MSME
• Corpor

porationN ionN

• n
• n-MSME
• 3. Non-Publ

ublic ic Good

• ds:

: Other ers Full Covered by Government amounting market rate Covered by Government with rate BI Reverse repo 3M minus 1%, and BI covered the remaining difference with market rate Issuance through market mechanism (auction, Green Shoe Option, Private Placement according to the SKB on April 16, 2020)

73

Government ernment Secur curit itie ies Finan anci cing g Realiz ealizat ation ion

(as of July y 31, 1, 2020)

Source: Ministry of Finance * Dual-currency bonds issuance using SEC format amounted USD2 bn and EUR1 bn, settlement on January 14, 2020 (BI mid day exchange rate; 1 USD = 13,654 IDR & 1 EUR = 15,207.83 IDR) ** Global bonds issuance using SEC format amounted USD4.3 bn, settlement on April 15, 2020 (BI mid day exchange rate on April 15, 2020; 1 USD = 15,707 IDR) *** Global Sukuk issuance amounted USD2.5 bn on June 16, 2020, settlement on June 23, 2020 (BI mid day exchange rate on June 16, 2020; 1 USD = 14,265 IDR) **** Samurai bonds issuance using public offering amounted JPY100bn, settlement on July 8, 2020 (BI mid day exchange rate on July 2, 2020 : 1 JPY = 134.34 IDR)

74

GS Prim imar ary y Mark rket t Perfor

• rmanc

mance e 2019-2020 2020

Through Auction

Source: Ministry of Finance

Average incoming bid in 2020 = IDR55.

• 55. 86 tn

tn/auction uction while average awarded bid in 2020 = IDR14.68 14.68 tn tn/auction uction

[IDR Trillion]

Average Incoming Bid 2019 = IDR35.48T/ auction Average Awarded Bid 2019 = IDR14.14T /auction

2,11 3,11 2,80 2,12 2,15 3,17 2,59 1,97 2,34 2,97 2,44 5,14 6,50 3,01 1,98 2,36 3,91 91 3,35

• 1,00

2,00 3,00 4,00 5,00 6,00 7,00

• 50

100 150 200 250 300 350 400

Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS)

75

Repub ublic lic of Indon

• nesi

esia – USD0.75 .75bn bn Green en Sukuk uk Global al & US & USD1 D1.7 .75bn bn Suk ukuk uk Gl Global bal Bonds nds Issuance uance

Source: Ministry of Finance

Issu suer er Republ blic ic of Indon

• nes

esia ia Issuer Rating Baa2 Moody’s (Stabil) BBB S&P (Negative) BBB Fitch (Stabil) Format 144A / Reg S, Senior, Unsecure, Wakala US$ Trust Certificate (“Sukuk”) issued under a USD$2.5 billion Trust Certificated Issuance Programme Pricing Date June 16, 2020 Settlement Date June 23, 2020 Aggregate Size USD2,5bn 5Y Gree een Sukuk kuk 10Y Y Sukuk kuk USD 30Y Y Sukuk kuk USD Maturity June 23, 2025 June 23, 2030 June 23, 2050 Tranche Size USD0,75bn USD1bn USD0,75bn Coupon 2.3% Fiixed 2.8% Fixed 3.8% Fixed Reoffer Spread UST +195.3bps UST +204.7bps UST +227.7bps Others Details USD200k/ik denoms, English/Indonesia Law Listing Singapore Stock Exchange and NASDAQ Dubai (dual listing)

 Second ROI transaction priced since COVID-19 pandemic  The transaction is the lowest ever 5-year and 10-year yield achieved by the Government across both conventional and Sukuk issuances in the US$ market.  The transaction is the first ever 30 year Sukuk issuance by the Government with the lowest coupon ever of Global Sukuk issuance in the world and the largest ever 30 year Sukuk from Asia.  The transaction has oversubscription of 6.7 times. With the size of orderbook, Government can press the pricing down by 70 bps from the initial price guidance (IPG) and well below its indicative fair value. Transaction Highlights

76

REPUB PUBLIC LIC OF INDONE NESIA SIA - JPY100bn 0bn SAMURAI URAI BOND

Source: Coordinating Ministry for Economic Affairs

Issu suer er Republ blik ik of Indon

• nes

esia ia Bond Rating Baa2 Moody’s, BBB S&P , BBB Fitch Format Samurai Bond (Public Offering), Reg S only Pricing Date July 2, 2020 Settlement Date July 8, 2020 Deal Size JPY100bn 3Y FXD 5Y FXD 7Y FXD 10Y Y FXD 20Y Y FXD Maturity July 7, 2023 July 8, 2025 July 8, 2027 July 8, 2030 July 6, 2040 Tranche Size JPY 50.7bn JPY24.3bn JPY10.1bn JPY13.4bn JPY1.5bn Coupon 1.13% 1.35% 1.48% 1.59% 1.80% Reoffer Spread YSO+110bp YSO+130bp YSO+140bp YSO+145bp

• Lead Managers

Daiwa / MUMSS / Nomura / SMBC Nikko

 First Sovereign Samurai issuance in 2020 and the first issue from Asian after the pandemic declaration and part of the proceeds will be allocated to various projects in response to COVID- 19  RoI’s achievements of successful pricing of benchmark sized transaction while significantly reducing average premium over its US dollar secondary curve across tenor, contributed to encourage the market and proved strong presence of RoI as a leading Samurai bond issuer. Transaction Highlights

77

Repub ublic lic of Indon

• nesi

esia – USD4.3b .3bn n GLOBA BAL L BONDS DS ISSU SUAN ANCE CE

Source: Ministry of Finance

On April 7, 2020, the Republic of Indonesia priced a transaction comprising USD4.3bn in senior unsecured notes

Iss ssuer Republic c of Indon

• nesia

esia Issuer Rating Baa2 Moody’s (Stable) BBB S&P (Stable) BBB Fitch (Stable)

• Exp. Issue Rating

Baa2 Moody’s / BBB S&P / BBB Fitch Format U.S. SEC registered Issue Senior unsecured fixed rate notes Pricing Date April 6, 2020 Settlement Date April 15, 2020 Aggregate Size USD4,300 mm Long 10.5-yea year Long 30.5-year year Long 50-year year Maturity Oct 15, 2030 Oct 15, 2050 Apr 15, 2070 Tranche Size USD1,650 mm USD1,650 mm USD1,000 mm Coupon (p.a.) 3.850% 4.200% 4.450% Reoffer Price 99.573 99.150 99.009 Reoffer Yield (p.a.) 3.900% 4.250% 4.500% Listing Singapore, Frankfurt Open Market Law New York Use of Proceeds For general purposes of the Republic of Indonesia, including financing COVID-19 relief and recovery

Transaction Highlights

 Net proceeds will be used for general purposes of the Republic, including financing COVID-19 relief and recovery efforts for the Republic to contain the virus and mitigate its impact on Indonesia.  The Republic's fiscal policy amidst volatile market conditions includes support for healthcare, the social safety net, and small and medium enterprises.  The debut 50-year offering on strong demand in the long end of the curve.  The transaction is the largest global offering by the Republic and demonstrates the Republic’s ability to respond swiftly to markets and capture favorable issuance windows.

Investor Breakdown by Investor Type Investor Breakdown by Region RI103 030 RI047 470 RI105 050

45% 25% 21% 9% 52% 20% 26% 2% 44% 38% 18%

US Europe Asia ex-Indonesia Indonesia

RI103 030 RI047 470 RI105 050

Asset Managers Insurance/Pension Fund Central Bank/Sovereign Wealth Fund Banks Private Banks Others

64% 20% 1% 4% 1% 10%

71% 22% 1% 1% 2% 3%

78

Disciplin ciplined ed and Sophistic histicat ated ed Debt t Portf tfolio

• lio Managemen

gement

Weig ighted ted Avera erage ge Debt bt Maturity turity of ~8. 8.7 Years rs Pruden ent t Fisc scal l Defic icit it Well ll Divers ersif ified ied Acros ross Differen erent t Curren rencie cies

% of Yearl rly y Issuance

Stabl ble Debt bt to GDP DP Ratio tio Over er the e Years rs

IDR R Tn Tn Govern vernmen ent Debt bt / GDP (%) 265 265 362 362 407 407 442 442 358 358 (9) 19 19 (4) (20) 14 14 (7) (58) (69) (56) (66) (227) (298) 8) (308) (341) (269)

• 2,2%
• 2,6%
• 2,5%
• 2,5%
• 1,8%
• 3,0%
• 2,5%
• 2,0%
• 1,5%
• 1,0%
• 0,5%

0,0% (400) (300) (200) (100)

• 100

200 300 400 500 2014 2015 2016 2017 2018 SBN (neto) Pinjaman DN & LN (neto) Non Utang (neto) Surplus (Defisit) APBN Rasio Defisit APBN thd. PDB (RHS) Non Debt (Net) Bonds (Net) Loans (Net) Budget Surplus/Deficit Fiscal Deficit (%GDP, RHS)

Source: Ministry of Finance

Note: *) as of end of December 2019, **) Preliminary number using GDP assumption

1.931,2 2.410,0 2.780,6 3.248,6 3.612,7 4.014,8 4.596,26

677,6 755,1 734,8 746,2 810,7 764,5 838,60 24,74% 27,43% 28,33% 29,40% 29,81% 30,18% 33,63% 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00%

• 1.000,0

2.000,0 3.000,0 4.000,0 5.000,0 2014 2015 2016 2017 2018 2019*) July - 20 **) Bond Loan Debt/GDP Ratio [RHS] 9,8 9,4 9,1 8,7 8,4 8,5 8,7 2014 2015 2016 2017 2018 2019 Jul-20

Aver erage ge Time me To Matur urity

ATM (in years) 55% 57% 59% 58% 62% 62% 32% 31% 29% 30% 27% 26% 3% 4% 4% 4% 5% 5% 8% 7% 6% 6% 5% 6% 2% 1% 1% 1% 1% 1% 0% 20% 40% 60% 80% 100% 2015 2016 2017 2018 2019 Jul-20 IDR USD EUR JPY OTHER

79

103 284 241 249 299 233 176 153 134 207 195 164 95 93 156 72 98 33 87 61 49 21 18 37 28 - 5 20 48

• 54

162 178 187 178 185 130 132 132 90 95 49 30 26 19 36 9 28 33 4 3 3 35 24 31 31 20 38 27 105,7

• 100

200 300 400 500 600 IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp)

Well Bala lanced nced Maturity urity Profile ile with h Strong

• ng Resili

silience nce Against nst Ext xtern ernal al Shocks ks

Decl clinin ining g Interes erest t Rate te Risks sks Debt bt Maturity turity Profil ile Decl clinin ining g Exch change ge Rate te Risks ks Upcom coming ing Maturities turities (Next t 5 Yea ears) rs)

IDR tn tn Source: Ministry of Finance

Note: 1. *) as of end of December 2019, preliminary number and using GDP assumption 14,8 13,7 12,1 10,6 10,6 9,8 8,5 21,0 20,7 17,5 19,2 19,7 16,1 17,0 2014 2015 2016 2017 2018 2019 Jul-20 Variable rate ratio [%] Refixing [%] 10,7 12,2 12,1 12,1 12,3 11,3 12,8 43,4 44,5 42,6 41,3 41,0 37,9 38,2 2014 2015 2016 2017 2018 2019 Jul-20 FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 7,7 8,4 6,5 9,9 10,6 8,1 9,7 20,1 21,4 22,7 25,0 25,5 24,3 24,4 33,9 34,7 36,0 39,3 40,4 41,0 41,4

2014 2015 2016 2017 2018 2019 Jul-20 in 1 year (%) in 3 year (%) in 5 year (%)

80

Holder lders s of Trada adable ble Centr tral al Governm rnment nt Securities rities

More Balance Ownership In Terms of Holders and Tenors

Forei eign gn Owners ership ip of Gov’t Domestic Debt Securit ritie ies s by Tenor

• r

Hold lders ers of Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

23,9% 22,5% 23,4% 20,3% 21,1% 31,2% 37,8% 39,9% 36,8% 42,0% 40,3% 39,1% 38,2% 37,5% 39,8% 37,7% 38,6% 29,8% 0% 20% 40% 60% 80% 100% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jul-20 Foreign Holders Domestic Non -Banks Domestic Banks 3,2% 3,5% 5,0% 4,3% 2,4% 7,2% 1,3% 5,3% 5,1% 1,9% 6,7% 5,2% 11,8% 17,8% 17,3% 18,4% 22,0% 22,7% 39,0% 37,4% 35,6% 36,8% 34,1% 27,8% 44,7% 36,0% 37,0% 38,6% 34,8% 37,2% 38,2% 37,5% 39,8% 37,7% 38,6% 29,8% 0% 20% 40% 60% 80% 100% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Jul-20

0-1 >1-2 >2-5 >5-10 >10 % Foreign Ownership of Total

81

Ownership ership of IDR Trada dable ble Centr tral al Governmen rnment t Securitie urities

(as of July y 31, 1, 2020)

1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks.

(IDR tn)

Source: Ministry of Finance

Descrip iption Dec-16 16 Dec-17 17 Dec-18 18 Dec-19 19 Jul Jul-20 20 Bank nks* 399.46 22.53% 491.61 23.41% 481.33 20.32% 581.37 21.12% 989.95 31.16% Govt Instit itut utions ions (Bank nk Indones nesia* ia**) 134.25 7.57% 141.83 6.75% 253.47 10.70% 262.49 9.54% 288.13 9.07% Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 273.21 9.93% 453.42 14.27% GS used for Monetary Operation 23.63 1.33% 38.01 1.81%

• 36.11
• 1.52%

10.72 0.39% 165.30 5.20% Non-Ba Bank nks 1,239.57 69.90% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% 1,898.94 59.77% Mutual Funds 85.66 4.83% 104 4.95% 118.63 5.01% 130.86 4.75% 139.69 4.40% Insurance Company and Pension Fund 325.52 18.36% 348.86 16.61% 414.47 17.50% 471.67 17.13% 510.09 16.06% Foreign gn Holder ers 665.81 37.55% 836.15 39.82% 893.25 37.71% 1,061.86 38.57% 945.79 29.77% Foreign Govt's & Central Banks 120.84 6.81% 146.88 6.99% 163.76 6.91% 194.45 7.06% 193.10 6.08% Individual 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95% 113.22 3.56% Others 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93% 190.14 5.98% Total 1,773.28 100% 100% 2,099.77 100% 100% 2,368.45 100% 100% 2,752.74 100% 100% 3,177.01 100% 100%

Commi mmitme tment t to Susta tain inabil bilit ity y and d Clim imat ate e Chan ange ge Mit itig igat ation ion

Se Sect ction ion 5

83

Commi mmitmen tment t to Sust stain ainability ability and Clima imate Chang nge e Mitigation igation

Republic of Indonesia’s Commitment to Sustainability Including Climate Change Mitigation

Background Indonesia’s En Environmental Commitment andObje jectives

Indonesia’s Environmental Law was enacted in 2009 based

• n the concept of sustainable development, prevention,

precaution and a “polluter pays” principle. To better address environmental issues, the Ministry of Environment and the Ministry of Forestry were merged to become the Ministry of Environment and Forestry in October 2014

For

• refront of
• f En

Environmental Pr Protection

The “Nine Agenda Priorities” of the President’s priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs

The President’s NawacitaPr Progr gramme

Mi Mitigation

• Adopted the National Action Plan for Greenhouse Gas Emission

Reduction in 2011.

• Focuses on reducing greenhouse gas emission through a National

Determined Contribution with an unconditional reduction target of 29% by 2030 compared to the 2010 baseline. An additional 12% reduction is conditional on technology transfer, capacity building, results for payment and access to finance.

• Environmental Fund Management Agency (BPLDH): established in

October 2019 with the vision to create a trusted institution to attract national and international donors as well as effectively mobilize public and private fund in order to support protection programmes.

Ada daptation

• National Action Plan on Climate Change Adaptation: National

framework for adaptation initiatives mainstreamed into the National Development Plan.

• Medium Term Development Plan 2020-2024 (RPJMN): reflects

Indonesia’s strong commitment to shift to a low carbon development based approach to economic development and a more climate resilient path. Includes key priorities such as renewable energy and energy efficient development, forest conservation and reforestation, waste management, land intensification, food security as well as governance and institutionalization of investment and regulation.

Biod

• diver

ersity

• Indonesia is an archipelago made up of 17,504

islands with unique ecosystems containing a large number of diverse species.

• Indon
• nesi

sian Bi Biod

• diversi

sity St Strategy and Action

• n Plan

2015 2015-202 2020: launched to provide an outline on how biodiversity could be utilized sustainably to improve economic and development

• pportunities.

Commitment to implement the United Nation’s (“UN”) Sustainable Development Goals (“SDG”) in order to achieve the 2030 development agenda introduced by the UN. Through Presidential Regulation No. 59/2017 relating to the implementation of SDGs in Indonesia, the National Development Planning Agency was instructed to present a roadmap to implement the SDGs

Commitment to

• Sustainability

Source: Green Sukuk Report 2020, Bank Indonesia, Ministry of Finance

84

Indonesia’s Existing Green Bond and Suk ukuk uk Frame mewor

• rk

Existin sting g Green n Bond d and Sukuk Framewor

• rk

k under which h the Republic ublic of Indone

• nesia

sia can Finance nce and Refina nance nce Select cted ed Eligib ible e Projects cts

Source: Indonesia’s Green Bond & Green Sukuk Framework

The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction

Use of proceeds

• f Green Bond

and GreenSukuk

Eligible Green Projects must fall into one of the nineeligible sectors

1

Project Evaluation and Selection

Review and approval process by Ministry of Finance and National Development Planning Agency

2

Management of Proceeds Management- Ministry of Finance

The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance.

Line Ministries

The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects

3

Reporting

Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report

• n the list of projects,

amounts of proceeds allocated to such projects and estimation of beneficial impacts

4

85

Indonesia’s Existing Green Bond and Suk ukuk uk Frame mewor

• rk

k (Cont’d)

Existin sting g Green n Bond d and Sukuk Framewor

• rk

k under which h the Republic ublic of Indone

• nesia

sia can Finance nce and Refin inan ance ce Select cted ed Eligible ible Project cts

Source: Green Sukuk Issuance Allocation and Impact Report (February 2020)

86

Indonesia’s Green Initiatives: Financing Green Projects

Development of Indonesia’s Green Projects Financing

Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC. Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project *These statistics are based on the HSBC’s in house assessment of investor ESG/ SRI appetite and sophistication, which is developed from Market Intelligence and our own understanding from client conversations. A green classification is assigned to investors taking into account whether they have Green/SRI fund and/or strategy, whether they are signatories of a variety of SRI initiatives and with awareness to their broader activities / public announcements in the SRI market. Classifications evolve over time

The Republic of Indonesia has issued two sovereign global Green Sukuk, consecutively in February 2018 and 2019, with the total amount of USD 2 Billion

2019 Issuance

USD 750 million

(or IDR 11.25 trillion) 2018 Issuance

USD 1.25 billion

(or IDR 16.75 trillion)

51% refinancing existing projects

and 49% financing new projects

Each issuance comprised of: Allocation by Sector Managed by 3 Ministries:

29% allocated to Green investors* 29% allocated to Green investors*

Indonesia has continued to develop the Green market through the introduction of the first Retail Green Sukuk in the world (Savings Retail Sukuk, ST006) in November 2019. The ST006 is an investment instrument based on Sharia principles issued and sold to individual Indonesian citizens in the domestic market with an online platform. Allocation and impact of the Retail Green Sukuk is not included in the Green Sukuk Issuance Allocation and Impact Report issued in February 2020

87

Indonesia’s Green Initiatives: Projected Environmental Benefits

Environmental Benefits Arising from Indonesia’s Green Sukuk Issuan suance ce 3,21 3,218,0 ,014.41 to tonnes

CO2e emissions reduced, towards a low carbon future

691. 691.4 km km

• f railway constructed,

linking the nation

7,42 7,429 kW kWh

• f additional power

generation capacity

2,05 2,056,2 ,200

• f households benefitting from

improved waste management

Source: Green Sukuk Issuance Allocation and Impact Report (February 2020)

88

Tangible Results from Indonesia’s Green Sukuk Init itiat iativ ives es

Green Projects Refinanced and Financed with Proceeds from Indonesia’s Green Sukuk uk Issuance suance

*Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the amount spent on each project

Loc

• cati

tion

• ns

Across the country Across the country Across the country Amou mount nt Co Committ mmitted ed to

• Fi

Fina nanc nce 2019 2019 Projects ts USD4.31 mil USD96.57 mil USD10.83 mil Amou mount nt Co Committ mmitted ed to

• Refin

efinance 2017 2017 Projects ts USD39.62 mil

• USD63.13 mil

Targ rget t Impa mpact / Emis missio ions Reductio tion (2017 2017) 134,872.41 tonnes of CO2e

• In order to achieve 48,000,000 tonnes target set in RAN-GRK

Project Example les Fi Fina nanced ed / Ref efin inanced

• Pla

Plannin ing, Dev evelo elopmen ent and Super ervisi sion

• f
• f

New ew, Ren enew ewable le Ener ergy and Ener ergy Conser ervatio tion Inf nfra rastru tructu ture re (Refinancing and Financing) Construction of new and renewable energy infrastructure, with a focus on areas outside current electricity coverage. The project aims to improve the electrification ratio in off- grid areas across the country. Power generation is sourced from solar, mini hydro, and micro hydro power plants*. Locations spread across 19 provinces in 2017 (Refinancing) and the 2019 development of such infrastructure are spread across all provinces (Financing)

• Co

Cons nstru tructio tion of

• f Fl

Flood

• od Co

Cont ntro rol Fa Facil ilitie ties (Financing) Construction of retention ponds/polders, flood canals, dikes, checkdam, and river maintenance and normalization. It aims to reduce the risk of flooding due to increased rainfall intensity and land use changes. Locations: West Java, Central Java, Yogyakarta, North Sumatera, West Sumatera, South Sulawesi, Maluku, Bali

• Impro

rovem emen ent of

• f Munic

icip ipal Soli lid Wast ste Managem emen ent Syste stem (Refinancing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal sites. Locations: All provinces except East Kalimantan

• Impro

rovem emen ent of

• f Munic

icip ipal Soli lid Wast ste Managem emen ent Syste stem (Financing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal site. Locations spread across 11 provinces

Ren Renewable le Energy Resilie Resilience ce to Cl Clim imate Ch Change Wast aste an and Waste to Energy Ma Management

89

Tangible Results from Indonesia’s Green Sukuk Initiatives (Cont’d)

Green Projects Refinanced and Financed with Proceeds from Indonesia’s Green Sukuk uk Issuance suance

Proceeds from Indonesia’s Green Sukuk Initiative has been Successfully Deployed to a Range of Eligible Green Projects

Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project

Loc

• cati

tion

• ns

Jakarta, Sumatera, Java Across the country Amou mount nt Co Committ mmitted ed to

• Fi

Fina nanc nce 2019 2019 Projects ts USD288.77 mil

• Amou

mount nt Co Committ mmitted ed to

• Refin

efinance 2017 2017 Projects ts USD77.95 mil USD202.72 mil Targ rget t Impa mpact / Emis missio ions Reductio tion (2017 2017) 1,543,000 tonnes of CO2e 355,394 tonnes of CO2e Project Example les Fi Fina nanced ed / Refin efinanced d in n 2019 2019

• Dev

evelo elopmen ent of

• f Ja

Jabodeta etabek ek Urb rban Tra rain in (Refinancing) Construction of double-double track of the Jabodetabek urban railway network. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi)

• Co

Constr structio tion and Managem emen ent

• f
• f

Rail ilways Infra frastru structu ture re and Supportin rting Facil iliti ities in in Sumater tera (Refinancing and Financing) Construction of the Trans Sumatera Railway from Aceh to Lampung province. The Trans Sumatera Railway causes a mode shift from road transport to rail transport and logistics Locations: Aceh, North Sumatera, West Sumatera and South Sumatera

• Construction and Management of

Double Track Railways Infrastructure and Supporting Facilities (Refinancing and Financing) The construction of the double track railway project in the Trans Java railway’s northern section, upgrading the single-track railway. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi)

• Ins

nsta tall llatio tion of

• f Navig

igatio tion Fa Facil ilitie ties (Refinancing) Construction, rehabilitation and replacement of marine navigation aids and the installation of solar cells to power marine navigation aids. The shift towards solar powered marine navigation aids reduces the use of fossil-fuel sources of power. Locations: spread across 21 provinces in 2017

• Impro

mprovem ement of

• f Land Transpo

porta rtati tion

• n Traffi

ffic Mana nagem ement Syste stem (Refinancing) Installation of road traffic equipment such as traffic signs, area traffic control systems (ATCS) and navigation aids for river and take crossings (SBNP) with energy-saving sensors. Locations: Jakarta, West Java, Central Java, Yogyakarta, East Java

• Co

Cons nstru tructio tion, Rehabil ilita tatio tion and nd Main inte tena nance of

• f Airp

rport

• rt Inf

nfra ra-stru tructu ture res (Refinancing) The installation of solar-powered street lights and solar power plants. It improves the energy efficiency of airports and ensure electricity is sourced from renewable sources Locations: spread across 30 provinces in 2017

Su Sustain inable le Tr Transport rt Energy Effic icie iency cy

Monet netar ary y an and d Fi Fina nanc ncia ial Fac actor:

• r:

Cred edib ible e Monet etary y Polic icy y Track k Rec ecor

• rd

d and d Favoura rable ble Fi Financia ial Sec ector

• r

Se Sect ction ion 6

91

Bank Indonesia’s Policy Mix

To Maint ntain in Macroeco

• econo

nomi mic c and Financi ncial System em Stabil bilit ity

Source: Bank Indonesia

 Implementing Macro prudential Intermediation Ratio (RIM)  Implementing Macro prudential Liquidity Buffer (MLB)  Electronification: Social program, e- payment for Government  Financial technology  National Payment Gateway (NPG)  QRIS (QR Indonesia Standard)  Expanding National Clearing System (SKNBI) services  Developing market instruments for financing infrastructure  Developing financial market infrastructures  Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS)  Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat Berharga Komersial)  Controlling inflation: TPIP, TPID  Structural reforms: Government  Financial deepening & stability: KSSK (Financial System Stability Committee), OJK (Financial Services Authority)  Coordinating efforts in reducing Current Account Deficit  Accommodative monetary policy consistent with controlled inflation in the target corridor, while serving as a pre-emptive measure to maintain domestic economic growth momentum  Stabilize exchange rate consistent with fundamentals  Optimize monetary operations in

• rder to ensure market

mechanisms and adequate liquidity in the money and foreign exchange markets

Monetar etary Po Polic icy Coordina dinati tion

• n

with ot

• ther

Authorit horities ies Financ ncia ial l Market et Deepening pening Macro- pruden enti tial al Po Polic icy Paymen ent System em Po Polic icy

1 2 3 4 5

92

Bank k Indones esia ia Polic licy y Mix: : August ust 2020

The BI Board rd of Govern rnors

• rs agreed on 18th and 19th August

st 2020 to hold the BI 7-Day y Reverse rse Repo Rate at 4.00%, , while le also mainta tainin ining the Deposit

• sit Facil

ility ity (DF) and Lendin ding g Facil ility ity (LF) rates s at 3.25% % and 4,75%.

Maintaining rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms Holds BI7DRR at 4,00% Strengthening synergy with the banking industry, FinTech, Government and relevant authorities to accelerate digitalization, amongst others, by supporting SME digitalization and the Made in Indonesia National Movement (GERNAS BBI), while expanding community based QRIS acceptance and promoting the use of QRIS for e-commerce

Source: Bank Indonesia

Strengthening monetary

• perations

strategy in order to accelerate monetary policy transmission Focusing on the quantity channel by providing liquidity to stimulate economic recovery from the COVID-19 pandemic, including BI supporting for the Government in accelerating state budget realization in 2020 Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles

93

Stren rengt gthen ened d Monetar etary Exp xpansion ansion and Fiscal al Synergy ergy

• Bank Indonesia continues to strengthen synergic monetary

expansion and the acceleration

• f

fiscal stimuli by the government to drive the national economic recovery by continues its commitment to funding the 2020 state budget through SBN purchases in the primary market in accordance with Act No. 2 of 2020 through market mechanisms and private placements as part of the efforts to accelerate the national economic recovery program, while maintaining macroeconomic stability

• As of 18th August 2020, Bank Indonesia had purchased Rp42.96

trillion of SBN in the primary market through market mechanisms pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 16th April 2020, through auction schemes, green-shoe

• ptions

(GSO) and private placements

• SBN purchases by Bank Indonesia in the primary market through

private placements based on the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020 currently total Rp82.1 trillion

• Through Bank Indonesia's commitment to purchase SBN in the

primary market, the Government can focus on accelerating state budget realization in order to stimulate national economic recovery

PRINC NCIPL PLES ES OF FUNDING DING AND BURDEN EN SHARING RING

94

Bank k Indones esia ia Polic licy y Mix: : July y 2020

The e BI Boar

• ard of Gove

vernor rnors agree reed on 15th h and 16th July 2020 20 to lowe wer r the BI 7-day day Rever everse e Repo

• Rate

e by 25 bps to 4.00%, , Depos

• sit

it Facil ility ity (DF) rate te by 25 bps to 3.25% % and Lending ding Facili ility ty (LF) rate te by 25 bps to 4.75%. .

Expediting payment system digitalisation in order to hasten implementation of the digital economy and finance as part of the economic recovery efforts through collaboration between the banking and FinTech industries to expand MSME and public access to economic and financial services Lower BI7DRR by 25 bps to 4,00% Strengthening a synergized expansive monetary policy response with accelerated fiscal stimuli from the Government:

• Firmly committed to funding the State

Revenue and Expenditure Budget (APBN) 2020 through Government Securities (SBN) purchases in the primary market to finance the budgets for healthcare, social protections, sectoral government ministries and agencies & local government

• Burden sharing with the Government to

accelerate MSME and corporate sector recoveries

Source: Bank Indonesia

Strengthening policy coordination with the Government and Financial System Stability Committee (KSSK) to maintain macroeconomic and financial system stability. Maintaining Rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms to control low inflation within the 3.0%±1% target corridor in 2020 and 2021.

95

Bank k Indones esia ia Polic licy y Mix: : June 2020

The e BI Boar

• ard of Gove

vernor rnors agree reed on 17th h and 18th June e 2020 20 to lowe wer r the BI 7-day day Rever everse e Repo

• Rate

te by 25 bps to 4,25%, , Depos

• sit

it Facil ility ity (DF) rate tes low

• wer

ered ed 25 bps to 3,50% % and Lending ding Facili ility (LF) rates tes low

• wer

ered d 25 bps to 5,00%

Continues to improve the effectiveness of payment system policy in the New Normal era, particularly in terms

• f digital economic

activity through broader QRIS implementation in various sectors. Lower the BI 7-day Reverse Repo Rate by 25 bps to 4,25%. Strengthen its policy mix and synergise to implement the follow-up policies required through coordination with the Government and Financial System Stability Committee in order to maintain macroeconomic and financial system stability, while supporting the national economic recovery.

Source: Bank Indonesia

Continues to

• ptimise monetary
• perations in order

to safeguard market mechanisms and preserve adequate liquidity in the money market and foreign exchange market. Maintains an accommodative macroprudential policy stance in line with the current policy mix and national policy mix, including various efforts to mitigate risk in the financial sector caused by COVID-19. Consistently maintain price stability and strengthen policy coordination with the central and local governments to control low inflation within the 3.0%±1% target corridor in 2020 and 2021.

96

Bank k Indones esia ia Polic licy y Mix: : May 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

Mechan anism ism for Bank k Indonesia

• nesia to purcha

hase se SBN in the primar ary y market et to finan ance e the the State Revenue and Expenditu enditure e Budget et (APBN) – Ab Above e the Line

 In accordance with the joint decree issued by the Minister of Finance and Bank Indonesia Governor, SUN/SBSN purchases by Bank Indonesia in the primary market are based on general practices through transparent market mechanisms to maintain good governance. The mechanism for Bank Indonesia to purchase SUN/SBSN in the primary market is divided into three stages as follows: (i) Phase I: As a non-competitive bidder, Bank Indonesia can purchase SUN/SBSN in the primary market based on the following provisions:

• Yield commensurate with the weighted average yield of the auction on the same day
• Maximum SUN bid of up to 25% of the target auction maximum and maximum bid on SBSN > 1 year of up to 30% of the target

auction maximum. (ii) Phase II: A greenshoe option based on the following provisions:

• Yield commensurate with the weighted average yield of the auction on the previous day.
• If the incoming bid is lower than the auction target, the maximum offer is the same as the previous offer.

(iii) Phase III: Private placements based on the following provisions:

• Refer to the latest market price published by the Indonesia Bond Pricing Agency (IBPA).
• Private placements are implemented if the Government seeks additional financing based on the agreed terms and conditions.

 Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden.  SBN purchases by Bank Indonesia in the primary market as a follow-up action to Act No. 2 of 2020 currently stand at IDR23.98 trillion, with IDR166.21 trillion purchased in the secondary market for stabilisation purposes. Consequently, BI holdings of SBN were recorded at IDR443.48 trillion on 26th May 2020.

97

 Bank Indonesia is providing liquidity to the banking industry through a repo mechanism for SBN in order to fund loan restructuring as part of the national economic recovery. If SBN purchases are insufficient, banks can apply to the government for fund placements, funded through SBN purchases by Bank Indonesia (below the line).  In accordance with Government Regulation No. 23 of 2020, government fund placements will only occur at participating banks if SBN available for repo to Bank Indonesia are insufficient, provided the participating bank is healthy based on a soundness assessment conducted by OJK and is holding tradeable government securities (SBN), Bank Indonesia certificates of deposit (CD), Bank Indonesia Certificates (SBI), Bank Indonesia Sukuk (SukBI) and Islamic Bank Indonesia certificates (SBIS) that have not been repo totaling more than 6% of third party funds.  Liquidity from Bank Indonesia to the banking industry for loan restructuring is provided through the following mechanisms: (i) Phase I: SBN Repo Total SBN held by the banking industry as of 14th May 2020 was recorded at IDR886.0 trillion. After meeting the Macroprudential Liquidity Buffer (MPLB) requirements for the banking industry, approximately IDR563.6 trillion must be repo to Bank Indonesia prior to applying for government fund placements. The current position of repo SBN to Bank Indonesia stands at IDR43.9 trillion. (ii) Phase II: Government fund placements in accordance with Government Regulation No. 23 of 2020 (iii) Phase III: Repo SBN - Macroprudential Liquidity Buffer (MPLB)

• Pursuant to Bank Indonesia regulations (Macroprudential Liquidity Buffer - MPLB), banks are required to maintain minimum SBN totaling 6% of

deposits (IDR330 trillion) for liquidity management in addition to the 3.5% reserve requirements

• All SBN, totaling IDR300 trillion, can be repo through monetary operations in accordance with the Bank Indonesia Act before applying for short-

term liquidity loan/financing facilities (PLJP/S).Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. (iv) Phase IV: Short-term liquidity loan/financing facilities (PLJP/S)in accordance with Act No. 2 of 2020 Banks can apply for the short-term liquidity loan/financing facilities (PLJP/S)if the SBN already repoed are nearly depleted. Pursuant to Act No. 2 of 2020, short-term liquidity loan/financing facilities (PLJP/S) are only available to solvent and healthy banks based on OJK requirements and assessments, with adequate repayment capacity and guaranteed by current loans registered at Bank Indonesia.

Bank k Indones esia ia Polic licy y Mix: : May 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

Nation ional al Economi mic Recover ery y and state e budget et finan ancin ing g mechan anism ism – Below

• w the Line

98

Bank k Indones esia ia Polic licy y Mix: : April il 2020

1) To stabilize and strengthen rupiah exchange rates, Bank Indonesia has strengthened the intensity of triple intervention policy through the spot and Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the secondary market. 2) To support national economic recovery efforts from the deleterious COVID-19 impact, Bank Indonesia will increase monetary easing through quantitative easing as follows:

• a. Expand monetary operations by providing banks and the corporates a term-repo mechanism with SUN/SBSN underlying transactions of tenors up to
• ne year.
• b. Lower the rupiah reserve requirement ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units,

effective from 1st May 2020.

• c. Relax the additional demand deposit obligations to meet the Macroprudential Intermediation Ratio (MIR) for conventional commercial banks as well

as Islamic banks/Islamic business units for a period of one year, effective from 1st May 2020. 3) To strengthen liquidity management in the banking industry and in relation to the lower rupiah requirements, Bank Indonesia has raised the Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. The banking industry is required to meet the additional MLB through purchases of government issued SUN/SBSN in the primary market. 4) To increase the uptake of non-cash payment instruments in order to mitigate the COVID-19 impact, Bank Indonesia is increasing various payment system policy instruments as follows:

• a. Supporting government programs to accelerate non-cash social aid program (bansos) disbursements to members of the public in conjunction with

payment system service providers by expediting the electronification of relevant social programs, including the Family Hope Program (PKH), Noncash Food Assistance Program (BPNT), Pre-Employment Card and Smart Indonesian Card (KIP).

• b. Increasing public socialization activities in collaboration with payment system service providers to increase the uptake of non-cash payment

instruments through digital banking, electronic money and broader QRIS acceptance.

• c. Relaxing credit card policy by lowering the upper limit for credit card interest, minimum payment requirements and the penalties for late payments,

while supporting credit card issuer policy to extend the due date for customers.

The e BI Boar

• ard of Gove

vernor rnors agree reed on 13th h and 14th Apri ril l 2020 20 to hold ld the BI 7-Day ay Rev ever erse se Repo

• Rate

te at 4.50%, , while le also so main inta tainin ing the Deposit

• sit Facili

ility (DF) and Lending ding Facili ility ty (LF) rates tes at 3.75% % and 5.25%. . Rupiah iah Reserv serve Requ quir irem emen ent Lowe wered d by 200 bps

99

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

As a f follo low-up measure e to strength engthen en monet etar ary y and finan ancial ial market et stabil ility ity in conjunct junction ion with h the Coordin dinat atin ing g Ministr istry y of Econom

• mic

ic Affair irs, s, Ministr istry y of Finan ance, e, Indon

• nesian

sian Finan ancia ial l Service ices s Authori

• rity

ty (OJK) and Deposit sit Insuran ance e Corporat

• ration

ion (LPS), , the Govern ernor

• r of Bank

k Indonesia,

• nesia, Perry

y Warjiy iyo, , on April il 1st 2020 deliv iver ered d The policy icy mix imp mpleme emented d by Bank k Indonesia

• nesia to mitiga

gate e the COVID ID-19 imp mpact is as follo lows ws:

1) Lower the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively; 2) Intensify triple intervention policy in the spot and DNDF markets and purchasing SBN in the secondary market; 3) Reduce the foreign currency reserve requirements for conventional commercial banks from 8% to 4%; 4) Extend the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as well as increase the frequency of FX Swap auctions to daily in order to ensure adequate liquidity; 5) Expand the types of underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia; 6) Lower the rupiah reserve requirements by 50bps for banks that are engaged in export-import financing, as well as the financing of MSMEs and other priority sectors; 7) Loosen the Macroprudential Intermediation Ratio (MIR); 8) Provide hygienic currency fit for circulation, reduce the costs of the National Clearing System (SKNBI), maintain a QRIS Merchant Deposit Rate (MDR) of 0% for micro-merchants, and support non-cash disbursements of various government programs, including the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia Card. Bank Indonesia reiterated that rupiah exchange rates are currently adequate and the outlook scenario formulated for the main macroeconomic indicators is a form of forward-looking anticipatory measure towards prevention through joint efforts, while Bank Indonesia continues to maintain rupiah stability.

100

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

As a f follo low-up measure e to strength engthen en monet etar ary y and finan ancial ial market et stabil ility ity in conjunct junction ion with h the Coordin dinat atin ing g Ministr istry y of Econom

• mic

ic Affair irs, s, Ministr istry y of Finan ance, e, Indon

• nesian

sian Finan ancia ial l Service ices s Authori

• rity

ty (OJK) and Deposit sit Insuran ance e Corporat

• ration

ion (LPS), , the Govern ernor

• r of Bank

k Indonesia,

• nesia, Perry

y Warjiy iyo, , on April il 1st 2020 deliv iver ered d The policy icy mix imp mpleme emented d by Bank k Indonesia

• nesia to mitiga

gate e the COVID ID-19 imp mpact is as follo lows ws:

• Bank Indonesia also backs promulgation of the Government Regulation in Lieu of Law in order to relax prevailing laws to mitigate the COVID-19

impact as an anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary measures, unconventional policies and policies that exceed previous jurisdiction.

• To that end, Bank Indonesia has reiterated its authority in accordance with Government Regulation in Lieu of Law (Perppu) No. 1 of 2020 as

follows: 1) Expansion of BI authority to purchase long-term government securities (SBN) and government Islamic securities (SBSN) in the primary market in

• rder to assist the Government finance the handling of the COVID-19 impact on financial system stability.

2) SBN will be purchased in the primary market by Bank Indonesia as a last resort if the market is unable to fully absorb the SBN issued by the

• Government. Further provisions will be regulated in conjunction with the Minister of Finance and the Governor of Bank Indonesia based on the

following considerations: financial market conditions and the impact on inflation. 3) As an anticipatory measure, Bank Indonesia will purchase repo securities held by the Deposit Insurance Corporation (LPS) in order to finance the handling of solvency issues at systemic and non-systemic banks; 4) Provision of short-term liquidity loan or short-term liquidity financing facilities in compliance with sharia principles to systemic and non-systemic banks; 5) Foreign exchange flow management for residents. The use of foreign exchange by residents, including provisions for the surrender, repatriation and conversion of foreign exchange to maintain macroeconomic and financial system stability as follows: 6) Bank Indonesia would like to stress that this measure is not a form of foreign exchange control but policy to manage foreign exchange applicable

• nly to residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign direct investment (FDI) are still required for

the Indonesian economy, thus existing policy permitting the free flow of foreign exchange by foreign investors remains effective. 7) Regulating foreign exchange amongst residents is consistent with international prudential principles for macroeconomic management, particularly under economic distress, such as the current COVID-19 pandemic.

101

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

• nesia has agree

eed d a repurchase ase agree eement ment line e (repo

• line)

e) with h the US Federal al reser erve wo worth th USD60 billion ion

• The agreement may be used by Bank Indonesia to fulfil US dollar liquidity if required. The repo line facility for Foreign and International

Monetary Authorities (FIMA) has only been extended to a few central banks, thus indicating confidence in Indonesia's economic outlook and the macroeconomic policies implemented. In addition, Bank Indonesia has also established repo line facilities with several other institutions, namely the Bank for International Settlements (BIS), worth USD2.5 billion, the Monetary Authority of Singapore (MAS), USD3 billion, as well as other central banks in the region valued at USD500 million-USD1 billion.

• The agreements will strengthen Bank Indonesia’s second line of defence, encompassing Bilateral Currency Swap Arrangements (BCSA) with

several other central banks, namely the People’s Bank of China (PBoC), worth CNY200 billion (equivalent to USD30 billion), the Bank of Japan (BOJ), USD22.76 billion, Bank of Korea, KRW10.7 trillion (equivalent to IDR115 trillion), and the Monetary Authority of Singapore (MAS), USD10 billion.

102

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

• nesia Issued

ed Imp mpleme ementin ting g Provisi isions

• ns for Auction
• n of Govern

ernmen ent Debt Securitie ities s (SUN) and/or /or Govern ernment ment Islam amic ic Securities ities (SBSN) in the Primar mary y Market et

• Bank Indonesia issued Board Member of Governors Regulation No. 22/5/PADG/2020 on Auction of Government Debt Securities and/or

Government Islamic Securities in the Primary Market to Maintain State Financial Management Sustainability as Implementation of Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management

• f Corona Virus Disease 2019 (Covid-19) and/or Encounter the Threat to National Economy and/or Stability of Financial Systems. The

regulation starts to take effect on 20 April 2020.

• The regulation serves as a follow-up to Government Regulation in Lieu of Law Number 1 of 2020, granting authority to Bank Indonesia

among others to purchase Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the primary market . It is necessary as a funding source for the government to recover the national economy including maintaining state financial management sustainability including SUN and/or SBSN issued in response to COVID-19 pandemic. Purchase of SUN and/or SBSN in the primary market is based on principle that Bank Indonesia is a last resort if the market capacity is unable to purchase them and/or result in high yield

• increase. Further, this regulation specifies the following:

1) Bank Indonesia holds auction of SUN and/or SBSN and auction of additional SUN and/or SBSN for long-term SUN and/or SBSN in the primary market as a follow-up to the implementation of Government Regulation in Lieu of Law Number 1 of 2020. 2) Provisions for offer quote and participants of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Finance Minister Regulation on auction of SUN and/or SBSN in the domestic primary market. 3) Bank Indonesia may quote an offer to purchase long-term SUN and/or SBSN in auction of SUN and/or SBSN and auction of additional SUN and/or SBSN in the following manners: a. directly without using the main dealer and/or SBSN main dealer; b. non-competitive bid. 4) Implementation of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Bank Indonesia provisions for auction of Government securities in the primary market provided that they are not in contravention of this regulation.

103

Bank k Indones esia ia Polic licy y Mix: : March h 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

To

• stren

engthen then coor

• ordinat

inatio ion and d the va vario ious s polic icy meas easures s alrea eady dy taken en, , Bank Indones

• nesia

ia on March 2nd

nd 2020 introduce

• duced a var

arie iety of five e follo low-up polic icy meas easures s to main intain tain monetar tary and d financ ancial ial market t stabili ility as well ll as mitigat igate e the COVID ID-19 risk sks

1) Intensify triple intervention policy to ensure rupiah exchange rates move in line with the currency's fundamental value and market mechanisms. To that end, Bank Indonesia will optimize its intervention strategy in the DNDF market, spot market and SBN market in order to minimize the risk of increasing rupiah exchange rate volatility. 2) Lower the FX reserve requirements for commercial banks from 8% to 4%, effective 16th March 2020, which will increase FX liquidity in the banking industry by around USD3.2 billion and simultaneously alleviate foreign exchange market pressures. 3) Lower the rupiah reserve requirements by 50bps for banks financing export-import activity in coordination with the

• Government. Effective from 1st April 2020 for a period of nine months before a further review, this policy is

expected to facilitate export-import activity through lower costs/fees. 4) Expand the range of underlying transactions available to foreign investors in order to provide alternative hedging instruments against rupiah holdings. 5) Reaffirm that global investors can utilize global and domestic custodian banks to conduct investment activity in Indonesia.

104

Bank k Indones esia ia Polic licy y Mix: : March h 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

• nesia on the Boar

ard of Governor nors s Meeti eting g 18th

th and

d 19th

th March 2020 has rein

infor

• rced

ed its policy icy mix towar

• wards

ds mitiga gatin ting g the risk sk of COVID ID-19 9 transm smis issi sion

• n,

, while le mainta tain ining ing money y market et and finan ancia ial l syst stem em stabil ility ity and cataly lyzi zing g econom

• mic

ic growth wth momentum tum through gh the follo lowi wing g policy icy measures es:

1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market. 2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March 2020. 3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate liquidity, effective from 19th March 2020. 4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes. 5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than 23rd March 2020. 6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing

• f MSMEs and other priority sectors, effective from 1st April 2020.

7) Strengthening payment system policy to support COVID-19 mitigation efforts by:

• providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions;
• encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank

Indonesia from IDR600 to IDR1 and from customers to the banking industry from a maximum of IDR3,500 to IDR2,900, effective from 1st April 2020 until 31st December 2020; and

• supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program

(BPNT), Pre-Employment Card and College Smart Indonesia Card.

105

Pri rinc ncipl iples s of Avera rage Reserv rve Requir irem ement nt Ratios

• s Impr

provement vement

Substance nce Old New Effectiv ective e Date a. Additional rupiah average reserve requirement for conventional commercial banks Fixed RR: 5% Average RR: 1.5% RR: 6.5% Fixed RR: 4.5% Average RR: 2% RR: 6.5% 16th July 2018 b. Annulment of demand deposit renumeration 2.5% (from 1.5% RR) 0% 16th July 2018 c. Implementation of foreign exchange average reserve requirement for conventional commercial banks Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% Average RR: 2% RR: 8%* 1st October 2018 d. Implementation of average reserve requirement for Islamic banks Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% Average RR: 2% RR: 5%* 1st October 2018

* Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks)

• Improvement in average reserve requirement is a follow up

to the monetary policy

• perational

framework reform implemented by Bank Indonesia since 2016.

• Monetary policy operational framework reform started in

August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening.

• The current improvement aims to elevate flexibility in

banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness

• f

monetary policy transmission in maintaining economic stability.

Consid iderati erations

• ns for the Average

rage Reserve ve Requir uirem emen ent Ratios ios Improve

• vemen

ent t

Source: Bank Indonesia

106

Relaxing laxing Reserve erve Require uirement nt Ratios ios

Regulati ulation

1 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 2 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 3 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export- import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 4 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3%

Source: Bank Indonesia

Lower reserve requirements, effective 1st May 2020

107

Princ inciples iples of Macroprud pruden entia tial Interm ermed ediation iation Rati tio

• (MIR)

R) and Macropruden prudenti tial al Liquid uidity ity Buffer er (MLB) B)

Striving to stimulate the bank intermediation function and liquidity management, Bank Indonesia issued Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018 and Board

• f Governors Regulation (PADG) No.

20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also overcoming the issue of liquidity procyclicality. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018.

Conside ideratio rations ns for r Mac acrop

• pru

rude dential ntial Instru truments ments Mac acropr

• prude

udentia ntial Interme ermedia diatio tion n Rat atio io (MIR IR) and d Macropr prude udential ntial Liquidit uidity y Buffer er (MLB) B)

1 2 3 4

This macroprudential policy instrument is countercyclical and can be adjusted in line with prevailing economic and financial dynamics.

Source: Bank Indonesia

108

Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR)* )*

Regulati lation

• n

MIR (Con

• nventional

tional Comm mmercial ial Bank) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Un Units) s)

1 MIR Accounting Formula Credit + Owned Bond Deposit + Issued Bond Financing + Owned Sharia Bond Deposit + Issued Sharia Bond 2 Rate and Parameters  Ceiling 94%  Floor 84%  Minimum Capital Adequacy Requirement 14%  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1  Ceiling 94%  Floor 84%  Minimum Capital Adequacy Requirement 14%  For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1 3 Scope of credit/financing and deposits to calculate MIR / MIR Sharia  Credit: rupiah and foreign currency  Deposits in rupiah and a foreign currency: (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds  Financing: rupiah and foreign currency  Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds 4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports 5 Criteria for securities held  Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

109

Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR)* )*

Regulati lation

• n

MIR (Con

• nventional

tional Comm mmercial ial Bank) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Un Units) s)

6 Percentage of the securities held 100% 7 Criteria for securities issued  medium-term notes (MTN), floating rate notes (FRN) and/or bonds other than subordinated bonds  sharia-compliant medium-term notes (MTN) and/or sukuk other than subordinated sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution 8 Securities Reporting Offline delivery mechanism (email) 9 Scope of deposits to meet DD MIR /DD MIR Sharia  Average daily total deposits in rupiah at all branch

• ffices in Indonesia

 Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting

• f:

(i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities  Average daily total deposits in rupiah at all branch

• ffices and sharia business units in Indonesia

 Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii)

• ther liabilities

10 Relaxation of DD MIR/Sharia DD MIR  Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation  The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK)  Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

110

Adjustment ustment of Macropr prudent udential ial Interme ermediat diatio ion n Ratio io (MIR)/ )/Sharia Sharia Macropru prude dent ntial ial Intermed ermediation ation Ratio io (Sharia aria MIR)*

• In response to global and domestic economic

developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability.

• BI relaxed MIR/sharia MIR policy in March

2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity.

• Considering the potential of bank funding

sources that are not included in the MIR ratio, for example the expanding share of loans/financing received by banks, BI decides to adjust MIR/sharia MIR policy in order to

• ptimize loans/financing received for bank

lending.

• This policy to stimulate credit growth will

comply with prudential principles. Therefore, BI is only encouraging banks with low non- performing loans and adequate capital resilience to expand credit/financing.

Polic icy Backgrou kgrounds nds

Source: Bank Indonesia

Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR.

• Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic

business units as a source of bank funding in the calculation of MIR/sharia MIR.

• The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation

are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement.

• Based on points a and b, the adjusted MIR/sharia MIR formula is as follows:
• The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted

from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA).

Main Regulatory latory Points ts

Credit it + Owned Bond Deposit it + Issue ued Bond + Loan/ n/Financ Financing ing Receiv ived ed Lower disinc incent ntiv ive param ameter er

MIR/sh R/sharia ia MIR MIR RR RR= Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR Target – Bank’s MIR/Sharia MIR) x Deposit

Upper disinc incent ntiv ive param ameter er

MIR/sh R/sharia ia MIR MIR RR RR= 0.2 x (Bank’s MIR/sharia MIR - Upper Bound of MIR/Sharia MIR Target – ) x Deposit

*This disincentive applies for banks with CAR below 14%. *This adjustment will be effective from December 2nd, 2019

111

Principles inciples of Macroprud pruden ential tial Liquidit uidity Buf uffer er (MLB) LB)

Regulati lation

• n

MLB (Conventional tional Comm mmercial ial Bank) MLB Shar aria ia (Shar aria ia Banks)

1 Rate 4% of rupiah deposits (including Sharia Business Units deposits) 4% of rupiah deposits 2 Components  Securities denominated in rupiah held by a conventional commercial bank that may be used for monetary

• perations (including SBI/SDBI/SBN); and

 Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia- compliant monetary operations (including SBIS/SBSN)  Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia- compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional commercial bank to rupiah deposits Percentage of sharia-compliant rupiah securities held by an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits 5 Sources

• f

Data

• n

Deposits  Monthly Commercial Bank Reports  Rupiah deposits to calculate MLB are the average daily total deposits at all branches in Indonesia  Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities  Monthly Sharia Bank Reports  Rupiah deposits to calculate sharia MLB are the average daily total deposits at all branches in Indonesia  Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities

112

Macropru prude dent ntial ial Liquidi uidity ty Buffer r (MLB) ) Policy y and d Cre redit it card policy cy

Regulati lation

• n

Befor

• re

After er

1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% of rupiah deposits 6% of rupiah deposits 2 Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits

Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020.

Regulati lation

• n

Befor

• re

After er Effec ectiv tive Perio iod

1 Lower upper limit on credit card interest 2.25% per month 2% per month 1st May 2020 2 Temporary reduction of minimum payment requirements 10% 5% 1st May 2020 – 31st December 2020 3 Temporary reduction

• f

late payment penalties 3% or maximum of IDR150,000 1% or maximum of IDR100,000 1st May 2020 – 31st December 2020 4 Supporting credit card issuer policy to extend the due date for customers Issuer discretion 1st May 2020 – 31st December 2020

Credit card policy, effective 1st May 2020.

113

Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios* s*

The e LTV/F V/FTV relaxa axation tion is cond nduct ucted while le taking aking into

• account
• unt aspects

spects of prude udential ntial and consu nsume mer r protect ectio ion* n*

• 1. Increasing opportunities of first time buyers to fulfill their housing needs

through housing loan, specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio for property financing as shown in the table below.

“-“= The LTV rate depends on each bank’s risk management

• 2. Relaxing the amount of loan/financing facility through indent

mechanism to a maximum of 5 facilities without taking account of the orders

• 3. Adjusting the arrangement of stages and amount of property

loan/financing disbursement of indent property:

Source: Bank Indonesia

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

114

Prude denti ntial aspects cts of Relaxing xing the Loan-to to-Value ue (LTV) and Fina nanci ncing ng-to to-Value ue (FTV) Ratios

• s

1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank’s risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debtor and developer/seller’s bank account.

LTV / F FTV Exempt mptions

• ns

Central government or local government loan / financing programs are exempt from this regulation.

Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios* s*

Source: Bank Indonesia

115

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

• 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing.
• a. BI decides to relax the LTV ratio for property loans and FTV ratio for property

financing by 5% from current ratio as follows:

Source: Bank Indonesia

Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. Polic icy Backgrou kgrounds nds Main n Regulatory latory Points ts

*This adjustment will be effective from December 2nd, 2019

• In

response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. This effort will be targeted to several potential sectors.

• Considering the ongoing needs to stimulate the property

and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles.

• Additional incentives are also given to support sustainable

development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation.

• As a prudential mitigation, those relaxations will be given to

borrower with strong repayment capacity and low credit/financing risk.

• BI will regularly evaluate this policy at least once a year.

116

• 2. Additional incentive on the LTV ratio for green property loans and

FTV ratio for green property financing.

• a. The Green Property criteria refers to the standards/certificates

issued by a nationally

• r

internationally recognized environmental institution.

• b. Green property that is granted for the incentive has to meet the

following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows:

• For buildings < 2500m2, the bank may conduct a self-

assessment using the tools/applications provided by a recognized institution.

• For buildings > 2500m2,

the assessment must be conducted by a recognized institution;

• For new buildings constructed in an area by one

developer or group of developers, the assessment must be conducted by a recognized institution and the certificate must be submitted by the developer i. Additional incentive for green property on LTV ratio for property loans and FTV ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows:

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

Source: Bank Indonesia

Main n Regulatory latory Points ts

• 3. Adjustment of Down Payments on Automotive Loans/Financing
• a. Down Payments on Automotive Loans/Financing is adjusted as

follows: i. Relaxation on the down payments of automotive loans or automotive financing 5%-10% from current regulations; ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment

• f

down payments

• f

automotive loans/financing in points a and b is as follows:

*This adjustment will be effective from December 2nd, 2019

117

• 4. Adjustment of Down Payments on Green Automotive Loans/Financing
• a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles.
• b. The down payments on green automotive loans or green automotive financing is adjusted as follows:

i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows:

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

Source: Bank Indonesia

Main n Regulatory latory Points ts

Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2nd, 2019

*This adjustment will be effective from December 2nd, 2019

118

Adjus ustm tmen ent t of Minimum mum Down wn Pa Paymen ments ts on Green en Aut utomo motiv tive e Loans/Financ ans/Financing ing

(Effect ectiv ive e 1st

st October

• ber 2020)

1. Adjustment of Minimum Down Payments on Green Automotive Loans/FinancingThe green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. 1. Applicable to banks with a non-performing loans (NPL) ratio below 5% 2. Effective 1st October 2020 Requirements: 1. Gross NPL ratio on total credit <5%; and 2. Net NPL ratio on automotive loan <5%

Source: Bank Indonesia

Main Regulatory latory Points ts Bank Indonesia adjusts macroprudential policy in automotive sectors by: (Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles.

119

Princ inciples iples of Domest estic ic Non Deliv iver erable ble Forwar ard (DNDF NDF) ) Transa ansaction ction

Purposes ses

1. To support the effort of stabilizing the Rupiah exchange rate through the additional of alternative hedging instruments 2. To support the development and deepening of the domestic financial market 3. To increase the confidence of exporters, importers, and investors in conducting economic and investment activities through the flexibility of hedging transactions against Rupiah currency risk

Genera eral Provisi sions

• ns

 Domes mestic tic Non-De Deliv liverable ble Forwar ard d Tran ansa saction tion (DNDF Trans ansac actio ion)

Plain vanilla derivative transaction of foreign exchange against rupiah in the form of forward transaction with fixing mechanism in the domestic market

 Forward Trans ansac actio ions

Forward Transactions are sell/purchase foreign currencies against rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date

 Fixing Mec echan hanism sm

Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date)

 Other er Definit initio ions

The definition of derivative transaction of foreign exchange against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah

Source: Bank Indonesia

120

Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction

Bank can perform

• rm DNDF Transa

nsacti ctions ns as follows: ws:

Bank – Customer Bank – Foreign Party

Bank – Bank

Tran ansac saction tion bet etween en:

Can only be performed to hedge rupiah exchange rate risk.

• 1. Must have Underly

lyin ing Transac sactions tions:

Includ cluding ing all foll llow

• wing

ing activ ivit ities ies : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excludi luding g foll llowi wing g activ ivit ities ies: a. Bank Indonesia certificates; b. Placement of funds with bank; c. Unwithdrawn credit facilities; d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities.

2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions

Source: Bank Indonesia

121

Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction

Transac nsacti tion

• n Set

ettl tlement ent

• Use Fixing mechanism
• Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR
• Settlement currency : IDR
• Roll over and early termination are not allowed

Roll ll over er and d early ly termi

mina nati tion for DNDF is proh

• hib

ibit ited ed However, unwind can be done by opening the reverse DNDF transactions

Cover He Hedging ng

Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose.

• Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign
• Purpose: Hedging

Custom

• mer

er / / Foreign eign Party ty

Bank Overseas seas Bank

Hedging

Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge.

Cover Hedging

Source: Bank Indonesia

122

Amendmen ndment t on DNDF F Regulation ulation

*to provide de more flexib ibilit ity in DNDF F transact saction

• n

*to increase rease liquidi idity ty and efficiency iciency in domesti estic c forei reign gn excha hange ge market

BI Regula lati tion n No. 20/10/ 0/PBI/20 2018

Source: Bank Indonesia

BI Regulati tion n No. 21/7/PBI BI/20 2019

AMENDMENT

Artic icle le 3

• 1. DNDF transactions must have Underlying

Artic icle le 3

• 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without

underlying documents Artic icle le 6

• 2. Not Regulated;

Artic icle le 6

• 2. DNDF can be terminated (unwind);

Artic icle le 11

• 3. Underlying documents must be final (firm) with additional

supporting documents Artic icle le 11

• 3. Underlying documents for buy FX/IDR for DNDF is :
• Final (firm commitment) + Supporting documents
• 4. Underlying documents for sell FX/IDR for DNDF above

threshold $ 5 mio can be:

• Final (firm commitment) + Supporting documents
• Projection (anticipatory basis) + Supporting documents

Artic icle le 11

• 4. Not Regulated;

Artic icle le 11

• 5. In using estimate underlying transaction documents in the

form of cash flow projection, Bank must evaluate the appropriateness through:

• a. Supplementary documents;
• b. Historical data within at least 1 year before; and
• c. Track record of the Customer or Foreign Party.

*Effective on May 17th, 2019; English version of the regulation is available in BI website.

123

Overn rnig ight ht Index x Swaps ps (OIS) IS) & I Interest erest Rate e Swaps ps (IRS RS)

Source: Bank Indonesia

As hedg dging ing instr trume ments ts agains ainst t Rupiah ah inter erest est rate te chang anges es

IR IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion

• f

the contract based

• n certain notional
• amount. IRS pricing is based on JIBOR.

OIS IS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA)  Encourage price transparency in the rupiah money market  Strengthen monetary policy transmission  Provide alternative hedging instruments against rupiah interest rate changes  Support securities market deepening in Indonesia

1 2 3 4

IndoNIA & JIBOR OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest rate Improvement of IRS transaction liquidity

Strengthening reference rate based on real transactions

124

OIS and IRS Transa ansactions: ctions: General eral Provisi visions

• ns

Source: Bank Indonesia

Mar arket Pl Player

• ers. Banks, bank clients, both individual

and non-bank institutions, and also foreign parties. Trans ransacti tion

• n Nee

Needs ds Analys nalysis

• is. A bank performing an IRS
• r OIS transaction with a customer and/or foreign party
• n behalf of the customer and/or foreign party is

required to have an analysis on the need of rupiah interest rate derivative transactions. Mar arket Con

• nventio

entions

• ns. When performing IRS and OIS

transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Se Sett ttlem ement

• ent. Settlement can be performed as a netting

payment and every transaction has to be settled in Rupiah. Close lose-out

• ut

ne nett tting ing can be applied under predetermined conditions.

Market Conventions

Calculat lation ion Base ACT/360 IndONIA ONIA Index x with 5 5 decimals mals Comp mpou

• und

d Floatin ting Rates s (CFR) based d

• n 5 decima

mals ls Interest rest Payment based d on Net etting ing Not

• tion
• nal

al of Net et inter erest st paymen ent in IDR with 0 d decim imals als Set ettlem emen ent Date e = 1 busin ines ess s days s after Maturity ity Date (MD) OIS Quot

• tation

ion rates s based d on 2 d decim imals als Quot

• tation

tion : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, e, OIS set ettle lement ment will l only ly be done at the end

• f the OIS tenor
• r

(MD+1bd) bd).

125

3,00 4,00 5,00 6,00 7,00 8,00

LF Rate BI Rate BI-7Day RR Rate DF Rate LF Rate (Dummy)

Well ll Maint intaine ined Infla lation tion Ensu sured red Price ice Stabi bility ity Stren engt gthened ed Moneta etary ry Poli licy cy Framew ework

• rk

Credit it Growt

• wth Profil

ile

BI 7Day RR Rate: e: 4.00

(%)

LF Rate: e: 7.00 LF Rate: e: 4.75 75 BI Rate: e: 6.50 DF Rate: e: 3.25

19 Augu gust 2016

The New Moneta tary ry Opera ratio tion Framework

Stable able Mone netar tary Envir ironment

• nment Despi

pite Chall llenges nges

Rupia iah Exch change ge Rate te Fared red Rela lative tively Well ll Compared red to Peers ers

Source: Bank Indonesia

YTD 20 2020 20 vs vs 201 019 % 1,5

• 1,3

5,6 2,3

• 5

5 10 15 20 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 2015 2016 2017 2018 2019 2020 %,yoy Total Growth Working Capital Loans Investment Loans Consumption Loans

• 0,45

2,85 1,04

• 1,51
• 2,14
• 2,36
• 3,07
• 1,51
• 5,07
• 2,83
• 13,66
• 13,33
• 20,64

5,70 4,18 2,88 0,56

• 1,44
• 2,26
• 2,32
• 4,50
• 4,57
• 6,48
• 19,46
• 19,72
• 25,68
• 30,0
• 25,0
• 20,0
• 15,0
• 10,0
• 5,0

0,0 5,0 10,0 EUR PHP JPY CNY SGD MYR KRW THB INR IDR TRY ZAR BRL point-to-point average

data as of August 18th, 2020 8,38 8,36 3,35 3,02 3,61 3,13 2,72 1,54 0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00

• 2

2 4 6 8 10 12 14 16 18 20 2013 2014 2015 2016 2017 2018 2019 July-2020 (%) CPI (%, yoy) rhs Core (%, yoy) - lhs Volatile Food (%, yoy) - lhs2 Administered (%, yoy) - lhs

126

Regio gional nal Inflation ation Remai mains ns Und Under er Contr trol

• l

…supported by low inflation in all regions

Source: Central Bureau of Statistics of Indonesia (BPS), calculated

LOW INFLA LATION ON IN ALL REGION GIONS, , JULY 2020 (%, YOY) Y)

127

4 Strat ategies gies to

• Achie

hieve e the he Inflat ation ion Targe get

Achieving inflation at 3,5%±1%

• Maintaining core inflation
• Maintaining volatile food stability at 4-5%
• Controlling administered price inflation

2018-2019 Target

Stabilizing the price

• 1. Price

e Affordabil dabilit ity Achieving inflation at 3,0%±1%

• Maintaining core inflation
• Maintaining volatile food inflation less than 4%
• Controlling administered price inflation

20 2020 20-20 2021 Targe get

Managing demand side Strengthening production, Government food reserves and food export- import management

• 2. Supply

ly Availabi lability lity

Strengthening institution Encouraging trade cooperation between regions

• 3. Well

l Managed ged Distr trib ibution ion

Improving trade infrastructure Improving data quality

• 4. Effec

ectiv ive e Communic ication ation

Strengthening central-regional coordination

Source: Bank Indonesia

4 Strat ateg egies ies

128

Improving ving the Effecti ctiveness eness of Monetar etary y Policy icy Transmi ansmissi ssion

• n

Bank nk Indon

• nes

esia ia has instit ituted uted a Reformulation

• rmulation of Monetary

netary Policy icy Operations ions Framewo mework k which ich consists of 3 pill llars; ; (1) (1) impleme lement ntation

• n of BI 7day Reverse Repo
• Rate;

e; (2) (2) impleme lement ntation

• n of reser

erve e requir uiremen ement averaging ging; ; and (3) (3) continue inue to impl plemen ement money ey market ket deepening epening progr

• gram.

Enhancement of monetary policy signal Enhancement of banking liquidity management Implem lemen entat tation ion of BI 7 Day Rever verse e Repo Rate Implem lemen entat tation ion of Reserve e Requiremen quirement t (RR) Aver veragin aging Reform rmula ulati tion

• n of

Moneta etary Po Polic icy Operat ational ional Framewor

• rk

Enhancement of instruments and transactions Implem lemen entat tation ion of Money Market et Deepen ening ing Program ram

Source: Bank Indonesia

129

Enhan ancemen cement t of Monetar tary y Operation ations s Frame mewor

• rk
• Can be traded among contributor banks for 10

minutes.

• Up to the amount of IDR10 billion.
• Up to 1-month tenor.
• Can be traded among contributor banks for 20

minutes.

• Up to a total of IDR20 billion.
• Up to 3-month tenor.

CURR RRENT ENT JIBOR OR (as per June 1st, 2016) PREVIOU VIOUS JIBOR OR

Source: Bank Indonesia

130

Finan ancial cial Interm ermed ediation iation Sti till ll Manages ges To Grow

Banking intermediation manages to grow positively, while multi-finance financing contracts

Source: Financial Service Authority (OJK)

Total l of capit ital al rais ised ed as of 28 July ly 2020 reaches hes IDR 54.1 Tn Tn Bank nking ing loans ns in June-20 grow by 1.49% cons nsid idering ng pressur ure on credit it distrib ibut ution n due to the covid id-19 pandemic emic Growth h of financ ancing ing distrib ibut uted ed by mult lti-fin financ ance e contrac acts by 7.27% % in June 2020 in in line ne with h slowing wing econom

• mic

ic activ ivit ity Contrac action ion of life fe insur uranc nce e premium ium is easin ing, g, while ile general al insur uranc ance enters negat ativ ive growt wth h as of June e 2020

5.549 49 1,49% 0% 2% 4% 6% 8% 10% 12% 14% 16% 1.000 2.000 3.000 4.000 5.000 6.000 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 IDR Tn YoY Bank Loans YoY Growth (rhs) 3,3 9,5 41,3 20 40 60 80 100 120 140 160 180 2016 2017 2018 2019 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 IDR Tn IPO Rights Issue Corporate Bond & Sukuk 413 413

• 7,27%
• 10%
• 8%
• 6%
• 4%
• 2%

0% 2% 4% 6% 8% 10% 100 200 300 400 500 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 YoY IDR tn Financing Growth (rhs)

• 10,1
• 2,32
• 30
• 10

10 30 50 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Life Insurance Premium Growth General & Reinsurance Premium Growth

131

Resili silien ent t Finan ancial cial Insti titu tuti tions

• ns

Domestic financial institutions are relatively stable amidst the pandemic, supported by strong capitalization, sufficient profitability and leverage…

Source: Financial Service Authority (OJK)

CAR of the bank nking ng sector remains ains high gh and stab able le at 22.59% % with h Tier-1 capit ital l at 20.89% % as of June ne 2020 *) Profit itab abili ility of the bank nking ng sector remains ains high gh and stab able le *) RBC of the insur urance nce indus ustry remains ains high gh and well l above the minim nimum um thresh eshol

• ld (120%)

%) *) Gearing ing ratio io of mult lti-finan finance companies anies is stead adil ily maint intained ined at a low level *)

*) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19 22,59 20,89 10 12 14 16 18 20 22 24 26 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 CAR Tier 1 4,46 1,94 2 4 6 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Net Interest Margin Return on Assets 688 688 319 319 50 100 150 200 250 300 350 400 100 200 300 400 500 600 700 800 900 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Life Insurance (Lhs) General Insurance (rhs) 2,48 1 2 3 4 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

132

Managea geable ble Cred edit it Risks sks with h Adequat ate e Liquid uidity ity

Financial Institutions are equipped with ample liquidity, while credit risks are maintained at a low level and remains below the threshold.

The ratio io of liquid uid assets to deposit it and non-core deposit its in the bank nking ing sector is maint intain ained well l above the thresh eshol

• ld *)

Bank nking ing sector NPL ratios ios are still ll manag nageab eable le below the thresh eshol

• ld, at 3.11%

gross and 1.13% net as of June ne 2020*) Multi-finance companies’ NPF increases in June, partly as there are lower amount of new loans ns and ongoing ing restruc uctur urin ing g program am Inves estment nt adequa uacy ratio io in the insuran urance indus ustry is steadily ly maint intained ined above 100% (thres eshold ld) *)

Source: Financial Service Authority (OJK) % *) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19 130,02 27,59 5 10 15 20 25 30 40 50 60 70 80 90 100 110 120 130 140 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 % % Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs)

threshold LA to Deposit (rhs) = 10% threshold LA/ NCD= 50%

1,13 3,11 1 2 3 4 5 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 % NPL Net NPL Gross 108,08 188,19 50 100 150 200 250 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Life Insurance General Insurance 5,10 1 2 3 4 5 6 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20

133

Managea geable ble Mark rket t Risks sks

Amidst global pressures, the risk profile of financial institutions is maintained at manageable levels…

Net et open en pos

• sit

ition ion in in the banking ing sect ector

• r is

is maint aintained ined far far bel elow

• w the

he maxim aximum um lim limit it

• f
• f 20

20% *) *) Insur uranc ance & pensio ion fund nd inves estment nt value ue is is stead adil ily increas easin ing g *) The exposures ures of mult lti-fi financ nance companies anies to foreign ign debt have e large gely ly been mitig igat ated ed by compan any hedging ng meas asur ures es Mu Mutual ual funds’ net net asset et valu alue (NAV) is is rec ecov

• ver

ering ing wit with lo low vol

• lat

atilit ility, aft after er a sha harp fall ll in in April 2020 2020

Source: Financial Service Authority (OJK) IDR Tn *) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19 1,92 1 2 3 4 5 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 % 1124,70 278,7 200 250 300 350 400 300 600 900 1.200 1.500 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 IDR Tn IDR Tn Insurance Pension Funds (rhs) 1.000 2.000 3.000 4.000 5.000 6.000 7.000 260 310 360 410 460 510 560 610 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 IDR Tn NAV Mutual Funds JCI (rhs) As of 4 August, 2020 164,64 103,56 25 50 75 100 125 150 175 200 225 250 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Domestic Debt Foreign Debt

134

Domest estic ic Capital ital Mark rket t Perfor

• rma

manc nce e Amid d Global al Challenges llenges

Source: Bloomberg and Ministry of Finance

Positive sitive senti timen ent t is returning g to dom

• mes

estic tic capita pital l market, rket, whic ich reflec lected ted on the e capi pita tal l marke rket t perform

• rmance

e

Non-resident portfolios’ sell-off ff are decreas easing ng in line ne with h lower level l of volatilit lity in the global al financ nancial ial market Domestic ic financ nancial al market contin inues ues to grow positiv ively ly from its month- to to-mont

• nth

h performanc ance

Government’s bond decline in yields as accommodative monetary policy support pport its perf rform

• rmance

ce Despite sentiment on rising number of Covid-19’s new cases still remains in the market, easing restrictions in many countries signals market positivism on economic recovery.

• 8,01

2,30 2,06

• 2,74
• 0,88
• 0,56

1,34

• 7,82
• 5,83
• 4,69

2,77 5,66

• 2,54

3,15 TURK BRAZ US EU JPN MAL CHIN PHIL SIN HKN INDO S KOREA THAI WORLD Stock

• ck Index

ex Perf rfor

• rmance as of 5 August ’20 (compared to 6 July 2020)
• 2,7
• 1,5
• 140
• 120
• 100
• 80
• 60
• 40
• 20

20 40 60 80 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Gov't Debt Securities Equity 292,15 5127,051 3000 3500 4000 4500 5000 5500 6000 6500 7000 200 210 220 230 240 250 260 270 280 290 300 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Comp Bond Index Comp Stock Index (rhs) 9.000 10.000 11.000 12.000 13.000 14.000 15.000 16.000 17.000 5 6 7 8 9 10 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Yield (%) 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs)

135

Stim imuli uli to Support Indonesia’s Financial Industry

OJK and d ot

• ther

er gover ernmen ment instit itutio ions s have e wo worked ed intensiv ively ly to minimize imize the impa mpact of COVID VID-19 on the econom

• nomy

Source: Financial Service Authority (OJK) *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities.

Mainta aintainin ining busin siness ss funda damenta tal l of the e rea eal sec ector

OJK Regula latio ion No

• No. 11

11/PO /POJK.03 03/2020: “National Economic

• mic Stimulu

imulus as as A Coun Counter ercyclic lical Policy of

• f The Impacts of
• f COVID-19

19 Outbreak” Bank ank

• Relaxation of credit assessment and credit restructuring to debtors

who are affected by COVID-19.

• Credit assessment (up to IDR10 billion) is based only on the

punctuality of debtors to pay their debts and interests.

• This applies to Commercial and Sharia Banks
• With maximum 1 year period of credit restructuring

*) *) OJK Regul ulation No

• No. 14

14/PO /POJK.05 05/2020: “Cou

• unter

ercy cycl clic ical Polic licy as as an an Impact of

• f CO

COVI VID-19 19 for Non-Bank Financial Institut utio ion (NBFI)”

• Extended deadline of report submission
• Relaxation of financing assessment
• Financing Restructuring
• Regulating loan restructuring, deadline of periodic reports,
• Conducting fit and proper tests,
• Determination of asset quality of financing,
• Calculation of solvency level of insurance companies,
• Calculation of pension fund quality, and
• Implementation of asset management provisions.

NBFI FI

2 1

• Stabilizing financial sector particularly in banking sector amid

COVID-19 outbreak by allowing merger, consolidation, acquisition, and/or integration to banks permitted by OJK. *) OJK Regula ulatio ion No.18/P /POJK.03/2 /2020: “Written Orders rs to Handle Bank Problems ems” OJK Circula ular r Letter No. 3/SEOJK. K.04 04/20 2020 20: “Other Conditions as Significantly Fluctuating Market Condition

• n Stock Buyback issued by Issuers or Public Companies”
• Prohibition of short-selling
• Asymmetric Auto Rejection (current auto rejection limits under 7%)
• 30-minute Trading Halt for 5% decrease in IHSG
• Negation of trade in the pre-opening session
• Stock buyback without prior general shareholders meeting

Aimed to enhance the participation of shareholders in General Shareholders Meeting (RUPS) by allowing electronic authorization to third parties. *) OJK Regula ulatio ion No.15/P /POJK.04/2 /2020: “Plan and and Organiz izatio ion of

• f the General Meeting of
• f Shareholde

lders rs of

• f

Public Companies” Regulating the implementation of electronic corporate decision making by requiring a member of the board of director/commissioner in charge of GSM, while other electronic attendances are counted as fulfillment of attendance quorum. *) OJK Regula ulatio ion No.16/P /POJK.04/2 /2020: “The Implementation of Electronic General Shareholders Meeting (GSM)” Improving the definition and procedure of Material Transaction, as well as the effectiveness of regulation to enhance the protection of public shareholders and the quality of information disclosure in Material Transaction and Business Activities Changes. *) OJK Regula ulatio ion No.17/P /POJK.04/2 /2020: “Mater erial ial Trans nsac action ion and Chang anges es in Busin iness Activ ivit itie ies”

Maintaining financial market stability

136

Furth ther er Stimuli imuli to Provide vide Liquidity uidity and Capital ital in Banking ing Industr stry

Source: Financial Service Authority (OJK)

• i. The deferment reforms include Risk-Weighted Assets (RWA) for operational risk, credit

risk, market risk, and Credit Valuation Adjustment (CVA)

• ii. Until then, the Capital Adequacy Requirement still refers to the current RWA standard.

Adjus justme ment nt of Bankin nking g Provis ision ions Implemen plementation ion during ing Relaxation ion Period iod i. Eliminating the obligation to fulfill Capital Conservation Buffer by 2.5 percent of Risk Weighted Assets (ATMR) for BUKU 3 and BUKU 4 banks (until 31 March 2021) ii. Maintaining the obligation of fulfilling Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for BUKU 3, BUKU 4, and foreign banks at a minimum level of 85 percent (until 31 March 2021)

• iii. Dismissing the quality assessment of Foreclosed Collateral (AYDA) based on the

period of ownership (until 31 March 2021)

• iv. Reducing the obligation of education funds provision to less than 5 percent

Relaxation ation for Conven ention ional al and Sharia ia Banks (Reporting/Treatment/Governance of Restructured Credit/Financing)

Restructured credit/financing is excluded from the Loan at Risk (LAR) in the assessment

• f banks performance. Banks are also allowed to approve credit restructuring with several

alternative governance by considering the necessary principle.

Defer erral ral of Basel III Reform rms Implem emen enta tati tion

• n

(valid until 31 December 2022) Relaxati ation

• n for Rural and Rural

l Sharia ia Banks

• i. Relaxing the General Loan Loss Provision (PPAP) to less than 0.5%
• ii. Exemption of Interbank Placement for Legal Lending Limit (BPMK) and Maximum Limit
• f Fund Channeling (BPMD) to a maximum 30% of capital
• iii. Temporary Halt on Foreclosed Collateral (AYDA) calculation based on period of
• wnership
• iv. Providing 5% less on Education, Training, and Human Resource Fund from the

previous year

137

OJK’s Role in the National Economic Recovery Program (PEN)

Source: Financial Service Authority (OJK)

OJK carry y out effor

• rts to

to suppor

• rt the economic recovery,

through:

Placement of funds by the Government to provide liquidity support to banks conducting loan restructuring and to provide additional credit / working capital financing

Fund nd Place ceme ment nt

OJK supports the program through Liquidity Buffer and Credit Restructuring to Banks and Multi- Finance Companies

Providing Interest Subsidies for MSMEs

• MSMEs debtors with credits up to

IDR10 billion

• Debtors of housing loans (KPR) up to

type 70

• Debtors of motorcycle loans for

productive activities, including online transportation and informal business

Targe geted ed Beneficiar iaries ies

• Obedient taxpayer
• Excluded from National

Blacklist (DHN)

Other r Requir uirem emen ents

Providing necessary information in the implementation of interest subsidies based on the procedure which will be arranged through Joint Decision Letter (SKB)

OJK’s Role

The provision regarding the budgeting, implementation, and responsibility mechanism of interest subsidies and debtor requirements are regulated in the Minister of Finance Regulation (PMK)

Mechan hanism ism Artic icle le 20 Paragrap graph 2 Gover ernm nmen ent t Regulat lations ions No.

• . 23 of 2020

All debtors with credits up to IDR500 million will be given interest subsidies while debtors with credits up to IDR10 billion will go through the same mechanism with credit restructuring program. The program is eligible for debtors of banks/multi-finance companies with Performing Loan (Kol 1 and Kol 2) before COVID-19, valid from 29 February 2020.

National Economic Recovery Program (PEN) PP PP No. 23/2020

138

Strat rategic egic Polic licies ies in Finan ancial cial Sector

• r

Source: Financial Service Authority (OJK)

Providing financing alternatives for Goverment Priority Sectors Supporting acceleration of national economic growth Providing financial access to MSMEs especially in remote areas Preparing financial services industry to cope with Industrial Revolution 4.0 Improvement of business process in the industry

139

Continuou tinuous s Progr gram am on Capital ital Mark rket t Deepen ening ing

…continuously strengthened, including through capital market deepening ini niti tiativ atives es

Stren engthen thening ing market t infras astr tructure

• Development of Integrated Licensing (SPRINT).
• Enhancement of electronic reporting system.
• Development of electronic public offering.
• Integrated data warehouse and supervisory system.

Enhanci ancing the supply-side side

• Product: QIB offering and private placements, private

fund, asset-backed securities, REITs, infrastructure fund, IGBF (Indonesia Government Bonds Future) & equity crowdfunding.

• Issuer: Financial conglomerates, big bank debtors, local

government, IDX incubators, SMEs, SOEs & big tax payers.

Enhanci ancing the deman mand-side side Stren engthen thening ing governance ance & c cust stom

• mer

er protec ectio ion

• Development of market players’ capacity
• Enhancement of GCG for publicly-listed companies
• Establishment of disgorgement fund

Source: Financial Service Authority (OJK)

• Enhancing the role of the domestic institutional investors

(insurers & pension funds) in capital markets .

• Development of the domestic investor base (conducting

investor education programs).

• Simplification in opening securities account.
• Development of regional securities companies.
• Development of e-bookbuilding.
• Online marketing initiative

140

Enhan ancing cing Financi ncial al Literac eracy y & Inclusion usion

Source: Financial Service Authority (OJK)

OJ OJK striv strives s to

• buil

build a a str strong foun

• unda

dation for

• r fina

inancial l incl inclusi sion prog

• grams,

, to

• en

ensu sure ac access to

• finan

inancial products ts & & ser ervices by In Indo donesians of

• f all

all soc

• cial

l cla

• lasses. Such

Such in initia itiati tives als also in include th the e en enha hancement t of

• f fin

inan ancial lit liter eracy an and d finan inancial cons

• nsumer protecti

tion. Developing financial education models utilizing various delivery channels Enhancing the role of the “Investment Alert Taskforce” The result of OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among Indo donesian ans com

• mpared

ed to that t of 2016.

Fina inanc ncial Lit iter eracy cy Fina inanc ncial Inclu clusio ion

21.8%

2013

Developing micro-credit products with additional business support (“KUR Klaster”) Promoting the establishment

• f Islamic

microfinance institutions (“Bank Wakaf Mikro”) Strengthening the role of Financial Access Acceleration Taskforce (TPAKD) in local areas 29.7%

2016

38.03 .03%

2019

2019 Targ rget: 35%

59 59.7%

2013

67 67.8%

2016

76.19%

2019

2019 Targ rget: 75%

141

A A Comprehen prehensiv sive e Financ ncia ial l Deepe pening ning Program

• gram

…strat

trategy gy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

In Apr-2016 2016, the Minis nister er of Fina nance nce, , the Gover erno nor of Bank nk Indon

• nes

esia, ia, and the Chair irma man n of the Board of Commi missione ioners of the Financi ncial l Service ices Authorit

• rity

launc nched ed a Coordina ination ion Forum um for Developme elopment nt Financin ncing throug ugh Financia ncial Market ket (FK-PPPK). K). The e three ee authorit

• rities

ies have e agreed eed to formula mulate e “The Natio ional l Strategy egy of Fina nancia ncial l Market ket Development elopment”

Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market

ECONOMIC FUNDING & RISK MANAGEMENT MARKET INFRASTRUCTURE DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION Benchmark Rate & Standardization Instrument Fund Regulatory Framework Market Infrastructure Intermediaries Coordination & Education

Mission: Financial Market as Sources of National Development Financing

1 2 3

Money Market FX Market Bond Market Stock Market Syariah Market Structure Product Market

3 Pilars 6 Markets 7 Elements

• f Financial

Market Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

142

BI’s Roles in Supporting Distribution of Non-Cash Cash Soc

• cial

ial Assistance stance (NCS CSA) A)

BI suppor

• rts

ts gover ernme ment’s progra

• gram

m of shiftin ing socia ial l assista istanc nce to targeted ed non cash sh soc

• cial

ial assistan istance disbu sburse seme ment t throu

• ugh

h the elec ectr tronic ic paymen ent system

• em. In the future,

re, elec ectr tronic ic mechan hanism ism disbu bursem rsement t will l be also

• applie

ied d to LPG subsidy sidy. . NCSA A Programs ams

Family ily Hope Program ram (Program gram Keluarga uarga Harapan an -PKH KH) Smart Indone

• nesia

ia Program ram (Program gram Indon

• nes

esia ia Pintar tar-PIP PIP) Non Cash Food d Assistan tance e (Bantuan tuan Pangan gan Non Tunai ai – BPNT)

2016-20 2020 20

Pilot Proj

• jec

ect Gradu adual al Impl mpleme ementatio tation

Inter erconne

• nnected

ed & inter eroperable

• perable

paymen ent t syst stem em

LPG Subsidy idy

Full Imp mpleme lementati tation

XXYYZZ 1234567 678

9876543210

Source: Bank Indonesia

143

Prog

• gres

ress of

• f NCSA

A Prog

• grams

ms

Family ly Hope e Program

• gram

(Program ram Kelu luarga rga Harap rapan an - PKH) Non

• n Cash Food
• d Assistance

istance (Ban antuan Pangan gan Non

• n Tunai -

BPNT)

• The Family Hope Program (PKH) is a program that

provides cash to very poor households. IDR1.89 million /year will be granted for each

• household. PKH will be granted every February,

May, August, and November.

• As of December 2017, PKH has been distributed

to 6.0 million households on non-cash basis.

• In 2018, PKH has been distributed to 10 million

households on non-cash basis.

• BPNT is a poverty alleviation and social protection

program that is managed by the central

• government. It provides subsidized rice and eggs

to low - income households. IDR110 thousand/ month will be granted for each household as BPNT that can be used in certain stores which called e-warong.

• As of December 2017, BPNT was distributed to

1.2 million households in 44 cities.

• In 2018, BPNT has been distributed to 10.1 million

households (65.1% of the target of 15.5 million households target).

Source: Bank Indonesia

• In 2019, PKH has been distributed to 9.84

million house hold on noncash basis with total realization of IDR32.75T.

• In 2019, BPNT has been distributed to

15 million household on non cash basis with total realization of IDR15.44T

144

Strong

• nger

er Fundamentals amentals Facing ng the Headwi dwind nds

82,4 12,1 6,8 1998 2008 Sep-15 17,4 50,2 1998 2008 Sep-15

Inflation tion Rate te (%) IDR R Movem emen ent t (%) Non Non-Perf Perform

• rmin

ing g Loa

• an/NPL

PL (% (%) Government ent Debt/G t/GDP Forei eign gn Reserv rves (USD D bn)

100.0% 1998 98 27.4% 2008 08 33.63% July 20 2020 20 8.6x 1998 98 3.1x 2008 08 3.1x Q2- 20 2020 20 116.8% 1998 98 33.2% 2008 08 37.3% Q2 - 2020

More e Liquid quid Market rket (%) Extern ernal l Debt bt (Publ blic ic & Priva ivate) te) to FX Reserv erve e Ratio tio Extern ernal l Debt bt/G /GDP

Inflat ation contro trolled d withi thin the target t range IDR depreciate ted d year-to to-date date in August t 2020 NPL NPL level (gross) is below w the maximum um thresho hold of 5% Consiste tentl tly y well-mai ainta tained Significan antl tly y highe her than n 1998 & 2008, ample to cover 8.6 months ths of import t and exte ternal al debt t repaym yment Significan antl tly y lower than n 1998 crisis Slightl tly higher than n 2008, but significan antl tly y lower than 1998 July’20 135,1

July ’20

1.54 54 (yoy)

62 62 10,5 5,7 1998 2008 Jul-15

Overnight ht interbank k money y market t rate is relati tively y lower

June ‘20

4.0

(ytd) d)

• 6,48
• 35
• 197
• 250
• 200
• 150
• 100
• 50

18-Aug-20 2008 1998 3,11 3,8 30 5 10 15 20 25 30 35 40 June 2020 2008 1998

145

Outlook look of Domest mestic ic Econom

• my

y Remai mains ns Robust st

...d ...dome mestic stic economic mic growth th is predi dict cted ed to be moderat ated d in 2020 0 and rebound nd in 2021

2019 and 2020 Economic

• nomic Outloo
• ok

 Bank Indonesia projects economic growth in 2020 at the range 0.9%-1.9%, revised down from around 2.3%.  Bank Indonesia projects inflation in 2020 within the target range, namely 3.0%±1%.  Bank Indonesia projects current account below level 1.5% of GDP in 2020, revised down from around 1.5% of GDP.  Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in 2020 in the 6-8% range, revised down from

9-11% previously, in line with the revised economic growth projection in 2020. Econom

• nomic

ic Grow rowth Inflat lation ion CAD D (% (% of

• f GDP)

DP) Cred redit it Growt

• wth

Source : Bank Indonesia

2018 Real aliza izatio ion 5.17% 3.13% 2.98% 11.75 .75% 201 2019 9 Real aliza izatio ion 5.02% 2.72% 2.71% 6.08% 20 2020 20 0.9%-1.9% .9% 3. 3.0±1% belo low 1.5% 6.0-8.0 .0%

Progr gressi essive e Infrastructure tructure Developme pment: Strong

• ng Commi

mmitme tment t on Accel celer eration ation of Infrastructure structure Provi vision ion

Se Sect ction ion 7

147

IIGF has the potential to provide project guarantee for non-PPP projects

The Governmen rnment t has Enact cted ed Various ious Reform rms s to Accelerat erate e Inf nfrastructur rastructure e Provis ision ion

Fiscal l Refor

• rms

ms Instit itutio ional al Refor

• rms

Regulat lator

• ry Refor
• rms

ms

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

Viabil ilit ity Gap p Fund nding ing (VGF) F) KPPIP IP Direct ect Lend nding ing Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Avail ilab abil ilit ity y Payment ent Land nd Revolv

• lving

ing Fund nd Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF

• Reg. No. 190/2015 for Central Gov’r and MoHA
• Reg. No. 96/2016 for Regional Gov’t.)

A revolving-fund sourced from State Budget, to accelerate land acquisition (MoF Reg. No. 220/2010) KPPIP is actively involved in accelerating delivery

• f priority infrastructure projects
• PT. Sarana

na Mult lti Infrastruk uktur ur Merging between PT. SMI and Gov’t Investment Center (PIP) to become an infrastructure funding company Indon

• nes

esia ia Infras. . Guarantee ntee Fund nd (IIG IGF) F) PPP Unit it Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land nd Acquis uisit itio ion Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg. No. 148/2015) and land acquisition fee payment for impacted community (Presidential Reg. No.56/2017) Econo nomy my Packa kages ges Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation Risk-sha haring ing Guid ideli elines nes IIGF has issued risk allocation and mitigation guidelines for PPP project Tax x Incent entiv ives es (Tax ax Holid iday ay) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 – 20 years depending on the investment value Indon

• nes

esia ia Infrastructur ucture e Guarantee ntee Fund nd (IIGF) F) IIGF has the potential to provide project guarantee for non-PPP projects

148

Some me of Most t Recen ent t Reforms

• rms

Policy y reforms rms are aiming ming to create a more conduci ducive e invest stment ent climat mate e for infrast frastructure ructure deliver ery

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

Presid ident entia ial l Reg. No. 20/2 /2018 on Use of Foreig eign Labor

• r – released on March 2018

This regulation aims at t simp mplif ifying ng the e perm rmit it appl plic icati tion

• n proce

cess ss for foreig eign n workers kers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia

Presid ident entia ial l Reg. No. 56/2 /2017 on Socia ial l Imp mpact t Handling ling in Land Acquis uisit itio ion n Proces ess for PSN – released on June 2017

This Presidential Reg. allows the Execu cuting ting Agency cy to pay land d acqu cquisi isition tion compe pensation tion to the impac pacted ted community ity who does not have officia icial l righ ghts ts

• ver

r the land d required ired for PSN. . This regulation helps to solve the land acquisition problem due to community objection over the land use.

MoF MoF No. 60/20 2017 on Proced edures res for the Provis isio ion of Central ral Govern rnmen ent t Guaran rantee ee for the Ac Accele elerat ration ion of the Nation ional al Strateg egic ic Projec ects ts Imp mplem lement entati tion

• n – released on May 2017

The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This is regula gulation tion regulates tes the scope pe and d genera ral l requirem irements ts and d proce cedu dure res to propo pose and d gra rant t guara rante tees, , as well l as all llocate cate state te budget dgetob

• bli

liga gatio tion on govern rnment t guara rantee tees to all ll PSN. . The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

Gover ernment nment Reg. . No. 13/2 /2017 on Natio iona nal l Spatia ial l Plan n (RT RTRW RWN) – released on April 2017

The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg.

• No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister

ister of Agra raria rian and Spatia tial can issu sue e a recom commen endation tion of spa patia tial l util iliz ization tion; ; so that t the proce cess of obta tain inin ing g projec ject t perm rmiss issio ion can be done.

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset t Managem agemen ent t of Land d Acquis uisit ition ion by State e Asset t Management gement Agenc ncy – released on February 2017

The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN.

149

Reforms Along the Project’s Life Cycle

...to

• encoura

urage and accelerat rate infrastructur nfrastructure project ect usi sing ng PPP sche heme me Government nment of Indonesi nesia

Proj

• jec

ect Develop lopment t Facili ility ty (PDF) Viabi ability lity Fundin ing Gap (VGF) Guarantee e Fund Tax x Facili ilitie ies Avail ailab abili ility Paymen ment Land d Ac Acquisition ition Preparation Bidding Process Construction

Project development facility contributing to assist GCA on PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI PT IIF, and Ministry of Finance A facility with contribution to construction cost to increase project financial viability Managing Entitiy: Ministry of Finance based

• n GCA proposal

Gov’t. commitment: 49% max. Per project cost

Guaranteeing

• Govt. contractual
• bligations under

infrastructure concession agreements and Mof Regulation No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt’s comitment: US$ 450 mn

MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment industries. Sector will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion

• f an asset.

MoF Regulation, and MoHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov’t. commitment: US$ 12 mn (2016) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

150

Effor

• rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

• n

Regulat ation ion imp mprovem emen ent to to accele elerat ate land procurem emen ent proces ess

• The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land

acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process.

• For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation
• No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which

has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement.

Land nd Procurem

• curement

t Process as Stipul ulate ated d in Law No. 2 of 2012

Law No

• No. 2/201

012 was succe ccessfully ully applied lied in in: 1.

• 1. Palemb

lembang ng – Ind Indralaya laya section ection of

• f the Trans

ns Sumater era Toll Road Project ject 2.

• 2. Java North Line Doub

uble le Track ck Rail Projec ject

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

151

Effor

• rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

• n

…the establishment of Indone

• nesia

sia Asset et Management ent Agency (LMAN)

Source: Ministry of Finance

Government nment has establish shed ed Stat ate Asset set Management nt Unit t (LMAN) as a s soluti ution n to accelera rate e the land acqu quisiti tion n through ugh the provisi vision n of land d acqu quisiti tion n fund

1. Unutilized fund can be allocated for the following year 2. Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the

• ther project

3. Land acquisition fund for PSN projects is managed under one agency

• 1. LMAN was established in December 2015

through the issuance of MoF Reg. 219/2015 concerning State Assets Management

• 2. In 2016, BLU LMAN was mandated to provide

land acquisition fund as a support to Ministry

• f Public Works due to US$ 1,081 Mio

shortage of fund to acquire land for priority toll roads

• 3. The scope of support is broaden for all

National Strategic Projects through the issuance of MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN

• 4. In January 2018, LMAN has disbursed up to

US$ 881.48 Million (IDR 11.9 Trillion) through bridging finance scheme for 27 toll road projects, and planned to start the implementation of direct payment scheme

Land Ac Acqui quisitio tion n Budgeting ting Scheme LMAN at a Glance This LMAN initiativ nitiative provi vides des bet etter r flexibil xibility ty, coordi dina nati tion n and management ent of land acqu quisit sition

• n fund

nd provisi vision n for National

• nal Strat

rategic gic Projects cts (PSN)

152

New ew Fundame ament ntal al Regulations ulations Have Been een Initiat tiated ed in 2017

to accelerat rate infrastru frastructu ture re projects cts deliver ery

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

1

Gover ernm nmen ent Reg. . No. 13/2017 on National ional Spatial ial Plan n (RT RTRWN RWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of

• btaining project

permission can be done.

2

MoF MoF No. 60/2017 on Proced edure ures for the Provisio ision n of Central ral Governm rnmen ent t Guarant rantee ee for the Ac Accele elera ration tion of the Nation ional al Strateg egic Projects ects Implem emen enta tation tion The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects

• Implementation. This regulation regulates the scope and general requirements and procedures to propose and

grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

3

Presid iden enti tial al Reg. No. 56/2017 on Social ial Impact t Handling ling in Land d Acquis uisit ition ion Proces ess for PSN PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use.

4

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset Managem gemen ent t of Land d Acquisit isition ion by State e Asset t Managem gemen ent Agen ency The implementing regulation of Presidential Reg. No.102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN

153

Und Under er Preside esident ntial ial Reg. . No.56/2 6/2018 18, , PSN N list st has been revised ised int nto

• 223 Proje
• jects

cts and nd 3 P Progr grams ams

projects

27

53 53

17

12 12

Sulawe awesi

US$23.4 B

Kalim limant ntan

US$35 35.7 B

Sumat atra

US$43.6 B

Maluk luku & Papua ua

US$34. 34.5 B

89 89 3

Programs

National ional

Projects

1 2

Projects

Java

US$72.7 B US$100 100.7 7 B

13 13

Bali & Nusa sa Tengga ggara ra US$0. 0.7 7 B

Exchange rate: US$ 1 = IDR 13,500

Road 69 Projects Dams 51 Projects SEZs & IEs 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation 8 Projects Airports 7 Projects Irigation 6 Projects Smelter 6 Projects Electricity 1 Program Technology 4 Projects Housing 3 Projects Fisheries/Farming 1 Projects Sea Dike 1 Projects Education 1 Projects Economic Equality 1 Program Aeroplane Industry 1 Program

Projec ect Program ram

PSN incl clud udes s 15 sector

• rs

s at project ct level and 3 sector

• rs at progra

gram m level

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

154

PSN may y rece ceiv ive e privil vileges eges as s stipulat ipulated ed in the e Presidential sidential Reg.

• g. No.

. 3/20 2016 j.o j.o. . the e Pr Presid sidential ential Reg.

• g. No. 58/20

/2017

01 01 02 03

Determination of National Strategic Projects

04 05 06 07 08 09 10 10 11 12

Permit & Non-permit Completion Spatial Planning Land clearing acceleration Local Content Utilization Government Guarantee Provision Projects Monitoring via KPPIP IT System SOE’s Assignment Problems and Hindrance Completion Accelerate Goods and Service Procurement Settlement of Legal Issues Acceleration of Non- State Budget Projects

Additional Facilities Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

155

Progr gress ess on 223 Projects jects and 3 P Program

• grams

s PSN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019

From 2016 – December 2019, there were 92 projects1 completed with an estimated investment value of US$ 34.6 Billion

1In cumulative, including projects that are already taken out in 2016 and 2017

Exchange rate: US$ 1 = IDR 13,500

156

Progr gress ess on 223 Projects jects and 3 P Program

• grams

s PSN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019

157

Energy ergy Sector

• r:

: the Progres gress s of 35.000 MW Progr gram am

No No Phase MW MW % 1 Operating 3,792 11 2 Construction 22,739 62 3 Signed Power-purchase Agreement 6,923 21 4 Procurement 1,279 4 5 Planning 734 2

17 Dec ‘14

Cabine inet Meeting ing “There’s electricity crisis in Indonesia, requires construction of large capacity plant "

Jan ‘15

Average econom

• mic

ic growth of 6.7% % requir ires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)

Jan ‘15

Debottle leneck neckin ing g through

• ugh regula

latio ion: n:

• 1. Regulation

No.1/2015 concerning electricity supply cooperation & joint utilization

• f

the electrical network among license holders.

• 2. Regulation No.3/2015, concerning Procedures of

Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection & Appointment.

16 Mar ‘15 4 May ‘15 June‘17

Cabine inet Meeting ing Progress of 35,000 MW Launc unching hing 35.00 000 0 MW by the President in Goa Beach Sanden DIY The progress so far:

Sulawesi PLN: 2,000 MW Private: 1,470 MW Transmission: 5,275 ckt.km Substation: 4,390 MVA Maluku ku PLN: 260 MW Private: 12 MW Transmission: 653 ckt.km Substation: 620 MVA Papu pua PLN : 220 MW Private: 0 MW Transmission: 364 ckt.km Substation: 460 MVA Kalimantan PLN: 900 MW Private: 1,735 MW Transmission: 5,604 ckt.km Substation: 3,500 MVA Nusa Tenggara PLN: 670 MW Private: 0 MW Transmission: 2,347 ckt.km Substation: 1,410 MVA Sumate tera PLN: 1,100 MW Private: 8,990 MW Transmission: 18,729 ckt.km Substation: 35,521 MVA Jawa wa & Bali PLN: 5,000 MW Private: 13,697 MW Transmission: 9,185 ckt.km Substation: 66,265 MVA

35,00 000 0 MW Progr

• gram

m Dist istrib ibution ution

Source: PLN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

Note : Progress of 35,000 MW Electricity Program as of August 2019

158

Energy ergy Sector

• r:

: the Progres gress s of 35.000 MW Progr gram am

Decemb mber er 2016

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

706 MW in operating phase 10,141 MW in construction phase 8,478 MW signed Power-purchase Agreement 10,560 MW in procurement phase

2% 2% 28% 28% 24% 24% 30% 30% 16% 16%

5,824 MW in planning phase

3% 3% 44% 44% 38% 38% 9% 9% 6% 6% 8% 8% 52% 52% 32% 32% 5% 5% 3% 3% 19% 19% 57% 57% 19% 19% 3% 3% 2% 2%

998 MW in operating phase 15,676 MW in construction phase 13,782 MW signed Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase 2,899 MW in operating phase 18,207 MW in construction phase 11,467 MW signed Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 6,811 MW in operating phase 20,168 MW in construction phase 6,678 MW signed Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase

Nove vemb mber er 2017 Decemb mber er 2018 Decemb mber er 2019

159

Acceleratio eration n of 35.000 MW Progr gram am

Governme ment PT PLN

EPC Power werpl plant nt and Trans nsmis missio ion PLN Subsid idia iary (Joint int Ventur ure) e) Independ ependent ent Power wer Produc ucer er

Streng ngthe then n Equity uity 2B 2B 1

Gover ernme nment nt Suppor port (outsid ide e Guarantee) ntee)

• Provision of Primary Energy
• Provision of Renewable Energy
• Simplicity of Permits and non-Licensing
• Spatial Planning
• Land acquisition
• Resolution on Legal Matters

Loca cal l Content ent Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content.

2A 2A

Assign ignmen ent SJKU KU* * Minis nistry y

• f Financ

nce

Strengthe gthen PLN‘s Balance e Sheet et

*)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter The Gover ernme nment nt has issued ued Presid idential ential Regul ulation ion No. 4/201 016 6 on Electr ectricit icity y Infrastructur ucture e Accel eler eratio ion n to accel eler erate e power er projec ects

Provis ision ion of Elect ectric icit ity Refina inancin ncing Hedging ging Financ ncial ial Asset et Optimiza imization ion Direct Lending Direct Lending Bond issuance by PT PLN Company Tax Holiday PT PLN’s divident allocation Loan from independent lenders Asset Revaluation Other types of funding Equity Injection by the Government

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

160

Sign gnif ific icant ant Progress

• gress on Infrast

rastructure cture Proje

• jects

cts

Datab abas ase Project information such as map, track, existing study and latest project status. An integrat grated ed IT system with monitoring capacity for stakeholders, so that they can have real l time data. Platf tform rm data outlook that is efficient and functional using a user- friendly framework. Record decisions related to projects and synchr hroniz nize e the implementation schedule that can be utilized by stakeholders.

KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision- making purposes. Improvi

• ving

ng Monitor nitoring ing System em on Infrastructur ucture e Projects jects1 Roads

Trans-Sumatr tra Toll Road Merah Puti tih Bridge, Ambon

Dams

Jati tigede Dam (Operati ational)

Transporta portation tion

Jakar karta ta MRT Project ct2

Drinking inking Water ter Proce

• cess

ssing ing

Umbulan Drinking Wate ter Provision System, East t Java va

1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2 Not funded from National Budget

Terminal 3 Ultimate Soekarno-Hatta ta2 New Tanjung Priok k Port t Project ct2 Nop Goliat t Dekai, kai, Papu pua

161

Infrast rastructure cture Projects jects and Financ ancing ing Schemes mes

Promoti

• tion

n of Infra frast structure ructure Developme pment nt to Ac Accelerat ate Economi mic Growth th

Establis ishment ent of PPP PPP Unit it

Broa

• ad

Objecti tive  Champion project preparation and acceleration of the PPP agenda in Indonesia Core e Mandates tes  Improve quality of project selection under KPPIP – OBC criteria  Support project preparation through PDF support and highlyqualified transaction advisors  Act on behalf the Minister of Finance in providing government support and approvals for projects Additiona ional Mandates es  Coordinate all public financeinstruments  Provide input for PPP Policy program Development and Regulations  Implement capacity building forGovt. Contracting Agency(GCAs)  One stop shop for PPP promotion & Information

Bud udget get Publi lic Private Partner nership ip SOE & Private Sector

• r

 Cen entr tral & regio gional budge get (speci special alloc

• cati

tion fund & rural transfer) er)  Pr Prim imaril ily to to supp pport basic sic infrastruct cture project ects: – Food secu security ty: Irrigation, dams etc. – Marit itim ime: e: Seaports, shipyards etc. – Connecti ectivit ity: Village roads, public transportation etc.  Certa tain in infrastr truct cture e proj

• ject

ects to be funded ed and opera perated ted throu

• ugh

gh a pa partner ership ip between en the Indon

• nes

esian ian gov

• vern

ernment ment and the e priv ivate secto ctor – Projects ready for auction under the PPP Scheme: – Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung – Railway projects such as an express line into Soekarno-Hatta International Airport – Water supply projects such as the West SemarangProject  Vario ious gov

• vern

ernmen ment t suppo port t for PPP: P: – Proje

• ject

ct Devel elopmen pment t Facil cilit ity (PDF): ): Helps Government Contracting Agencies (GCAs) in project preparation and transaction – Viabil ilit ity y Gap p Fund: improves financial viability of PPP projects – Gov

• ver

ernmen ment Guarantees ees: Supports PPP projects’ bankability by providing sovereign guarantees – Infrastructu cture e Financin cing Fund: Provided through PT SMI and IIGF – Availabilit ity Payme yment t (AP): P): GCA pays private partner based of availability of infrastructure services  Gov

• ver

ernme ment to inject ect capi pita tal into to SOEs Es: Intended multiplier effect to develop more infrastructure projects  Key y focu cus area eas: – Infrastructure and maritime development – Transportation and connectivity – Food security  Medi dium m term infrastruct cture e develop elopme ments ts to focu cus on: – Water Supply – Airports – Seaports – Electricity and power plants – Housing – Mining

Source : Ministry of Finance; Bappenas; KPPIP: “Komite Kebijakan Percepatan Penyediaan Infrastruktur” or National Committee for the Acceleration of Infrastructure Delivery Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity

 Infrastru tructu cture e Develop

• pmen

ent t in order to:

• 1. Accelerate growth particularly in rural areas
• 2. Support industrial development and tourism
• 3. Reduce unemployment and poverty

 Infrastru tructu cture e fundraisin sing needs: s: $357. 57.9 9 bn bn (or equivalent to IDR4,796.2 tn)  245 5 Nati tion

• nal Strategy

gy Proje

• jects

cts under National Medium Term Plan for 2015 – 2019 with an estimated total cost of IDR4,197 tn (USD313 bn)  37 prior

• rity

ty infrastru tructu ture proj

• jects

ects with an estimated cost of IDR 2,490 tn (USD 180 billion)  Majority of 37 priority projects are expected to commence commercial operation by 2018 - 2022

Infrastruc uctur ure Development nt is a Key Priorit ity

162

Govern ernment ment Guara rant ntee ee For Basic sic Infrast rastructure cture Development lopment

Reflec ects ts strong

• ng commitm

tment ent to nati tiona nal developme pment nt planning nning

Source: Ministry of Finance No. Central Govern ernme ment t Guarantee tee for Infrastru tructu cture e Progr

• grams

ms Guarante tee e Documents ments Expos posure/ Outsta tstanding ing (USD bn bn) 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 16 1.49 2 Clean Water Supply Program 6 0.01 3 Direct Lending from International Financial Institution to SOEs 6 1.63 4 Sumatra Toll Road 9 2.07 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 7 3.83 6 Public-Private Partnerships (PPP) 7 3.80 7 Regional Infrastructure Financing 1 0.17 8 Public Transportation (Light Rail Transit) 1 0.19 9 Electricity Infrastructure Fast Track Program (35GW) 4 3.96 Tota tal 57 57 17.15

Conting tingen ent t Lia iabi bili liti ties es from

• m Gov
• vern

ernmen ent t Guara rantee tee as of Q1 2020 ** Governmen ent t Guarantee ntee Progra gram

Credit it Guaran antee PPP Guarant antee

Busines iness Viability ty Guarante tee (BVG)  Pow

• wer

er (El (Electri ctricit city) y) – Full credit guarantee for PT PLN’s debt payment obligation under FTP 1 10,000MW and 35GW programs*.  Cl Clean an Water ter – Guarantee for 70% of PDAM’s debt principal payment obligations.  Toll roa

• ad – Full credit guarantee for PT Hutama Karya’s

debt payment

• bligations

for the development

• f

Sumatra Toll Roads.  Infrastr structu cture - Full credit guarantee on SOE’s borrowing from international financial institution & guarantee for PT SMI’s local infrastructure financing.  Public Transport portati tion

• n (L

(Lig ight Rail Transit) sit) – Full credit guarantee for PT Kereta Api Indonesia’s debt payment

• bligations for the development of LRT Jabodebek.

 Pow Power er (El (Electri ctricit ity) y) – Guarantee for PT PLN’s obligations under Power Purchase Agreements with IPPs (off-take and political risk) under FTP-2 10.000MW and 35GW programs*  Infrastr structu cture – Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements  From 2008 to Q1-2020 **, the government has issued 85 guarantee documents with total value of USD36.17 billion, there were 28 guarantee documents worth USD3.54 billion have been expired.  The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. P.  Beginning in 2008 the Government has allocated a contingent budget with respect to these

• guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund.

This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees.

**) As of end March 2020; currency conversion of IDR16,367.01/USD1 and IDR18,044.64/EUR1

Politic ical l Risk Guarantee

 Infrastr structu cture – Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees

*) MOF provides both credit guarantees and BVGs for 35GW program

163

Go Govern ernmen ment t Fina nancial ncial Facilit ilities es for PPP PP Projects jects

Financ ancial ial Facilit ilities ies to to Attrac tract More e Privat vate Parti ticip ipati ation

Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close

• f the following PPP projects:

Viabilit ility Gap Fund d (VGF) Projec ect t Develop elopmen ent t Facilit ility (PDF) Gover ernm nmen ent Guar arant antees ees (direc rectly tly by MoF MoF or throug ugh h IIGF) F) Finan ancing ing from PT

• PT. SMI and PT. IIF

Availa vailabil ilit ity Paymen ent t Schem emes es More Funding ing Schem emes es are on the Pipelines elines

Project Financing fund nded by the privat ate sector

• r through

the granting of concessions for an operating asset

• wned by the Government/SOE (based on the policy
• f the Government) to the private sector to be
• perated & managed.

Project Financing fund nded by any source of funds

• ther than Government’s budget, e.g. long term

management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas.

• Asset is owned by public sector
• Operating asset, not greenfield project
• Records positive cash flow for the last several

years

• Predicted revenue
• Asset is owned by private sector
• Greenfield / brownfield / operating projects

Scheme e Charac acteris istic ics Scheme e Charac acteris istic ics

LCS (Limit ited ed Concession ion Schem eme) e) PINA (Non-Gover ernm nmen ent Budget get Infras astruc tructure ure Financ ancing) ing)

Source: Ministry of Finance

164

Progr gress ess of PPP P Inf nfrastru rastructure ture Project

• jects

No No Project Name Project Cost (IDR tn tn) Financ ancial ial Facilit ilities Status us 1 Central Java Power Plant 40 Guarantee (MoF & IIGF) FC on June 6th, 2016; Construction 30%; COD Target: May 2020 2 Palapa Ring – West Package 1.28 PDF, IIGF Guarantee & AP FC on August 11th, 2016; COD target: February 2018 3 Palapa Ring – Central Package 1.38 PDF, IIGF Guarantee & AP FC on September 29th, 2016; COD target: March 2018 4 Palapa Ring – East Package 5.13 PDF, IIGF Guarantee & AP FC on March 29th, 2017; COD target: September 2018 5 Umbulan Water 2.1 PDF, VGF & IIGF Guarantee FC on August 30th, 2016; COD target: July 2019

Succes essful ful Projec ects ts Reaching hing Financi ncial l Close e in 2016 and 2017

No No Project ct Name Project Cost (IDR tn tn) Financ ancial ial Faciliti ilities Status us 1 Batang–Semarang Toll Road 11 IIGF Guarantee PPP & guarantee contracts signed on April 27th, 2016 2 Manado–Bitung Toll Road 5.1 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 3 Samarinda–Balikpapan Toll Road 9.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 4 Pandaan–Malang Toll Road 5.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 5 Serpong–Balaraja Toll Road 6.0

• PPP contracts signed on June 8th, 2016

6 Jakarta–Cikampek Elevated Toll Road 14.8 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 7 Krian–Legundi-Krian Toll Road 9.0 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 8 Serang–Panimbang Toll Road 5.3 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017 9 Cileunyi–Sumedang-Dawuan Toll Road 8.2 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017

Signed ed PPP Projects ects in 2016 and 2017

Source: Ministry of Finance, as of July 2017

165

New Guarant antee e Schemes emes for Non-PP PPP P Proj

• ject

ects

The Government had issued Presidential idential Regu egulati lation No No 82 82/2015 and Mini Ministry of

• f Fi

Finan nance Regu egulati lation No No 189 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. Guarant rantee ee on SOE Direc ect Lending ding from Internat rnational ional Financ ancial ial Instit itutions utions (IFIs Is) Guarant rantee ee for Regiona ional l Infras rastruct ructur ure e Financ ancing ing Provis ision ion State e financ ance e soundne ness Fiscal al sustainab inabilit ility Best practi tice e of fiscal al risk managem gemen ent The objective of this guarantee is to to provid vide e credit dit enhancem ncemen ent in terms of low

• w intere

rest rate and long g tenor fina nanci ncing ng, with 3 main princi nciples les:

The Government had issued Minis inistry of

• f

Fin Finance nce Regulation egulation No No 174 174 of

• f 2016

2016 to provide guarantee to PT SMI on the assignment

• f

regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. Based

• n

Gover

• vernme

nment nt Regulation egulation No

• No. 95

95/2015 2015 and Min inis istry of

• f Fin

Finance ce Regulation egulation No

• No. 232

232/2015 2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried

• ut

by PIP (Government Investment Center). The objective is to giv give stimulus imulus to to the acc accele elerat ation ion

• f
• f

lo local cal infrastr infrastruct uctur ure dev evelopment elopment through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in

• rder

to meet local infrastructure development needs and to reduce reliance on state/local budget.

166

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