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Republic of Indonesia Its All About Reforms December 2019 About Investor Relations Unit of the Republic of Indonesia Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating

  1. Omnibus Law Simplifying regulation to improve the investment environment and to boost competitiveness, MSME, and employment. The Government will simplify regulations through Omnibus Law which aims to improve the investment environment and to boost • competitiveness, MSME, and employment. At present, the Government prepares to submit two draft laws (RUU) to Parliament (DPR), namely the Omnibus Law on Job Creation • and Omnibus Law on Taxation . The draft law will be submitted to Parliament in January 2020 and is targeted to be completed in three months (March or April 2020). • Omnibus Law on job creation includes 11 clusters, namely: Taxation includes 6 clusters, namely: 1. Simplification of Licensing Endeavors, 1. Investment Funding, 2. Investment Regulations, 2. Territory System, 3. Labor Reform, 3. Individual Tax Subject, 4. Ease, Empowerment and Protection of MSMEs, 4. Taxpayer Compliance, 5. Ease of Doing Business, 5. Equity of Business, 6. Research and Innovation Support, 6. Taxation facility. 7. Government Administration, 8. Penalty, The Omnibus law on taxation consists of 28 articles but amends 7 Laws 9. Land Acquisition, specifically, the Income Tax Law, VAT Law, Taxation general provisions 10. Ease of Government Investment and Projects, and procedures Law, Customs Law, Excise Law, regional tax and levies 11. Special Economic Zone. law and the regional government law. As of 12 December 2019, 82 laws and 1,194 articles were identified that will be harmonized through the Omnibus Law in Job Creation. Source: Coordinating Ministry for Economic Affairs 9

  2. National Strategic Development Plan (Nawa Cita) The 3 Dimensions on Economic Development Priority Sector Development Human Development Equitable Development Food Security Education Inter- Income Group Energy & Electrical Security Health Inter-Region: Maritime & Marine (1) Rural Area, Housing (2) Periphery, Tourism & Industry (3) Outside Java, Character Water Security, Basic Infrastructure & (4) Eastern Area. Connectivity Necessary Condition Legal Certainty & Law Politic & Democracy Governance Security & Order Enforcement 10

  3. Economic Equality Policies to support sustainable public welfare... Build a fair land distribution scheme • Agrarian Reform Build a priority scale of Tanah Objek Reforma Agraria (TORA) recipient based on land gini ratio, poverty, & land demand • Economic Equality Developing an agricultural industry by agglomeration or cluster method • Policies • Define Lahan Pertanian Pangan Berkelanjutan LP2B to prevent land usage for non-agriculture purposes Agriculture (Landless Farmer) Land consolidation for agriculture • Improve research on seeds and agriculture method, off-farm infrastructure, integrated logistic system, build seeds market, tools and machinery • • Data collection & law enforcement on palm oil land area, including land bank data collection Land • Building a database and arranging policy on planting non-agriculture commodities Plantation Improve cooperative performance by encouraging SOEs and private sectors involvement • Research support, market synergies, off-takers, and supply chain on downstream business • Social Housing • House financing • Urban Poor & Affordable Housing • Land banks and affordable land prices • Law enforcement on spatial policies Integrating fishing and seaweeds sectors • Fishermen & Seaweed Cultivation Improve and support aquaculture industry and fishery sector value chain • • Encourage Private sector investment on seaweed sector (process and off-taker) Develop and improve progressive tax, capital gain tax and tax on unutilized asset • Fair Tax System supporting fiscal spending • • Developing natural resources industries and value chains Manufacture and ICT Minimize interest gap between large companies and small companies • Protect market share from integrated businesses and strong capital • Opportunity • Regulate and build a database on traditional/modern market, traditional and modern shops Regulate the distances, location, and zone of the market and modern stores • Retail and Market Compulsory mandates to maximize the usage of Local products • Fair access to the logistic system • • Improving Kredit Usaha Rakyat (KUR) scheme to support non-bankable SME Financing & Government Budget Improving procurement scheme to support SME accessibility to finance • Identified and built priority scale on sectors, sub-sectors of leading industries and profession • Vocational, Entrepreneurship & Human Resource • Improving link and match scheme between industries and vocation Capacity Labor Market • Early childhood education Encourage education system to be more skill, collaborative, flexibility and impact oriented instead of degree consideration • Source: Coordinating Ministry for Economic Affairs Priority 11

  4. The Economic Policy Packages “To improve national industry competitiveness, export and investment to generate significant economic growth” Harmonizing Regulations Simplifying Bureaucratic Process Ensuring Law Enforceability Phase I (9 Sept ’15) Phase IX (27 Jan ’16) Improving national industry competitiveness Accelerating electricity generation, stabilizing meat prices and improving rural – urban logistics sector Phase II (29 Sept ’15) Easing permit requirement and simplifying export proceeds requirement Phase X (11 Feb ’16) Revising the Negative investment List and improving protection for SMEs Phase III (7 Oct ’15) Financial services facilitation, export financing and elimination of business unnecessary burden Phase XI (29 Mar ’16) Stimulating national economy through facilitation to SMEs and industries Phase IV (15 Oct ’15) Social safety net and betterment of people welfare Phase V (22 Oct ’15) Phase XII (28 Apr ’16) Improving industry and investment climate through tax incentives and deregulation on sharia Improving Indonesia’s rank on Ease of Doing Business (EODB) banking Phase XIII (24 Aug ’1 6) Phase VI (5 Nov ’15) Low Cost Housing for Low-Income Communities Stimulating economic activities in border areas and facilitating strategic commodities availability Phase XI V (10 Nov ’1 6) Roadmap for E-commerce Phase VII (7 Dec ’15) Stimulating business activities in labor-intensive industries nation-wide through incentives in Phase XV (15 Jun ’1 7) the form of accelerating land certification process for individuals Improving logistics Phase XVI (16 Nov ’1 8) Phase VIII (21 Dec ’15) Improving the competitiveness and domestic economy Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries In addition to the 16 Policy Packages, on August 31, 2017 the Government has issued a Presidential Regulation No.91/2017 for enhancing business license service standard Source: Coordinating Ministry for Economic Affairs 12

  5. Improving the Competitiveness and Domestic Economy The 16 th Economic Policy Package has been launched TAX HOLIDAY EXPANSION EXPORT PROCEEDS (DHE) SCHEME Background In order to further increase investment value in Indonesia, there is a need for expansion of sector and standard classification of Indonesian Business Fields (KBLI) that are given tax holiday, complemented with a process simplification to receive the tax holiday according to the Online Single Submission (OSS). Objectives and benefits 1) Increasing investment and strengthening the industrial sectors from the downstream to the upstream through the expansion of the business sector, KBLI’s pioneer industries, and Special Economic Zones (SEZ) that can receive tax holiday facilities 2) Increasing the process of convenience of filing process and tax holiday facilities Tax Rates on Deposit Interest provision Tax Rates on Deposit Interest Income Income Source: Coordinating Ministry for Economic Affairs 13

  6. Progress of the Economic Policy Packages* 236 I – XVI Initially, there are 236 regulations which need to be deregulated I – XII TOTAL INITIAL REGULATIONS 11 I – XVI Based on the further assessment, 11 regulations has been revoked from I – XII REVOKED deregulation process REGULATIONS 225 I – XVI I – XII Total regulation subject to be deregulated: 225 regulations TOTAL REGULATIONS 223 99% SET As of October 1 st , 2019, deregulation of 223 regulations are finished (99%), PRESIDENTIAL LEVEL 99% PRESIDENTIAL 54 comprising 53 regulations at Presidential level and 170 regulations at 53 47 42 TOTAL FINISHED Ministerial/Institutional level SELESAI MINISTERIAL/INSTITUTIONAL LEVEL 99% 171 170 FINISHED TOTAL 1% 2 ON GOING Total regulation which are still discussed: 2 DISCUSSION *as of October 1 st , 2019 Source: Coordinating Ministry for Economic Affairs 14

  7. Other Progress on Economic Policy Packages Development of Fair, Simplified & Spesial Economic Zone (SEZ) Projectable Wage System 29 Provinces have set 2016 Minimum Wage System in Investment commitments in SEZ up to 2017 reach 41 T, with 3 accordance to the Government Regulation (GR) No. 78/2015 hour licenses already applied in 4 SEZ’s Administrators in 2017 Industrial Zone Deregulation on Logistics Sector 52 Bonded Logistic Center has been launched to support • The Provinces of Central Java proposed 3 IZ’s : Kendal, various industries Demak, and Ungaran • Pharmaceutical IZ in Bitung (North Sulawesi) in 2017 15

  8. Investment Incentives to Boost Industry Sector BUSINESS EXPANSION INDUSTRIAL ZONE Tax allowance • VAT exemption on import or delivery of capital goods, • Exemption or relief of import duty on capital goods, machinery or equipment for production • Import Duty exemption on machineries/goods/materials, • purposes that can not be produced domestically; Tax Allowance and Tax Holiday • Exemption or relief of import duty on raw materials or auxiliary material for production • purposes for a certain period of time and certain conditions; Exemption or suspension of VAT on the import of capital goods or machinery or equipment for • production purposes that have not been produced domestically for a certain period of time; FREE TRADE ZONES AND PORTS Accelerate depreciation or amortization (part of tax allowance); and • Property tax relief , especially for certain business sectors in certain regions; • Combine with Online Single Submission (OSS) Exemption of: • Import Duty • VAT • Luxury Goods Sales Tax (PPnBM) • Customs duty • MICRO, SMALL, MEDIUM ENTERPRISES (MSMES) PIONEER INDUSTRIES Decreasing MSMEs Tax from 1% to 0.5% of gross revenue Tax holiday of corporate income tax in a certain amount and time SPECIAL ECONOMIC ZONE E-COMMERCE No collection of VAT and Luxury Goods Sales Tax (PPnBM), • Sales from customs areas for non-small entrepreneurs through the market place will be • Customs tax exemption, • subject to 0.5% income tax and 1% VAT Tax Allowance and Tax Holiday, • Sales from customs areas for small entrepreneurs through the market place will be subject to • Suspension of Import Duty, • 0.5% income tax 0% Import Duty for goods produced using local components of a certain level • Source: Coordinating Ministry for Economic Affairs 16

  9. New Tax Holiday Policy* to boost industry sector BEFORE PROVISION AFTER Pioneer Industry with minimum investment value of 1 trillion Rupiah (minimum Pioneer Industry with minimum investment value of 500bn Rupiah investment value of 500bn Rupiah for telecommunication sector) Applied to 17 industry groups: (i) upstream base metal; (ii) oil and gas refinery; (iii) petrochemical (oil, gas, or coal based); (iv) Applied to 8 industry groups: non-organic base chemical; (v) organic base chemical; (vi) pharmaceutical materials; (vii) (i) upstream basic metal industry; (ii) oil and gas refinery industry; (iii) organic semiconductor and other components; (viii) communication devices components; (ix) medical basic chemicals industry; (iv) machinery industry; (v) plantation, forest, and devices components; (x) machine manufacturing for industry; (xi) machine main components fishery products processing industry; (vi) telecommunication, information and Taxpayer manufacturing; (xii) robotic components manufacturing; (xiii) ship components manufacturing; (xiv) communication industry; (vii) marine transportation; and (viii) economic airplane components manufacturing; (xv) train components manufacturing; (xvi) power plants; and infrastructure (xvii) economic infrastructure 10 – 100% 100% (single rate) Corporate Income Tax (CIT) reduction rate 5 – 20 years depends on the investment value (in IDR): 5 – 15 years; or • 1. 500Bn – 1Tn : 5 years 4. 15Tn – 30Tn : 15 years Can be extended to 20 years; subject to MoF discretion • 2. 1Tn – 5Tn : 7 years 5. ≥ 5Tn : 20 years Concession period 3. 5Tn – 15Tn : 10 years Not available 50% CIT reduction for the next 2 years Transition Tax allowance for business expansion can be provided with terms and Tax allowance not provided conditions applied After Tax Holiday *) MoF has issued a new Tax Holiday policy through Regulation No. 35/PMK.010/2018 (PMK-35) dated 4 April 2018. Source: Coordinating Ministry for Economic Affairs 17

  10. Enhancing Business License Service Standard Presidential Regulation to Accelerate Ease of Doing Business has been launched Improve efficient, streamlined, & integrated Provide business licensing process Overcome the barriers to doing business license service standards assurance in terms of the costs and lead business in Indonesia times Policy Goals 2 4 6 3 5 1 Implement integrated licensing Accelerate the business licensing Increase coordination & synergy between process central & regional government process (single submission) 2 nd Phase 1 st Phase Forming a Task Force to identify & overcome Business license regulatory the end-to-end licensing barriers reforms Main Policy Implementing a licensing checklist for Special Implementation of the Single Economic Zones (KEK), Free Trade Zones (FTZ), Submission system Industrial Zones & Tourist Zones Utilizing data sharing Note: 1 st and 2 nd Phase are implemented in parallel Source: Coordinating Ministry for Economic Affairs 18

  11. Improving Investment Climate Online Single Submission (OSS) Has Been Launched... OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors Environment & Public Works & Lorem Ipsum Suitable Electricity Sector Industry Sector Health Sector Forestry Sector Housing Sector for all category, Information & Marine & Fishery Medicine & Food Transportation Trade Sector Communication Sector Sector Sector Sector Other Sector The Advantage of Using OSS Business licenses can be Standardized business Ellectronically secured in under an hour licenses are available integrated The whole licensing process is Accessible at anytime More practical monitored by the Task Force and anywhere Source: Coordinating Ministry for Economic Affairs 19

  12. Improving Investment Climate …Bonded Logistic Center to Improve Indonesia’s Competitiveness Bonded Logistic Center To date, 52 Bonded Logistic Center has been launched to support various industries. (Pusat Logistik Berikat/PLB) is a facility provided Small and Food & by Ministry of Finance as part of the medium beverages implementation of the 1 st Economic Policy industry industry Personal care/ Package. Oil and gas, home care and mining PLB facility aims to improve efficiency and industry industry Synthetic textile reduce the cost of transportation and logistics in (chemical Indonesia; support the growth of the domestic Auto-motive substances) industry industry, including small and medium industry. Heavy Textile (cotton) industries; increase investment; and to make Equipment industry Indonesia to become a logistics hub in Asia industry Pacific. Aircraft MRO Defence industry industry 20

  13. Improving Investment Climate …revising the Negative Investment List Introduction of New Foreign Ownership Regulation for Strategic Sectors Sports Center, Pharmaceutical Raw Materials Manufacturing Cold storage Restaurants, Bars Film Processing Lab, Crumb Rubber After Before After Before After Before After Before 100% 100% 100% 100% 33% 85% 49% 51% Private Museum, Catering, apparel Toll Road Operator, Distribution, Warehousing Manufacturing, Exhibitions & Conventions Telecommunication Testing Company Key Reforms in Negative Foreign Investment List Before After Before After Before After Revision of "Partnership" category to refer to partnership with Micro, Small and Medium Enterprises (MSMEs) 100% 67% 67% 95% 33% 51% Grandfather Law: If a particular sector is tightened in future, existing foreign investor does not need to Professional Training, Golf Course Management, Air Transport Telecommunication Provider comply with tighter stake Support Services, Travel Bureau Consultancy for Construction 1 with Integrated Services Before After Before After Before After Strengthen implementation of negative investment law through active roles from ministries, agencies 67% 67% 67% 49% and regional governments 55% 65% 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) 21

  14. Investment Realization (Q3-2019) Direct Investments Top 8 FDI Realization by Sectors (Q3-2019 vs Q3-2018) IDR tn Transportation, Warehouse, and 220 Telecommunication FDI DDI TOTAL 205,7 200 180 US$1,842.6 mn 160 140 Mining 75.5% Electricity 120 US$285.6 mn 100 US$1,554.0 mn 80 52.0% 27.4% 60 105,0 40 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Housing, Industrial Estate, and Office Building Food Industry 2019 2013 2014 2015 2016 2017 2018 Investment US$296.1 mn US$681.8 mn Realization 23.2% IDR205.7tn 1.5% Rp159.4 T IDR173.8tn 434,463 375,982 Rp145.4 T * Metal, Except Machinery, and Paper, Paper Based 18.4% Equipment Industry Goods, and Printing 9.6% 15.6% Industry US$587.3 mn US$314.2 mn Q3-2018 Q3-2019 Q1-2016 Q1-2017 Q1-2016 Q1-2017 17.8% 453.5% * person Chemical and Pharmaceutical IDR105.0tn Industry IDR100.7tn IDR89.1tn IDR84.7tn US$315.6 mn 30.3% 17.8% 18.9% Q3-2019 Q3-2018 Q3-2019 Q3-2018 Source: Investment Coordinating Board (BKPM), compared to Q3-2018 period 22

  15. Section 2 Economic Factor: Strong and Stable Growth Prospects Remain Intact

  16. Conducive Environment Underpinning Strong Growth Fundamentals Tax base to be Budget reform as a part of 4th Most Populous broadened from one Largest Economy in larger economic reform country in the World; reduce dependency on South East Asia initiative 64% in productive age commodities Large and Stable Consistent Budget Economy Reform Fuel subsidies significantly Manageable Inflation Rising Middle Class and reduced and spending Prudent debt Rate Affluent Customers redirected to more management productive allocation Reform-Oriented Administration Three main sources of financing for investment needs: State From commodity-based to manufacturing and and regional budget, State Owned Enterprises and PPP service sectors via infrastructure development New Economic High Infrastructure Continuing from 2015 policy, infrastructure will be higher Structure Investments From consumption-led to investment-led growth via a than fuel subsidy stronger manufacturing sector and more investment initiatives Infrastructure spending focused on basic infrastructure projects Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic Fiscal and non-fiscal incentives to attract infrastructure conditions investment and promote PPP 24

  17. Indonesia’s Strong GDP Strong GDP Growth 1 Indonesia has maintained economic growth momentum against a backdrop of worsening global economic moderation. • % QoQ YoY Economic growth in the third quarter of 2019 was recorded at 5.02% (yoy), relatively unchanged compared with the 7,0 5.05% (yoy) posted in the previous period. Such developments were influenced by solid domestic demand and 5,06 5,27 5,17 5,18 5,01 4,94 5,01 5,01 5,06 5,19 5,18 5,07 5,05 5,12 4,94 4,93 5,05 4,82 4,74 4,77 5,17 improving external sector performance despite dwindling global demand and lower international commodity prices. 5,02 4,92 5,0 4,21 4,20 In the third quarter of 2019, exports achieved positive 0.02% (yoy) growth and imports experienced a deeper 4,01 4,01 • 3,83 3,74 3,31 3,06 3,27 3,19 contraction to 8.61% (yoy). Meanwhile, solid domestic demand has been maintained, primarily on the back of expansive 3,14 3,09 3,0 household consumption growth. In addition, investment is also expanding, led by 5.03% (yoy) building investment growth. 1,0 0,04 In terms of production, a number of economic sectors have achieved stronger growth, including mining and quarrying • (0,16) in the primary sector; the manufacturing industry in the secondary sector; and wholesale and retail trade, (0,36) (0,30) (0,41) -1,0 (0,52) transportation and storage, as well as financial services and insurance in the tertiary sector. (1,73) (1,81) (1,69) (1,70) (2,07) -3,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 2018 2019 Favourable GDP Growth Compared to Peers 2 Growth Prospect % 9,0 Institutions 2019 GDP growth (%YoY) 8,0 7,0 7,0 6,1 2019 Budget 5.3 6,2 6,0 5,7 Bank Indonesia Around 5.1 5,0 5,1 5,0 3,7 3,6 4,0 5.0 IMF (WEO October 2019) 3,0 3,2 3,4 World Bank 5.2 2,0 1,0 5.2 ADB 0,0 Consensus Forecast (December 2012 2013 2014 2015 2016 2017 2018 2019* 2020* 5.0 2019) Bulgaria Colombia India Indonesia Philippines 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2019; * indicates estimated figure 25

  18. GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY) 1 2014 2015 2016 2017 2018 2019 By expenditure Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 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 4.9 5.0 4.9 5.0 4.9 4.9 5.2 5.0 5.1 5.0 5.0 5.2 5.0 HH. Consumption Non profit HH. 23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 5.3 6.9 8.1 8.8 8.6 10.8 9.1 16.9 15.3 7.4 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 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 5.2 6.3 4.6 4.8 5.2 8.2 1.0 Government consumption Gross Fixed Cap. 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 4.8 5.3 7.1 7.3 6.2 7.9 5.9 7.0 6.0 6.7 5.0 5.0 4.2 Formation 3.1 1.5 4.9 (4.4) 1.1 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (1.7) 8.4 2.7 16.5 8.4 8.9 5.9 7.6 8.1 4.3 6.5 (1.9) (2.0) 0.0 Exports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 (2.4) 4.8 0.2 15.4 11.9 8.1 12.6 15.2 14.0 7.1 12.0 (7.4) (6.8) (8.6) Imports 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 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 5.0 GDP 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption GDP Growth by Sector (%, YoY) 2014 2015 2016 2017 2018 2019 By sectors Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Agriculture, forestry, and fishery 5.2 4.9 3.6 3.3 4.2 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3.3 4.7 3.7 3.9 3.9 1.8 5.3 3.1 Mining and Quarrying -1.2 0.7 0.7 1.5 0.4 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 (1.3) 2.1 1.8 0.0 0.7 1.1 2.6 2.7 2.2 2.2 2.3 (0.7) 1.9 Manufacturing 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 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4.6 3.9 4.4 4.2 4.3 3.9 3.5 4.1 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 6.0 7.0 7.0 7.2 6.8 7.4 5.7 5.8 5.6 6.1 5.9 5.7 5.6 Wholesale and Retail Trade, Repair 6.1 5.1 5.2 4.4 5.2 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5.0 5.2 5.3 4.4 5.0 5.3 4.6 4.7 of Car and Motorcycle Transportation and Storage 7.0 7.6 7.7 7.2 7.4 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8.6 8.7 5.6 5.3 7.0 5.3 5.8 6.6 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 8.9 9.6 8.9 10.5 11.1 8.8 8.3 9.6 7.8 5.1 8.1 7.2 7.0 9.1 9.6 9.1 Financial service 3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 8.9 6.0 5.9 6.1 3.8 5.5 4.2 3.1 3.1 6.3 4.2 7.3 4.5 6.1 Other Services * 5.4 4.7 5.9 6.5 5.7 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 6.0 4,6 5.4 6.2 6.7 6.4 6.2 6.8 7.3 6.4 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 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 5.0 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 26

  19. Regional Economic Growth Economic growth was supported by robust household consumption in various regions, coupled with strong investment from national strategic projects in Sulawesi, Kalimantan and Java. Source: Central Bureau of Statistics of Indonesia (BPS) 27

  20. Section 3 External Factor: Improved External Resilience

  21. External Balance under Control Supported by Adequate Reserves Balance of Payments Portrait Current Account Deficit within Safe Threshold Indonesia's Balance of Payments 2014: 2015: 2018: 2013: 2016: 2017: CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit US$bn US$bn (US$27.5bn) (US$17.5bn) (US$30.5bn) US$bn (US$29.1bn) (US$17.0bn) (US$16.2bn) Current Account Capital and Financial Account 20 160 0,0 8 Overall Balance Reserve Asset (rhs) 6 -0,5 15 1,3 124,3 4 1,8 -1,0 120 10 2 -1,5 0 -2,0 5 7,6 -2 80 -2,7 -2,5 -4 0 -3,0 0,0 -6 -8,4 -5 -3,5 40 -8 -7,7 -4,0 -10 -10 -2,3 -4,5 -12 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2* Q3** -15 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2* Q3** 2013 2014 2015 2016 2017 2018* 2019** 2013 2014 2015 2016 2017 2018* 2019** Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs) Source: Bank Indonesia Source: Bank Indonesia Substantial FX Reserves to Mitigate External Challenges Trade Balance Portrait 2018: 2014: 2015: 2016: 2017: 2013: FX Reserves as of November 2019: US$126.6bn US$bn Deficit Deficit Surplus Surplus Surplus Deficit (Equiv. to 7.2 months of imports + servicing of government debt) (US$8.57bn) (US$2.37bn) US$7.59bn US$8.83bn US$11.83bn (US$4.10bn) 3,00 US$bn Month FX Reserves (LHS) Month of Import & Debt Service (RHS) 130 15 14 2,00 120 13 12 110 1,00 11 10 100 9 0,00 8 90 7 6 -1,00 80 5 4 70 -2,00 OG Non-OG Total 3 2 60 1 -3,00 50 - 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 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 3 5 7 9 11 1 3 5 7 9 11 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 * Preliminary Figure ** Very Preliminary Figure Source: Bank Indonesia Source: BPS 29

  22. Exchange Rate In Line with Fundamentals Movement of Rupiah IDR/US$ The rupiah continues to appreciate, supported by improving BOP performance. As of 18th December 2019, 15.500 IDR/USD Quarterly Average the rupiah strengthened by 0.93% (ptp) on the November 2019 level, thus appreciating 2.90% (ytd) since the beginning of the year. The strong rupiah is supported by the supply of foreign exchange from exporters and Monthly Average 15.000 maintained foreign capital inflows due to the favourable national economic outlook, highly attractive domestic 14.798 financial markets and less uncertainty in the global financial markets. Looking forward, Bank Indonesia predicts 14.220 14.232 rupiah stability in line with the currency's fundamental value and maintained market mechanisms, supported by 14.500 14.381 14.601 14.120 the sound BOP outlook based on maintained foreign capital inflows in line with the promising domestic economic 14.113 14.037 outlook and attractive yields, as well as the positive impact of dovish monetary policy in advanced economies. 14.000 14.254 Bank Indonesia will continue to accelerate financial market deepening, targeting the money market and foreign 14.141 13.952 14.100 13,975 14.078 exchange market in particular, in order to support exchange rate policy effectiveness and strengthen domestic 14.134 14.031 financing. 13.500 14.065 13.576 *data as of December 18, 2019 13.000 16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct 16-Nov 16-Dec 16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct 16-Nov 16-Dec Rupiah Exchange Rate Fared Relatively Well Compared to Peers Rupiah Exchange Rate Volatilty YTD 2019 vs 2018 % *data as of December 18, 2019 25 point-to-point average -10,30 TRY -14,32 -0,06 19,90 ZAR -8,21 20 Nov-19 Dec-19 -4,69 18,18 BRL -7,17 -4,96 KRW -5,60 -2,84 EUR 15 -5,42 -1,69 CNY -4,15 11,92 11,53 -1,82 INR 10,07 -2,74 -0,13 10 MYR -2,55 7,93 7,73 0,49 7,11 SGD -1,09 6,73 5,75 5,52 5,28 2,90 IDR 0,72 4,52 4,53 5 3,70 0,56 JPY 3,05 2,90 2,84 1,35 2,71 2,50 3,78 PHP *data as of December 19, 2019 1,72 7,12 THB 4,03 % - BRL ZAR TRY IDR KRW THB MYR INR SGD PHP -20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 Source: Bank Indonesia 30

  23. Bank Indonesia’s Policy Direction To maintain Rupiah stability and support growth Measures To Stabilize Rupiah Exchange Rate Measures To Support Growth 1 1 A pre-emptive, front-loading and Further easing of To stabilise the rupiah exchange rate, while ahead-of-the-curve policy response macroprudential policy To bolster the growth of the property sector which has consistently controlling inflation within the positive impact to the economy 2018-2019 target range of 3.5±1% 2 2 Coordination with the Coordinating Ministry of Dual intervention in the foreign To stabilise the rupiah exchange rate, adjust Policy coordination to Economic Affairs, the Ministry of Finance, and the exchange market and government fair prices in the financial markets and accelerate financial market Financial Services Authority to accelerate financial securities (Surat Berharga Negara maintain adequate liquidity in the money market deepening market deepening, particularly in private financing for – SBN) market in a measured way infrastructure. 3 3 Strengthening the monetary operations Payment system development to Electronification to support social assistance in the foreign exchange and money To maintain adequate liquidity in the rupiah support digital economy disbursement and financial transcation of the central markets money market and interbank swap market and regional government 4 4 Sharia economy and finance development to create To form rational expectations, thus helping to Intensive communication, especially Sharia economy and finance halal value chain, sharia financal sector development mitigate the rupiah overshooting its to market players, banks, businesses, development both for commercial and social purposes, including its fundamental level. and economists education and communication Source: Bank Indonesia 31

  24. Ample Lines of Defense Against External Shocks Ample Reserves Ample level of FX reserves to buffer against external shock  FX Reserve FX Reserves as of November 2019: US$126.6 billion  Swap Arrangement Renewed a 3 year USD22.76 billion swap line with Japan on October 14 th , 2018  Japan The facility is available in USD and JPY  South Korea Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2017  Australia Bilateral Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018  Singapore Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2019  Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in  China November 2018 Malaysia Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019  Entitled to a maximum swap amount of USD600 million under ASA  ASEAN Swap Arrangement The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million  (ASA) Doubled to USD2 billion in 2005  Regional Chiang Mai Initiative Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement  Multilateralization (CMIM) Came into effect in 2010 with a pool of US$120 bn  Agreement Doubled to US$240 bn effective July 2014  IMF Global Financial Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem  Global Safety Net - GSFN Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)  Source: Bank Indonesia 32

  25. Solid Policy Coordination In Managing Financial Markets Volatility The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at Gov’t Securities Crisis Management Protocol (CMP) the time of financial crisis in the form of Financial System Stability Committee Indicators: (KSSK)  - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities KSSK members : the Ministry of Finance, Bank Indonesia, the Financial Services Policies to address the crisis at every level : Authority, and the Deposit Insurance Corporation  - Repurchase the government securities at secondary market - Postpone or stop the issuance Bond Stabilization Framework Swap facility arrangements based on international cooperation First Line of Defense Buyback fund at DG of Budget Financing and Risk Management State’s Budget Investment fund at Public Service Agency (BLU) (min. level Enhancing coordination between government institutions and continuous Aware) dialogue with market participants State Owned Enterprises (BUMN)’s Related SOEs (min. level Aware) Budget Social Security Organizing Agency BPJS (min. level Aware) (BPJS)’s Budget CMP Implementing Crisis Management Protocol (CMP) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget Accumulated cash surplus (SAL) (min. Level Crisis) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 33

  26. Strengthened Private External Debt Risk Management Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Hedging Ratio* External Debt/GDP (%) 2020F 54,3 165, 6% Bulgaria 56,5 2019F 57,3 255, 10% 42,3 2018 Colombia 42,9 39,9 21,4 India 20,9 20,0 ≤ 3 months > 3 - 6 months 37,0 Indonesia 36,7 36,2 2,295, 90% 21,9 2,385, 94% Philippines 23,0 23,9 0 10 20 30 40 50 60 70 Source: Moody’s Statistical Handbook, November 2019 Liquidity Ratio* Regulation on Prudential Principle in Managing External Debt Phase 1 Phase 2 Phase 3 306, 12% Regulation Key Points Jan 1,2015 – Jan 1,2016 – Jan 1, 2017 & Dec 31,2015 Dec 31,2016 beyond Object of Regulation Governs all Foreign Currency Debt Hedging Ratio < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** 2,244, 88% Liquidity Ratio (< 3 months) 50% 70% Credit Rating Not applicable Minimum rating of BB- Must be done with a Hedging transaction to meet hedge ratio not necessarily be done with a bank in Indonesia Comply Not Comply bank in Indonesia Sanction As of Q IV-2015 Applied *Data as of Q2 2019, with total population 2.550 corporates Source: Bank Indonesia Source: Bank Indonesia 34

  27. Healthy External Debt Composition External Debt Structure The Structure of External Debt is Dominated by Long-Term Debt Short Term External Debt Long Term External Debt Private External Debt Public External Debt 100% 100% 90% 90% 80% 80% 44,2 45,9 46,4 48,8 50,0 49,5 49,6 49,8 50,2 49,2 49,1 50,2 50,1 50,1 50,0 51,2 50,4 52,6 57,4 58,6 70% 70% 60% 78,8 78,3 78,8 60% 79,3 79,8 81,7 82,1 82,9 83,2 84,4 84,0 83,9 84,9 84,3 83,9 84,2 85,3 85,7 85,9 85,7 50% 50% 40% 40% 30% 30% 55,8 53,6 54,1 50,0 50,5 50,4 50,2 50,8 51,2 50,9 48,8 49,8 49,8 49,9 49,9 50,0 49,6 47,4 42,6 41,4 20% 20% 21,2 20,7 21,7 21,2 10% 10% 20,2 18,3 17,9 17,1 16,8 15,6 16,0 16,1 15,1 15,7 16,1 15,8 14,7 14,3 14,1 14,3 0% 0% External Debt Remains Manageable External Debt to GDP Ratio & Debt to Export Ratio Million USD % % % External Debt / Export Ratio External Debt / GDP Ratio (rhs) External Debt External Debt Growth (rhs) 450.000 20,0 37,0 200 36,7 40 36,3 36,1 36,2 17,1 34,7 18,0 34,3 400.000 32,9 35 31,8 16,0 180 350.000 29,1 27,4 30 26,5 178,4 14,0 176,1 12,0 25,0 300.000 173,6 11,5 11,3 160 169,9 168,4 168,0 12,0 25 10,2 10,1 162,3 9,8 250.000 9,5 10,0 8,0 140 20 200.000 6,5 8,0 139,5 5,9 5,4 15 150.000 120 6,0 123,1 121,8 3,0 10 100.000 4,0 114,9 113,8 100 5 50.000 2,0 101,0 0 0,0 80 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018* Q1-2019* Q2-2019* Q3-2019* *Provisional Figures Source: Bank Indonesia, External Debt Statistics of Indonesia, October 2019 35

  28. Manageable External Debt Profile Short term non-bank corporate debt (non affiliation) represents only 9.1% of total private external debt Public Long Term 1 Private Bank Affiliation US$201.9bn US$151.5bn US$19.1bn or or or 50.4% 76.3% 9.6% US$10.0bn of Total Ext. of Private Ext. of Private or Debt Debt Ext. Debt 5.1% External Debt of Private Position Ext. Debt US$198.6bn US$47.2bn US$28.0bn or or or 49.6% US$400.6bn 23.7% 14.1% of total of Private of Private Ext. Debt Ext. Debt Ext. Debt Private Non-Bank US$18.0bn Short-Term 1 or 9.1% Private of Private Ext. Debt External Debt Position as of October 2019 1 Based on remaining maturity Non Affiliation Source: External Debt Statistics of Indonesia, December 2019 36

  29. Section 4 Fiscal Performance and Flexibility: More Fiscal Stimulus with Prudent Fiscal Policy

  30. Integrated Reform to Provide Higher Quality of Economic Growth Structural reforms to enhance potential growth and navigate through challenges • Fair State Budget that declines poverty and income inequality Fiscal Synergy in reform to boost the more sustainable and inclusive • Monetary policy to support macroeconomic Monetary & • Efficient, competitive, and innovative real Real Sector growth stability Financial Sector sectors • Price stability and sustainable current • Job-creation account deficit • Trade and investment policies that • Efficient and credible support growth, efficiency, and stability financial sector Source: Ministry of Finance 38

  31. Growth Momentum is Expected to Continue Several key drivers and strategies to accelerate growth Key Drivers Strategies to Encourage Growth Maintaining purchasing power, boosting domestic demand and • Consumption remains robust among others supported by benign • supporting business activity . inflation Improve distribution channels  Increased shopping events, creative industries and festivals in  Investment grows stably supported by infrastructure acceleration, • tourism areas business climate improvement, rating upgrades, economic packages Incentives for manufacture  Developing e-commerce industry  Export and Import keeps improving driven by increasing demand • Encouraging private sector's role in investment • and improving prices Strengthening and deepening financial markets  Making a stable investment climate through political stability  Support from several important events such as Asian Games, • Regional Elections, and IMF-WB annual meeting Expand services sector, especially tourism • Increasing foreign tourists arrival through cooperation with other  countries by increasing the direct flight schedule Encouraging national creative industry growth  Risks & Challenges Global economic uncertainties : China economic rebalancing and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change 39

  32. 2019 State Budget (APBN 2019) Healthier, More Equitable, Self-Sufficient Macroeconomic Healthier Assumption Growth Inflation Exchange Rate 3 months T-bills Deficit 1.84% of GDP, the lowest since • 5.3% 3.5% 15,000/US$ 5.3% 2013 • Towards positive primary balance Debt to GDP ratio below 30% of GDP • ICP Oil Lifting Gas Lifting 70/barrel 775 thousands barrel/day 1,250 thousands barrel/day More equitable • Strengthening decentralization (increasing fiscal transfer to regions) Development Target Unemployment Poverty Gini ratio HDI Strengthening social protection • 4.8% – 5.2% 8.5 – 9.5 0.38 – 0.39 71.98 programs Focusing on human capital quality • EXPENDITURE improvement (inter-generational REVENUE fairness) Rp2,461.1 T Rp2,165.1 T  Central Government  Tax Self sufficient Rp1,634.3T Rp1,786.4 T • Increasing tax revenue  Transfer to Region  Non Tax Increasing the share of local currency • Rp756.8 T Rp378.3 T bond issuance  Village Fund Domestic financial deepening  Grant • Driving export Rp70.0 T • Rp0.4T Deficit Primary Balance Rp296.0 T (1.84% of GDP) (Rp20.1 T) Debt Financing Investment Rp359.3 T Rp75.9T Source: Ministry of Finance 40

  33. Credible and Healthier Budget …providing more certainty to all stakeholders Macroeconomic Assumption for 2018 & 2019 Budget 2018 Budgetrealization showed healthy and credible performances: • 2017 2017 2018 2019 Indicator - with tax revenues grewrelatively high R-Budget Realization Budget Budget - improving tax ratio Economic growth (%, yoy ) 5.2 5.1 5.4 5.3 - optimal level of expenditure Inflation (%, yoy ) 4.3 3.6 3.5 3.5 2019 Budgetis healthier, more equitable, and self-sufficient • 3-Month Treasury Bill (SPN) (%) 5.2 5.0 5.2 5.3 - towards positive primarybalance Exchange Rate (Average, IDR/USD) 13,400 13,384 13,400 15,000 - strengthening decentralization ICP (USD/barrel) 48 51.2 48 70 - increasing tax revenue Oil Production (thousand barrel/day) 815 804 800 775 Gas Production (millions barrel/day) 1.15 1.14 1.20 1.25 2019 2016 2017 2018 Description (IDR Trillion) Audited Audited Audited Realization % Realization to Proposed Budget Budget Realization Realization Realization (a.o. November 30) Budget A. Revenues and Grants 1,555.9 1,666.4 1,943.7 2,142.5 2,165.1 1,677.1 77.5 I. Domestic Revenue 1,546.9 2,142.1 2,164.7 1,675.2 77.4 1,654.8 1,928.1 1. Tax Revenue 1,285.0 1,343.5 1,518.8 1,781.0 1,786.4 1,312.4 73.5 2. Non Tax Revenue 262.0 311.2 409.3 361.1 378.3 362.8 95.9 II. Grants 9.0 11.6 15.6 0.4 0.4 1.9 447.3 B. Expenditure 1,864.3 2,007.3 2,213.1 2,439.7 2,461.1 2,046.0 83.1 I. Central Government Expenditure 1,154.0 1,607.3 1,634.3 1,293.2 79.1 1,265.3 1,455.3 1. Ministerial Spending 684.2 765.1 846.5 840.3 855.4 717.8 83.9 2. Non Ministerial Spending 469.8 500.2 608.8 767.1 778.9 575.4 73.9 II. Transfer to Region and Village Fund 710.3 832.3 826.8 752.8 91.1 742.0 757.8 C. Primary Balance -125.6 -124.4 -11.5 -21.7 -20.1 -101.3 503.8 D. Surplus (Deficit) -308.3 -340.9 -269.4 -297.2 -296.0 -368.9 % of GDP -2.49 -2.51 -1.81 -1.84 -2.30 E. Financing 334.5 366.6 305.7 297.2 296.0 421.0 142.2 Source: Ministry of Finance 41

  34. 2020 State Budget (APBN 2020) Indonesia 2045: Becoming a Developed Country Macroeconomic Assumption for 2020 Budget 2036-2045 2019 2020 Indicator ADVANCED Sovereign, Advanced, Just, and Prosperous Country Outlook Budget INDONESIA Economic growth (%, yoy ) 5.2 5.3 2031-2035 Inflation (%, yoy ) 3.1 3.1 Strengthening Competitiveness 3-Month Treasury Bill (SPN) (%) 5.6 5.4 TRANSITION Exchange Rate (Average, IDR/USD) 14,250 14,400 ICP (USD/barrel) 63 63 2020-2030 Oil Production (thousand barrel/day) 754 755 STRENGTHENING THE FUNDAMENTAL Improving Competitiveness Gas Production (millions barrel/day) 1.07 1.19 2020 Fiscal Competitiveness Theme 2020 2019 Description (IDR Trillion) Growth (%) Proposed “ State Budget to Accelerate Competitiveness through Outlook Growth (%) Budget Growth (%) Budget Innovation and Strengthening Quality of Human Resources ” A. Revenues and Grants 2,221.5 9.4 2,233.2 10.0 2,030.8 4.5 I. Domestic Revenue 1. Tax Revenue 1,861.8 13.3 1,865.7 13.5 1,643.1 8.2 FISCAL POLICY STRATEGY FOR 2020 2. Non Tax Revenue 386.3 (5.6) 359.3 (7.0) 367.0 (5.0) II. Grants 0.5 (61.5) 0.5 (61.5) 1.3 (91.7) B. Expenditure 2,528.8 8.0 2,540.4 8.5 2,341.6 5.8 I. Central Government Expenditure 1,670.0 9.4 1,683.5 10.2 1,527.2 4.9 II. Transfer to Region and Village Fund 585.8 5.5 856.9 5.2 814.4 7.5 Revenue Mobilization C. Primary Balance -34.7 201.7 -12.0 (65.4) -12.0 (65.4) D. Surplus (Deficit) -310.8 15.4 -307.2 (1.2) -307.2 (1.2) % of GDP -1.76 (8.81) -1.76 (8.81) -1.93 6.04 Effective state spending E. Financing 310.8 1.7 307.2 (1.2) 307.2 (1.2) Creative financing Source: Ministry of Finance 42

  35. New and Strategic Programs The policies and initiatives in State Budget 2020 for Improvement in human resource quality and competitiveness. Kuliah Tax Incentives for supporting human resources Improvement In Human Resource Quality and Social Assistance Accelerated completion of 4 super priority tourism destinations development & competitiveness Indonesian Smart Card College/KIP Kuliah • Super deduction for vocational program and R&D The development of Danau Toba, Borobudur, Labuan Bajo and Supporting the poor people to achieve the higher education level • Mini tax holiday for investment commitment under 500 billion rupiah Mandalika, synergy among line ministries and local government • Investment allowance for human intensive industry Pre Workers Card Improving the job seekers’ productivity Food Aid Card Protecting the food access for poors Strengthening The Transfer to Regions and Village Funds Endowment Fund for Human Resource and Culture Strengthening The Current Account Balance • Strengthening The Physical Specific Allocation Fund for social Supporting the reducing current account deficit in the short and The Utilization of endowment fund investment to improve the the quality of and marine transportation sectors; long term higher education and promotion of national culture, through: • Additional General Allocation Fund DAU for equalization village officials’ fixed income and remuneration of Government Employees with Work Agreements (PPPK) Culture Endowment Fund  Higher Education Endowment Fund  Significant additional endowment fund for research and  development Source: Ministry of Finance 43

  36. In 2020, Budget Deficit will be Maintained at level 1.76% GDP Directed to be healthier and adaptive to face the economic risks 0,0 0,00 Deficit to GDP ratio in 2020 will be the lower deficit in the • (11,5) (12,0) (50,0) (34,7) past five years (0,50) Primary balance deficit will be decreased gradually to (100,0) • (1,00) positive direction (124,4) (125,6) (150,0) (142,5) Tax revenue for supporting the competitiveness with the • (200,0) (1,50) realistic and optimal target (1,76) (1,82) (1,93) Budget spending will be prioritized for productive spending • (250,0) (2,00) Budget financing will be decreased and will be utilized for • (269,4) (300,0) (298,5) (308,3) (341,0) competitiveness improvements (307,2) (310,8) (2,50) (350,0) (2,49) (2,51) (2,59) (400,0) (3,00) 2015 2016 2017 2018 2019 Outlook 2020 Budget Budget Deficit (Trillion IDR) Primary Balance % Deficit to GDP 11,6 11.6 11,4 11,1 10,8 10,7 TAX RATIO 2015 2016 2017 2018 2019 Outlook 2020 Budget Source: Ministry of Finance 44

  37. State Revenue Optimization Followed by tax reforms for supporting the economy and business climate. Tax Revenue (Trillion Rupiah) Improvement to Support Taxation 2.000 1.861,8 1.865,7 Increasing the tax compliance • 1.800 1.643,1 1.518,8 Service quality improvement, counseling, and supervision through the • 1.600 1.343,5 1.285,0 strengthen IT system and tax and administration 1.400 1.240,4 14,8 Equalizing the level playing field 1.200 • 13,4 10,5 Improving the business process especially for VAT refund 1.000 • 12,6 13,0 13,5 8,2 8,2 800 Implementing the AEoI • 5,8 600 Extensification of excise goods • 4,6 3,6 400 • Adjusting the excise duty rates on tobacco 200 2,9 - 2015 2016 2017 2018 2019 2020 2020 2020 2020 Outlook RAPBN APBN Budget Plan Budget Pajak nonmigas Kepabeanan dan Cukai Oil & Gas Non Oil & Gas Tax Penerimaan Perpajakan Pertumbuhan Penerimaan Perpajakan (%) Custom & Excises Tax Revenue Growth (%) Non Tax Revenue (Trillion IDR) Pertumbuhan Pajak nonmigas (%) Non Oil & Gas Tax Revenue Growth (%) 450,0 40,0 409,3 31,5 386,3 400,0 30,0 The role of the non-oil and gas PNBP sector continues to be 370,0 359,3 311,2 350,0 strengthened accompanied by increased services to the 20,0 18,8 300,0 community 262,0 10,0 255,6 250,0 - 200,0 2,5 Management and Utilization of Optimal, Effective and Efficient Natural • (5,6) (5,0) (10,0) (7,0) Resources 150,0 (20,0) Service Improvement and Tariff Adjustment • 100,0 Improvement of BUMN Efficiency and BLU Performance (30,0) • 50,0 (35,9) • Improving Governance - (40,0) 2020 2020 2015 2016 2017 2018 Outlook RAPBN 2020 APBN 2020 Budget Budget Plan 2019 Oil & Gas (Trillion Rp) PNBP Migas (Triliun Rp) PNBP Nonmigas (Triliun Rp) Pertumbuhan (%) Growth (%) Non Oil & Gas(Trillion Rp) Source: Ministry of Finance 45

  38. Government expenditure in 2020 A better spending to supporting development to be efficient and effective. Source: Ministry of Finance 46

  39. Central Government Expenditure Directed to support Human Capital improvement and several strategic programs  Human Resource Quality Improvement Smart Indonesian Card (KIP) for Higher Ecuation Supporting the poors to continue their education to higher education Pre-Employment Card To Improve the productivity of job seekers • Sustainability of health service provision (increased premium aid by Government)  Social Protection Strengthening • Food access improvement (Food Card)  Infrastructure Development • Equalizing inter-region development • Accelerating development of 4 destination of super-priority tourism Source: Ministry of Finance 47

  40. Budget for Improving the Human Resource Quality Higher quality of human resources for achieving the welfare and just society. National Education Development (DPPN) • Culture Endowment Fund Rp1,0 T • Rp18,0 T • Ensure the continuity of culture promotion for the scholarships for 5.000 new students (higher degree level)  next generation scholarships for 12.333 students (higher degree level)  Financing 104 researches  Investment Financing Rp29,0 T Higher Education Endowment • Research Endowment Fund Rp5,0 T • Fund Increasing the human resource quality and  competitiveness Rp5,0 T • Increasing the research which supported the university  Human resources and education infrastructure for stakeholders achieving the World Class University Incresing the research contribution to economic growth  Source: Ministry of Finance 48

  41. The National Budget is to Prepare the Younger Generation to Improve the Quality of Human Resources Education Budget Rp508,1 T Source: Ministry of Finance 49

  42. The National Budget is Preparing the Youth through Job Training Definition of Pre-Employment Card Total Budget “It is a card given to job seekers or workers to get vocational training (skilling and re-skilling) and / or job Rp10 T competency certification" Target Design of Implementation of Digital and 2 Billion participants Regular Access Regular Digital Training + Certification + Incentives Training + Digital: 1.5 Mill Regular: 0.5 Mill Incentives Skilling Targets : Fresh graduate job seekers • Participants choose the • Training and Certification in Objectives : skill adjustment, vocational skill to work type of training through Government Job training Outcome : reduce unemployment a digital platform (GoJek, Center (LPK) (including Tokopedia, Jobstreet Vocational Center/BLK), Re-Skilling etc.). Private LPK, and Industrial • Private training * Taining Center Targets : Workers who are laid off or potentially laid off Objective : to equip new/different vocational skills for new profession/entrepreneur Online ( e-learning ) and Offline Outcome : prevent unemployment from returning Offline training (class) (Class) Source: Ministry of Finance 50

  43. Infrastructure Budget To build infrastructure and remote areas Investment for accelerating infrastructure development (SOE and PSA): PT HK Rp 3.5 T for building toll road Pekanbaru- Dumai and Terbanggi Besar- Pematang Panggang – Kayu Agung • Total Budget PT PLN Rp 5.0 T for fulfilling electrification target 100 % by 2020 • PT SMF Rp 2.5 T to support financing for building house for low income society • Rp423,3 T PSA LMAN Rp 10.5 T for land clearing to support national strategic project • PPPDP Rp 9.0 T for financing credit housing FLPP • Clean Water &Sanitations 49 18,758 km Development of drinking water pipelines • Bridges Dams Development of domestic wastewater treatment systems • Provision of infrastructure for processing waste • 3 19,879 ha 6,346 km Airports Irrigations Roads Internet Connectivity Housing for Low Income Society 238.8 km Development (Palapa Ring) Railroads Source: Ministry of Finance 51

  44. Subsidy is Directed to Improve Effectivity and Efficiency through Attempts in Accuracy Improvement Budget 2020 Outlook 2019 Energy Subsidy 125.3 T 142.6 T Policy :  Continuing fix subsidy for diesel of Rp1.000/litre  Price differential subsidy for kerosene and LPG 3 kg canister  Electricity subsidy is given to certain tariff groups.  Electricity subsidy is given accurately for household customer of 450 VA and 900 VA  Improving electricity ratio and reducing inter-regions disparity Non Energy Budget 2020 Outlook 2019 Subsidy 69.8 T 62.3 T Policy : Expanding capital access of Micro, Small, Medium Enterprises • • Data validation of beneficiaries and their needs of subsidized fertilizer  e-RDKK through interest subsidy of KUR (Definitive Plan of Group Needs) Allocating down payment and interest differential subsidy to encourage • • Expanding the use of Farmer Card to buy subsidized fertilizer house ownership of low income people • Improving public service in transportation and public information Source: Ministry of Finance 52

  45. Transfer to Region and Village Fund Rp856.9 T Increased by Rp42.5 triliun from the Outlook 2019 that is directed to: Accelerating Promoting productive Improving basic public service competitiveness spending delivery Accelerate the provision of public infrastructure and • strengthen the quality of human resources, especially through education, health, drinking water, social protection, and inter-regional connectivity. Increase competitiveness through innovation, ease of • doing business, governance, and incentive policies that support the investment climate. Increase productivity, especially export-oriented • through the development of regional economic potential. Source: Ministry of Finance 53

  46. Debt Financing Policy 2020 Debt financing that is productive, efficient, fulfills prudential aspects and supported by good governance and risk management systems. Debt Financing Direction Debt Financing Strategy Prudent • Optimizing community participation in the domestic bond market debt ratio control within the safe limit ranges from 29.4 - 30.1 percent • (financial deepening) of GDP to support fiscal sustainability • Active debt management through liability and asset Maintaining macro balance by maintaining the composition of • management. domestic and foreign debt in a controlled limit and deepening the financial markets Source: Ministry of Finance 54

  47. 2017 Achievements of State Budget Value creation on various projects and country development 15.5% 101.7% 118.5% 7.4% 23.0% 27.8% • Tax revenue growth vs. 2016 (excluding • Non-tax revenue over 2017 revised • Growth of realized government • Growth of transfer to village • Revenue of customs and excise • Capital expenditure growth vs. Budget, a growth of 17.7% vs 2016 vs. 2016, 99.6% over 2017 Tax Amnesty and Asset Revaluation) spending vs. 2016 over 2017 revised Budget, a 7.4% 2016, a 92.8% over 2017 revised revised Budget increase vs. 2016 Budget. Local Government Achievements Central Government Milestones Infrastructure: • 794 km roaddevelopment Bridges: 3,749 m bridgein • 9,072 m bridgedevelopment development, 291 m maintenance, and • 3 airports completed 2,916m improvement • 618.3 km railways Classroom: 1,351new classrooms,11,006 Roads: 1,033 km in development, rehabilitation, 11,758 rural library 1,503km collection Education: maintenance, 9,789 km • Distributed Indonesian Smart Card to 19.8 improvement million students Tuition: Reduced tuition costs for • School Operational Benefit for 8.0million 46.6 million students and 5.6 • Scholarship for 364.4 students million kindergarten-agedchildren Welfare: Increased welfare and work ethics of 1.7million civil teachers in rural areas Medical: Improved facilities in 347 and compensated 41,000 teachers in special Healthcare and Social Security: hospitals and 3,873 clinics regions • Distribution of Indonesian Health Card to 92.1 million people Rural: 107,9 villageroads, 89,200 health clinics, 178,800 toilets, and 107,700 connected clean water and 25,903 Ha irrigated lands Source: Ministry of Finance 55

  48. Indonesia’s Tax Amnesty Program – A Success Story With more than 965,900 taxpayers participating in the program Tax Amnesty Result (as of the end of March 31 st , 2017) Repatriation Preliminary Evidence 3% Payment SMEs 1% 2% Tax Arrears Companies ​Offshore 147,1 Payment 12% 1,7 Declaration 14% 85,59 21% 18,8 594,99 1,036 Individual SMEs 18% 861,81 3.323,36 ​Onshore 3,698 114,2 Declaration Individuals 76% 68% Redemption Money 85% Revenue Asset Declared Composition of Participants Based on IDR 134.8tn (~1.1% GDP) IDR 4,881tn (~39.4% of GDP) Asset Declared Redemption Money Assets Declared 39,3 1,10 % of GDP % of GDP 0,62 0,58 8,3 0,20 5,2 0,17 0,15 3,9 3,6 0,12 2,1 0,04 0,04 0,3 Germany Belgium Italy Chile Indonesia India South Spain Australia India Spain Chile Indonesia Italy South Australia (2004) (2004) (2009) (2015) (2016) (1997) Africa (2012) (2014) (1997) (2012) (2015) (2016) (2009) Africa (2014) (2003) (2003) Source: Ministry of Finance 56

  49. 2019 Financing Needs Fulfilled from Government Securities IDR 903.37 tn (92.41%) and Loan IDR74.22 tn (7.59%) Source: Ministry of Finance 57

  50. Government Securities Indicative Financing Plan for 2019 Auction: • Conventional Securities – 24x • Islamic Securities – 24x • • Non-auction: Retail GDS (tradable/ORI & non-tradable), Retail Sovereign Sukuk • (tradable/Sukri & non-tradable); Private Placement – based on request. • Auction GS Net GS Rupiah [74% – 76%] Domestic [446.49] [83% - 86%] Non-auction GS Issuance Need [9% - 10%] Issuance Composition [904.09] Foreign Denominated GS GS Matured International [457.60] [14% - 17%] *in IDR Trillion Foreign denominated GS as complementary  Avoid crowding out in • domestic market. The target amount can be adjusted to the potential of other financing • sources and financing needs. Source: Ministry of Finance 58

  51. Government Securities Realization As of End of November 29, 2019 – in Trillion IDR Government Securities realization as of November 29, 2019 IDR 903.36 T or 99.92% from the target From IDR903.36 T consist of: 903,36 29,52 Isuance Need for 2019 3% 841,78 228,76 26% 526,03 58% 119,06 13% 460,27 Government Securities Net 381,83 IDR Government Debt Securities FX Government Debt Securities IDR Sovereign Sharia Securities FX Sovereign Sharia Securities Realization as of Nov 29, 2019 Budget 2019 Source: Ministry of Finance 59

  52. Disciplined and Sophisticated Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt / GDP (%) 442 500 0,0% 35,0% 407 362 30,0% 358 29,8% 29,4% 400 5.000,0 28,3% 27,4% -0,5% 30,0% 265 300 24,9% 770,0 24,7% 4.000,0 810,7 25,0% 200 -1,0% 746,2 100 19 14 20,0% 734,8 -1,5% 3.000,0 755,1 - (9) (7) (4) (20) 15,0% 677,6 (100) -2,0% (69) (66) (58) (56) 2.000,0 714,4 4.044,3 -1,8% 3.612,7 3.248,6 (200) 10,0% -2,2% 2.780,6 (227) -2,5% 2.410,0 1.000,0 (300) 1.931,2 1.661,1 5,0% (298) -2,5% (269) (308) -2,5% -2,6% (341) (400) -3,0% Bonds (Net) Loans (Net) - 0,0% SBN (neto) 2014 2015 Pinjaman DN & LN (neto) 2016 2017 Non Utang (neto) 2018 Non Debt (Net) Budget Surplus/Deficit 2013 2014 2015 2016 2017 2018 2019*) Surplus (Defisit) APBN Rasio Defisit APBN thd. PDB (RHS) Fiscal Deficit (%GDP, RHS) Bond Loan Debt/GDP Ratio [RHS] Source: MoF Source: Ministry of Finance Weighted Average Debt Maturity of ~8.6 Years Well Diversified Across Different Currencies % of Yearly Issuance 9,8 ATM (in years) 100% 3% 2% 2% 1% 1% 1% 1% 1% 6% 6% 5% 7% 6% 8% 9% 12% 4% 4% 4% 90% 4% 9,4 4% 3% 3% 3% 80% 9,1 27% 28% 30% 30% 31% 29% 32% 70% 29% 60% 8,7 8,6 50% 8,4 40% 62% 62% 30% 59% 58% 57% 57% 55% 53% 20% 10% 0% 2013 2014 2015 2016 2017 2018 Oct-19 Nov-19 2014 2015 2016 2017 2018 Nov 2019 IDR USD EUR JPY OTHER Source: Ministry of Finance Source: Ministry of Finance Note: *as of end of November by using GDP (interpolation) 60

  53. Well Balanced Maturity Profile With Strong Resilience Against External Shocks Declining Exchange Rate Risks Declining Interest Rate Risks Variable rate ratio [%] Refixing [%] FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 21,0 20,7 44,5 43,4 19,7 42,6 19,2 41,3 41,0 38,0 17,5 16,4 14,8 13,7 12,1 10,6 10,6 9,9 12,2 12,3 12,1 12,1 11,4 10,7 2014 2015 2016 2017 2018 Nov 2019 2014 2015 2016 2017 2018 Nov 2019 Debt Maturity Profile Upcoming Maturities (Next 5 Years) IDR tn in 1 year (%) in 3 year (%) in 5 year (%) 450 41,4 40,4 39,3 400 36,0 IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 34,7 33,9 350 151 154 130 161 300 25,5 25,0 24,7 166 22,7 250 80 21,4 20,1 120 117 200 103 150 43 258 16 150 266 10,6 247 208 9,9 26 22 210 31 8,4 8,4 100 141 8 31 7,7 6,5 150 139 143 199 3 34 50 96 94 99 19 90 89 62 85 33 2 2 33 23 30 26 29 19 36 25 132 27 26 27 13 23 20 22 28 12 24 - - - - 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049-2058 2014 2015 2016 2017 2018 Nov 2019 Note: using GDP assumption Source: Ministry of Finance 61

  54. Holders of Tradable Central Government Securities More Balance Ownership In Terms of Holders and Tenors Holders of Tradable Gov’t Domestic Debt Securities Foreign Ownership of Gov’t Domestic Debt Securities by Tenor 100% 37,5% 35,2% 36,0% 38,1% 37,0% 37,7% 38,5% 38,2% 38,6% 39,8% 80% 42,8% 44,7% 60% 30,8% 39,8% 36,0% 38,55% 37,8% 38,1% 38,2% 39,9% 37,5% 37,7% 36,8% 42,0% 40% 34,3% 35,6% 37,4% 36,8% 33,6% 20% 39,0% 22,1% 17,3% 17,8% 31,0% 15,2% 18,4% 25,4% 23,9% 23,4% 22,5% 20,3% 11,8% 5,1% 3,7% 5,3% 1,9% 6,3% 1,3% 5,0% 4,3% 3,2% 3,5% 4,6% 2,1% 0% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 29-Nov-19 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Nov-19 Domestic Banks Domestic Non-Banks Foreign Holders 0-1 %Foreign Ownership of Total ≥1 -2 ≥2 -5 ≥5 -10 ≥10 Source: Ministry of Finance 62

  55. Ownership of IDR Tradable Central Government Securities (IDR tn) Description Dec-15 Dec-16 Dec-17 Dec-18 Nov-19 Banks* 350.07 23.95% 399.46 22.53% 491.61 23.41% 481.33 20.32% 704.11 25.42% Govt Institutions (Bank Indonesia**) 148.91 10.19% 134.25 7.57% 141.83 6.75% 253.47 10.70% 145.91 5.27% Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 260.94 9.42% GS used for Monetary Operation 23.63 1.33% 38.01 1.81% (36.15) (1.52%) 115.03 4.15% Non-Banks 962.86 65.87% 1,239.57 69.90% 1,466.33 69.83% 1,633.65 68.98 % 1,920.18 69.32% Mutual Funds 61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01 % 131.16 4.73% Insurance Company and Pension Fund 221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50 % 473.87 17.11% Foreign Holders 558.52 38.21% 665.81 37.55% 836.15 39.82% 893.25 37.71 % 1,067.80 38.55% Foreign Govt's & Central Banks 110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91 % 195.77 7.07% Individual 42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09 % 82.67 2.98% Others 78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67 % 164.67 5.94% Total 1,461.85 100.00% 1,773.28 100.00% 2,099.77 100.00% 2,368.45 100.00% 2,770.19 100.00% 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. Source: Ministry of Finance 63

  56. Section 5 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector

  57. Bank Indonesia’s Policy Mix To Maintain Macroeconomic and Financial System Stability Pre-emptive, front loading and ahead-of-the-  Implementing Macro prudential Intermediation Ratio (RIM)  curve policy rate response Implementing Macro prudential Liquidity Buffer (MLB)  Stabilize exchange rate consistent with  2 fundamentals 1 Accelerate implementation of reserve  Macro- requirement averaging prudential Monetary Maintaining a monetary operations strategy  Policy Policy Electronification: Social program, e-payment for  oriented towards increasing available liquidity Government (FX swap) Financial technology  3 National Payment Gateway (NPG)  QRIS (QR Indonesia Standard)  Payment Expanding National Clearing System (SKNBI) Coordination  System services with other Policy Authorities Controlling inflation: TPIP, TPID  4 5 Structural reforms: Government  Financial deepening & stability: KSSK (Financial  Financial Market Developing market instruments for financing infrastructure  System Stability Committee), OJK (Financial Deepening Developing financial market infrastructures Services Authority)  Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS) Coordinating efforts in reducing Current Account   Deficit Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat Berharga Komersial)  Source: Bank Indonesia 65

  58. Bank Indonesia Policy Mix: December 2019 The BI Board of Governors agreed on 18 th and 19 th December 2019 to hold the BI 7-Day Reverse Repo Rate at 5.00%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 4.25% and 5.75%. Maintains accommodative macroprudential Monetary policy remains Continues to orient Continues to strengthen policy to stimulate economic financing in line accommodative and is Monitors domestic and global monetary operations coordination with the Government consistent with controlled with the suboptimal financial cycle, while also economic development in using towards maintaining Holds the BI and other relevant authorities in paying due consideration to prudential inflation in the target corridor, its room to implement an adequate liquidity, 7-Day order to maintain economic maintained external stability principles. Payment system policy and financial accommodative policy mix in particular during the Reverse stability and catalyse domestic market deepening will be strengthened to as well as efforts to maintain order to maintain controlled Repo Rate approach to yearend, and demand, while boosting exports support economic growth. The current policy domestic economic growth inflation and external stability as supporting the at 5.00% and tourism and attracting foreign momentum against a backdrop response will maintain economic stability and well as to support economic transmission of an capital flows, including Foreign bolster economic growth momentum in Indonesia of global economic growth momentum accommodative policy mix. Direct Investment (FDI). moderation. to mitigate the global risks. 66 Source: Bank Indonesia

  59. Principles of Average Reserve Requirement Ratios Improvement Considerations for the Average Reserve Requirement Ratios Improvement Substance Old New Effective Date a. Additional rupiah average Fixed RR: 5% Fixed RR: 4.5% Improvement in average reserve requirement is a follow up to the monetary • 16 th July 2018 reserve requirement for Average RR: 1.5% Average RR: 2% policy operational frameworkreform implemented by Bank Indonesia since 2016. conventional commercial RR: 6.5% RR: 6.5% banks Monetary policy operational framework reform started in August 2016 as BI7DRR • replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by 16 th July 2018 the implementation of the average reserve requirement in rupiah for b. Annulment of demand 2.5% (from 1.5% RR) 0% conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve deposit renumeration requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. c. Implementation of foreign • The current improvement aims to elevate flexibility in banking liquidity exchange average reserve Fixed RR: 8% Fixed RR: 6% management, enhance banking intermediation function, and support efforts in requirement for Average RR: 0% Average RR: 2% 1 st October 2018 financial market deepening. This multiple targets will in turn improve the conventional commercial RR: 8% RR: 8%* effectiveness of monetary policy transmission in maintaining economic stability. banks d. Implementation of average Fixed RR: 5% Fixed RR: 3% 1 st October 2018 reserve requirement for Average RR: 0% Average RR: 2% Islamic banks RR: 5% RR: 5%* * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 67

  60. Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) Considerations for Macroprudential Instruments Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 1 2 3 4 Striving to stimulate the bank intermediation The policy is expected to stimulate the bank This macroprudential policy The regulation is effective for function and liquidity management, Bank intermediation function to the real sector instrument is conventional commercial banks from 16 th July 2018 and for sharia Indonesia issued Bank Indonesia Regulation (PBI) congruent with sectoral capacity and the countercyclical and can be banks from 1 st October 2018. No. 20/4/PBI/2018 and Board of Governors economic growth target in compliance with adjusted in line with Regulation (PADG) No. 20/11/PADG/2018 prudential principles, while also overcoming prevailing economic and concerning the Macroprudential Intermediation the issue of liquidity procyclicality. financial dynamics. Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. Source: Bank Indonesia 68

  61. Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 1 MIR Accounting Formula Credit + Owned Bond Financing + Owned Sharia Bond Deposit + Issued Bond Deposit + Issued Sharia Bond 2 Rate and Parameters  Ceiling 94%  Ceiling 94%  Floor 84%  Floor 84%   Minimum Capital Adequacy Requirement 14% Minimum Capital Adequacy Requirement 14%  Upper disincentive parameter 0.2  For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank  Lower disincentive parameter 0.1  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1 3 Scope of credit/financing and deposits to  Credit: rupiah and foreign currency  Financing: rupiah and foreign currency calculate MIR / MIR Sharia  Deposits in rupiah and a foreign currency: (i) demand deposits, (ii)  Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) savings deposits; and (iii) term deposits, excluding interbank funds unrestricted investment funds, excluding interbank funds 4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports 5 Criteria for securities held  Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution 69 *As part of furtherrelaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019

  62. Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 6 Percentage of the securities held 100% 7 Criteria for securities issued  medium-term notes (MTN), floating rate notes (FRN) and/or bonds  sharia-compliant medium-term notes (MTN) and/or sukuk other than other than subordinated bonds subordinated sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution 8 Securities Reporting Offline delivery mechanism (email) 9 Scope of deposits to meet DD MIR /DD  Average daily total deposits in rupiah at all branch offices in Indonesia  Average daily total deposits in rupiah at all branch offices and sharia MIR Sharia business units in Indonesia  Including rupiah liabilities to a resident and non-resident third-party nonbank, consisting of: (i) demand deposits, (ii) savings deposits; (iii)  Including rupiah liabilities to a resident and non-resident third-party term deposits, and (iv) other liabilities nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities  10 Relaxation of DD MIR/Sharia DD MIR Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation  The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK)  Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions 70 *As part of furtherrelaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019

  63. Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backgrounds Main Regulatory Points Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic business units as a source of bank • In response to global and domestic economic developments, • funding in the calculation of MIR/sharia MIR. BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation are as follows: • financial system stability. a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic BI relaxed MIR/sharia MIR policy in March 2019, which • business units; stimulated bank lending. Nevertheless, the macroprudential c. Loans/financing excludes interbank loans/financing. intermediation ratio (MIR) is again approaching the upper d. Loans/financing received with a maturity of no less than 1 year; and bound, thus necessitating efforts to increase bank lending e. Loans/financing received based on a loan agreement. capacity. Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: • Considering the potential of bank funding sources that are not • included in the MIR ratio, for example the expanding share of loans/financing received by banks, BI decides to adjust Credit + Owned Bond MIR/sharia MIR policy in order to optimize loans/financing Deposit + Issued Bond + Loan/Financing Received received for bank lending. Lower disincentive parameter Upper disincentive parameter This policy to stimulate credit growth will comply with • prudential principles. Therefore, BI is only encouraging banks MIR/sharia MIR RR = MIR/sharia MIR RR = with low non-performing loans and adequate capital resilience Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR Target – Bank’s 0.2 x (Bank’s MIR/sharia MIR - Upper Bound of MIR/Sharia MIR Target – ) x to expand credit/financing. MIR/Sharia MIR) x Deposit Deposit *This disincentive applies for banks with CAR below14%. The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted from the Jakarta Interbank Offered • Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA). *This adjustment will be effective from December 2 nd , 2019 71 Source: Bank Indonesia

  64. Principles of Macroprudential Liquidity Buffer (MLB) Regulation MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks) 1 Rate 4% of rupiah deposits (including Sharia Business Units deposits) 4% of rupiah deposits 2 Components  Securities denominated in rupiah held by a conventional commercial bank that  Sharia-complaint securities denominated in rupiah held by an Sharia may be used for monetary operations (including SBI/SDBI/SBN); and bank that may be used for sharia-compliant monetary operations (including SBIS/SBSN)  Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional commercial bank to rupiah Percentage of sharia-compliant rupiah securities held by an Sharia bank to deposits rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet the MLB may be used for repo Under certain conditions, the securities used to meet the sharia MLB may be transactions to Bank Indonesia for open market operations, totalling no more than used for repo transactions to Bank Indonesia for open market operations, 2% of rupiah deposits totalling no more than 2% of rupiah deposits   5 Sources of Data on Deposits Monthly Commercial Bank Reports Monthly Sharia Bank Reports  Rupiah deposits to calculate MLB are the average daily total deposits at all  Rupiah deposits to calculate sharia MLB are the average daily total branches in Indonesia deposits at all branches in Indonesia  Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term  Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment deposits, and (iv) other liabilities funds, and (iii) other liabilities 72

  65. Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios* The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection* 2. Relaxing the amount of loan/financing facility through indent mechanism to a maximum of 1. Increasing opportunities of first time buyers to fulfill their housing needs through housing loan, 5 facilities without taking account of the orders specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio 3. Adjusting the arrangement of stages and amount of property loan/financing for property financing as shown in the table below. disbursement of indent property: “ - “= The LTV rate depends on each bank’s risk management *As part of further relaxationon macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019 Source: Bank Indonesia 73

  66. Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios* Prudential aspects of Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios 1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank’s risk management policy (e.g.the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debitor and developer/seller’s bank account. LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. Source: Bank Indonesia 74

  67. Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. Policy Backgrounds Main Regulatory Points 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing. In response to global and domestic economic developments, BI is maintaining • an accommodative policy mix to maintain the economic growth while also a. BI decides to relax the LTV ratio for property loans and FTV ratio for property financing by 5% from maintaining macroeconomic and financial system stability. This effort will be current ratio as follows: targeted to several potential sectors. Considering the ongoing needs to stimulate the property and automotive • sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support sustainable development • through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be given to borrower with • strong repaymentcapacityand low credit/financing risk. BI will regularly evaluate this policy at least once a year. • *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 75

  68. Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Main Regulatory Points 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria refers to the standards/certificates issued by a nationally or internationally recognized environmental institution. b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows: 3. Adjustment of Down Payments on Automotive Loans/Financing  For buildings < 2500m 2 , the bank may conduct a self-assessment using the a. Down Payments on Automotive Loans/Financing is adjusted as follows: tools/applications provided by a recognized institution. i. Relaxation on the down payments of automotive loans or automotive financing  For buildings > 2500m 2 , the assessment must be conducted by a 5%-10% from current regulations; recognized institution;  For new buildings constructed in an area by one developer or group of ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF developers, the assessment must be conducted by a recognized institution ratios on automotive loans/financing; and the certificate must be submitted by the developer iii. The adjustment of down payments of automotive loans/financing in points a i. Additional incentive for green property on LTV ratio for property loans and FTV and b is as follows: ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows: *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 76

  69. Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Main Regulatory Points 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2 nd , 2019 *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 77

  70. Principles of Domestic Non Deliverable Forward (DNDF) Transaction Purposes General Provisions  Domestic Non-Deliverable Forward Transaction (DNDF Transaction) Plain vanilla derivatif transaction of foreign exchange against rupiah in the form of forward transaction with fixing 1. To support the effort of stabilizing the Rupiah mechanism in the domestic market exchange rate through the additional of alternative hedging instruments  Forward Transactions Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date 2. To support the development and deepening of the domestic financial market  Fixing Mechanism Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date) 3. To increase the confidence of exporters, importers, and investors in conducting  Other Definitions economic and investment activities through the flexibility of hedging transactions against The definition of derivative transaction of foreign exchange againts rupiah, Forward Transaction, Spot Transaction, Rupiah currency risk Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction againts rupiah Source: Bank Indonesia 78

  71. Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: 1. Must have Underlying Transactions: Transaction between: Including all following activities : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Can only be performed to hedge rupiah Bank – Customer Excluding following activities : exchange rate risk. a. Bank Indonesia certificates; b. Placement of funds with bank; c. Unwithdrawn credit facilities; d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities. Bank – Foreign Party 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank – Bank Source: Bank Indonesia 79

  72. Principles of Domestic Non Deliverable Forward (DNDF) Transaction Transaction Settlement Use Fixing mechanism • Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR • Settlement currency : IDR • Roll over and early termination are not allowed • Roll over and early termination for DNDF is prohibited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign • Purpose: Hedging • Customer / Bank Cover Overseas Bank Hedging Foreign Party Hedging Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge . Source: Bank Indonesia 80

  73. Amendment on DNDF Regulation *to provide more flexibility in DNDF transaction *to increase liquidity and efficiency in domestic foreign exchange market BI Regulation No. 21/7/PBI/2019 BI Regulation No. 20/10/PBI/2018 AMENDMENT Article 3 Article 3 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without underlying documents 1. DNDF transactions must have Underlying Article 6 Article 6 2. Not Regulated; 2. DNDF can be terminated (unwind); Article 11 Article 11 3. Underlying documents for buy FX/IDR for DNDF is : 3. Underlying documents must be final (firm) with additional supporting documents Final (firm commitment) + Supporting documents • 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: Final (firm commitment) + Supporting documents • • Projection (anticipatory basis) + Supporting documents Article 11 Article 11 5. In using estimate underlying transaction documents in the form of cash flow 4. Not Regulated; projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. *Effective on May 17 th , 2019; English version of the regulation is available in BI website. Source: Bank Indonesia 81

  74. Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) IRS is a contract between two parties to periodically exchange As hedging instruments against Rupiah interest rate changes rupiah interest rate flows during the contract period or at the 4 completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based on a daily 3 overnight reference rate (IndoNIA) Improvement of IRS transaction 2 liquidity Alignment between JIBOR Encourage price transparency in the rupiah money market  and OIS interest Strengthen monetary policy transmission  rate OIS transaction 1 Provide alternative hedging instruments against rupiah  with IndoNIA as interest rate changes benchmark rate Support securities market deepening in Indonesia  IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia 82

  75. OIS and IRS Transactions: General Provisions Market Players . Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions Transaction Needs Analysis . A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is required to have an analysis on the need Calculation Base Interest Payment based OIS Quotation rates based of rupiah interest rate derivative transactions. ACT/360 on Netting on 2 decimals Notional of Net interest Market Conventions . When performing IRS and OIS transactions, the IndONIA Index Quotation : 1W, 2W, 1M, payment in IDR with 0 respective bank is bound by market conventions agreed upon by market with 5 decimals 2M, 3M, 4M, 5M, 6M decimals players through industry association including the Indonesian Foreign Exchange Market Committee. At the 1st phase, OIS Compound Settlement Date = 1 Settlement . Settlement can be performed as a netting payment and every settlement will only be Floating Rates business days after done at the end of the OIS transaction has to be settled in Rupiah. Close-out netting can be applied (CFR) based on 5 Maturity Date (MD) tenor (MD+1bd). decimals under predetermined conditions. Source: Bank Indonesia 83

  76. Bank Indonesia Policy Mix: 2015 – 2017 2015 2017 2016 BI 7-day RR Rate cut of 25bps to 4.50% • BI Rate cut of 25bps (Feb)  Policy Rate cuts of 150bps • 1. Monetary Policy (Aug)  Moving from BI Rate (12 month) to BI 7-day Further BI 7-day RR Rate cut of 25 bps Reverse Repo Rate (Aug) • Policy Rate to 4.25% (Sept) Reserve Requirement Further lowering RR by 100bps to 6.5% (Feb) Lowering RR by 50bps to 7.5% (Nov) • • Implementation of RR Averaging (Aug): • RR fixed 5%; RR Averaging 1.5% Market-based exchange rate stability consistent with fundamental  2. Exchange Rate Policy Dual intervention in the FX market and purchases of government bonds from secondary market in time of distress (capital reversal) or large mis-  alignment Relaxation of LTV for property and  Further relaxation of LTV for property loans • Initiative to issue macroprudential  automotive loans (June) (Sept) regulation on Financing to Funding Ratio 3. Macroprudential Strengthening systemic surveillance & Crisis  (FFR) Policy Management Protocol (April)  Obligation to use IDR in domestic National Payment Gateway (June)  4. Payment System transaction (March) E-money for social transfer (Nov)  Modernized cash management underway  Policy  Non-cash movement (GNNT) Financial Technology (FinTech) Office (Nov)  New Rupiah issuance (Dec)  Source: Bank Indonesia 84

  77. Stable Monetary Environment Despite Challenges Well Maintained Inflation Ensured Price Stability Strengthened Monetary Policy Framework (%) (%) 20 9,00 19 August 2016 8,38 8,36 8,00 The New Monetary 18 CPI (%, yoy) - rhs 8,00 Operation LF Rate: 7.00 Framework 16 Volatile Food (%, yoy) - lhs 7,00 7,00 14 Administered (%, yoy) - lhs BI Rate: 6.50 6,00 12 Core (%, yoy) - lhs 6,00 5,00 10 LF Rate: 5.75 8 4,00 3,35 3,39 3,61 3,28 5,00 3,13 3,13 3,02 3,00 BI 7Day RR Rate: 5.00 6 2,48 3,00 4 DF Rate: 4.25 4,00 2,00 2 1,00 0 3,00 -2 0,00 2013 2014 2015 2016 2017 2018 Q1 2019 Q2 2019 Q3 2019 Oct-19 Nov-19 Rupiah Exchange Rate Remains Comparable to Peers Credit Growth Profile YTD 2019 vs 2018 %,yoy 20 point-to-point average Total Growth -10,30 TRY 18 Working Capital Loans -14,32 -0,06 ZAR Investment Loans -8,21 16 -4,69 BRL -7,17 Consumption Loans 14 -4,96 KRW -5,60 -2,84 12 EUR -5,42 11,2 -1,69 CNY -4,15 10 -1,82 INR -2,74 8 6,5 -0,13 MYR -2,55 6,5 0,49 6 SGD -1,09 2,90 IDR 0,72 4 4,1 0,56 JPY 1,35 2 3,78 PHP *data as of December 19, 2019 1,72 7,12 0 THB 4,03 % 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 -20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 2015 2016 2017 2018 2019 Source: Bank Indonesia 85

  78. Regional Inflation Remains under Control In November 2019, most regions recorded inflation within the national inflation target range. Nevertheless, North Sulawesi inflation (6.3% yoy) were relatively high, particularly triggered by tomatoes price. Source: Central Bureau of Statistics of Indonesia (BPS), calculated 86

  79. 4 Strategies to Achieve the Inflation Target 2018-2019 Target 2020-2021 Target Achieving inflation at 3,5%±1% Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining core inflation • • Maintaining volatile food stability at 4-5% Maintaining volatile food inflation less than 4% • • Controlling administered price inflation Controlling administered price inflation • • 4 Strategies 1. Price Affordability 2. Supply Availability 3. Well Managed Distribution 4. Effective Communication Strengthening production, Encouraging trade Stabilizing the Managing demand Government food Strengthening Improving trade Strengthening central- cooperation between Improving data quality price side reserves and food institution infrastructure regional coordination regions export-import management Source: Bank Indonesia 87

  80. Improving the Effectiveness of Monetary Policy Transmission Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars; (1) implementation of BI 7day Reverse Repo Rate; (2) implementation of reserve requirement averaging; and (3) continue to implement money market deepening program. Reformulation of Monetary Policy Operational Framework Implementation of Money Market Implementation of Reserve Implementation of BI 7 Day Deepening Program Requirement (RR) Averaging Reverse Repo Rate Enhancement of instruments and Enhancement of monetary policy signal Enhancement of banking liquidity management transactions Source: Bank Indonesia 88

  81. Enhancement of Monetary Operations Framework PREVIOUS JIBOR Can be traded among contributor banks for 10 minutes. • Up to the amount of Rp10 billion. • Up to 1-month tenor. • CURRENT JIBOR (as per June 1 st , 2016) Can be traded among contributor banks for 20 minutes. • • Up to a total of Rp20 billion. Up to 3-month tenor. • Source: Bank Indonesia 89

  82. Financial Intermediation is Expected to Expand Banking and multi-finance intermediation are managed to grow at their potential level. While at the same period, domestic capital markets and insurance premium is also rising. Banking intermediation is growing moderately at 6.52% in Oct 2019 inline with economic Meanwhile, Financing distributed by multi-finance companies is continued to grow at level of 3.46% slowdown. yoy. yoy IDR Tn yoy Financing Growth (rhs) IDR tn Bank Loans YoY Growth (rhs) 6.000 16% 475 10% 5.506 450,6 14% 5.500 450 8% 12% 10% 5.000 425 6% 8% 4.500 400 4% 6% 6,52% 4% 3,46% 4.000 375 2% 2% 3.500 0% 350 0% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Capital raising through corporate issuance continues to increase The gross premium revenue starts to pick up in 2019. since early 2019 and it has reached IDR 155 tn as of 26 Nov ’19. IDR Tn % yoy 180 IPO Rights Issue Corporate Bond & Sukuk Gross Insurance Premium Growth (YoY%) Pertumbuhan premi asuransi jiwa Pertumbuhan premi asuransi umum & reasuransi 160 60 Gross General Insurance & Reinsurance Premium Growth (YoY%) 140 50 114 120 40 100 30 80 20 17,89 60 10 29 40 0 12 20 -2,39 -10 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 26 Nov -20 2019 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Source: Financial Service Authority (OJK) 90

  83. Financial Institutions Remain Robust Domestic financial institutions exhibit a generally robust condition. The capital is steadily well above the minimum requirements, while profitability and leverage are still constantly at a sufficient level. Risk-based capital (RBC) of the insurance industry remained high and well above the minimum threshold (120%). RBC of the life insurance is reported up to 705% in Oct-19. CAR of the banking sector remained high and stable at 23.54% with Tier 1 Capital at 21.97% as of Oct-19. Life Insurance (Lhs) General Insurance (rhs) CAR Tier 1 26,0 850 380 23,54 329 24,0 750 330 21,97 22,0 650 280 20,0 550 705 230 450 18,0 180 350 16,0 130 250 14,0 80 150 12,0 30 50 10,0 -50 -20 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Profitability of the banking sector has been relatively stable during the past three years with the Gearing ratio of multi-finance companies is steadily maintained at 2.69 times in Oct-19. Providing ample highest net interest margin in the region. room for future growth. % Net Interest Margin Return on Assets 4,0 6,0 3,5 4,9 5,0 2,69 3,0 2,5 4,0 2,0 3,0 2,5 1,5 1,0 2,0 0,5 1,0 0,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Source: Financial Service Authority (OJK) 91

  84. Manageable Credit Risks with Adequate Liquidity Banks are equipped with sufficient liquid assets. Insurance industry also demonstrates a sufficient level of investment adequacy ratio. Credit risk is also managed at a low level as non-performing loan and non-performing financing remains below the threshold. The ratio of liquid assets to deposit and LA/NCD in the banking sector is maintained at a sufficient Investment adequacy ratio in the insurance industry was kept above 100%. level. % % Life Insurance General Insurance 210 140 Liquid Assets to Non-Core Deposits (lhs) Liquid Assets to Deposit (rhs) 30 185,76 130 190 25 18,4 120 170 110 20 100 150 90 15 118,96 130 80 threshold LA /Deposit = 10% 87,8 10 70 110 threshold LA/ NCD= 50% Threshold = 100% 60 5 90 50 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 40 0 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 As of Oct-19, the gross & net NPL ratios of the banking sector were 2.70% & 1.21% respectively, still NPF ratio of the multi-finance industry constantly remained below 3% since Q4 2018, and currently at well maintained far below the threshold of 5%. 2.5% as of Oct-19. % 4,00 NPL Net NPL Gross 3,5 3,50 3,0 2,70 3,00 2,5 2,5 2,50 2,0 2,00 1,5 1,21 1,50 1,0 1,00 0,5 0,50 0,0 0,00 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Source: Financial Service Authority (OJK) 92

  85. Manageable Market Risks Amidst the increasing market volatility, the risk profile of financial institutions remains manageable. Net open position of the banking sector was maintained at a low level, while the investment value of domestic institutional investors was still relatively stable. Net open position in the banking sector maintained significantly far below the maximum limit (20%). Mutual funds’ net asset value (NAV) is steadily increasing with low volatility. % IDR Tn NAV Mutual Funds IDX (rhs) 3 590 6.800 560 6.600 530 6.400 2 500 6.200 1,52 470 6.000 440 5.800 1 410 5.600 380 5.400 350 5.200 320 5.000 0 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-17 Mar-17 May-17 Jun-17 Nov-17 Dec-17 Jan-18 Mar-18 May-18 Jun-18 Nov-18 Dec-18 Jan-19 Mar-19 May-19 Jun-19 Feb-17 Apr-17 Jul-17 Aug-17 Sep-17 Oct-17 Feb-18 Apr-18 Jul-18 Aug-18 Sep-18 Oct-18 Feb-19 Apr-19 Jul-19 Aug-19 Sep-19 Oct-19 Multi- finance companies’ exposures to foreign debt has generally been mitigated through company The investment value of insurance & pension funds are continuously increasing. hedging measures. IDR Tn IDR tn IDR Tn Insurance Pension Funds (rhs) 1.500 400 177 180 1.116 1.200 160 350 140 900 Domestic Debt Foreign Debt 300 120 104 600 100 250 300 277 80 0 200 60 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Source: Financial Service Authority (OJK) 93

  86. Domestic Capital Markets Maintained Positive Growth The domestic financial market performance tends to improve and has room to further strengthen. JCI has managed to rebound in the early Dec-19 after positive developments on the U.S. – China trade Domestic capital markets performance bounced back after mid of May 2019. front Comp Bond Index Comp Stock Index (rhs) Stock Index Performance 16 Dec 2019 (compared to 31 Dec’18) 280 7.000 272 22,7 WORLD 270 6.500 THAI -0,9 KOREA 6,2 260 6.000 0,3 INDO HKN 6,4 250 6.212 5.500 SIN 4,5 240 5.000 PHIL 3,2 19,7 CHIN 230 4.500 -7,2 MAL JPN 19,7 220 4.000 EURO 23,6 210 3.500 21,0 AS BRAZ 27,3 200 3.000 TURK 21,8 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 -10 -5 0 5 10 15 20 25 30 Indonesia’s bond prices extended its upside movement due to attractive return and stable rupiah. Nonresident investors recorded net buy bonds in the last 3 months. Yield (%) Gov't Debt Securities Equity 60 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs) 15500 50 10 15000 40 9 30 14500 0,73 20 8 14000 10 7 0 13500 -10 6 -1,10 13000 -20 5 12500 -30 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 13 Dec-19 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance 94

  87. Strategic Policies in Financial Sector Providing financing alternatives for Goverment Priority Sectors Supporting acceleration of national economic growth Providing financial access to MSMEs especially in remote areas Preparing financial services industry to cope with Industrial Revolution 4.0 Improvement of business process in the industry Source: Financial Service Authority (OJK) 95

  88. Continuous Program on Capital Market Deepening …continuously strengthened, including through capital market deepening initiatives Enhancing the supply-side Strengthening market infrastructure  Product: QIB offering and private placements, private fund, asset-backed  Development of Integrated Licensing (SPRINT). securities, REITs, infrastructure fund, IGBF (Indonesia Government Bonds  Enhancement of electronic reporting system. Future) & equity crowdfunding.  Development of electronic public offering.  Issuer: Financial conglomerates, big bank debtors, local government, IDX  Integrated data warehouse and supervisory system. incubators, SMEs, SOEs & big tax payers. Strengthening governance & customer Enhancing the demand-side protection Enhancing the role of the domestic institutional investors (insurers & pension  Development of market players’ capacity  funds) in capital markets .  Enhancement of GCG for publicly-listed companies Development of the domestic investor base (conducting investor education  Establishment of disgorgement fund  programs). Simplification in opening securities account.  Development of regional securities companies.  Development of e-bookbuilding.  Online marketing initiative  Source: Financial Service Authority (OJK) 96

  89. Enhancing Financial Literacy & Inclusion OJK strives to build a strong foundation for financial inclusion programs, to ensure access to financial products & services by Indonesians of all social classes. Such initiatives also include the enhancement of financial literacy and financial consumer protection. Promotingthe Strengthening Developing Developing financial Enhancingthe role of establishment the role of Financial micro-credit products with education modelsutilizing the “Investment of Islamic microfinance Access Acceleration additional business support variousdelivery channels AlertTaskforce ” institutions (“ Bank Wakaf Taskforce (TPAKD) in local (“ KUR Klaster ”) Mikro ”) areas The result of OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among Indonesians comp ared to that of 2016. 21.8% 29.7% 38.03% 59.7% 67.8% 76.19% Financial 2013 2016 2019 Financial 2013 2016 2019 Literacy Inclusion 2019 Target: 35% 2019 Target: 75% Source: Financial Service Authority (OJK) 97

  90. A Comprehensive Financial Deepening Program … strategy to tackle challenges in deepening Indonesia’s financial markets In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate “The National Strategy of Financial Market Development ” Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN 1 2 3 ECONOMIC FUNDING & RISK POLICY COORDINATION, HARMONIZATION 3 Pilars MARKET INFRASTRUCTURE DEVELOPMENT MANAGEMENT & EDUCATION FX Market Structure Product Market Money Market Bond Market Stock Market Syariah Market 6 Markets Fund Market Infrastructure Regulatory Framework 7 Elements of Financial Market Instrument Coordination & Benchmark Rate & Ecosystem Standardization Education Intermediaries Source: Bank Indonesia 98

  91. BI’s Roles in Supporting Distribution of Non -Cash Social Assistance (NCSA) BI supports government ’s program of shifting social assistance to targeted non cash social assistance disbursement through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG subsidy. NCSA Programs Pilot Project Family Hope Program Smart Indonesia (Program Keluarga Program (Program Harapan -PKH) Indonesia Pintar-PIP) Gradual Implementation 2016-2020 9876543210 XXYYZZ 12345678 Full Non Cash Implementation Food Assistance (Bantuan Pangan Non Tunai – BPNT) LPG Subsidy Interconnected & interoperable payment system Source: Bank Indonesia 99

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