[PPT] - Buildin lding Exter ernal Resil ilie ience nce of Indon PowerPoint Presentation

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March 2017 Republic ublic

f

Indone nesia ia

Buildin lding Exter ernal Resil ilie ience nce

f

Indon

nesia

esia

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1

About Investo tor Relatio tions ns Unit

f

the Republic ublic

f

Indones nesia ia

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 of 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

f 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 Contact: Wiwit Widyastuti (International Department - Bank Indonesia, Phone: +6221 2981 8279) Adrianto (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012 ) Farid Arif Wibowo (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +6221 351 0714) E-mail: contactIRU-DL@bi.go.id

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2

Overv rview iew

1 2 3 4 5 6

Institu itutio tional and Governance Effectiv tiveness: Accelerate ted Reforms Agenda with th Institu itutio tional Improvement Economic ic Factor: Strong and Stable Growth th Prospects ts Remain in Intact External Facto tor: Improved External Resil ilie ience Fiscal Performance and Flexib ibil ility ity: More Fiscal Stimulus with Prude dent t Fiscal Management Moneta tary and Financia cial Fact ctor: Credib ible Moneta tary Policy Track k Record and Favourable Financia ial Secto tor Progressiv ive Infrastr tructu ture Development: t: Strong Commitm itment t on Acceleratio tion

f Infrastr

tructu ture Provis isio ion

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Inst stitu itution tional and Govern ernme ment nt Effectiv tivene ness: s: Accele elerate ted Reform

rms

Agen enda da with th Instit titutio tiona nal Improv

vement

ement

Sec ection

n

1

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4

Positiv itive Global bal Perceptio eption

52 25 46 40 38 15 25 35 45 55 2010 2011 2012 2013 2014 2015 Voice and Accountability Political Stability/Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption

1. Source: World Bank – Doing Business 2017 Report; 2. Source: Transparency International – Corruption Perceptions Index 2016 Report; 3. Source: World Economic Forum –The Global Competitiveness Report 2016 – 2017 4. Source: World Bank

World ld Governance Indicato tors1 Ease of Doing ng Busine ness1 Globa bal l Competi titi tivene ness Index3 Corrupti uption n Perce cept ption n Index2

Higher rank is better Higher score is better 41 39 81 57 55 30 45 60 75 90 2009 2010 2011 2012 2013 2014 2015 2016 Indonesia India Brazil Phillipines Turkey 91 130 123 99 69 50 70 90 110 130 150 2008 2009 2010 2011 2012 2013 2014 2015 2016 Indonesia India Brazil Philippines Turkey * Both ‘Rule of Law’ and ‘Regulatory Quality’ shared the same score (40) in 2015 37 40 35 41 20 25 30 35 40 45 50 2012 2013 2014 2015 2016 Indonesia India Brazil Philippines Turkey * Both India and Brazil shared the same score (40) in 2016 Higher rank is better Higher rank is better

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Indone nesia ia Remain ins the Investme tment Destina inatio tion

f

Choice

1. Source: The Economist – Asia Business Outlook Survey 2017 2. Source: IMF World Economic Outlook, Database October 2016 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2016 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (28th Annual Survey)

201 2016E E Total Invest stment / GDP (%)

Indonesia Enjo joys Large Investments Relative to Peers within the Region2 JBIC IC: Amongst ASEA EAN N countries, Indonesia is one of preferred place for business investment (December 2016)4 The Economist: Indonesia among the top 3 destination for attracting investors in Asia (January 2017)1

2.5 3.1 3.5 4.8 6.8 7.2 10.1 10.6 19.3 25.9 29.4 32.7 35.8 42.0 47.6 5 10 15 20 25 30 35 40 45 50 Turkey Korea Russia Singapore Malaysia Brazil Myanmar Philippines USA Mexico Thailand Vietnam Indonesia China India

% of surveyed who consider each country has promising prospects

18 18.9 21.3 24.8 25.3 26.3 27.7 28.4 33.3 39.4 46.2 53.7 55.7 71.6 10 20 30 40 50 60 70 80 Taiwan Singapore Japan Hong Kong South Korea Australia Malaysia Myanmar Thailand Phillipines Vietnam Indonesia India China

UNCTA TAD: Indonesia among the top p 10 investment destination country (January 2017)3

4 4 5 5 5 5 8 11 11 13 13 15 19 21 47 10 20 30 40 50 Myanmar Vietnam Malaysia Philippines France Australia Indonesia Brazil Mexico Germany Japan United Kingdom India China United States 17.96 31.66 34.65 26.15 23.74 24.42 5 10 15 20 25 30 35 40 Brazil India Indonesia Malaysia Philippines Thailand

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6

BBB BBB- / / Positive Baa3 / Positive BB+ + / Positive

Feb 201 2017, , Baa3, , Outlook

k Revis

ised to Posit itiv ive “We changed the outlook on Indonesia's sovereign rating to positive from stable to reflect emerging signs

f a reduction in structural constraints, including its

level of external vulnerability and the strength of its institutions.“ June 2016, , BB+ , Posit itiv ive Ratin ing Affir irmed “The ratings on Indonesia balance the country's low per capita income plus middling fiscal and external indicators, against improved policy and institutional settings, credible monetary policy, and buoyant economic growth.” Des 201 2016, , BBB-, Outlook

k Revis

ised to Posit itiv ive “Key drivers of the Positive Outlook are the build-up of a track record of macroeconomic stability in the past few years, and a strong structural reform drive since September 2015.”

BBB BBB- / / Positive

March 201 2017, , BBB-, Outlook

k Revis

ised to Posit itiv ive “JCR has changed the rating outlook from Stable to Positive, based

n the recent improvement on the investment climate promoted by a

series of Economic Policy Packages & the containment of private external debt brought by Bank Indonesia’s prudential regulations on external borrowing.”

BBB BBB- / / Stable

April il 201 2016, BBB-, Stable Rating Affir irmed “Indonesia's economy has been stable despite uncertainty lingering over external demand.... Fiscal deficits are kept low, and fiscal soundness is

maintained. In light of these factors, R&I has affirmed the Foreign

Currency Issuer Rating at BBB- with a Stable Rating Outlook.”

Moody's S & P Fitch

Investm tment nt Grade

JCRA R & I

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

BBB BBB

BB

BB+ BB B+ BB-

Strong ng Confid idenc nce

n

Indone nesia ia as Refle lected ted in Improvement nt

f

Rating ing Outlo look

Belo low Investm tment nt Grad ade

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Natio iona nal Strateg tegic ic Develo elopment nt Plan (Nawa Cita)

Human Development

Educatio ion Health Housi sing ng Character er

Priority Sector Development

Food Security ity Energy & Electr tric ical Security ity Maritime itime & Marin ine Touris ism & Industr try

Water r Securit rity, Basic Infra rastru ructure re & Connectiv ivit ity

Equitable Development

Inter- Incom

me

Group Inter-Regi egion

n:

(1) Rural Area, (2) Periph pher ery, (3) Outsid side Java, (4) Easter ern Area.

Security & Order Politic & Democracy Governance

The 3 Dimension

ns
n

Economic Develop

pment

Necessary Condition

Legal Certainty & Law Enforcement

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The Economic ic Polic icy Packag ages es

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

Phase III (7 Oct t ’15) Boosting investment, spurring exports, and maintaining people‘s purchasing power Phase IV (15 Oct t ’15) Simplifying wage formula and expanding loans for small business Phase V (22 Oct t ’15) Improving industry and investment climate through tax incentives and deregulation on sharia banking Harmo moni nizing ng Regul ulations

ns

Simpl mplifyin ying Bureaucr ucratic Proc

cess

Ensur uring ng Law Enfo forceabi bility Phase VI (6 Nov ’15) Stimulating economic activities in border areas and facilitating strategic commodities availability Phase I (9 Sept ’15) Improving national industry competitiveness Phase II (29 Sept ’15) Easing permit requirement and simplifying export proceeds requirement Phase VII (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 VIII (21 De Dec ’15) Resolving land acquisition disputes, intensifying domestic

il production, stimulating domestic parts and aviation

industries Phase IX (27 Jan ’16) Accelerating electricity generation, stabilizing meat prices and improving rural –urban logistics sector Phase X (11 Feb ’16) Revising Negative investment List and improving protection for SMEs Phase XI (29 29 Mar ’16) Stimulating national economy through facilitation to SMEs and industries Phase XII II (28 28 Apr’16) Improving Indonesia’s rank on Ease of Doing Business (EODB) Phase se XIII (24 Aug ’16) Low Cost Housing for Low-Income Communities Phase XI XIV (10 Nov ’16) Roadmap for E-commerce

Source: Coordinating Ministry for Economic Affairs

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Thematic ic Polic icy Issues

n

Deregu gula latio tion

Next Phase of

f Policy Packages

es based on

n Sectoral and Them

ematic ic Issues Six policy issu sues es under Packages I-XIV:

improvement

f

industry competitiv titiveness improvement

f

society’s purchasin ing power widenin ing of

f

investm tment expansio ion of

f

export effic icie iency of

f

logis istics tics secto tor improveme ment

f

touris ism secto tor

Education and Vocational Training Logistics Agrarian reform Energy Industry, Manufacture, Tourism, Fishery & Service sector Food Invention, Innovation and Creative Economy

Source: Coordinating Ministry for Economic Affairs

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10

Progr gres ess

f

the Economic ic Polic icy Packag ages

Initially, there are 215 regulations which need to be deregulated As of February 6nd, 2017, deregulation of 203 regulations are finished (99%), comprising 49 regulations at Presidential level and 154 regulations at Ministrial/Institutional level Unfin inish ished ed reg egulat atio ions: Proposed Policy on E-commerce Roadmap

I–XII

203 03

SET

99% 11 11

REVOKE OKED REGULATIONS ONS

1

ON GOI OING NG DISC SCUSS USSION ON

1%

154 54 TOTAL

154 54

MINISTRIAL/INSTITUTIONAL LEVE VEL 100

100%

47 47 42 42

SELESAI

PRESI SIDENTI TIAL

50 50 TOTAL

49 FINISHED

PRESIDENTIAL LEVE VEL

99% I–XIV IV

FINISHED

I–XII

215

TOTAL INI NITI TIAL REGUL ULATI TION ONS

I–XIV IV

I–XII

204 204

TOTAL REGULATIONS ONS

I–XIV IV

Based

n

the further assessment, 11 regulations has been revoked from deregulation process Total regulation subject to be deregulated: 204 regulations

Source: Coordinating Ministry for Economic Affairs

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Improving ing Inves estme tment Climate te

…implement 3-hour investmen ent lice cens nsin ing servic ice to compl plem emen ent the One Stop Servic ice (OSS)

BKPM

Arriv

rive at OSS at BKPM directly from the airport

Consult with Director of Investment Service
Submit

it the required documents & data Requirement for utilizi zing 3-ho hour r Investment Lisencin ing Servic ice:

No requirements ts for investm tment nt in infrastructu ture sector

9 documen ents

btained

ed

Wait at the lounge while documents are

processed by BKPM, in-house notary, ministries, & other government institutions Obtain in eight documents & letter of land availability within three hours to start the business

RPTKA/Employment plan
IMTA/Working permit
Investment license
Certificate of incorporation
NPWP/Tax Registration Number
TDP/Company Registration
APIP/Import identification
NIK/Customs registration
Letter of land availability

Certa tain inty ty to start a busin iness Certa tain inty ty to Import capita ital goods Certa tain inty ty to work Accurate te land informatio tion

1. Minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers. 2. Application must be submitted directly by at least one candidate of the proposed company stakeholder

2 docu cumen ents needed eded

ID Card
And/or Deed of Establishment (Indonesian company) or

Article of Association (Foreign company)

Containing workflow from raw material production to the

finished products

Investo tor identitiy titiy as the prospectiv tive shareholders Flowchart

f

busin iness activ ivitie ities workf kflow

Source: Investment Coordinating Board (BKPM)

Until il December 2016, more than 250 compan anies have utilized the “3 hours servic ices”

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Improving ing Inves estme tment Climate te

…implement 3-hour investmen ent lice cens nsin ing servic ice for Ener ergy gy and Mine neral Resources es Sector

Director arrives at central OSS, then submit required documents* Waiting in priority lounge, while the documents processed

1 2 3

Applicant receive the requested licensing products Note *: ESDM3J service is given if the company has fulfilled the

checklist of administrative & technical requirements as regulated

n MEMR Ministrial Decree No.15 of 2016

9 Types

f

licensi nsing ng issue ued by ESDM3J servi vice

No. Type

f

Licensin ing Duratio tion for reguler servic ice (work days) 1 Temporary Business License for Electricity 20 2 Temporary Business License for Oil/Fuel/LPG storage 32 3 Temporary Business License for Storage

f

Processed Products/CNG 32/40 4 Temporary Business License for LNG Storage 32 5 Temporary Business License for Oil Refinery 32 6 Temporary Business License for Processing Oil Residue Industry 32 7 Temporary Business License for Natural Gas Processing 32 8 Temporary Business License for General Trade

f

Oil/Fuel 40 9 Temporary Business License for General Trade

f Processed

Product 40

Source: Investment Coordinating Board (BKPM)

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13

Improving ing Inves estme tment Climate te

…impl plem emen ent Direc ect Constructio ion Permit to attract ct investmen ent in Indu dustria ial Estates es

Direc ect Construct ctio ion (KLI LIK) K)

No Requir irem ements ents

No

minimum investments

r

workers is required.

Available for 32

32 selected ed indust stria ial estates es.

Construction

permits can be

btained

in parallel with construction process.

Investors can directly start their project construction before

btaining construction permits. This service is supported by

both Central and Region

nal Gov

Governments nts which become th the first step to to synergize between central and local licensing

Obtain in investment licence at

OSS at national or regional level.

Survey a land within selected

industrial estates.

Acquir

ire the land for your

industry.

Start

rt the construction ion of your

project. No other permits are

required.

Apply for building construction permit

& environmental permit, in parallel with construction process.

Priority Investment Service

Source: Investment Coordinating Board (BKPM)

Until il December 2016, 82 projects have utilized the “KLIK servi vices”

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14

Improving ing Inves estme tment Climate te

…Direct Constructio ction Permit it is expanded nded to 32 Indus dustria ial Estates es (IE) through ghout Indo done nesia ia

Source: Investment Coordinating Board (BKPM)

1

Bant nten (3 3 IE IE; ; 3,150 ha)

1. Modern Cikande Industrial

Estate/MCIE (1,800 ha)

2. Wilmar Integrated

Industrial Park/WIIP (800 ha)

3. Krakatau Industrial Estate

Cilegon/KIEC (570 ha) West Java a (5 5 IE IE; ; 1.151 ha)

1. Bekasi Fajar Industrial

Estate/BFIE (300 ha)

2. Delta Silicon 8 (158 ha)
3. Karawang Internasional

Industrial City/KIIC (293 ha)

4. Suryacipta City of

Industry/SCI (300 ha)

5. GT Tech Park @

Karawang (100 ha) Cent ntral al Java a (3 3 IE IE; ; 840 840 ha)

1. Kendal Industrial Park/KIP

(700 ha)

2. Bukit Semarang Baru/BSB

(40 ha)

3. Wijayakusuma Industrial

Estate/KIW (100 ha) East Java a (1 1 IE; 1,761 ha) KI Java Integrated Industrial and Port Estate/JIIPE (1,761 ha) North Sumat atera a (1 1 IE; 100 ha) Medan Industrial Estate/KIM (100 ha) South Sulaw awesi i (1 1 IE IE; ; 3,000 000 ha ha) Bantaeng Industrial Park/BIP (3,000 ha)

KLIK 1st

st Stage (14 IE)

KLIK 2nd

nd Stage (18

IE)

1 2 3 4 5 6 3 5 6 7

1 2 3 4 5 6

East Java (2 IE; 341 341 ha) 1. IE Maspion (151 ha) 2. IE Tuban (190 ha) East Kalim imant ntan an (1 1 KI KI;133.8 8 ha ha) IE Kariangau (133.8 ha) Riau au Island and (5 IE; 556 ha)

1. Batamindo Industrial

Park (61.4 ha)

2. Bintang Industrial

Park II (20 ha)

3. Kabil Integrated

Industrial Estate (142.5 ha)

4. Bintan Inti Industrial

Estate (229.6 ha)

5. West Point Maritim

Industrial Park (102.5 ha) West Java (6 IE; 1,814 814.1 1 ha)

1. Artha Industrial Hill

(315.1 ha)

2. Greenland International

Industrial Center (GIIC)/Deltamas (400 ha)

3. Jababeka Tahap III

(45 ha)

4. Kota Bukit Indah Ind.

City (510 ha)

5. Indotaisei Kota Bukit

Indah (300 ha)

6. Marunda Center (300

ha) Cent ntral al Java (1 1 IE IE; ; 285 285.7 7 ha ha) IE Demak (285.7 ha)

2

1

Riau au (1 IE IE; ; 198 198.9 9 ha) IE Dumai (198.9 ha)

2

4

DKI Jakar arta (2 IE; 129 129 ha)

1. Kawasan Berikat

Nusantara/KBN (118.6 ha)

2. Jakarta Industrial

Estate Pulagadung/JIEP (10.4 ha)

3 6 4 7 5

SLIDE 16

15

(Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part

f

the implementation

f

the 2nd 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 date, 30 30 Bond nded ed Logi gist stic Cen enter has be been en launched ed to to suppor

rt various

us indust ustrie ies.

Improving ing Inves estme tment Climate te

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil il and ga gas, s, and mining ning indust stry Food & beverages es indust stry Auto- motive ive indust stry Person

nal

care/ home care indust stry Textil ile (cotton) indust stry. . Small and medium ium indust stry Synthetic ic textile (chem emic ical substanc nces es) indust stry. .

Bonded Logistic Center

SLIDE 17

16

Improving ing Investm tment Climate te

…revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

Cold storag age Restau auran ants, s, Bars Phar armac aceut utical al Raw Material als s Manufac nufactur turing ng Sports s Center, Film Process ssing ng Lab, b, Crumb b Rubb bber

Revision

n of "Partn

tners ership" cate tegory

ry to

refer er to part rtners ership with Micro, cro, Small and Medium m Enterp rpris rises es (MSMEs) Gra randfather er Law: If a part rticu cular sect ctor

r is tighten

ened in future re, existing foreig reign inves estor

r does

es not need ed to com

mply with tigh

ghter er stake ke Key Refor

rms

ms in Nega gative e Fore reign gn Inves estmen ment List Stren rengt gthen en implemen ementation

n of

nega gative e inves estmen ment law throu

ugh

gh activ tive e roles es from

m ministri

ries es, age genci cies es and regi gion

nal gover

ernme ments

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

Dist stribu bution, n, Warehousi sing ng Privat ate Muse seum, Catering ng, appar arel Manuf nufac actur uring ng, Exhibi bitions ns & Convent ntions ns Toll Road ad Operat ator, Telecommuni unicat ation n Test sting ng Compan any Cons nsul ultan ancy for Cons nstruc uction1 Telecommuni unicat ation n Provider with Integrat ated Services Profess ssiona nal Trai aini ning ng, Golf Cour urse se Manag nagement nt, Air Transp ansport Sup upport Services, s, Trav avel Bureau au

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

Introduc ucti tion n of New Foreign n Owne nership p Regula ulati tion n for Strate tegic c Secto tors Source: Investment Coordinating Board (BKPM)

SLIDE 18

17

Improving ing Inves estme tment Climate te

Improvin ing Indonesia’s Rank nk

n

Ease

f

Doing ng Busin ines ess (EODB)*

EODB 2017 Rank EODB 2016 Rank Change in Rank EODB 2017 Point nts EODB 2016 Point nts Change in Point nts

Overall 91 91 106 106 15 15 61.52 58.51 3.01 Startin ting a business 151 167 16 76.43 67.51 8.92 Dealin ing with th Constr tructio tion Permit it 116 113 3 65.73 65.26 0.47 Gettin ting Electric icity ity 49 49 61 12 80.92 77.60 3.32 Regis iste terin ing Property ty 118 123 5 55.72 53.24 2.48 Gettin ting Credit dit 62 62 70 8 60.00 55.00 5.00 Prote tectin ing Minority ity Investo tors 70 70 69 1 56.67 56.67 Payin ing Taxes 104 104 115 11 69.25 64.47 4.78 Tradin ing Across Borders 108 108 113 5 65.87 63.53 2.34 Enforcin ing Contr tracts ts 166 171 5 38.15 35.37 2.78 Resolvin ing Insolvency 76 76 74 2 46.46 46.48 0.02

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 2017 was published in October 2016

SLIDE 19

18

Other Progr gres ess

n

Economic ic Polic icy Packag ages es

14 Provinces have set 2016 Minimum Wage System in accordance to the Government Regulation (GR) No. 78/2015 (Kepulauan Riau, Kalimantan Barat, Nusa Tenggara Barat, Sumatera Barat, Jambi, Aceh, Kalimantan Selatan, Banten, Gorontalo, Nusa Tenggara Timur, Jawa Barat, Bali, Sumatera Utara, and Bangka Belitung)

Fair, Simpl plified ified & & Projec ectabl ble Wage System em

1

Total value of facilities and incentives for SEZs

amounted Rp 33.8 tn (as of September 2016)

18 companies benefitted from the simplification
f

fiscal incentive process with average processing time of 13.4 days (previously 2 years)

Devel elopm pmen ent

f

Spesia ial Econo nomic ic Zone (SZEs)

2

State-owned train manufacturer PT Industri Kereta Api (INKA) in Madiun, East Java, has begun its first passenger train exports by shipping 15 train wagon to Bangladesh.

Expo port-Or Orie iented ed Busines ess Credi edit (KURB URBE)

3

North Sulawesi has sucessfully exported coconut product through SOEs’ joint program

Deregu egulatio ion

n

Logis gistic ics Sector

4

SLIDE 20

19

Improving ing Inves estme tment Realiza izatio tion (Q (Q4-2016)

Source: Investment Coordinating Board (BKPM), compared to Q4-2015 period

Rp145.4 T Rp159.4 T Rp99.2 T Rp Rp101.3 T Rp46.2 T Rp Rp58.1 T 434 434,463 463

9.6% 15.6% 2.1% 25.8%

Q4-2015 Q4- 2016 2016 Q4-2015 Q4-2016 Q4-2015Q4-2016 Q4-2015 Q4-2016

*

* * person 37 375,982

IDR R tn

159.4 2013 2014 2015

Rising Direct Investments1

20 40 60 80 100 120 140 160 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FDI DDI TOTAL 2016

Mini ning ng Chemical cal & & Pharmace ceuti utica cal l Indus ustry try Rubbe ber & & Plasti tic c Indus ustry try Metal, l, Machi chine nery & & Electr ctroni nic c Indus ustry try

US$ US$74 745.9 mn US$ US$86 862.5 mn mn US$ US$259.3 mn mn US$ US$1,074.3 mn mn US$1,075.3 mn mn US$ US$494.1 mn mn

Food Indus ustry try

37.2%

US$ US$48.5 mn mn Constru tructi ction

45.2% 11.4% 18.1% 90.4% 55.9% 38.1% Inves estmen ent Realiz izatio ion

Electr ctrici city ty, Gas & & Water Suppl ply Paper & & Printi nting ng Indus ustry try

US$ US$22 225.8 mn

20.0%

Source: Investment Coordinating Board (BKPM), compared to Q4-2015 period

58.1 101.3

SLIDE 21

20

Investment Achievement nt in 2016: Summary

Source: Investment Coordinating Board (BKPM)

Investme tment t Growth th Workf kforce Absorptio tion Regio ional Investme tment Sectoral Contr trib ibutio tion (IDR tn tn) Investme tment t in New Projects ts Investme tment t Source (USD D mn mn)

* 2016 investment target was IDR 594.8 tn

Sulawes wesi, Malu luku & Papua reco corded ed the highes est inves estmen ent growth in 2016 16 2016* 16*

612.8

IDR tn tn

Java

11%

Kalimantan

26% 26%

Bali & Nusa Tenggara

16%

Sumatera

39% 39%

Sulawesi si

56% 56%

Maluku & Papua

58% 58%

Inves estment in outside e Java reach ched ed

46.4% 4%

from total l inves estmen ent in 2016 16

8 1.5 2.2 2.7 5.4 9.2 2 4 6 8 10 Others Netherland Hong Kong China Japan Singapore 20 40 60 80 100 2015 2016 Primary Manufacture Infrastructure & Services 95 95 89 89 236 236 355.8 214.4 188 188

2015

545.4 .4

IDR tn tn

12.4%

Increased

1.4 mn mn

f domestic workers

75.5%

New projects

24.5%

Expansion projects

SLIDE 22

Econom nomic ic Factor tor: Stron

ng

and Stab able le Growth Prospec pects ts Remain main Intact tact

Sec ection

n

2

SLIDE 23

22

Condu duciv ive Envir ironment nt Underp erpinn inning ing Strong Growth wth Fundam amenta entals ls

Largest Econo nomy in South East Asia 4th Most Popul ulous us country in the World; ; 64% in product ductiv ive age Manag nageabl able Infl flat atio ion n Rate Growing ing Middle Inco come Class

From

m commo

modity-based ed to manufact cturin ring g and serv rvice ce sector

rs via infrastru

ruct cture e devel elop

pmen

ent From

m consump

mption

n-led

ed to investmen ment-led ed grow

wth via a stron

ronger ger manufact cturin ring g sect ctor

r

and more

re investmen

tment t initia tiati tives es Policies es to maintain purc rchasing g power er to stimu mulate e dom

mestic

c econ

nomy
my in the midst
f weaken

kening g macro croecon economi

mic

c condition

ns

Budge get ref eform

rm as a

part rt of larger rger econ

nomi
mic

c refor

rm

m initiative Tax base e to be broa

adened

ed from m

ne

e reduce ce dependen ency cy on com

mmod

modities es Fuel el subsidies es sign gnifica cantly reduced ced and spen ending g redirect ected ed to more

re prod
ductive

e alloca

cation

Pru rudent debt manage gemen ment

Reform-Orie iente ted Admin inis istr tratio tion

Three ee main sources rces of financin cing g for r inves estmen ment need eds: State e and regi gion

nal

budget get, State Owned ed Enter erprises es and PPP Contin tinuing from

m 2015 policy

cy, infra rastr tructu ture re will be higher er than fuel el subsidy Fisca cal and non-fisca cal incen centives es to attra ract ct infrastru ruct cture e inves estmen ment and promote romote PPP Infrastru ruct cture e spen ending g focu cused ed on basic c infrastru ruct cture e proje

jects

cts

Large e and Stable Econom

my

Consi sist stent nt Budget et Reform New Econom

mic

ic Structure High gh Infrast struc uctur ure e Invest stmen ents

SLIDE 24

23

Indonesia’s Strong GDP

Growth th Prospe pect GDP Growth th Based on Expe pend nditur tures (%, YoY YoY)1 Strong ng GDP Growth th1

By expenditure 2014 2014 2015 2015 2016 2016 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot.

HH. consumption

5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 Non profit HH. consumption 23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.6 6.7 6.6 Government consumption 6.1 (1.8) 1.2 0.9 1.2 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (2.9) (4.0) (0.1) Gross Fixed Cap. Formation 5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 Exports 3.1 1.5 4.9 (4.4) 1.1 (0.7) (0.3) (0.9) (6.4) (2.1) (3.3) (2.2) (5.6) 4.2 (1.7) Imports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.4) (6.6) (8.7) (6.4) (5.1) (3.2) (3.7) 2.8 (2.3) GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0

%

Institution

ns

2017 GDP grow rowth (% (%YoY

Y)

2017 Budget 5.1 Bank Indonesia 5.0-5.4 IMF 5.1 World Bank 5.3 ADB 5.1 Consensus Forecast (March 2017) 5.2

5.0
3.0
1.0

1.0 3.0 5.0 7.0 9.0 2011 2012 2013 2014 2015 2016* 2017* 2018*

Brazil India Indonesia Malaysia Philippines Singapore Thailand

Favour urable ble GDP Growth th Compared to Peers2

1. Source: Central Bureau of Statistics of Indonesia (BPS) 2. Source: World Economic Outlook Database - October 2016; * indicates estimated figure

%

0.04 3.83 3.27 (2.07) (0.17) 3.75 3.30 (1.70) (0.40) 4.01 3.13 (1.77) 5.12 4.94 4.93 5.05 4.82 4.74 4.77 5.17 4.92 5.18 5.01 4.94

3.0
1.0

1.0 3.0 5.0 7.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2014 2015 2016

QoQ YoY

SLIDE 25

24

Strong ng and Stable ble GDP Performan rmance

Contri tribu buto tors to GDP Growth th by Secto ctor (%, YoY YoY) Spati tial l GDP Growth th

By sectors 2014 2014 2015 2015 2016 2016 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Agriculture, forestry, and fishery 5.2 4.9 3.6 3.3 4.2 3.8 6.5 2.9 1.6 3.8 1.5 3.4 3.0 5.3 3.3 Mining (1.2) 0.7 0.7 1.5 0.4 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.2 0.3 1.6 1.1 Industrial processing 4.5 4.9 5.0 4.2 4.6 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.4 4.3 Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 Big traders, wholesale, retail 6.1 5.1 5.2 4.4 5.2 3.8 1.6 1.4 3.7 2.6 4.1 4.1 3.6 3.9 3.9 Transportation and warehousing 7.0 7.6 7.7 7.2 7.4 5.8 5.9 7.3 7.7 6.7 7.9 6.9 8.3 7.9 7.7 Information and communication 9.9 10.7 9.8 10.1 10.1 9.7 9.3 10.6 9.2 9.7 7.6 9.3 9.0 9.6 8.9 Financial service and insurance 3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.4 12.8 8.6 9.3 13.6 9.0 4.2 8.9 Other Services 8.4 9.5 9.5 8.4 8.9 8.0 8.1 8.1 8.2 8.1 7.9 7.9 7.7 7.7 7.8 GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0

Java: 58. 58.5% 5% Sumatera: 22.0% Maluku & Papua: 2.5% Sulawesi si: 6. 6.0% 0% Kalimantan: 7. 7.9% 9% Bali & Nusa Tengga gara: 3. 3.1% 1%

Spati tial l GDP Growth th Contr tribu buti tion

Sumatera GDP Growth Q4 201 2016: 4.5% Java GD GDP Gr Growth Q4 201 2016: 5.5% Kalim imantan GDP Growth Q4 201 2016:2. 2.2% Sulawesi si GDP Growth Q4 201 2016:6. 6.8% Maluku & Papua GDP Growth Q4 201 2016: : 14.7% Bali i & Nusa sa Tenggara GD GDP Gr Growth Q4 201 2016: : 4.9%

After

experiencing negative growth in 2015, mining sector could grow positively. Mainly, due to the improvement in commodity prices.

Java,

as a major growth contributor, maintained its high growth, while other regions improved

Government tries to promote more value

added, as well as labor intensive sectors, to achieve higher growth, by providing various incentives, including investment relaxation, fiscal incentives, and easiness in doing business.

SLIDE 26

Exte tern rnal Facto tor: Improved External al Resil ilie ience nce

Sec ection

n

3

SLIDE 27

26

3.00
2.00
1.00

0.00 1.00 2.00 3.00 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 2012 2013 2014 2015 2016 2017 Non-OG OG Total

12
8
4

4 8 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* 2012 2013 2014 2015 2016** Goods Service Income Secondary Inc. Current Account

A Narro rower, er, Struc uctu tural rally ly-Str tronge nger r Current ent Account t Deficit it

Improving ing Current nt Account unt Defic icit it Strong ng Balance ance of Payment nts Supported d by Subs bstant antial ial FX Reserves to Mitig igate External nal Chal alleng nges Trade de Balance ance Surplus us Continue inues

Source: Bank Indonesia Source: Bank Indonesia US$bn US$bn

2015: CA Deficit (US$17.5bn) n) 2012: CA Deficit (US$24.4bn) n) 2013: CA Deficit (US$29.1bn) n) 2014: CA Deficit (US$27.5bn) n)

US$bn

(6.3) (1. 1.6) 5.1 0.9 (1.8)

Source: Bank Indonesia FX Reserves s as of Feb 2017: 7: US$1 $119.9bn n (Equiv. to 8.5 5 months s of imports s + servicing of government debt) Month US$bn

201 2016** **: CA Deficit (US$16.3b 3bn) n) 116.4 6.6 4.5 (1.8)

Source: BPS US$bn * Preliminary Figure ** Very Preliminary Figure

2.55 1.32 (1.23)

3

6 9 12 15

20

40 60 80 100 120 140 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 2012 2013 2014 2015 2016 2017

FX Reserves (LHS) Month of Import & Debt Service (RHS) 40 80 120 160

20
10

10 20 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* 2012 2013 2014 2015 2016** Current Account Capital & Financial Account Overall Balance Reserve Assets (RHS) 2015: Surplus US$7.59bn 2012: Deficit (US$ S$1.79bn) n) 2013: Deficit (US$ S$4.10bn) n) 2014: Deficit (US$ S$2.37bn) n) 201 2016: : Surplus US$8.83b 3bn

SLIDE 28

27

Exchang ange Rate In Line with Fundam amenta entals ls

Stable ble Movement nt of Rupi piah Th The ru rupiah con

ntinued to

to app ppre reciate in in February ry 2017 in in line wit ith maintained macroe

econo
nomic

ic stabilit ity and despi pite a backdro rop of

f gro

rowing globa

bal uncert
rtainty. On average, the

rupiah appreciated by 0.17% (mtm) to Rp13,338/USD in the reporting period, supported by forex sales by exporter corporations along with improving exports, and a net inflow

f

foreign capital to purchase tradeable government securities (SBN) along with positive investor perception towards the domestic economy.

Source: Bank Indonesia

IDR/US$

data as of 28 February 2017 IDR/USD Monthly Average Quarterly Average

Rupi piah Exch chang nge Rate Fared Relati atively ly Well ll Compared to Peers

Source: Bank Indonesia Source: Bank Indonesia

YTD 201 2017* vs 201 2016 Feb eb vs Jan 201 2017

* data as of 28 February 2017

2.50 3.21 2.8 1.59 2.83 1.29 0.31 0.17 1.66 0.33

0.49

0.04

3.49 2.75 2.64 1.76 1.23 0.9 0.25 0.12 0.03

0.27
0.89
2.10
3.00
2.00
1.00

0.00 1.00 2.00 3.00 4.00 TRY KRW ZAR INR BRL THB CNY IDR JPY MYR PHP EUR Point to Point Average

* data as of 28 February 2017

6.68 4.66 5.49 2.73 1.85 1.02 1.03 0.75

1.33
2.56
0.21

10.52 9.72 0.12

0.58
0.34
6.83
4.09
4.74
18.51
20.00
15.00
10.00
5.00

0.00 5.00 10.00 15.00 KRW BRL ZAR THB INR IDR MYR EUR PHP TRY Average Point to Point

SLIDE 29

28

Ample Lines of Defens nse Agains nst Extern ernal al Shocks ks



Ample level of FX reserves to buffer against external shock



FX Reserves as of February 2017: US$119.9 bn

South Korea



Renewed a 3 year KRW/IDR swap arrangement with the size of up to 10.7 tn KRW/IDR115 tn in March 2017

Austr tralia ia



Established a 3 year A$/IDR swap arrangement with the size of up to A$10 bn or IDR100 tn in Dec’ 2015

Chi hiang Mai Initia iativ ive Multil ilatera raliz izatio ion (CMIM) Agreeme ment



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



US$22.76 billion swap line with Japan currently in place



The quantum of the swap line was increased from US$12 bn in December 2013

IMF Global Financia ial Safety ty Net

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)

Bilate teral Regio ional Global FX Reserve

Ample Reserves Swap p Arrang ngement nt

SLIDE 30

29

Measur ures es to Manag age Extern ernal al Volatili tility ty

Pre-emptiv tive Measures

Implementing Crisis Management Protocol (CMP)
Implementing Bond Stabilization Framework (BSF)
Enhancing coordination between government institutions

and continuous dialogue with market participants

Specific policies in place to address crises enacted in

2017 budget law

Swap facility arrangements based on international

cooperation

Crisis is Management Protocol

Indicators to determine crisis level of Government

Securities Market condition (normal, aware, alert, crisis)

Several market indicators that are monitored daily:
Yield of benchmark series;
Exchange rate;
Jakarta Composite Index;
Foreign ownership in government securities
Policies to address the crisis at every level :

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

First Line

f

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 Owned Enterprises’s Budget Related BUMNs (min. level Aware) Social Securit rity Organiz izin ing Agency (BPJS)’s Budget BPJS (min. level Aware)

Second Line

f

Defense

State’s Budget State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) State Owned Enterprises’s Budget Related BUMNs (min. level Alert) Social Securit rity Organiz izin ing Agency (BPJS)’s Budget BPJS (min. level Alert)

Bond Stabi biliza zation ion Framewor work

Source: Ministry of FInance

SLIDE 31

30

50 100 150 200 250 300 350 50 100 150 200 250 300 2005 2007 2009 2011 2013 2015* Feb 2016* Apr 2016* Jun 2016* Aug 2016* Oct 2016* Dec 2016* Public (Govt. & BI) Private Total (RHS)

Streng ength thened ned Private te Extern ernal al Debt Risk Manag agem ement nt

(US$bn)

Source: External Debt Statistics of Indonesia, March 2017 Source: Moody’s Statistical Handbook, November 2016

Regu gulation Key Points Phase e 1 Jan 1,2015 – Dec 31,2015 2015 Phase e 2 Jan 1,2016 – Dec 31,2016 2016 Phase e 3 Jan 1, 2017 and beyon

nd

Object ect of Regulation

n

Governs all Foreign Currency Debt Hedgi ging g Ratio < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** Liquidity Ratio ( < 3 months) 50% 70% Cred edit Rating Not applicable Minimum rating of BB- Hedgi ging g transact ction

n to meet

eet hedge ge ratio tio not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanctio tion As of Q IV-2015 Applied

External al Debt / GD GDP (%)

(US$bn) 23.3 27.3 34.7 33.0 29.5

50.4

23.4 26.5 33.3 36.0 37.5 55.4

21.4 25.8 36.4 34.7 39.3 55.5

0.0 10.0 20.0 30.0 40.0 50.0 60.0 India Philippines Thailand Indonesia Brazil Turkey 2016F 2015 2014

Debt t Burden n Indica cato tor (Exte xterna nal l Debt / GDP) Remains ns Comparable ble to Peers Despi pite te Increasing ng Trend of Externa nal l Debt Enco cour uraging ng Corpo porate tes Compli lianc nce

Total Ext. Debt: : US$320 20bn Private e Sector

Ext. Debt:

US$159 59bn

(%)

2,371

161 Q3 Q3-2016 (∑n = 2,532) 2)

Comply Not Comply

(6.4%)

(93.6%)

2,243

289 289 Q3 Q3-2016 (∑n = 2,532)

Comply Not Comply

(88.6%) (11.4%)

> 3 – 6 mont

nths

hs < 3 mont

nths

SLIDE 32

31

Manag ageable able External rnal Debt Profile file

... ...shor

rt

term rm non-bank ank corpor rporate deb ebt (non

n

affil ilia iatio ion) n) repres esent nts

nly

9.1% %

f

total al private external ernal deb ebt

Priv ivat ate Short-Term1 Priv ivat ate Non-Bank ank External nal Debt bt Posit itio ion

Af Affiliation

n

Non Af Affiliation

n

US$161.2 Bn

r

50.3%

f Total Ext.

Debt US$112.8 Bn

r

70.9%

f Private Ext.

Debt US$20.9 Bn

r

13.2%

f Private
Ext. Deb

US$10. 0.9bn

r
r

6.8%

f Private

Ext. . Debt US$14.4 Bn Bn

r
r

9. 9.1%

f Private

Ext. . Debt

Publ blic ic Long Term 1 Priv ivat ate Bank

US$25.3bn bn

r

15. 5.9% 9%

f Private
Ext. Debt

US$159 59bn bn

r

49.7%

f total
Ext. Debt

US$46. 6.3bn bn

r

29. 29.1%

f Private
Ext. Debt

External Debt Position as of January 2017

1 Based on remaining maturity

Source rce: External Debt Statistics of Indonesia, March 2017

US$320.3 bn

SLIDE 33

Fiscal al Perf rform

rmance

and Flex exib ibil ilit ity: More Fiscal al Stim imulus lus with th Prudent dent Fiscal al Policy

licy

Sec ection

n

4

SLIDE 34

33

Integrate ted Reform rm to Provid ide Higher Quality ity

f Economi

mic Growth wth

.. ...syne ynergy gy between ween authorit ities es to driv ive econo nomy naviga igatin ing the challen enges es

Productive

and realistic budget

Credible

budget execution

Policy

to maintain consumption and improve investment climate

Economic

policy packages

Inflation

management

Monetary

policy to support economic stability

Accommodative

macroprudential policies Fisc scal Real Sector Monetary & Financ ncial Sector

Synergy in reform to boost the more susta tain inable and inclusiv ive growth

Source: Ministry of FInance

SLIDE 35

34

Long Term Strateg tegie ies to Achieve Sustain ainable able Growth wth

…stim imuli to mainta ntain in purch chasing ng power er

 Consumptio

tion is still the largest contr trib ibuto tor to Indonesia’s GDP

 Private

consumption has been a key factor driving Indonesia’s economic growth in recent years

 The

government has designed stimulus program to main inta tain in and enhance purchasin ing power for households

 The

government has increased non-ta taxa xable income level and adjuste ted wage policy to ensure that the lowest income bracket has the greatest support

 Funds

are targeted at not

nly

to improve basic village infrastr tructu ture but also to create te jobs through labor intensive projects as well as

ther

job creation programs

u Fuel price and electric icit ity adjust stment Predic ictable labour wages Boostin ing housi sing develop

pment

Elimination ion of luxury goods s tax for consumer goods 2 months addit ition ion of rice subsi sidy program Rural transfer for productiv ive spendin ing Ease of land certific icatio ion and licensi sing for street vendor

rs

Maint ntaining ining Pu Purchasi sing Power er

Increase se non-taxable income limit Stabil iliz ized price for meat products

The Virtuou

us

s Cycle of Purchasing sing Power er Stimul uli

SLIDE 36

35

Long Term Strateg tegie ies to Achieve Sustain ainable able Growth wth

…stim imuli to promote inves estmen ents

Licensin ing Incentiv tives Tax Incentiv tives Other Incentiv ives Busin iness and Infrastr tructu ture Incentiv tives

Tax incent ncentiv ives

n property

Speci cial al econo nomic ic zones Relax axat atio ion n of negat ativ ive foreig ign n investment nt list Integrat ated logistic ics zones CPO fund Support for export-orie ient nted indus ustrie ies Villag age-ci city logistic ics improvement nt Accelerat atio ion

f power

infras astruct uctur ure Inco come tax relie ief f for labor intens nsiv ive indus ustrie ies Permit & licens nsing ing simplfi ficat catio ion One map polic icy Ince cent ntiv ives for footwear ar and appar arel indus ustrie ies Simplif ifica catio ion of import licens nsing ing for drugs and raw food Accelerat ating ing infras astruct uctur ure development nt Water management nt and regul ulat atio ion Tax incent centiv ives es for REITS Relax axat atio ion n of entry visa a polic icie ies Expans ansio ion n of coverag age and interest subsid idy for MSME Dwelling ing time

ptim

imiz izat ation Oil refine inery development nt Aviat iatio ion sector incent ntiv ives Downs nstream am indus ustrie ies Debt bt To equit ity ratio io

SLIDE 37

36

Build lding ing a Credible ible and Realis istic tic Budget et

…providing more certainty to all stakeholders

1: Unaudited Source: Ministry of FInance INDICATOR 2016 2016 2017 2017 Realization

n1

APBN Econ

nomi
mic

c growth (%, yoy) 5.0 5.1 Inflation

n (%, yoy)

3.0 4.0 3-Mon

nth Trea

easury Bill (SPN) (%) 5.7 5.3 Exch change ge Rate (Rp/US$) 13,305 13,300 ICP (US$/barrel) 40 45 Oil Prod

duct

ction

n (thousand barrel/day)

829 815 Gas Prod

duct

ction

n (thousand barrel oil equivalent/day)

1,184 1,150

Credible and realistic budget with 2016 outlook number

used as a base for formulating the 2017 State Budget

Tax revenue grew 3.5%, between 2015 and 2016, which

includes the contribution of IDR 109.5 trillion from tax amnesty

Improved efficiency in government expenditure
Discipline in managing budget deficit

Descr crip iptio ion n (IDR Tril illio ion) n) 2016 2016 2017 2017 Revis ised Budg dget Outlook Real aliz izat atio ion1 % realiz izat atio ion n to revis ised d budget % realiz izat atio ion n to outlook State budget % growth to realiz izat atio ion

A. A. Reven enues es and grants 1,786.2 1,582.9 1,555.2 87.1% 98.3% 3% 1,750.3 50.3 12.5%

I. Domes

estic reven enue 1,784.2 1,580.9 1,547.0 86.7% 97.9% 9% 1,748.9 48.9 13.1%

1. Tax revenue

1,539.2 1,320.2 1,284.9 83.5% 97.3% 1,498.9 16.7%

2. Non tax revenue

245.1 260.7 262.0 106.9% 100.5% 250.0

4.6%
II. Gra

rants 2.0 2.0 8.2 410.0% 410.0% 1.4

82.9%
B. Expen

enditure re 2,082.9 1,898.6 1,860.7 89.3% 98.0% 0% 2,080.5 80.5 11.8%

I. Total Central govern

ernmen ment expen enditure re 1,306.7 1,195.3 1,150.2 88.0% 96.2% 2% 1,315.5 15.5 14.4%

1. Ministerial spending

767.8 672.0 680.8 88.7% 101.3% 763.6 12.2%

2. Non ministerial spending

538.9 523.3 469.4 87.1% 89.7% 552.0 17.6%

II. Transfer

er to region gion and village ge Fund 776.3 703.3 710.4 91.5% 101.0% 764.9 7.7%

1. Regional transfer

729.3 659.1 663.7 91.0% 100.7% 704.9 6.2%

2. Village fund

47.0 44.2 46.7 99.4% 105.7% 60.0 28.5% C. C. Prima mary balance ce

105.5
126.4
122.7

116.3% 97.1% 1%

109.0
11.2%
D. Surp

rplus (def eficit) cit)

296.7
315.7
305.4

102.9% 96.7% 7%

330.2

8.1% % of GDP

2.35%
2.50%
2.46%

104.7% 98.4% 4%

2.41%
2.0%
E. Financin

cing 296.7 315.7 330.6 111.4% 104.7% 330.2

0.1%

SLIDE 38

37

A More Realis istic tic 2017 Tax Revenue nue Target et

…taxation policies are directed at expanding the tax base and increase compliance

Source: Ministry of FInance 897.7 1,011.2 1,069 90.8 233. 3.5 249.9 1,271.7 600 700 800 900 1000 1100 1200 1300 1400 2014 2015 2016 2017 Realization Outlook

1,146.9 1,240.4 1,284.9 99.2 248.9 255.6 1,498.9

800 900 1000 1100 1200 1300 1400 1500 1600 2014 2015 2016 2017 Realization Outlook

19 19.5% 5% 8.2% 2% 29 29.9% 9% 3.4% 4% 3.6% 24 24.1% 1% (2 (2.6% 6%) 16 16.7% 25 25.9% 9% 38 38.7% 7% 8.2% 2% 6.0% 0% 30 30.4% 4% 5.7% (3 (3.6% 6%) 19 19.0% 0%

Target to target growth Realization to target growth Realization to Realization growth

IDR tn tn IDR tn

Increasing the tax base and compliance i.e. through IT and database improvement Providing tax incentives to support competitiveness and investment climate Improving tax regulation i.e. through the amendment of laws Using excises to control consumption of certain goods and minimize negative externality Optimizing international tax arrangement to enforce transparency 2017 Main n Taxati tion n Poli lici cies Non-Oil l and Gas Tax Colle lecti ction Tax Colle llecti tion Target t (All l sources includ luding Oil & Gas)

SLIDE 39

38

Indone nesian ian Tax Amnesty ty: A Success Story ry

Tax amnesty ty result1 Declaratio ion & repatr tria iatio tion (Countr try

f

Origin in) Complia iance rate te in submit ittin ting annual tax report

Source: Ministry of Finance

Count untry Offs fshore Decl clar arat atio ion IDRtn % Singapore 750.98 69.21 Virgin Islands 78.00 7.19 Cayman Islands 56.43 5.20 Hong Kong 52.19 4.81 Australia 40.18 3.70 Count untry Repat atriat iatio ion IDRtn % Singapore 83.61 64.77 Cayman Islands 16.51 12.79 Hong Kong 16.18 12.53 China 3.64 2.82 Virgin Islands 2.55 1.98

Source: Ministry of Finance

Reven enue IDR 109.5tn tn ~0.9% % of GDP

Asset declared IDR 4,296.3tn ~34.6% of GDP

Note: Figures in IDR trillion 1 Data as of 31 December 2016. End of Tax Amnesty Period II

3,143.1 1,012.6 140.5 Onshore Declaration Offshore Declaration Repatriation 103.2 0.7 5.5 Redemption Money Preliminary Evidence Payment Tax Arrears Payment 56.2% 59.2% 60.4% 62.3% 52% 54% 56% 58% 60% 62% 64% 5 10 15 20 25 30 35 2013 2014 2015 2016 Registered Taxpayers Registered Taxpayers – Tax Report Required Submitted Tax Report Compliance Rate = Submitted Tax Report/Registered Taxpayers-Tax Report Required

Source: Ministry of Finance

Total

assets declared in the tax amnesty program as

f

December 31, 2016 amounted to an equivalent

f

34.6%

f

2016 GDP

Tax

reform results positive impact to the broadening the tax base, as well as restoring trust between taxpayers and tax authority

Referring

to research from an independent body, Indonesia’s tax amnesty is the most successful tax program in the world (based

n

revenue and declared assets)

SLIDE 40

39

More Compreh ehen ensiv ive Tax Reform rm

...ex .expec pected ed to posit itivel ely impact ct the trajec ectory

f

the econo nomy in both the short and long term

Tax Amnesty ty as the Mile lesto tone ne of Tax Reform

Optim imizin izing the tax amnesty ty momentu tum (last t period – until il March 2017 2017– and post program benefits its) 1. Intensive communication for the last period up to March 2017 2. Encouraging SMEs participation by allowing them apply the program collectively 3. Optimizing new database from tax amnesty participants 4. Improving law enforcement (through audit and investigation)

658.7 619.9 723.3 873.9 980.5 1077. 77.3 1146.9 1240.4 1283.6 1495.9 13.3% 11.1% 11.2% 11.8% 11.9% 11.9% 11.4% 10.7% 10.3% 11.0% 0% 2% 4% 6% 8% 10% 12% 14% 200 400 600 800 1000 1200 1400 1600

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Human Resources

To Improve Tax Rati tio in 2017

Tax (IDR tn) Tax Ratio to PDB (RHS)

Business Process

Improvement of the human

resources and

rganization

capacity and capability

The

establishment

n

tax reform task force team

Discipline on Plan-Do-Check-

Action to monitor collection

Stronger law enforcement
Authorization to gather 3rd

party data (banking)

Implementation of

Automatic Exchange of Information

Simplification of tax

registration

Regulation

General Provision and

Administration of Taxation Law

VAT Law
Income Tax Law
Stamp Duty Law

IT Support

Improvement of IT and

communication system

Improvement on public

data access for individual data management

Enhancement of data

management

SLIDE 41

40

Revenue nue and Expenditure enditure Profile file by Region

…effective expen pendit diture e polic icy y as a tool to promote e equalit ity y across Indo done nesia ia

SUMATERA Revenue nue 141.1

a. Tax

66.9

b. Custom & Excise

6.8

c. Non Tax Revenue

70.4 Expendit nditur ure 232.3

a. Transfer to Region

176.1

b. Ministerial

Spending 56.2 Nett (88.2) JAVA Revenue nue 1.143.2

a. Tax

884.9

b. Custom & Excise

161.6

c. Non Tax Revenue

96.6 Expendit nditur ure 302.8

a. Transfer to Region

201.8

b. Ministerial

Spending 101 Nett 840.4 BALI & NUSRA Revenu enue 15.5

a. Tax

11.7

b. Custom & Excise

1.5

c. Non Tax Revenue

2.3 Expendit enditur ure 56.4

a. Transfer to Region

39.5

b. Ministerial Spending

17.0 Nett (40.9) KALIMANTAN Revenue nue 86.0

a. Tax

32.0

b. Custom & Excise

1.1

c. Non Tax Revenue

52.9 Expendit nditur ure 93.9

a. Transfer to Region

73.7

b. Ministerial

Spending 20.3 Nett (7.9) SULAWESI Revenue nue 19.7

a. Tax

16.6

b. Custom & Excise

0.6

c. Non Tax Revenue

2.5 Expendit nditur ure 104.5

a. Transfer to Region

73.3

b. Ministerial Spending

31.2 Nett (84.8) PAPUA & MALUKU Revenue nue 18.4

a. Tax

10.7

b. Custom & Excise

1.7

c. Non Tax Revenue

6.0 Expendit nditur ure 89.6

a. Transfer to Region

71.7

b. Ministerial Spending

17.9 Nett (71.3) Notes: 1. Average data 2014 - 2016 2. Revenue  amount collected from certain region for central government budget 3. Expenditure  amount spent for certain region from central government budget 4. Figure in IDR trillion Source: Ministry of Finance

SLIDE 42

41

Commitme itment to Continu tinue Strength ngthening ning Produc uctiv tive Spend ndin ing

...r .rea ealloca catin ing budget et to produ ductive ctive activ ivit ities ies, includin ding infrastructure, e, health, educa catio ion, n, and non-en ener ergy gy subsid idy

Source: Ministry of Finance

416.1 104.0 77.3 387.3 0.0 50.0 100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 2011 2012 2013 2014 2015 2016 2017 Education Health Energy Subsidy Infrastructure

CONTINUING THE REFORM INITIAL L REFORM

% to total budget allocation for subsidy

Focus on produ

ductiv tive spendin ing to support growth momentum and improve basic services

Preserving in

infrastr tructu ture acceleratio tion and socia ial welfare spending to improve equality, and maintain consumption growth

Targeted energy subsidy in the form of 3 Kg LPG subsidies

and electricity subsidy and increased non energy subsidy allocation

Continue the improvement of intergovernmental transfer,
esp. village fund, to spur growth through regions

Budget t Re Re-all lloca cati tion Budget t allo locati tion for subsidy

48.3% 51.7% 10% 20% 30% 40% 50% 60% 70% 80% 90% 2012 2013 2014 2015 2016 2017 Budget Energy Non Energy

IDR tn

SLIDE 43

42

Educatio tion and health th spending ing well deliv iver ered in 2016

…investment to improve the quality

f

human capit ital in the long ng term

Education ion Expenditure re Health h Expenditure re

2015: 95.5% of budget 2016: 89.0% of budget 2015: 89.6% of budget 2016: 88.6% of budget Immu munization

n for

r 0 – 11 11 mon

nth

ths old infant Realization

n: 4,006,979

infants Target 4,001,210 infants Univer ersity schol

lars

rship for r poor

r

studen ent (Bidikmi misi) Realization

n: 331.9 thousand

college students Target: 306 thousand college students Health Insura rance ce Subsidy (PBI BI) Realization

n: 91.9 million

people Target 92.4 million people School

ol Opera

eration

nal

Assistance ce (BOS OS) Realization

n: 8.0 million

students Target: 8.2 million students Vacc ccine availability in Community ty Hea ealth th Centr tre e (Puskes kesma mas) Realization

n: 81.5%

Target 92.5% School

ol Rehabilitation

Realization

n: 30,300 rooms

Target: 27,200 rooms Malaria ria Era radica cation

n

Realization

n: 247 cities

Target 245 cities Indon

nes

esia Smart Card rd (KIP) Realization

n: 19.4 million

students Target: 19.5 million students Accre credited ed Region

nal Hospital

Realization

n: 201 hospitals

Target n/a

Source: Ministry of Finance

50 100 150 200 250 300 350 400 450 Budget Realization Budget Realization IDR tn Ministerial Spending Non Ministerial Spending Regional Transfer Financing 20 40 60 80 100 120 Budget Realization Budget Realization IDR tn Ministerial Spending Non Ministerial Spending Regional Transfer Financing 408.5 390.2 416.6 370.5 74.8 67.0 104.1 92.3

SLIDE 44

43

Better ter Targetin eting

f

Subsid idy Polic icy in 2017

...m .more budg dget et alloca cated ed to non ener ergy gy subsid idy and prio iorit ity progr grams to improve basic servic ices es

Bidik ikmis isi Scholar arship 50 100 150 200 250 300 350 400 450 2009 2010 2011 2012 2013 2014 2015 2016 2017 APBN IDR tn

416.1

2.7 2.8 3.0 2.7 2.8 3.3 3.8 5.0 5.0 0.0 1.0 2.0 3.0 4.0 5.0 6.0 50 100 150 200 2009 2010 2011 2012 2013 2014 2015 2016 2017 APBN APBNP % of APBNP IDR tn % Basic & complete immunization for 92% of 0-11 months old infants Immuniz izat atio ion 94.4 million people Health Insur urance ance Subs bsid idy (PBI) Stunting prevention to 29.6% of children below 2 years old Stunt unting ing Prevent ntio ion 700 regencies Communit ity Health Centre e (Puske kesmas) 6.7 million people Family Plan n Program am (KB) Budget t for Educ ucati tion n Program Budget t for Healt lth Program 360.5 thousands college students 19.5 million students Indone nesia ia Smart Card (KIP) 101,100 teachers 10,200 lecturers Certif ific icat atio ion School Rehabil abilit itat atio ion 41,128 rooms 8.5 million students School Operat atio ional nal Assistance ance (BOS OS) 107 Colleges/Universities Operat atio ional nal Assistance ance for Colleges

SLIDE 45

44

Budget et Alloc

catio

ion Between een Cent ntral al & & Local al Gover ernmen nment Improves

ves

…promoting better quality

f

budget spending from local government

65.85% 22.67% 0.98% 2.65% 7.85%

Gradually increases Village ge Fund, with average allocation for each village is IDR800.5 mn. Village ge Fund (IDR60.0 tn tn) Improving efficiency and effectiveness of Specia ecial Auton

nomy

my & Spec ecial Region

n of

Yogyaka kart rta Fund. (Papua IDR5.6 tn; West Papua IDR2.4 tn; Aceh IDR8.0 tn; DTI Papua & West Papua IDR3.5 tn) Specia ecial Auton

nomy

my & Speci ecial Region

n Yogyaka

karta rta (IDR20.3 tn tn) Incen centive e Fund (IDR7.5 tn tn) Minimum 25% (IDR125.9 tn) of Gen ener eral Transfer r Fund has to be used for public service facility development acceleration Gen enera eral Transfer er Fund (IDR503.6 tn tn) Physical Specia ecial Transfer er Fund allocation is based

n regions’ proposal

and national priorities Specia ecial Transfer er Fund (IDR173.4 tn tn) Incen centive e Fund allocation is increased (317 regions being rewarded, The lowest incentive is Rp7,5 billion, The highest incentive is Rp65,3 billion)

Implementation
f

policy to allocate te spendin ing to regio ions

2017

budget has higher allocatio tion

f

Transfer to Region / Village Fund compared to the Ministerial Spending

Minim

imum 25%

f

general transfer fund has to be used for public service infrastructure 2017 Transfer to Regio ions and Village Funds Transf sfer to Regio ions/Vil /Village Funds s & Minis iste teria ial Spendin ing

IDRtn 2013 2014 2015 2016 2017 Budget Transfer to Region 513.3 573.7 602.4 663.7 704.9 Village Fund

20.8

46.7 60.0 Total Interg rgov

vern

rnme mental Transfer 513.3 573.7 623.1 710.4 764.9 Minis isteria ial Spendin ing 582.9 577.2 732.1 680.8 763.6

SLIDE 46

45

Polic icy

f

Infrastr truc uctur ture Spend nding ing and Trans nsfe fer to Regio ions

…developing the nation through gh target eted ed spendi nding ng

In 2017, minimu mum m 25% of genera ral transfer er fund has to be used for public service infrastructure

Kali limanta ntan 2016 : 2,889.9 2017 : 3,641.6 2016 : 597.9 2017 : 634.5 2016 : 2,694.4 2017 : 4,117.1 2016 : 606.2 2017 : 1,042.6 2016 : 3,749.1 2017 : 3.686.3 2016 : 1,680.2 2017 : 1,941.7 Sumatera 2016 : 3,895.4 2017 : 3,545.7 2016 : 1,044.8 2017 : 1,320.4 2016 : 3,229.4 2017 : 3,257.8 2016 : 461,1 2017 : 1,147.5 2016 : 661.3 2017 : 1,207.3 2016 : 101.1 2017 : 308.2 Ja Java 76 86 114.2 145.5 168.5 154.1 256.1 317.1 387.3 8.1 8.3 8.8 9.8 10.2 8.7 14.2 15.2 18.6 5 10 15 20 100 200 300 400 500 2009 2010 2011 2012 2013 2014 2015 2016 2017 % IDR tn Anggaran Infrastruktur % thd Belanja Negara (RHS) Infrastructure budget % of total state expenditure (RHS) Maluku uku & Papua ua Sulaw lawesi Bali li & Nusa Tenggara Infrastru tructu cture Budget t Allo loca cati tion 2017 2017 Infr fras astruc uctur ure e Budge get Alloca catio ion (IDR billio ion) and 2016 realiz izat atio ion 2017 Constru tructi ction n Target Roads ds 815 km Bridg dges 9,399 m Rail ilway ays 550 km Airports 13 airports Seap aports 55 locations Termina inal 3 location 2016 Constru tructi ction n Reali lizati tion Road (km km) Target: 2,139 Realization: 2,529 Airports Target: 15 (2019) Realization: 3 Bridg dges (km) Target: 16 Realization: 10.6 Rail ilway ays Target: 142 Achievement: 33*

* Land issues are in progress

Dam Target: 37 Achievement: 37 Irrig igat atio ion n (km) Target: 4,889 Achievement: 1,025

SLIDE 47

46

Manag agement ent

f

Contin tingent ent Liabilities abilities

Govern rnme ment Guara rantee Prog

gra

ram m and Port rtfol

lios

ios 2008 08 - Present

Central Government Guarantees are carefully provided to

meet various item of infrastructure programs

Until Sept 2016, total guarantee committed are USD16,24

bn (eq. IDR211,1 tn) for 6th programs, and

utstanding/exposure were USD5,59 bn (eq. IDR72,6 tn)

SLIDE 48

47

Financ ncing ing Polic icy 201 2017: : General Object ectiv ive & Polic icy

To conduct active debt portfolio To manage debt-to- GDP ratio To optimize the use of external and domestic loans To

ptimize

currency mix of issuance

General Policy

To support market development To enhance public accountability as part

f

transparent Government debt management To meet financing needs at

ptimum

cost and tolerable risk

Source: Ministry of Finance

SLIDE 49

48

Budget et Financ ncing ing Breakd kdown in 201 2017

Breakdo kdown

f

Budget Financin ing IDR tn US$ bn Government Debt (net) t) 384.69 69 28.36 Government Securitie ities (net) t) 399.99 99 29.49 Issuance 684.84 50.49 Redemption & Cash Management (281.84) (20.78) Debt Portfolio Management (3.00) (0.22) Domestic tic Loans (net) t) 1.49 0. 0.11 11 Withdrawal 2.50 0.19 Redemption (1.01) (0.07) Foreig ign Loans (net) t) (16.79) (1.24) ) Withdrawal 48.29 3.56 Redemption (65.08) (4.80)

Source ce: Ministry of Finance

Debt (Gross) IDR735.6tn

(eq. USD 55.1bn)

Redemption IDR350.9tn

(eq. USD 26.3bn)

Budget Financing IDR330.2tn

(eq. USD 24.7bn)

Non-Debt Financing IDR54.5tn

(eq. USD 4.1bn)

SLIDE 50

49

Governm ernment ent Securi rities ties: Indic icativ tive Financ ncing ing Plan for 2017

…prudent and sustain inabl ble fiscal managem emen ent

Governme rnment Issuance Targets Interna rnationa ional Bonds

Issuance of international

bonds as a complement to avoid crowding out the domestic market consists of USD, YEN or EURO global bonds;

International bond issuance

can be maximized up to 25% from gross target, depends on financing need

Source ce: Ministry of Finance

Domestic tic Bonds

Weekly kly Aucti tion: n: Conv nventi ntiona nal l secur uriti ties 24 x Islamic c securiti ties 24 x Non-Auc ucti tion: n: Retail bonds Private te Placement t Based on request Front

nt Loadin

ing Issuance For

r Budget Financin

ing

Pre-funding to optimize cost ahead of potential Fed rate

hike

Anticipate developments in global environment
Government Securities target for 1st semester 2017 is

59.3% from gross issuance target

Government Securities target in Rupiah for 1st semester

2017 is 45.7% from gross issuancce target

Debt Securities 71% Sukuk

29% ATM for Government Securities (SBN): 7-9 years.

Instruments ts Budget Indic icativ tive target (IDRbn) Indic icativ tive target (USDbn)* Government securitie ities (net) t) 399,993 29.98 Government securitie ities (gross) 684,835* 51.33 33 Compositio ition Local currency 80% Foreign currency 20%

* USSD/IDR: 13,343 as of 31 Jan 2017 ** Gross financing is not included auction for cash management purposes amounted IDR 119 trillion 3 month and 6 month T-bills)

SLIDE 51

50

Discip iplined lined and Sophis istic ticated ted Debt Portf tfolio lio Manag agem ement ent

Stable ble Debt to GDP Ratio Over the Years Weighte ted Average Debt t Matur urity ty of ~9.0 .0 Years (As of Feb.

b. 2017)**

US US$ bn

Remarka kable ble Debt t Reduc ucti tion n Initi tiati tive Over the Past t 10 Years

Change in Debt to GDP Ratio io (2006 – 2016) (%) Source: IMF World Economic Outlook Database, October 2016

Well l Diversified Across Different nt Currenc ncies

% of Yearly Issuan ance Government Debt / GDP (%) Source: Ministry of Finance Source: Ministry of Finance Source: Ministry of Finance

(1)

Years * Based on 2016 realization, ** Using GDP assumption in 2016 R-Budget, ***SDR, AUD, and other

35.3
31.9
29.0
11.2

2.8 11.0 11.4 18.9 29.9 32.9 34.6 40.8 64.9 70.1 117.0

60.0

0.0 60.0 120.0 180.0 240.0 300.0 Philippines Turkey Indonesia India Germany Poland Thailand Brazil Italy Colombia Japan Malaysia South Africa United States United Kingdom Chile Australia

131 131 141 141 136 136 155 155 175 175 203 203 69 69 64 64 58 58 54 54 55 55 55 55 23.1 23.0 24.9 24.7 27.4 27.9 0.0 5.0 10.0 15.0 20.0 25.0 30.0 50 100 150 200 250 300 2011 2012 2013 2014 2015 2016* Securities (LHS) Loans (LHS) Govt Debt / GDP (%) (RHS) 9.7 9.6 9.7 9.4 9.0 9.0 8.0 8.3 8.5 8.8 9.0 9.3 9.5 9.8 10.0 2012 2013 2014 2015 2016 Feb-17 56% 53% 57% 56% 58% 58% 24% 29% 29% 31% 30% 30% 14% 12% 9% 8% 7% 7% 3% 3% 3% 3% 4% 4% 3% 3% 2% 2% 1% 1% 0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 2016 Feb-17 Others*** EUR JPY USD IDR

SLIDE 52

51

Well Balanc nced ed Matur turity ity Profile file With Strong Resilienc lience Agains nst External rnal Shocks ks

136 184 180 100 136 95 95 168 45 126 85 53 100 29 120 53 52 97 5 71 22 22 7 15 26 23 20 25 87 109 134 111 124 114 103 87 114 87 44 45 20 19 17 16 16 11 29 5 23 28 1 1 1 31 21 28 28 39

50 100 150 200 250 300

2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045

IDR-Denominated Other Currencies

Declin inin ing Intere rest Rate Risks ks Debt Maturit rity Prof

fil

ile

%

Declin inin ing Excha hange Rate Risks ks

%

Upcom

min

ing Maturit ritie ies (Next xt 5 Years rs)

% IDR tn tn

Source: Ministry of Finance 16.2 16.0 14.8 13.7 12.3 11.6 22.5 23.2 21.0 20.7 17.8 19.8 5 10 15 20 25 2012 2013 2014 2015 2016* Feb-17 Variable Rate Ratio¹ Refixing Rate² 10.2 11.7 10.7 12.2 11.7 10.9 44.4 46.7 43.4 44.5 41.8 41.7 10 20 30 40 50 2012 2013 2014 2015 2016* Feb-17 FX Debt to GDP Ratio** FX Debt to Total Debt Ratio 7.2 8.6 7.7 8.4 6.6 9.2 21.5 21.8 20.1 21.4 23.0 23.4 32.4 33.4 33.9 34.7 36.5 36.9 0.0 10.0 20.0 30.0 40.0 2012 2013 2014 2015 2016* Feb-17 In < 1 year In < 3 year In < 5 year

1 Variable Rate Ratio is defined as ratio between debt instruments with variable rate divided by total debt instruments (variable + fixed rates) 2 Refixing Rate ratio is defined as ratio between debt instruments with variable rate + debt instruments with fixed rate maturing in 1 year divided by total debt instruments (variable + fixed rates)

*Preliminary Figures **Using GDP assumption in 2017 Budget.

SLIDE 53

52

Profile file

f

Tota tal Centr tral Governme rnment nt Debt

Foreign Ownershi hip p of Government t Securiti ties at Longer Tenors Holders of Government t IDR Bonds – Compositi tion Febr bruary 2017 Governm nment nt Debt t Outstan tanding ng

30.80 32.98 32.54 38.13 38.12 38.48 39.10 39.16 37.5 37.85 37.47 32.58 30.49 33.76 30.83 37.85 32.89 38.94 39.77 39.9 34.89 34.5 36.63 36.53 33.70 31.04 23.95 28.63 21.95 21.07 22.5 27.27 28.03 20 40 60 80 100 2011 2012 2013 2014 2015 Mar-16 Jun-16 Sep-16 Dec-16 Jan-17 Feb-17 Foreign Holder Domestic Non Banks Domestic Banks

34.34 31.18 29.96 25.87 23.84 21.14 20.67 20.63 65.66 68.82 70.04 74.13 76.16 78.86 79.33 79.37

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2011 2012 2013 2014 2015 2016 Jan-17 Feb-17

Loan Government Securities

209.41 199.48 204.51 194.55 229,4 258,03 265.98 USD bn 268.91 Source: Ministry of Finance 11.87 7.84 5.2 4.65 3.23 2.69 3.5 3.4 5.2 24.97 19.32 18.29 18.96 13.1 13.73 23.1 19.8 19.1 63.16 72.84 76.5 76.39 83.66 83.57 73.4 76.8 76.7 30.80 32.98 32.54 38.13 38.21 39.10 37.55 37.8 37.5 20 40 60 80 100 2011 2012 2013 2014 2015 Jun-16 Dec-16 Jan-17 Feb-17

0-1 1-5 >5 Foreign Ownership to Total

(%) (%)

SLIDE 54

53

Ownersh rship ip of IDR Tradable able Central ral Governm ernment nt Securi rities ties

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) Descript ription ion Dec-14 14 Dec-15 15 Jun-16 16 Dec-16 16 Feb-17 17 Banks ks* 37 375. 5.55 31.04 04% 350. 0.07 07 23.95 95% 361. 1.54 54 21.95 95% 399. 9.46 46 22.53 53% 517.52 28.03% Govt Instit itutions ions (Bank k Indone

nesia**)

*) 41.63 3.44% 148.91 10.19% 150.13 9.12% 134.25 7.57% 49.26 2.67% Bank Indonesia (gross) 149.07 9.05% 157.88 8.90% 168.42 9.12% GS used for Monetary Operation

1.05
0.06%

23.63 1.33% 119.16 6.45% Non Non-Ba Banks ks 792.78 65.52% 962.86 65.87% 1135.18 68.93% 1239.57 69.90% 1279 79.58 58 69.30 30% Mutual Funds 45.79 3.78% 61.60 4.21% 76.44 4.64% 85.66 4.83% 89.43 4.84% Insurance Company 150.60 12.45% 171.62 11.74% 214.47 13.02% 238.24 13.43% 245.00 13.27% Fore reig ign Holders rs 461.35 38.13% 558.52 38.21% 643.99 39.10% 665.81 37.55% 691.89 37.47% Foreign Govt's & Central Banks 103.42 8.55% 110.32 7.55% 118.53 7.20% 120.84 6.81% 122.48 6.63% Pension Fund 43.30 3.58% 49.83 3.41% 64.67 3.93% 87.28 4.92% 87.68 4.75% Individual 30.41 2.51% 42.53 2.91% 48.90 2.97% 57.75 3.26% 57.42 3.11% Others 60.51 5.00% 78.50 5.37% 86.72 5.27% 104.84 5.91% 108.15 5.86% Total 1,209.96 100% 1,461.85 100% 1,646.85 100% 1,773.28 100% 1,846.36 100%

SLIDE 55

54

Governm ernment ent Securi rities ties Realiza izatio tion

(IDR mn mn) *Adj djus usted with h issua uanc nce rela lated to cash h mana nagement realiz lization ion Budget 2017 Budget Realiza izatio tion (a.o. . February 28, 2017) % Realiza izatio tion to Budget 2017 Gove

vernment Secur

urit itie ies Net 399,992,586 134,869,334 33.72% Gove

vernment Secur

urit itie ies Matur uring ing in 2017 and nd Buyba uyback 284,842,264 30,928,623 10.86% Issua uance Need fo for 2017* 684,834,850 165,797,957 24.21% Gove

vernment Debt

bt Securit itie ies (GDS) 139,327,500 Dom

mestic

ic GDS 92,130,000

Coupon GDS

36,680,000

Conventional T-Bills

55,450,000

Private Placement
Retail Bonds
Internatio

iona nal l Bond

nds

47,197,500

USD GMTN

47,197,500

Euro GMTN
Samurai Bonds
Domestic USD Bonds
Gove
vernment Isla

lamic ic Debt bt Securit itie ies 26,470,457 Dom

mestic

ic Gover

vernment Isla

lamic ic Debt bt Secur urit itie ies 26,470,457

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

26,470,457

Retail Sukuk
Private Placement
Globa
bal

l Suk ukuk uk

SLIDE 56

55

Positiv itive Respons nse

f

Governm ernment ent Securi rities ties Issuanc nce in 2016

Globa

bal Conventiona

ional Bond Globa

bal Sukuk

Euro ro-Denomin inated Bonds Samurai Bonds Tenure re 10 yr 30 yr 5 yr 10yr 5 yr 12 yr 3 yr 5 yr Pricin ing Date December 8th, 2015 March 29th, 2016 June 14th, 2016 June 21st, 2016 Nom

min

inal US$ 2.25 bn US$ 1.25 bn US$0.75 bn US$1.75 bn EUR 1.5 bn EUR 1.5 bn JPY62 bn JPY38 bn Coupon pon Rate 4.75% 5.95% 3.40% 4.55% 2.625% 3.750% 0.83% 1.16% Yield 4.80% 6.00% 3.40% 4.55% 2.772% 3.906% 0.83% 1.16% Incom

min

ing Bid US$8.1 bn bn US$8.6 bn bn EUR 8.4 bn bn JPY100 bn bn

The

average incoming bids in 2016 was IDR18.81tn/auction, higher than 2015 (IDR14.05tn/auction);

The

average awarded bids in 2016 was IDR9.44tn/auction, higher than 2015 (IDR6.75tn/auction);

Bid

to cover ratio

f

government securities issuance in 2016 was 1.99 times (2015 was 2.08 times).

IDR bn bn Increasing Incoming Bids in 2016’s Government Securities Issuance

Incoming Bid 2016 Bid to Cover Ratio 2016 (RHS) Awarded Bid 2016

SLIDE 57

Monet etary ary and Finan nancial ial Facto tor: r: Credib dible le Moneta tary ry Polic icy Track ack Recor

rd

and Favour

urab

able le Finan nancial ial Secto tor

Sec ection

n

5

SLIDE 58

57

Bank Indones esia ia Polic icy Mix: : 2016-2017

19 9 May 2016 2016 Held BI Rate at 6.75%, and maintained DF & LF Rate at 4.75% & 7.25% respectively 16 16 Marc rch 20 2017 Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 % 19 January ry 20 2017 Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 % 17 Novemb ember er 2016 2016 Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 % 22 Septemb ember er 2016 2016

Lowered BI 7-

day RR Rate to 5.0%

Lowered DF and

LF Rate to 4.25% and 5.75% 21 July 2016

Held BI Rate at 6.5%, &

maintained BI 7-day RR Rate, DF & LF Rate at 5.25%, 4.5% & 7.00% respectively.

BI continued to conduct

financial market deepening by introducing new investment & hedging products in the financial market, strengthened monetary management strategies, & encouraged the real sector to make optimal use of repatriation funds to support the implementation of the 2016 Tax Amnesty Law 16 16 Feb ebru ruary ry 20 2017 Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 % 15 Decem cember er 2016 2016 Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 %. 20 Oct ctob

ber

er 2016 2016

Lowered BI 7-

day RR Rate to 4.75%

Lowered DF

and LF Rate to 4.00% and 5.50% 19 Augu gust 2016

Held BI 7-day

RR Rate and DF Rate at 5.25% and 4.5%

Cut LF Rate to

6.00%. 16 June e 2016 16

Cut BI Rate 25 bps to 6.5%
Cut DF & LF Rate at 4.5% &

7.0% respectively

Relaxed the loan-to-value ratio

(LTV) and financing-to-value ratio (FTV) on housing loans/financing

Relaxed partially prepaid

loans/financing

Raised the floor on the

Reserve Requirement - Loan to Funding Ratio (RR-LFR) from 78% to 80%, with the ceiling maintained at 92%. The change was effective on August 2016 21 April ril 2016

Held BI Rate at

6.75%, and maintained DF & LF Rate at 4.75% & 7.25% respectively.

Reformulated policy

rate from BI Rate into the 7 day (Reverse) Repo Rate to improve the effectiveness of monetary policy

transmission. The

change was effective

n August 19th

2016

SLIDE 59

58

Bank Indones esia ia Polic icy Mix: March 2017

Holds the BI 7-day Repo Rate at 4.75%. Projects credit growth in the 10- 12% range and deposit growth at around 9-11% in 2017 in line with increased economic activity and a looser monetary and macroprudential policy stance. Remains vigilant towards global risks, such as the increase of inflation in advanced economies that can trigger monetary tightening, as well as further FFR hikes, the Brexit issue, geopolitical risks in several European countries due to growing populist sentiment and debt settlement in Greece. Continues to strengthen policy coordination with the Government to control inflation in response to several risks, including further adjustments to administered prices (AP) as the Government continues to reform energy subsidies as well as inflationary pressures

n volatile foods.

Continues to implement the stabilisation measures necessary to ensure the rupiah remains consistent with the currency’s fundamental value, while maintaining market mechanisms. Projects economic growth in 2017 at 5.0- 5.4% (yoy), on the back of strong private consumption, increase in government consumption, and the improvement of export performance.

The BI Board of Governo nors s agreed on 16 March 201 2017 to hold the BI 7-days s Repo Rate at at 4.75 75%, as well as the Deposi sit Facility at 4.00 00% and Lending ng Facilit ity at 5.50 50%

SLIDE 60

59

Enhanc ncem ement nt

f

Moneta etary ry Operatio tions ns Framew ework rk

...p .posit itiv ive results thus far

Source: LHBU, HARTIS, Bloomberg

Domestic tic Money Marke ket Yield Curve (Dec. 30th

th, 2015)

Domestic tic Money Marke ket Yield Curve (May 26th

th,

, 2016) Monetary

peration

term structure is being referred by money market rates… Domestic tic money marke ket yield curve tend to converge Domestic tic Money Marke ket Yield Curve (Dec. 28th

th,

, 201 2016) Domestic tic Money Marke ket Yield Curve (Jan. 13rd

rd, 201

2017)

OM: Monetary Operation PUAB: Interbank Money Market

SLIDE 61

60

Enhanc ncem ement nt

f

Moneta etary ry Operatio tions ns Framew ework rk

...p .posit itiv ive results thus far

... ...JI JIBOR has been stren engt gthene ened as as a market ket referen ence STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement.

1

ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA

2

REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties

3

Can

be traded among contributor banks for 10 minutes.

Up

to the amount

f

Rp10 billion.

Up

to 1-month tenor.

PREVIO IOUS US JIBOR

Can

be traded among banks contributor for 20 minutes.

Up

to a total

f

Rp20 billion.

Up

to 3-month tenor.

CURRENT NT JIBOR OR

as per June 1, 2016

SLIDE 62

61

Stable ble Moneta etary ry Envir ironm nment ent Despit ite Chall llen enges es

Rupi piah Exch chang nge Rate Remains ns Comparable ble to Peers

YTD 2017* vs. 2016

Downw nward Trend nd of Inflati lation n Ensur ured Price ce Stabi bili lity ty

(%)

Streng ngth thene ned Mone netary Poli licy cy Framework

Source: Bank Indonesia

Credit t Growth th Suppo ported by Macr cropru prudenti ntial Poli licy

4.46 46 3.41 41 3. 3.83 83 4.76

(%)

LF Rate: 7.00 LF Rate: 5.50 BI Rate: 6.50 BI 7Day RR Rate: 4.75 DF Rate: 4.50 DF Rate: 4.00

19 Augu gust t 2016

The New Monet etary Operation Framew ework

2

3 8 13 18 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 7 9 11 1 2011 2012 2013 2014 2015 2016 2017 CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy) Average Point-to-point * data as of 28 February 2017 6.68 4.66 5.49 2.73 1.85 1.02 1.03 0.75

1.33
2.56
0.21

10.52 9.72 0.12

0.58
0.34
6.83
4.09
4.74
18.51
22.00
17.00
12.00
7.00
2.00

3.00 8.00 KRW BRL ZAR THB INR IDR MYR EUR PHP TRY 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 LF Rate BI Rate BI-7Day RR Rate DF Rate 0% 5% 10% 15% 20% 25% 30% 35% 40% 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 2013 2014 2015 2016 2017 Total Growth Working Capital loans Investment Loans Consumption Loans 9.1% 7.1% 8.3% 8.3% 9.6%

SLIDE 63

62

6 Measur ures es to Contr trol Inflatio ion

On On Ja January 25 25th

th, 2017, the Government and Bank Indo

donesia ia agreed six ix str trate tegic ic measu sures to to contr trol in inflatio tion in in 2017 with ithin th the ta target corrid idor of

f 4±1% (as well as

as in in 2018 at at 3.5±1%), whil ile also settin tting th the in inflatio tion ta targets ts for 2019-2021 at at 3.5±1%, 3±1% and 3±1% respectiv tively. Those measure is is needed to to address several onerous domestic tic and exte ternal challenges th that demand vig igil ilance and early mitig itigatio

tion. The

external challenges mainly stem from rising international commodity prices, while the domestic challenges stem from ongoing energy reforms through adjustments of electricity tariffs for 900VA subscribers as well as fuel prices as the global oil prices continues to rise. Nevertheless, the current aforementioned reforms require support to ensure equitable distribution and to create more healthy fiscal space.

Maint ntain in volatil ile food (VF) infl flation ion at 4-5% by:

1 2 3 4 5 6

Strengthening infrastructure for food logistics in local areas, particularly warehousing for storage Developing a commodity flow data system, specifically for food commodity Utilising fiscal instruments and incentives to extend the local government’s role in price stability

Dampen the second- round effect

f

Administ istered Price adjust stments Introduce Admin inist ister ered Price Sequen encin ing Estab ablis ishin ing the Nat ational Inflatio ion Control Team am Stren engt gthen en central al and local governmen ent coordin inatio ion

Through Eighth National TPID Coordination Meeting in July 2017

Stren engt gthen en the Bank Indonesia esia polic icy mix to maintain ain macroec economic ic stabil ilit ity

Through Presidential Decree to strengthen the National Inflation Task Force (TPI) and Regional Inflation Task Forces (TPID)

Strengthening interregional cooperation Encouraging diverse food consumption in the community, especially of fresh chillies and alliums, by fostering product innovation in the processed foods industry Accelerating connectivity infrastructure development Improving planting patterns

Example: Controlling transportation fares Including the planned conversion of several direct subsidies to cash transfers (fertilizer, rice for the poor and 3kg LPG) 3kg

SLIDE 64

63

Financ ncial ial Interm ermediaries ediaries Develo elopmen ent

After slightly moderating in 2016, the growth of banking loans improved in early 2017, and is expected to further expand by 9-12% this year. In the domestic capital markets, capital raising by corporations (particularly right issues and corporate bond issuance) spiked significantly.

Source: Financial Service Authority (OJK)

The growth th of fina nanc ncing ng distri tribu bute ted by multifinance nance compani nies in January 2017 was still in an increasing trend… Gross premium um revenu nue in the domesti tic c insur uranc nce indus ustry also demonstrated a continuous growth… Capital tal raising ng throug ugh rights ts issue ues & & corpo porate te bond issua uanc nce in the capi pital tal market t conti tinu nued to incr crease in the first two months of 2017… The growth th of banki king ng loans ns was 8.28% % (yoy) in Janua uary 2017, , incr creasing ng from that t of the previous us year…

IDR tn IDR tn IDR mn IDR tn

SLIDE 65

64

Financ ncial ial Instit itutio tions ns Remain in Robus ust and Less Vulner erable ble

Banking sector’s capital adequacy ratio (CAR) was maintained at a high level. As of Jan-17 17, CAR & Tier er 1 C Capit ital al was 23.21 21% & 21.37 37% % respect ctiv ively Risk-bas based d capit ital al (RBC) of the insur urance ance indus ustry also remains ns high, well above the minimum threshold (120%) Gear aring ing ratio io of multifin inan ance ce companie anies was 3.02 times (well below the maximum requir uirement nt of 10 times), providi ding ng ample room for futur ure growth Profitabi tabili lity ty of the banki king ng secto tor is relati tively ly stable ble

Financial performance of domestic financial institutions generally remains robust. Capital adequacy is well above the minimum

requirements. Profitability and leverage are maintained at a sufficient level. Further, gearing (debt-to-equity) ratio of multifinance

companies provides ample room for future growth.

% Source: Financial Service Authority (OJK)

SLIDE 66

65

Adequa uate te Liquidit uidity, y, Managea eable ble Credit it Risks

Banks are found to possess adequate liquid assets to anticipate depositors’ withdrawal. Insurance industry also demonstrates an enhanced level of investment adequacy ratio. The non-performing loan/financing (NPL/NPF) ratio is also maintained below the threshold.

The ratio io of liquid id assets to deposit its in the banking nking sector was well maintaine ained d at a high level. NPL in the banki king ng sector maintai aine ned below the 5% threshold at the end of 2016 2016. . Gross & net NPL ratio ios in Jan-17 were 3.09% & 1.35 35% % respect ctiv ively NPF ratio io in the multif ifinance inance indus ustry is also maintai aine ned d below the 5% threshold Investment nt adequacy quacy ratio io in the insur urance ance indus ustry is maintaine ained d above 100%

Source: Financial Service Authority (OJK)

SLIDE 67

66

Manag ageable able Marke ket Risk Amidst Fluctu tuati tions

Being exposed to market fluctuations, financial institutions demonstrated resiliency in dealing with such risks. Net open position of the banking sector remains low, while the investment value of domestic institutional investors (mutual funds, insurers, and pension funds) continues to increase.

Net open n positi tion n in the banki nking ng secto tor was kept t far below the maximum limit t (20%) %) The investment nt value ue of insur urers & pension n funds remaine ned in an incr creasing ng trend nd Multi tifinance companies’ exposures to foreign debt have generally been mitigate ted throug ugh hedging ng measures The movement of mutual funds’ net asset value (NAV) is in line with th that t of market t index, but with th much lower vola lati tili lity ty

% Source: Financial Service Authority (OJK)

IDR tn

IDR tn IDR tn IDR tn

SLIDE 68

67

Capital ital Marke ket Demons nstr trate te Streng ength thening ening Tren end

The domestic capital markets continued to demonstrate a strengthening trend, amidst uncertainties in the global economy and financial markets. This strengthening trend was accompanied by significant nonresident inflows in the government debt market.

Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance

Both th the stock ck & bond nd indice ces are relati atively ly stable le in early ly 2017, supporte ted by the improving ng domesti tic c econo nomic c prospe pect ct Outflow pressur ure in the equi uity ty market t tended to ease, while le the governm nment nt debt t market t still ll attracte cted nonr nresident nt inflo low The IDX Stock k Composite te Index demonstr trated a positi tive growth th in early ly 2017 In line ne with th the stabi bili lizing ng IDR and improving ng domesti tic c prospe pects, the governm nment nt bond nd yield lds conti tinu nued to decli line ne

SLIDE 69

68

Maintain ntaining ing Financ ncial ial Sy Syste tem Stabili bility ty

…maintaining resil ilien ience ce in confr nfronting nting possib ible shock cks and enhanc ncing ng financ ncia ial system em stabi bilit ity

Stren engt gthenin ening financ ncial sector supervi vision sion

Assessment
n

the soundness

f

financial institutions

Liquidity

coverage ratio for banks

Regulations
n

risk management for financial institutions

Minimum

capital requirement for banks

Enhancement
f

GCG for financial institutions and publicly-listed companies

Stren engt gthenin ening & structur urin ing financ ncial sector based

n

inter erna nation ional stand ndards

Risk-based

supervision for all financial sectors

Regulations
n

domestic systemically-important banks and capital surcharge

Enhancement
f

crisis management protocol and interagency coordination Financia ial conglomerate tes account for 75.5%

f

the total assets ts

f

financial sector…

Impr proving ving the integ egrated ed regulatio ion & supervision framework…

Such

improvement has become even more important due to the dominance

f

financial conglomerates in the domestic financial sector.

OJK

has issued regulations

n

GCG, risk management, and minimum capital requirements for financial

conglomerates. These

will be followed by regulations

n

liquidity management, capital management, and intragroup transaction exposures.

Source: Financial Service Authority (OJK)

Financial Conglomerates 75.5% Others 24.5%

SLIDE 70

69

A A Compreh ehens ensiv ive Financ ncial ial Deepening ning Progr gram am

...s ...strategy

egy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

Financia ial Marke rket Deepe penin ing Progra ram

First Priority: Continuous Basis

Marke rket Develop

pment

Coor

ordination

ion

Monitoring, match making, and solution:

Repo
Hedging

Money Market Encourage well-functioning money market (deep and efficient, risk mitigation, and market integrity), through:

Bank Indonesia Regulation (PBI)

I) on Negotiable Certificate of Depo posit (NCD) Enriching money market instruments, encourage banks to raise long term funding, and acts as an alternative investment for investors

Bank Indonesia Regulation (PBI)

I) on Commercial Pape per Alternative sources of financing for non-bank corporations, as well as an investment outlet for investors FX Market

Developme

pment roadmap p of Indonesia CCP P in OTC Derivatives To support FX market development and reduce market segmentation.

Establish

h Local Currency Settlement Framework Reducing dependency on USD payment for international trade.

Encourage product developm

pment to increase hedging Suppl ply in domestic market To provide hedging instrument alternative for corporations to manage their risk exposure

Corporate

Bonds

Government

Bonds

Medium term

notes

Other

instruments

Infrastructure

(ETP, etc)

Suppor portin ing Regulatio ions

Money Broker Certification of Dealer and Code of Conduct Strengthening JISD SDOR

Increase the governance of money broker
Revitalize role of money broker in financial

market

Obligation on certification for dealers
Obligation to honor code of conduct
Dealers’ training for certification
Strengthening the credibility of JISDOR
Extend the usage of JISDOR

Inter-agency Coope

pera

ratio ion On April 2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners

f the Financial Services Authority have launched a Coordination Forum for the Development Financing through Financial

Market (FK-PPPK). The three authorities have agreed to formulate “The National Strategy to Develop Indonesian Financial Market Towards 2025” which is expected to be concluded by the end of 2017/early 2018.

SLIDE 71

70

Continu tinuous us Progr gram

n

Capital ital Marke ket Deepening ning

…continuously strengthened, including through capital market deepening initia iativ ives es

The utiliza izatio tion

f

capita ital marke kets ts by domestic ic corporatio tions (includin ing financia ial institu itutio tions) demonstr trate tes an increasin ing trend

Stren engt gthenin ening marke ket infr frast struc ucture

Expansion
f

Single Investor Identification (SID) coverage

Development
f

electronic trading platform (ETP) in the debt market

Development
f

integrated investment management system

Enhancement
f

the clearing and settlement process

Enhancement
f

capital market data warehouse

Enhancin ing the supply-sid side

Simplification
f

public-offering requirements & procedures

Development
f

financial market products (mutual funds, private equity funds, REITs, ABS)

Development
f

municipal bonds

Cross-border
ffering

(harmonizing regulations with ASEAN Disclosure Standards established by ACMF)

Enhancin ing the demand nd-sid side

Expansion
f

the domestic investor base (conducting investor education programs)

Expansion
f

mutual fund distribution channels, including the marketing methods

f

securities companies

Stren engt gthenin ening governa nance

Development
f

market players’ capacity

Enhancement
f

GCG for publicly-listed companies

Development
f

repo regulations and infrastructure

Source: Financial Service Authority (OJK)

SLIDE 72

71

Macroprud ruden ential tial Polic icy Mix to Support rt Growth wth

Effective from August 29th, 2016, Bank Indonesia relaxed the Loan to Value Ratio (LT LTV) V) and Financing to Value Ratio (FTV) V) on housing loans at 85-90% for the first mortgage lending facility, 80-85% for the second mortgage lending facility, and 75-80% for the third mortgage lending facility.

Housin sing Loans and Finan ancin ing Based ed

n

Murab abah ahah ah and Istish shna Contrac acts

Property ty type (m2) Lendin ing/F /Fin inancin ing Facil ilit ity First Second Third House >70 m2 85% 80% 75% 22

70 m2
85%

80% <21 m2

Apartment

>70 m2 85% 80% 75% 22

70 m2

90% 85% 80% <21 m2

85%

80% Home Shop/Office

85%

80%

Housin sing Finan ancin ing Based ed

n

MMQ and IMBT Contrac acts

Property ty type (m2) Lendin ing/F /Fin inancin ing Facil ilit ity First Second Third House >70 m2 90% 85% 80% 22

70 m2
90%

85% <21 m2

Apartment

>70 m2 90% 85% 80% 22

70 m2

90% 85% 80% <21 m2

85%

80% Home Shop/Office

85%

80% The relaxation is only applicable to banks with nett NPL for total loan below 5% and gross NPL for property loan/financing below 5%. The rationale is to stimulate domestic demand in order to drive domestic economic growth momentum while maintaining compliance to prudential principles.

SLIDE 73

72

Financ ncial ial Sector: r: Foste teri ring Domestic tic Growth wth

…boosting domestic econo nomic activ ivit ities es and suppo portin ing the natio iona nal econo nomic ic devel elopm pmen ent

Funding ng

f

infrast structure & prior

rity

econom

mic

ic sector

rs
Enhancement
f

NBFI

wnership

in government bonds

Private

equity funds for infrastructure financing

Asset-backed

securities specifically designed for secondary mortgage financing

Insurance

for farmers and fishermen

Capacity buildin ing

f

fina nanc ncial inst stit itut utio ions ns

Strengthening

the capital

f

financial institutions to increase their financing capacity

Expansion
f

the business lines

f

multifinance companies

Capital

requirements for rural banks based

n

their

perational

zones

Developm

pment

ent

f

financia ial produc ucts & servi vices es

Expansion
f

the distribution channels for financial products & services

Development
f

sustainable finance regulations

Utilization
f

KYC information from third parties

Facilitating

access to capital market as a source

f

funding (e.g. simplification

f

public

ffering

procedures)

Capital

market deepening initiatives

Developm

pment

ent

f

Islamic financia ial sector

Strengthening

the capital

f

Islamic financial institutions

Spin-off
f

the Islamic business units

f

commercial banks

Development
f

Islamic financial product regulations (sukuk, mutual funds, asset-backed securities)

Continuous

education & socialization

n

Islamic financial products & services

SLIDE 74

73

Strong nger er Fundam amentals ntals Facing the Headwinds winds

197
35

5.62

1998 2008 Sep 16 82.4 12.1 6.8 1998 2008 Sep-15 30.0 3.8 2.8 1998 2008 Aug-15 17.4 50.2 1998 2008 Sep-15

Inflati lation n Rate (%) IDR Movement nt (%) Non-Pe Performing ng Loan/NPL PL (% (%) Governm nment nt Debt/ t/GDP Foreign n Reserves (USD SD bn)

100.0% 1998 98 27.4% 2008 08 27.9% Q4-2016 2016 8.6x 1998 98 3.1x 2008 08 2.7x Q4-201 2016 116.8% 1998 98 33.2% 2008 08 34.0% Q4 Q4-201 2016

More Liquid Marke ket (%) Exte terna nal l Debt t (Publi blic c & Private ate) to FX Reserve Ratio Exte terna nal l Debt/ t/GDP

Infla lation controlle lled within the target get range ge IDR still l apprec eciated ed in early ly 2017 NPL level el is below w the maximum thres eshold ld of 5% Consisten ently ly well-maintained ed belo low 30% Significa cantly ly higher er than 1998 8 & 2008, 08, ample le to cover er 8. 8.5 5 months of import and exter ernal l debt repaymen ent Significa cantly ly lower er than 1998 8 crisis Sligh ghtly ly higher er than 2008, 08, but significa cantly ly lower er than 1998 98

Feb 17

119.9

Feb 17

3. 3.83 83 (yoy)

Jan 17

3.1

62 10.5 5.7 1998 2008 Jul-15

Overnigh ght inter erbank k money ey market ket rate e is rela lativel ely lower er

Feb 17

4. 4.24 1.0 (ytd)

Feb 17

SLIDE 75

74

Outlo look

f

Domestic stic Economy my Remains ins Robust ust

...d .domes estic ic econo nomic ic growt wth is predic dicted ed to be higher in 2017

2017 Econom

mic

ic Outlook

k

 Economic recovery is expected to continue, driven by exports and investments as financing increases from bank loans and non-bank

financing. Meanwhile, household consumption is predicted to remain stable.

 Inflation is predicted to be within the 2017 inflation target of 4±1%, with the current account deficit projected below 2.5% of GDP  Credit is projected to grow 10-12% in line with increased economic activity and the looser monetary and macroprudential policy

stance adopted

2016 (Realizat zatio ion) n)

Econom

mic Growth

5.02%

Infla lation

n

3.02%

CAD (% GDP)

1.8%

Credit Growth

7.9% 2017 5.0-5.4 .4% 4.0±1% <2.5% 10 10-12%

Global Domestic tic Opportu tunit itie ies

Improving

global economic growth

Increasing global

commodity prices,

il

and non-oil

Improving

domestic economic growth

Relatively

low current account deficit Challenges

Increasing

global inflation

US

Policy: Fiscal expansion & tightening monetary policy, trade protectionist, relaxation

f

financial regulation.

Geopolitical

risks, especially populism in Europe.

Pressures on

exchange rate from global factors.

Pressures
n

inflation from administered prices

Effectiveness
f

monetary transmission through bank lending and interest rate.

2017 Econom

mic

ic Opportun unities es & & Challeng nges es

Source : Bank Indonesia

SLIDE 76

Prog

gressiv

ive Infras astru ructu ture Developm lopment: Stron

ng

Commitm itment

n

Accele leratio tion

f

Infras astru ructu ture Prov

visio

ision

Sec ection

n

6

SLIDE 77

76

The Govern rnment has Enacte ted Various us Reforms rms to Accelerate te Infras astr truc uctur ture Provis isio ion

Fiscal Reforms Instit itutio iona nal Reforms Regulatory Reforms

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

Viabil ility ity Gap Fundin ing (VGF) KPPIP Direct Lendin ing Issuance

f

MoF Reg. No. 223/2012. To increase project financial feasibility by contributing up to 49%

f

the construction cost Avail ilabil ility ity Payment Land Revolvin ing Fund Risk-sha harin ing Guid idelin ines Issuance

f

regulatory framework for annuity payment scheme by the Government (MoF Reg. No. 190/2015 for Central Gov’r and MoHA Reg. No. 96/2016 for Regional Gov’t.) during the concession period after the project

perational

by private sector in

rder

to make the project bankable Issuance

f

MoF Reg. No. 220/2010. A revolving-fund sourced from State Budget, to accelerate land acquisition IIGF has issues risk allocation and mitigation guidelines for PPP project KPPIP is actively involved in accelerating delivery

f

priority infrastructure projects

PT. Sarana Multi

ti Infrastr truktu ktur Merging between

PT. SMI

and Gov’t Investment Center (PIP) to become an infrastructure funding company Indonesia ia Infrastr tructu ture Guarante tee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects PPP Unit Provide facilities to help GCA

n

preparing PPP project (PDF/TA) BLU LMAN The State Asset Management Agency is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Issuance

f

Presidential

Reg. No.

82/2015. Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects Land Acquis isitio ition Issuance

f

Presidential

Reg. No.

148/2015. To stipulate land acquisition acceleration based

n

Law

No. 2/2012

Economy Packa kages Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness

f

economic packages implementation

SLIDE 78

77

Reforms Along the Project’s Life Cycle

...t .to enco courage and accel eler erate infrastructur cture projec ect using ng PPP schem eme Gover ernm nmen ent

f

Indone nesia ia

Projec ect Developm

pment

ent Facility (PDF) F) Viabil bility Funding ng Gap (VGF) Guarant ntee Fund Tax Facilities ies Availabil bility Paymen ent Land Acquisit sition ion 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 of 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)

SLIDE 79

78

Effort rts to Accele lerate Infras astr truc uctu ture Provis isio ion

Regu gulatio ion improvem emen ent to to acceler erate land procurement process ss

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

f 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 Procurement Process as Stipulated d in Law No. 2 of 2012

Law No

No. 2/2012 was successfully applie

ied in in: 1. 1. Pa Palembang – Indra ralaya section ion of

f the

he Tra Trans Sumatera ra Toll Road Proj

ject

2. 2. Java Nort rth Line Double Track Rail Proj

ject

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 80

79

Effort rts to Accele lerate Infras astr truc uctu ture Provis isio ion

Indo done nesia ia Asset Managem emen ent Agenc ncy (LMA MAN) Establ blishmen ent

Legal Basis

1. Government Regulation No.27

f

2014

n

the Management

f

State/Region Property 2. Finance Minister Regulation No.219/PMK/2015

n

the Governance and Organization

f

State Asset Management 3. Finance Minister Regulation No.1319/KMK.05/2015

n

the Appointment

f

Indonesia Asset Management Agency as Government Agency to Implement Financial Management

f

Public Service Agency

Mandate

1. Property Management 2. Land Funding for National Strategic Project

Portfolio io Asset

1. Asset

f

ex-Pertamina: LNG Badak Bontang, LNG Arun, and Tarogong Land 2. Asset

f

ex-Indonesian Bank Restructuring Agency (BPPN) Other portfolio: Asset

f

ex-Asset Management Company (PPA) and ex-Contractor Cooperation Contract (KKKS)

Source: Ministry of Finance

On December ber 12th,

h, 2016,

Indonesia esia Asset Managem ement ent Age gency (Lem emba baga ga Manajem emen en Aset Negara/LMA LMAN) has been launched ed to

ptim

imiz ize the use

f

state asset ets. . LMAN should plan for funding ng and utiliz izatio ion

f

land banks as well as pay compensation for land acquisition to support the government’s infrastructure development program

SLIDE 81

80

Progr gres ess

n

225 Natio ional nal Strategic tegic Projec ects ts

SECTORS LOCATION ONS

1. Sumate

tera 46 46

2. Java

89 89

3. Kalim

imanta tan 24 24

4. Bali

& Nusa Tenggara 16 16

4. Sulawesi

28 28

6. Maluku

ku & Papua 13 13

7. Natio

tional 10 10 9% 43% 6% 35% 7%

* Projects are taken

ut

because those projects doesn’t fulfil PSN basic, strategic and/or operational criterias

20 projects are completed 96 projects are under construction 12 projects are during transaction 81 projects are in preparation 16 projects are taken

ut*

Road Com

mmuni-

cation Nationa ional Bord rders rs Economic ic Zones

52 52 3 7 25 25

Housin ing Energ rgy Fishe herie ries /Marit ritim im e Water Supply Airport rport

3 7 3 10 10 17 17

Seapor port Railway Dams Smelter Power

13 13 19 19 60 60 6 1 Progress of Natio ional Strate tegic ic Projects (as of February 201 2017) The Estim imate ted Investme tment t Cost of Natio ional Strate tegic ic Projects

Priv ivat ate (IDR1,778 tn tn) SOE (IDR813 tn tn) State Budg dget (IDR360 tn tn)

IDR2,952 tn tn

Notes:

The investment cost was

calculated for 164 NSP.

Excluding cost of NSP that

finished construction, under review, and have not finished their estimation of construction cost

Including the costs for the

35,000 MW Program Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 82

81

Progr gres ess

n

30 Priori rity ty Projec ects ts

1. Balikpapan-Samarinda Toll Road 2. Manado-Bitung Toll Road 3. Panimbang-Serang Toll Road 4. Trans-Sumatera Toll Road (8 Sections) 5. SHIA Express Railway 6. MRT Jakarta South-North Line 7. Makassar-Parepare Railway 8. Kuala Tanjung International Port Hub 9. Bitung International Port Hub 10. Karangkates IV & V (2x250MW) Hydro-Electric Plant 11. Kesamben (37MW) Hydro-Electric Plant 12. Lodoyo (10MW) Hydro-Electric Plant 13. Inland Waterways Cikarang-Bekasi-Laut (CBL) 14. Light Rail Transit (LRT) South Sumatera 15. Integrated LRT Jakarta-Depok-Bogor-Bekasi 16. National Capital Integrated Coastal Development (NCICD) Phase A 17. Jakarta Sewerage System 18. West Semarang Water Supply 19. High Voltage Direct Current (HVDC) 20. Sumatera 500 kV Transmission Line 21. Central-West Java 500 kV Transmission Line 22. Batang, Central Java Powerplant 23. Indramayu Powerplant 24. Mine to Mouth Powerplant Sumatera Selatan 8- 10 25. Bontang Refinery 26. Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) 27. New Port Development in West Java (North Part) 28. Tuban Refinery 29. Palapa Ring Broadband 30. East Kalimantan Railway Trans nsact actio ion Prep epar arat atio ion Reas assessed 8 5 9 18 18 17 17 13 13 23 23 25 26 27 27 28 28 30 16 16 10 10 1 3 2 4 6 7 4 4

4 4 4 4

4 15 15

14 20

21 21 22 22 29 29 29 29 29 29

29 29 29 29

11 11 12 12 19 19 24 Construc uctio ion

From

m

the Nat ationa

nal

Strategi ategic Projects, s, the Governm nment ent has selected ed a list

f

30 Prior

rity

Projec ect to be the focus

f
f

infrast struc uctur ure delive very in the beginnin ning

f

2016. .

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 83

82

Progr gres ess

n

30 Priori rity ty Projec ects ts

Recent Milestone

nes

Prog

gre

ress of 30 Prior

rit

ity Proj

jects (as of Febru

ruary 2017) Fundin ing Scheme of 30 Pri rior

rit

ity Proj

jects

3% 40% 40% 17%

12 projects are in construction 1 project is under construction 12 projects are in preparation 5 projects are reassessed

Priv ivat ate (IDR DR769 tn tn) SOE (IDR324 tn tn) State Budg dget (IDR245 tn tn)

KA-ANDAL (environment impact) assessment process is completed after fulfilling administrative pre-requirements including letter from Spatial Planning Director General, Seaport Transport Director General and project’s inclusion in National Port Masterplan. Integrated Pre-FS/OBC has been finalized to integrate port development plan and supporting infrastructure. All Spatial Planning issues have been resolved and location determination for all location has been done. COD is postponed until 2023, in

rder

to adjust the completion

f

New Duri 500kV Transmission to Muara Enim

15 projects reassessed include HVDC; Mine Mouth South Sumatera 8,9,10 Plant;

Karangkates, Kesamben and Lodoyo Plants.

Patim imban Port: Kuala Tanjung ng Interna nation ional Hub Port: Central-West st Java Transm smissio ission Line: e: Sumse sel 8 Mine Mouth Coal Fired ed Power Plant:

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 84

83

Energy gy Sector: r: the Progr gress

f

35.000 MW Progr gram

No Phase MW % 1 Planning 5,824 16.31 2 Procurement 10,560 29.57 3 Power-purchase Agreement 8,478 23.74 4 Construction 10,141 28.40 5 Commercial Operation Date 706 1.98 17 Dec ‘14 Cabine binet Meeting ing “There’s electricity crisis in Indonesia, requires construction

f large capacity plant "

Jan ‘15

Averag age econo nomic ic growth of 6.7% % requi uires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)

Jan ‘15

Debo bottlene necki cking ng throug ugh regul ulat atio ion: n:

1. Regulation No.1/2015 concerning electricity

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

2. Regulation

No.3/2015, concerning Procedures

f

Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection & Appointment.

16 Mar ‘15 4 May ‘15 Feb ‘17

Cabine binet Meeting ing Progress of 35,000 MW Launch unching ng 35.000 MW by the President in Goa Beach Sanden DIY The e progr gres ess so far:

Source: KPPIP

Sulawesi si PLN: 2,000 MW Private: 1,470 MW Transmission: 5,275 ckt.km Substation: 4,390 MVA Maluku PLN: 260 MW Private: 12 MW Transmission: 653 ckt.km Substation: 620 MVA Papua 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 Sumatera PLN: 1,100 MW Private: 8,990 MW Transmission: 18,729 ckt.km Substation: 35,521 MVA Jawa & Bali PLN: 5,000 MW Private: 13,697 MW Transmission: 9,185 ckt.km Substation: 66,265 MVA

35,000 MW Prog

gra

ram Distrib ibution ion

Source: PLN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 85

84

Acceler eratio tion

f

35.000 MW Progr gram am

Governm nment ent PT PLN

EPC Powerpl rplant and Transmis mission ion PLN Subsid idiary (Joi

int Venture

re) Indepe pendent Power r Producer r

Strength then Equity ity 2B 2B 1

Governme rnment Suppor port (outsid ide Guara rantee)

Provision of Primary Energy
Provision of Renewable Energy
Simplicity of Permits and non-Licensing
Spatial Planning
Land acquisition
Resolution on Legal Matters

Local Content 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

Assignment SJKU* U* Minis istry ry of Finance

Strength then PLN‘s Balance Sheet

*)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter The Gov

vernme

rnment has issued Presid identia ial Regulatio ion No. 4/2016 on Electricit ricity Infra rastru ructure re Accelera ration ion to accelera rate power r proj

jects

Prov

vision

ion of Electric icit ity Refinancin ing Hedging Financia ial Asset Optim imiz izatio 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

f funding

Equity Injection by the Government

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 86

85

Signific nifican ant Progr gres ess

n

Infras astr tructur ture Proje jects ts

Database Project information such as map, track, existing study and latest project status. An inte tegrate ted IT system with monitoring capacity for stakeholders, so that they can have real time data ta. Platf tform data

utlook

that is efficient and functional using a user-friendly framework. Record decisions related to projects and synchronize ize the implementation schedule that can be utilized by stakeholders.

KPPIP developed an integrated IT System for monitoring

f

national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision-making purposes. Impro proving ng Moni nitoring ring System on Infras rastruct cture re Project cts1 Roads

Trans-Sumatra Toll Road Merah Putih Bridge, Ambon

Dams

Jatigede Dam (Operational)

Trans nspo portati tation

Jakarta MRT Project2

Drinki king Water Processing

Umbulan Drinking Water Provisi sion Syst stem, East st Java 1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

2 Not funded from National Budget

Terminal 3 Ultimate Soekarno-Hatta2 New Tanjung Priok Port Project2 Nop Goliat Dekai, Papua

SLIDE 87

86

Existin ing Iron

n Ore Refinery

ry Facilit ity

No. Company Prod

duct

Ore e Input t Capacit city (ton

n)

Con

ncen

entr trate e Input Capaci city (ton

n)

Inves estmen ent (USD mn) Progr

gres

ess Completi etion

n Date

te 1 PT DPS Steel 1.100.000 220.000 40 100% 2011 2 PT MJIS Sponge iron, slab, billet 3.300.000 660.000 150 100% 2013 No. Company Prod

duct

Ore e Input Capacit city (ton

n)

Con

ncen

entrate e Input Capacit city (ton

n)

Inves estme ment (USD D mn) Progr

gres

ess Completion etion Date 1 PT SILO Sponge iron 6.300.000 4.939.200 170 92% 2017 2 PT SBP Pig iron 240.000 50.000 120 35% 2017 3 PT MIS Pig iron 1.200.000 900.000 73 54% 2018 4 PT MMP Pig iron 6.300.000 5.400.000 86.570 83% 2018 5 PT RS Sponge iron 3.000.000 600.000 4.394 5% 2018 6 PT QEP Sponge iron 2.000.000 400.000 8.417 8% 2018 7 PT JMI Pig Iron 3.000.000 600.000 73 6% 2019

Completed but not operating

No. Company Prod

duct

Input Capacit city (ton

n)

Inves estmen ment (US$ mn) Progr

gres

ess Completion etion Date 1 PT Indonesia Chemical Alumina Chemical Grade Alumina 1,000,000 0,49 100% 2013 2 PT Well Harvest Winning Smelter Grade Alumina 1,000,000 1,1 Phase 1 : 100% Phase 2 : 0% 2016 (Phase 1) 2017 (Phase 2)

Upcom

min

ing Iron

n Ore Refinery

ry Facilit ity Existin ing Alumin ina and Bauxit xite Refinery ry Facil ilit ity Completed and operating

Inves estme tment nt in Iron Ore, Alumina ina and Bauxite ite Smelter ter

SLIDE 88

87

Inves estme tment nt in Nickel el Smelter ter

SLIDE 89

88

Infras astr truc uctur ture Financing ing

88

Source: Ministry of Finance

124.6 SOE

Private 200.4 75.8 Financing Needs Gov’t Budget Financing Gap 341.4 141.0 (USD bn)* 41,25% 58,75% 22,23% 36,52% 100%

Infrastr tructu ture Financin ing Need 2015-2019 General crite teria ia for financin ing schemes

Government Budget is used for basic infrastructure projects,

mainly for projects that are economically feasible but financially not.

SOE scheme is used for projects managed under SOEs (electricity,

toll roads, oil, etc.) to leverage public funding channeled through capital injections (PMN) and empower SOEs

PPP scheme is mainly targeted for projects that are both

economically and financially feasible. The government can provide financial facilites to support PPP & SOE schemes

*) USD/IDR = 13,343 (as of Jan 31st, 2017)

PPP scheme and facil ilitie ities provid ided to PPP Projects ts

The government may appoint certain SOEs to assign specific

infrastructure projects

To support the infrastructure provision through the SOEs, the

government provide a number of financial facilities, such as:

Capital Injection (PMN)
Lending
Credit Guarantees
Guarantees for SOE Direct Lending
Business Viability Guarantees

Financia ial Facil ilitie ities Provid ided to Infrastr tructu ture SOEs

SLIDE 90

89

Governm ernment ent Financ ncial ial Facilit itie ies for PPP Proje jects ts

Financia cial Facil cilitie ities from Minist istry

f

Finance ce to Attract ct More Private te Particip ticipatio tion

Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects:

Viabil ility ity Gap Fund (VGF) Project Development Facil ility ity (PDF) Government Guarante tees (dir irectl tly by MoF or through IIGF) Financin ing from PT

PT. SMI

and PT. IIF IIF Avail ilabil ility ity Payment Schemes

No No Project t Name Project t Cost t (IDR R tn tn) Financial l Facili liti ties Status tus 1 Central Java Power Plant 40 Government Guarantee (MoF & IIGF) Financial Close on June 6th, 2016 2 Palapa Ring – West Package 1.28 IIGF Guarantee & Availability Payment Financial Close on August 11th, 2016 3 Palapa Ring – Central Package 1.38 IIGF Guarantee & Availability Payment Financial Close on August 29th, 2016 4 Umbulan Water 2.1 PDF, VGF & IIGF Guarantee Financial Close on August 30th, 2016

More Funding Schemes are in the Pipelines LCS (Lim imite ited Concessio io n Scheme) PINA (Non- Government Budget Infrastr tructu ture Financin ing)

Project Financing funded by the priv ivat ate sector through the granting of concessions for an operating asset owned by the Government/SOE (based on the policy of the Government) to the private sector to be operated & managed. Project Financing funde ded d by any source ce of funds ds other 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 Char aract acteris istic ics Scheme Char aract acteris istic ics

SLIDE 91

90

New Guarantee ntee Schemes for Non-PPP Proje jects ts

Prog

gre

ress of proj

jects benefitin

ing from

m guarantees on SOE direct lending:

The Government had issued Presid identia tial Regulatio tion No No 82 82/2015 and Min inis istry of

f Fin

inance Regulatio tion No No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. Guarante tee

n

SOE Direct ct Lendin ing from Internatio tional Financia cial Institu itutio tions (IFIs) s) Guarante tee for Regio ional Infrastr tructu cture Financin cing Provisio ision No No Project Name Project Cost (IDR mn mn) Lender SOE Statu tus 1 Sumatera Power Transmission and Distribution 600 ADB

PT. PLN

Guarantee is effective 2 Sumatera Power Distribution 500 World Bank

PT. PLN

Guarantee is effective State te finance soundness ss Fisca cal susta tain inabil iliy iy Best practic tice

f

fiscal risk management The

bjective
f

this guarantee is to provid ide credit it enhancement in terms

f

low inte terest rate te and long tenor financin ing, with 3 main in princip iples:

The Government had issued Ministry ry

f
f Finance

Regulation

n

No No 174 174 of

f 2016 to provide guarantee

to PT SMI

n 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

Gov

vern

rnment Regulation No No. 95 95/2015 and Ministry ry

f
f

Finance Regulation

n

No No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry

ut functions in providing loan to

local government, as previously carried

ut

by PIP (Government Investment Center). The objective is to give stim imulus to to the he accelera ration

n
f
f

loca

cal

infra rastru ructure re develop

pment

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

n

state/local budget.