Government Debt Securities Management May 2012 Directorate General - - PowerPoint PPT Presentation

May 2012

Government Debt Securities Management

Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id

2

Milestones of Government Bond Market: Recapitalization triggered Bond market to emerge in Indonesia

1999 2002 2003 2004 2010 2009 2008 2007 2006

Banks Recapitalisation program 1st Govt. Debt Securities issuance for budget financing

• Govt. Debt

Securities Law enacted

1st Auction

• Govt. Islamic
• Secs. Law

enacted

Issued T- Bills for 1st time

1st Retail Bond issuance

2005

• Govt. Debt Securities

Reprofiling on Recap Banks amounting IDR180 trillion 1st Debt Switching

• peration

Issued Sukuk for 1st time 1st issuance of Zero Coupon Bond 1st issuance

• f Retail

Sukuk

Regular monthly issuance Recap Bonds traded in secondary market for the first time

2012

1st issuance

• f Sharia T-

Bills

Debt Management Office established

2001

1 st Global Bond Issuance

1st issuance

• f Samurai

Bond

2011

Establishment of Primary Dealer

3

Financing Budget Deficit Trend, 2004 – 2012

Government securities are the major source of financing for the budget deficit, debt refinancing and infrastructure support

Budget Deficit Financing

Notes: ** : Based on Revised Budget 2012 * : Based on realized budget (preliminary figure) Other based on LKPP

2004 2005 2006 2007 2008 2009 2010 2011* 2012** Budget Defisit, % to GDP 1,1 0,5 0,9 1,3 0,1 1,6 0,7 1,3 2,2 Govt Securities (Netto), % to GDP 0,3 0,8 1,1 1,4 1,7 1,8 1,5 1,7 1,9 0,00 0,50 1,00 1,50 2,00 2,50

Financing Trend, 2006 – 2012

Budget Deficit Financing

(trillion IDR)

4

Notes: + Based on Audited Budget Report ++ Based on Realized Budget 2011 (preliminary figure) +++ Based on Revised Budget 2012

2006+ 2007+ 2008+ 2009+ 2010+ 2011++ 2012+++ Govt Securities - net 36,0 57,2 85,9 99,5 91,1 119,9 159,6 Domestic Loan

• 0,3

1,0 External Loan - net (26,6) (26,6) (18,4) (15,5) (4,57) (19,2) (4,4) Others/Non-Debt - net 20,0 9,1 16,5 28,6 5,0 28,3 33,9 Budget Deficit 29,1 49,8 4,1 88,61 46,8 90,1 190,1

29,1 49,8 4,1 88,61 46,8 90,1 190,1

• 50

50 100 150 200

18,8% 19,3% 17,0% 14,2% 15,1% 12,2% 10,7% 11,6% 18,1% 18,0% 15,8% 12,8% 14,9% 12,7% 10,6% 11,6%

0% 5% 10% 15% 20% 25% 2005 2006 2007 2008 2009 2010 2011* 2012F**

to Tax Revenue to Central Gov't Expenditure

47,34% 39,00% 35,17% 33,06% 28,32% 26,11% 24,28% 22,97%

0% 10% 20% 30% 40% 50% 2005 2006 2007 2008 2009 2010 2011* 2012F**

Debt to GDP Ratio and Debt Service Ratio 2005 – 2012

5

Debt to GDP Ratio (% of GDP) Debt Service to GDP Ratio (%) Interest Expenses to Revenue and Expenditure Ratio (%) Interest Expenses to Tax Revenue & Central Government Expenditure Ratio (%)

Notes: * Based on Revised Budget 2012 4,6% 5,7% 5,0% 4,0% 3,8% 3,2% 3,1% 3,2%

0% 1% 2% 3% 4% 5% 6% 2005 2006 2007 2008 2009 2010 2011* 2012F**

13.17% 12.40% 11.28% 9.01% 11.05% 8.88% 7.71% 8.67% 12.79% 11.85% 10.53% 8.97% 10.00% 8.48% 7.20% 7.61%

0% 2% 4% 6% 8% 10% 12% 14% 2005 2006 2007 2008 2009 2010 2011* 2012**

to Revenue to Expenditure

6

Moody’s, S&P, Fitch and JCR have all recently upgraded Indonesia’s credit rating based on Indonesia’s sustained strong economic growth

Moody’s (Baa3 Stable)

2012: Ba1  Baa3 2010: Ba2 2009: Ba3  Ba2 2008: Ba3 2007: B1  Ba3

• “ Indonesia’s cyclical resilience to large external shocks points to sustainably high trend growth over the

medium term. A more favoreable assessment of Indonesia’s economic strength is underpinned by gains in investment spending, improved prospects for infrastructure development following key policy reforms, and a well-managed financial system.”

S&P (BB+ Positive)

2011 :BB -> BB+ 2010 : BB 2009: BB- 2008: BB- 2007: BB-

• “The main factor supporting this decision is continuing improvements in the government's balance sheet

and external liquidity, against a backdrop of a resilient economic performance and cautious fiscal management”

• “S&P noted the improving government's financial performance as reflected by declining government debt

burden and increase the accumulated foreign reserves as the key to improving Indonesia's rating”

Fitch (BBB- Stable)

2011 : BB+  BBB- 2010: BB  BB+ 2009: BB 2008: BB-  BB 2007: BB-

• "The upgrades reflect the country's strong and resilient economic growth, low and declining public debt

ratios, strengthened external liquidity and a prudent overall macro policy framework"

JCR (BBB- Stable)

2010: BB+  BBB- 2009: BB  BB+ 2008: BB 2007: BB

• “The upgrading reflects Indonesia's (i) enhanced political and social stability along with the progress in

democratization and decentralization (ii) sustainable economic growth outlook underpinned by solid domestic demand (iii) alleviated public debt burden as a result of prudent fiscal management, (iv) reinforced resilience to external shocks stemming from the foreign reserves accumulation…”

R&I (BB+ Positive)

2010: BB+ 2009: BB+ 2008: BB+ 2007: BB  BB+

• “Supported by private consumption, Indonesia is expected to secure a real gross domestic product (GDP)

growth rate in the 4% range for 2009. The economic structure, which depends substantially on domestic demand, cushioned the negative impact resulting from the drop in external demand that was triggered by the global recession”.

• “The government has maintained disciplined fiscal management since President Yudhoyono assumed
• ffice in 2004. Because of economic stimulus measures centered on tax reductions, the size of the fiscal

deficit is expected to expand slightly in 2009, to 2.4% of GDP”.

Indonesia’s Credit Rating

Budget 2011 & 2012

Trillion IDR

7

* Preliminary number - Realized budget as of 3 January 2012

2011 - Realized Budget* % of GDP 2012 - Budget (trillion IDR) % of GDP 2012 - Revised Budget (trillion IDR) % of GDP Total Revenue & Grants 1,199.5 16.9% 1,311.4 16.2% 1,344.5 16.6%

• f which

Tax Revenue 872.6 12.3% 1,032.6 12.7% 1,016.2 12.5% Non Tax Revenue 324.3 4.6% 277.99 3.4% 341.14 4.2% 0.0% 0.0% Expenditure 1,289.6 18.1% 1,435.4 17.7% 1,534.6 18.9%

• f which

Interest payment 93.3 1.3% 122.2 1.5% 117.8 1.5% 0.0% 0.0% 0.0% Subsidy 294.9 4.1% 208.9 2.6% 273.2 3.4% Primary Balance 3.1 0.0% (1.8) 0.0% (72.3)

• 0.9%

Overall Balance (deficit) (90.1)

• 1.3%

(124.0)

• 1.5%

(190.1)

• 2.2%

Financing 129.3 1.8% 124.0 1.5% 190.1 2.3% Non Debt (Net) 28.3 0.4% (9.5)

• 0.1%

33.9 0.4% Debt 101.0 1.4% 133.6 1.6% 156.2 1.9% 0.0% 0.0% 0.0% Govt Securities (Net) 119.9 1.7% 134.6 1.7% 159.6 1.9% 0.0% 0.0% 0.0% Domestic Official Borrowing 0.3 0.0% 0.9 0.0% 1.0 0.0% External Official Borrowing (Net) (19.2)

• 0.3%

(1.9) 0.0% (4.4)

• 0.1%

Disbursement 31.7 0.4% 54.3 0.7% 53.7 0.7% Program Loan 13.6 0.2% 15.3 0.2% 15.6 0.2% Project Loan (Gross) 18.1 0.3% 39.0 0.5% 38.1 0.5% On lending (3.6) 0.0% (8.9)

• 0.1%

(8.4)

• 0.1%

Amortization (47.3)

• 0.7%

(47.2)

• 0.6%

(49.7)

• 0.6%

Assumptions: GDP (trillion) 7,114.0 8,119.8 8,542.6 Growth (%) 6.7 6.5 Inflation (%) 5.3 7.0 3-months SPN (% avg) 4.8 6.5 5.0 Rp / USD (avg) 8,776.0 8,800.0 9,000.0 Oil Price (USD/barrel) 111.6 90.0 105.0 Oil Lifting (MBCD) 898.1 950.0 930.0 Item

Gov’t Debt Securities Issuance Plan 2012

8

Gov’t Debt Operation – Policy Combination

• Issuing in domestic market will be prioritized
• Issuing in variety of tenor
• Issuing in global market (Global Bond and Samurai

Bond)

• Maximum foreign issuance 18% from total gov’t debt

securities issuance

• Buyback, debt switching, direct transaction
• Initiatives strategic :USD issuance domestically & liability

management (USD bonds) Benchmark Series for 2012

• FR 60 – 5 Y
• FR 61 – 10 Y
• FR 59 – 15 Y
• FR 58 – 20 Y

Indicative Tenor in Domestic Market

• 1 y - 30 % *
• 3 y - 7 % * ^
• 5 y - 16 % *
• 10 y - 18 % *
• 15 y - 15 % *
• > 20 y - 14 % *

* as percentage of total gross securities issuance in the domestic market ^ Retail bond

IDR (trillion) $ USD (billion) IDR (trillion) $ USD (billion)

Deficit (124,0) (13,39) (190,1) (20,52) Amortization (167,6) (18,09) (161,9) (17,47) External Loan (47) (5) (50) (5) Govt Securities (incl Buyback) (120) (13) (112) (12) Domestic Loan (0,14) (0,02) (0,14) (0,02) Non Debt Financing Expenditures (18,77) (2,03) (26,62) (2,87) Two Steps Loan (8,9) (0,96) (8,4) (0,91) Financing Needs (319,3) (34,5) (387,0) (41,8) Financing Sources 319,3 34,5 387,0 41,8 Non Debt (Gross) 9,2 1,00 60,6 6,54 Debt (Gross) 310,1 33,47 326,4 35,23 Govt Securities 254,8 27,5 271,6 29,3 Program Loan 15,3 1,6 15,6 1,7 Project Loan (Bruto) 39,0 4,2 38,1 4,1 Domestic Loan 1,0 0,1 1,1 0,1

Exchange Rate Assumption (IDR/USD 1) a.o May 22, 2012 : 9.265 IDR

2012 - Budget 2012 - Revised Budget

2012 Issuance Program

IDR (tr) $ USD (billion)

2012 Budget Government Securities Net Financing: 134.60 14.53 Redemption + Buyback (1) (120.23) (12.98) 2012 Revised Budget Government Securities Net Financing: 159.60 17.23 Redemption + Buyback (1) (112.07) (12.10) Net Realization (May 22, 2012) 101.45 10.95 Gross Issuance: 148.86 16.07 Coupon GDS (2) 57.08 Retail bonds

• Retail Sukuk

13.61 Zero coupon GDS (conventional T-Bills) (2) 15.85 Zero coupon GIS (Islamic T-Bills) 1.19 Domestic Sukuk + SDHI 22.13 International Sukuk

• International bonds

39.01 Redemption + Buyback (47.41) (5.12)

Exchange Rate Assumption (IDR/USD 1) a.o May 22, 2012 :

IDR 9,265

2012 Funding Strategy Progress

9 Net Issuance Realization as of May 22, 2012

Source: Ministry of Finance 1. Redemption and buyback amount subject to change 2. GDS stands for Government Debt Securities (SUN)

The Government’s funding plans are well on-track with realized financing at 55.00% of gross issuance required in the 2012 Budget

10

Debt Issuance Program 2012

Calendar of Issuance

1) Tenor (sector) means that the tenor to be issued will be around the tenor stated in column "Tenor (sector)". 2) The total of issuance is excluding Sukuk Retail, ORI, and International Bonds.

Month Date Type Tenor (sector) 1) Target (Rp)

January January 10, 2012 ON 5, 10, 20 year SPN 3 month, 1 year January 26, 2012 ON 10, 15, 20 year SPN 3 month, 1 year January 31, 2012 IFR/PBS 10, 15, 25 year 1.325.000.000.000 February February 7, 2012 ON 15, 20, 30 year SPN 3 month, 1 year February 14, 2012 IFR/PBS 6, 15, 25 year 2.175.000.000.000 February 21, 2012 ON 10, 20, 30 year SPN 3 month, 1 year February 23, 2012 IFR/PBS 6, 10, 15, 25 year 1.472.000.000.000 March March 6, 2012 SPN 3 month, 1 year 1.600.000.000.000 March 13, 2012 IFR/PBS 15, 25 year SPN-S 6 month March 20, 2012 ON 5, 10, 20 year SPN 3 month, 1 year March 27, 2012 IFR/PBS 25 year 355.000.000.000 60.387.000.000.000 April April 3, 2012 ON 10, 20 year SPN 1 year April 10, 2012 IFR/PBS 5, 25 year SPN-S 6 month April 17, 2012 ON 10, 15 year SPN 3 month, 1 year April 24, 2012 IFR/PBS 5, 25 year May May 2, 2012 ON 5, 20 year SPN 1 year May 8, 2012 IFR/PBS 5, 25 year SPN-S 6 month May 15, 2012 ON 10, 15 year SPN 3 month, 1 year May 22, 2012 IFR/PBS 5, 25 year June June 5, 2012 ON 5, 20 year SPN 1 year June 12, 2012 IFR/PBS 5, 25 year SPN-S 6 month June 19, 2012 ON 10, 20 year SPN 3 month, 1 year June 26, 2012 IFR/PBS 5, 25 year 46.500.000.000.000 12.000.000.000.000 1.660.000.000.000 7.300.000.000.000 Issuance in 1st Quarter 2) 10.000.000.000.000 10.500.000.000.000 12.000.000.000.000

Month Date Type Tenor (sector) 1) Target (Rp)

July July 3, 2012 ON 10, 15 year SPN 1 year July 10, 2012 IFR/PBS 5, 25 year SPN-S 6 month July 17, 2012 ON 5, 20 year SPN 3 month, 1 year July 24, 2012 IFR/PBS 5, 25 year SPN-S 6 month August August 7, 2012 IFR/PBS 5, 25 year SPN-S 6 month August 9, 2012 ON 10, 15 year SPN 3 month, 1 year August 28, 2012 ON 5, 10 year SPN 1 year September September 4, 2012 IFR/PBS 5, 25 year SPN-S 6 month September 11, 2012 ON 15, 20 year SPN 3 month, 1 year September 18, 2012 IFR/PBS 5, 25 year SPN-S 6 month September 25, 2012 ON 5, 10 year SPN 1 year October October 2, 2012 IFR/PBS 5, 25 year SPN-S 6 month October 9, 2012 ON 15, 20 year SPN 3 month, 1 year October 16, 2012 IFR/PBS 5, 25 year SPN-S 6 month October 23, 2012 ON 5, 10 year SPN 1 year October 30, 2012 IFR/PBS 5, 25 year SPN-S 6 month November November 13, 2012 ON 15, 20 year SPN 3 month, 1 year November 20, 2012 IFR/PBS 5, 25 year SPN-S 6 month November 27, 2012 ON 5, 10 year SPN 1 year December December 4, 2012 ON 10, 15 year SPN 3 month, 1 year

Issuance of Domestic Government Securities in 2006 - 2012

11

[in IDR Million] Auction Date Series Settlement Date Maturity Coupon WAY/ WAP Target Total Bids Total Accepted Bids to Accepted Total 2006 26.875.000 98.850.550 42.578.650 2,32 Total 2007 47.000.000 205.057.495 86.379.695 2,37 Total 2008 58.000.000 158.483.440 86.931.640 1,82 Total 2009 64.190.000 227.140.120 97.756.020 2,32 Total 2010 113.671.500 366.720.245 136.861.860 2,68 TOTAL 2011 146.360.000 435.088.810 158.501.410 2,75 Jan-12 21.825.000 81.979.500 21.825.000 3,76 Feb-12 27.647.000 73.831.000 27.647.000 2,67 Mar-12 10.895.000 32.173.000 10.895.000 2,95 SPN12130404 04-Apr-13

• 3,92%

6.100.000 1.000.000 6,10 FR0061 15-Mei-22 7,00% 5,87% 4.188.000 3.300.000 1,27 FR0059 15-Mei-27 7,00% 6,32% 4.009.000 2.700.000 1,48 FR0058 15-Jun-23 8,25% 6,73% 5.192.000 2.000.000 2,60 SPN-S11102012

• 2.451.000
• PBS001

15-Feb-18 4,45% 5,31% 2.171.000 1.000.000 2,17 PBS002 15-Jan-22 5,45% 6,11% 466.000 100.000 4,66 PBS003 15-Jan-27 6,00% 6,53% 1.341.000 550.000 2,44 PBS004 15-Feb-37 6,10% 6,90% 639.000 250.000 2,56 SPN03120718 18-Jul-12

• 3,31%

2.080.000 300.000 6,93 SPN12130404 04-Apr-13

• 3,95%

4.150.000 1.900.000 2,18 FR0061 15-Mei-22 7,00%

• 3.225.000
• FR0059

15-Mei-27 7,00%

• 3.020.000
• FR0058

15-Jun-32 8,25%

• 2.362.000
• PBS001

15-Feb-18 4,45% 5,31% 2.674.000 1.500.000 1,78 PBS002

• 441.000
• PBS003

15-Jan-27 6,00% 6,53% 841.000 320.000 2,63 PBS004

• 235.000
• 14.920.000

45.585.000 14.920.000 3,06 Apr-12 14.920.000 45.585.000 14.920.000 3,06 SPN12130502 02-Mei-13

• 4,05%

3.550.000 900.000 3,94 FR0060 15-Apr-17 6,25% 5,26% 1.562.000 1.050.000 1,49 FR0061 15-Mei-22 7,00% 6,03% 3.747.500 2.750.000 1,36 FR0058 15-Jun-32 8,25% 6,84% 5.862.000 2.850.000 2,06 SPNS09112012 09-Nop-12

• 3,83%

1.596.000 150.000 10,64 PBS001

• 207.000
• PBS002

15-Jan-22 5,45% 6,22% 361.000 225.000 1,60 PBS003 15-Jan-27 6,00% 6,61% 651.000 640.000 1,02 PBS004

• 264.000
• 09-May-12

SPNS09112012 10-Mei-12 09-Nop-12

• 3,83%

755.000 955.000 755.000 1,26 SPN03120815

• 2.655.000
• SPN12130502

02-Mei-13

• 2.780.000
• FR0061

15-Mei-22 7,00% 6,30% 3.511.000 500.000 7,02 FR0059 15-Mei-27 7,00% 6,69% 2.100.000 275.000 7,64 FR0058 15-Jun-32 8,25%

• 2.263.000
• 10.095.000

32.064.500 10.095.000 3,18 10.095.000 32.064.500 10.095.000 3,18 TOTAL 2012 85.382.000 265.633.000 85.382.000 3,11 TOTAL 598.378.500 1.891.297.860 754.217.775 2,51 08-May-12 10-Mei-12 1.015.000 14-May-12 16-Mei-12 775.000 1.820.000 17-Apr-12 19-Apr-12 2.200.000 03-Apr-12 05-Apr-12 9.000.000 10-Apr-12 12-Apr-12 1.900.000 02-May-12 04-Mei-12 7.550.000 24-Apr-12 26-Apr-12

Government Debt Securities Market Update

13

Government Securities Profile

• Since October 2006, Government and Central Bank committed to replace interest payment of Promissory Notes to Bank Indonesia (SU-002 & SU-004) with

new bond (SU-007) and omitted indexation of SU-002 & SU-004

GOVERNMENT DEBT SECURITIES (GDS) Des '07 Des '08 Dec-09 Dec-10 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 22-May-12

• 1. Zero Coupon

IDR 14.669 IDR 21.503 IDR 33.386 IDR 32.307 IDR 32.412 IDR 36.612 IDR 35.162 IDR 34.562 IDR 35.012 IDR 33.212

• 1. Government Treasury Bills

IDR 4.169 IDR 10.012 IDR 24.700 IDR 29.795 IDR 29.900 IDR 34.100 IDR 32.650 IDR 32.050 IDR 32.500 IDR 30.700

• 2. Zero Coupon Bond

IDR 10.500 IDR 11.491 IDR 8.686 IDR 2.512 IDR 2.512 IDR 2.512 IDR 2.512 IDR 2.512 IDR 2.512 IDR 2.512 Government Domestic Bonds

• 1. Fixed Rate *) +)

IDR 294.453 IDR 353.558 IDR 393.543 IDR 440.396 IDR 517.142 IDR 524.961 IDR 544.611 IDR 537.822 IDR 545.822 IDR 553.247

• 2. Variable Rate *)

IDR 168.625 IDR 145.934 IDR 143.286 IDR 142.795 IDR 135.063 IDR 135.063 IDR 135.063 IDR 135.063 IDR 135.063 IDR 135.063

• 2. Sub Total Tradable GDS

IDR 477.747 IDR 520.995 IDR 570.215 IDR 615.498 IDR 684.618 IDR 696.636 IDR 714.837 IDR 707.447 IDR 715.897 IDR 721.522

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

IDR 259.404 IDR 258.160 IDR 251.875 IDR 248.432 IDR 244.636 IDR 244.636 IDR 243.807 IDR 243.807 IDR 243.463 IDR 243.463

• 4. Total GDS (2+3)

IDR 737.151 IDR 779.155 IDR 822.090 IDR 863.930 IDR 929.254 IDR 941.273 IDR 958.644 IDR 951.254 IDR 959.360 IDR 964.985

• 5. Total Government International Bonds *)

USD 7.000 USD 11.200 USD 14.200 USD 16.200 USD 18.700 USD 20.450 USD 20.450 USD 20.450 USD 22.950 USD 22.950 35.000 ¥ 95.000 ¥ 95.000 ¥ 95.000 ¥ 95.000 ¥ 95.000 ¥ 95.000 ¥ 95.000 ¥

• 6. TOTAL GOV'T DEBT SECURITIES (4+(5*Exchange Rate Assumpt

IDR 803.084 IDR 901.795 IDR 959.130 IDR 1.020.062 IDR 1.109.922 IDR 1.136.525 IDR 1.155.143 IDR 1.149.602 IDR 1.181.164 IDR 1.188.704 GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS) Government Domestic Islamic Bonds

• 1. Fixed Rate *)++)

IDR - IDR 4.700 IDR 11.533 IDR 25.717 IDR 37.668 IDR 37.668 IDR 37.084 IDR 52.433 IDR 56.153 IDR 57.018

• 2. Zero Coupon

IDR 1.320 IDR 1.320 IDR 420 IDR 700 IDR 280 IDR 1.185 Government International Islamic Bonds

• 1. Fixed Rate *)

USD 650 USD 650 USD 1.650 USD 1.650 USD 1.650 USD 1.650 USD 1.650 USD 1.650

• 7. Total Tradable GIDS

IDR - IDR 4.700 IDR 17.643 IDR 31.561 IDR 53.950 IDR 53.838 IDR 52.494 IDR 68.280 IDR 71.596 IDR 73.490

• 8. TOTAL GOVERNMENT SECURITIES +++)

IDR 803.084 IDR 906.495 IDR 979.458 IDR 1.064.406 IDR 1.187.655 IDR 1.214.146 IDR 1.231.420 IDR 1.246.665 IDR 1.284.044 IDR 1.293.477 Notes:

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

IDR 18.885 IDR 34.699 IDR 40.149 IDR 40.672 IDR 51.672 IDR 51.672 IDR 51.672 IDR 51.672 IDR 51.672 IDR 51.672

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

IDR 5.556 IDR 13.590 IDR 20.931 IDR 20.931 IDR 20.931 IDR 20.931 IDR 20.931 IDR 20.931

• +++) Including Non Tradable Sukuk/ SDHI (IDR Billion)

IDR 2.686 IDR 12.783 IDR 23.783 IDR 23.783 IDR 23.783 IDR 28.783 IDR 31.283 IDR 31.283

(e.o Dec 2007) (31 Des '08) (31 Des '09) (31 Des '10) (30 Des '11) (31 Jan '12) (29 Feb '12) (31 Mar '12) (30 Apr '12) (22 Mei '12)

• Exchange Rate Assumption (IDR/USD1)

IDR 9.419 IDR 10.950 IDR 9.400 IDR 8.991 IDR 9.068 IDR 9.000 IDR 9.085 IDR 9.180 IDR 9.190 IDR 9.265

• Exchange Rate Assumption (IDR/JPY1)

IDR 101,70 IDR 110,29 IDR 116,80 IDR 117,92 IDR 112,75 IDR 111,76 IDR 114,67 IDR 116,71

14

Maturity Profile of Tradable Government Securities, as of May 16, 2012 ,

ZC : Zero Coupon bond PN : T’bills IFR : Islamic Fixed Rate Bond SNI : International Sukuk IB : International Bond ORI : Retail Bond SR : Retail Sukuk SPN-S: Sharia T’bills VR : Variable Rate Bond FR : Fixed Rate Bond RIJPY : Samurai Bond PBS: Project Based Sukuk

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 2031 2032 … 2035 2036 2037 2038 2041 2042 Total 55,84 67,14 74,06 65,14 52,33 48,99 59,40 56,05 68,96 59,08 66,86 21,03 18,01 28,02 19,61 35,30 20,84 25,68 27,10 27,75

• 14,85

4,11 24,91 34,25 13,55 31,13 PBS

• 2,55
• 0,91
• 2,85
• 4,59
• SPNS

1,19

• SNI
• 6,03
• 9,28
• SR
• 8,03

7,34 13,61

• IFR
• 0,55
• 5,35
• 1,17

1,99

• 0,25
• 1,55
• 2,18
• 4,11
• RIJPY
• 4,04

6,93

• ZC

1,25 1,26

• FR

20,15 35,71 15,69 19,55 26,06 21,72 10,03 10,74 17,90 35,88 47,39 21,03 18,01 26,47 19,61 32,45 20,84 23,50 27,10 27,75

• 6,40

15,69 13,55 10,25 SPN 20,70 11,00

• IB
• 21,34

9,28 8,35 9,28 17,63 18,56 18,56 23,20 18,56

• 14,85
• 13,92

18,56

• 20,88

ORI 8,19 10,59 11,00

• VR

4,37

• 12,66

17,35 17,92 16,82 17,92 22,72 25,32

• 5

5 15 25 35 45 55 65 75 85 95 trillion rupiah

15

IDR Gov’t Bonds : Average Daily Trading in Secondary Market

3.307 5.899 4.235 3.420 4.963 5.901 4.842 6.230 7.909 6.272 8.162 8.210 11.283 11.097 7.347 6.993 8.121 7.671 8.259 10.912 7.415 5.767 6.161

• 90

180 270 360 450 540 630

• 2.000

4.000 6.000 8.000 10.000 12.000

2006 2007 2008 2009 2010 Jan'11 Feb'11 Mar'11 Apr'11 May'11 June'11 July'11 Aug'11 Sep'11 Okt'11 Nov'11 Des'11 2011 Jan '12 Feb '12 Mar '12 Apr'12 up to May'21

Volume (billion rupiah) - LHS Frequency - RHS

• 5.00

10.00 15.00 20.00 25.00 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 30Y

21-May-12 14-May-12 23-Sep-11 7-May-10 27-Oct-08 13-Sep-05

[in percentage]

Sources: IDMA, Bloomberg

Yield Curve of Government Securities (IDMA/Himdasun)

16

Tenor 21-May-12 14-May-12 23-Sep-11 7-May-10 27-Oct-08 13-Sep-05 1YR 4.18 4.06 5.29 7.00 19.37 2YR 4.91 4.58 6.01 7.09 17.35 14.59 3YR 5.08 4.63 6.14 7.99 19.93 4YR 5.34 5.16 6.54 8.12 17.17 14.14 5YR 5.44 5.31 6.69 8.77 17.46 14.96 6YR 6.11 5.77 6.81 8.93 17.05 15.24 7YR 6.11 5.77 7.08 9.03 17.06 16.17 10YR 6.49 6.27 7.44 9.29 20.91 15.75 15YR 6.80 6.64 7.83 9.89 16.65 14.12 20YR 7.16 7.02 8.21 10.46 20.27 30YR 6.53 6.48 8.29 10.55 20.37

Indonesia CDS 5 Y and 10 Y

as of May 21, 2012

Sumber: Bloomberg

17

5Y CDS 10Y CDS

• 200

400 600 800 1.000 1.200 1.400

Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12

Indonesia Phillipine Turkey

• 200,00

400,00 600,00 800,00 1.000,00 1.200,00 1.400,00

Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12

Indonesia Phillipine Turkey

Des-07 Des-08 Banks 268,65 56,2% 258,75 49,2% 254,36 43,72% 217,27 33,88% 265,03 36,63% 267,49 36,36% 283,33 37,66% 293,16 38,54% 297,80 38,56% 308,87 39,56% State Banks - Recap 154,67 32,4% 144,72 27,5% 144,19 24,79% 131,72 20,54% 148,64 20,54% 148,02 20,12% 149,28 19,84% 148,50 19,52% 147,25 19,07% Private Banks - Recap 72,63 15,2% 61,67 11,7% 59,98 10,31% 54,93 8,57% 67,33 9,30% 70,90 9,64% 73,52 9,77% 84,61 11,12% 89,11 11,54% Non Recap Banks 35,37 7,4% 45,17 8,6% 42,40 7,29% 26,26 4,10% 42,84 5,92% 41,74 5,67% 52,91 7,03% 52,24 6,87% 52,53 6,80% Regional Banks 5,97 1,3% 6,50 1,2% 6,02 1,03% 1,41 0,22% 4,32 0,60% 5,03 0,68% 4,67 0,62% 4,55 0,60% 5,43 0,70% Shariah Banks

• 0,0%

0,69 0,1% 1,77 0,30% 2,95 0,46% 1,90 0,26% 1,81 0,25% 2,95 0,39% 3,26 0,43% 3,47 0,45% 3,69 0,47% Govt Institutions 14,86 3,1% 23,01 4,4% 22,50 3,87% 17,42 2,72% 7,84 1,08% 2,42 0,33% 7,37 0,98% 3,12 0,41% 2,15 0,28% 1,41 0,18% Bank Indonesia 14,86 3,1% 23,01 4,4% 22,50 3,87% 17,42 2,72% 7,84 1,08% 2,42 0,33% 7,37 0,98% 3,12 0,41% 2,15 0,28% 1,41 0,18% Non-Banks 194,24 40,7% 243,93 46,4% 304,89 52,41% 406,53 63,40% 450,75 62,29% 465,71 63,31% 461,64 61,36% 464,30 61,05% 472,38 61,16% 470,44 60,26% Mutual Funds 26,33 5,5% 33,11 6,3% 45,22 7,77% 51,16 7,98% 47,22 6,53% 47,63 6,48% 47,49 6,31% 46,95 6,17% 48,52 6,28% 48,12 6,16% Insurance Company 43,47 9,1% 55,83 10,6% 72,58 12,48% 79,30 12,37% 93,09 12,86% 93,63 12,73% 98,65 13,11% 100,63 13,23% 102,94 13,33% 103,92 13,31% Foreign Holders 78,16 16,4% 87,61 16,7% 108,00 18,56% 195,76 30,53% 222,86 30,80% 235,97 32,08% 226,98 30,17% 224,72 29,55% 228,87 29,63% 225,65 28,90% Pension Fund 25,50 5,3% 32,98 6,3% 37,50 6,45% 36,75 5,73% 34,39 4,75% 33,53 4,56% 34,01 4,52% 33,93 4,46% 33,98 4,40% 34,67 4,44% Securities Company 0,28 0,1% 0,53 0,1% 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,27 0,04% 0,52 0,07% 0,53 0,07% 0,22 0,03% 0,28 0,04% Others 20,50 4,3% 33,87 6,4% 41,12 7,07% 43,43 6,77% 53,05 7,33% 54,68 7,43% 53,99 7,18% 57,54 7,57% 57,85 7,49% 57,79 7,40% Total 477,75 100,0% 525,69 100,0% 581,75 100,00% 641,21 100% 723,61 100% 735,62 100% 752,34 100% 760,58 100% 772,33 100% 780,72 100% 21-May-12 Apr-12 Jan-12 Dec-10 Dec-09 Mar-12 Feb-12 Dec-11

18

Notes:

• Foreign Holders (offshore) are non-resident Private Banking, Fund/Asset Mgmt, Securities Co, Insurance,

Pension Fund, etc

• Others are Corporate, Individuals, Foundations, etc.
• Private Banks – Recap and Non Recap Banks include foreign banks branches and subsidiaries

Source: Ministry of Finance

Ownership of IDR Tradable Government Securities

Dec-10 Mar-11 Jun-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 21-May-12 Total 195.755 211.574 234.992 222.857 235.971 226.982 224.716 228.870 225.655 >5 131.232 140.767 148.742 140.762 145.759 143.858 143.770 143.067 144.207 >2-5 35.511 33.823 40.422 37.400 39.582 38.440 38.933 42.617 41.356 >1-2 9.077 12.039 17.510 18.252 19.606 18.787 14.039 14.317 15.320 0-1 19.935 24.945 28.318 26.443 31.024 25.897 27.973 28.868 24.772 50.000 100.000 150.000 200.000 250.000 300.000 [IDR billion]

19

Foreign Ownership of Govt Domestic Debt Securities

62,51% 18,62% 6,26% 12,61% 63,91% 18,33% 6,79% 10,98%

20

Implementing Crisis Management Protocol 1 Implementing Bond Stabilization Framework 2 Enhance coordination and continuous dialogue 3

 Indicators to determine crisis level of Government

Securities Market condition

 Equipped with related action to be taken for each

condition

 Providing list of applicable sources of fund to be

used for bond stabilization purposes

 Providing coordination mechanism among various

parties in using funds to stabilize bonds market

 Enhancing coordination between government

institutions and relevant authorities (Central Bank, Capital Market Supervisory Agency, SRO’s)

 Continuous dialogue with market participants

Policies to Address and Mitigate Sudden Reversal (1)

21

Policies to Address and Mitigate Sudden Reversal (2)

Implementation of the Crisis Management Protocol

1

Implementation of the Bond Stabilization Framework

2

Enhancing coordination between government institutions and continuous dialogue with market participants

3 Pre-emptive measures Bond market stabilization framework

Buyback of government bonds by the DMO from the state budget

1

Potential purchase of government bonds by State Owned Enterprises

2

Purchase of government bonds by the Treasury office

3

Purchase of government bonds by the DMO from accumulated cash surplus

4

Support from the central bank in stabilizing government bond price in distress conditions

5 Monetary and macro prudential policies

Maintain IDR exchange rate stability

1

Implement minimum 1 month holding policy

• n BI bills

2

Increase reserve requirement and maximum short term

• ffshore borrowing for

banks

3

Lengthen period between each auction and offer longer tenor BI bills

4

Specific policies in place to address crisis enacted in the 2012 budget law

4

Swap facility arrangements based on international cooperation

5

22

3 6 9 12 15

1Y2Y3Y4Y5Y6Y7Y8Y9Y 10Y 15Y 20Y 30Y

[in percentage]

• Average of bid to cover ratio per year

is 2.57 X, despite average of total gross issuance per year rose by 30.90% (2005 –2011)

• Average daily trading & yield curve
• Retail Investor in 33 Provinces

2006 2011 16.561 156.209

DMO’s Effort Progress

• Market making through primary dealers

system

• Contribution of PDs at secondary market

in 2011:

• Volume: 42.29% of total trading
• Frequency: 36.45% total trading
• Widening investor base  instrument

diversification

• 2002 3 inst. : FR, VR & HB
• 2012 12 inst. : + Global Bond,

ORI, ZC, T-Bills, Private Placement with Local Govt & Ministry of Religion Affair, Sukuk (IFR), Retail Sukuk, Global Sukuk, Samurai, SPNS (Syaria T-Bill)

• Improving an understanding of Govt securities
• Seminar: 27 colleges + 21 cities/regencies
• Pre-marketing & Marketing: 52 cities/regencies
• Publication through local & national media:

TV talk show, radio, brochure, exhibition.

• Developing Repo market
• Developing investment capacity of institutional investor

Next improvement with other market player/ regulators:

2005 2012

• 3.000

6.000 2007 2008 2009 2010 2011

Govt Sec Equity [in Billion IDR]

Developing Domestic Bond Market

Thank You

Directorate General of Debt Management Ministry of Finance of The Republic of Indonesia www.dmo.or.id