[PPT] - Its All About Reforms January ary 2020 About Investo tor PowerPoint Presentation

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January ary 2020

Republic ublic

f

Indone nesia ia

It’s All About Reforms

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1

About Investo tor Relatio tions ns Unit

f

the Republic ublic

f

Indones nesia ia

Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit – Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Wiwit Widyastuti (International Department - Bank Indonesia, Phone: +6221 2981 8279) Evy Mulyani (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012) I Gede Yuddy Hendranata (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +62213510714) E-mail: contactIRU-DL@bi.go.id This Presentation Book also can be downloaded from: http://www.bi.go.id/en/iru/presentation/red/Default.aspx

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What’s New in This Edition Sover ereig eign Credit it Ratin ing (SCR)

1. Fitch

Affirms SCR Indonesia at BBB/Outlook Stable.

2. JCR

Upgrades SCR Indonesia to BBB+/Outlook Stable

Page 7

Inves estme tment nt Realiza izatio tion for Q4 Q4-2019

Page 22

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Overv rview iew

1 2 3 4 5 6

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

f Infrastr

tructu ture Provis isio ion

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Instit titutio tiona nal and Gover ernment nt Effectiv tivene ness: Accele elerate ted Reforms

rms

Agen enda da with th Instit titutio tiona nal Improv

vement

ement

Sec ection

n

1

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Improving ing Global bal Perceptio eption

…with recent improvem emen ents

n

corrupt ptio ion perce cept ptio ion index ex and gover erna nanc nce indic icator

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

World ldwide Governa nanc nce Indica cato tors3 Ease of Doing ng Busine ness2 Globa bal l Competi titi tivene ness Index1 Corrupti uption n Perce cept ption n Index4

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

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

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

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Continu tinuous us Improvem ement ent

f

Inves estme tment Climate te

…ano nother er leap

n Indonesia’s

Rank

n

Ease

f

Doing ng Busin ines ess (EODB)*

EoDB 2020 Rank EoDB 2019 Rank Change in Rank EoDB 2020 Point nts EoDB 2019 Point nts Change in Point nts

Overall 73 73 73 73 69.6 68.0 1.6 Startin ting a business 140 134 6 81.2 81.2 0.0 Dealin ing with th Constr tructio tion Permits its 110 112 2 66.8 66.6 0.2 Gettin ting Electric icity ity 33 33 33 33 87.3 86.4 0.9 Regis iste terin ing Property ty 106 106 100 100 6 60.0 61.7 1.7 Gettin ting Credit it 48 48 44 44 4 70.0 70.0 0.0 Prote tectin ing Minority ity Investo tors 37 37 51 51 14 70.0 63.3 6.7 Payin ing Taxes 81 81 112 31 75.8 68.0 7.8 Tradin ing Across Borders 116 116 67.5 67.3 0.2 Enforcin ing Contr tracts ts 139 146 7 49.1 47.2 1.9 Resolvin ing Insolvency 38 38 36 36 2 68.1 67.9 0.2

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

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

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BBB / Stable Baa2 / Stable BBB / Sta table

Apr 201 2018, , Ratin ing Upgraded at Baa2/Stable “The upgrade to Baa2 is underpinned by an increasingly credible and effective policy framework conducive to macroeconomic stability. Together with a build-up of financial buffers, prudent fiscal and monetary policy strengthens Moody’s confidence that the sovereign’s resilience and capacity to respond to shocks has improved.” May 2019, Rating Upgraded at BBB/Stable “We raised the ratings to reflect Indonesia’s strong economic growth prospects and supportive policy dynamics, which we expect to remain following the re-election of President Joko Widodo recently.” Januar ary 2020, Ratin ing Affirmed at BBB/Stab able Indonesia's rating balances a favourable medium-term growth

utlook and a small government debt burden compared with

'BBB’ category peers against challenges that include a strong dependence on external financing, low government revenue, and lagging structural indicators such as governance indicators and GDP per capita.

BBB+ / Stable

January 2020, , Ratin ing Upgraded at BBB+/Stable “The ratings mainly reflect the country’s solid domestic consumption-led economic growth, restrained budget deficit and public debt, and resilience to external shocks supported by flexible exchange rate and credible monetary policies and accumulation of foreign exchange reserves. Since its previous rating review, JCR has been paying particular attention to the continuing reform initiatives pushed by the administration of President Joko Widodo and the content and progress of the economic policy taken by his second administration which took office in October 2019. Among the reform agenda, infrastructure development has continued to progress faster than JCR had expected.”.

BBB / Stable

April il 2019, Ratin ing Affirmed ed at at BBB/ BBB/Stab able “Indonesia’s economy is growing at a solid pace. The fiscal deficit to GDP ratio narrowed from a year earlier, and the government debt to GDP ratio remains

low. While the CAD somewhat widened, foreign reserves are ample relative to

short-term external debts. Its economic resilience to external shocks is maintained, supported by the government and central bank’s policies emphasizing macroeconomic stability.”

Indone nesia ia Has Been Rated as Investm tment nt Grade de Countr try since 2017

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31.31 34.47 23.61 26.94 24.99 26.57 31.27 34.52 22.48 27.21 24.95 26.34 31.78 34.55 23.14 29.56 25.31 26.26 5 10 15 20 25 30 35 40 India Indonesia Malaysia Philippines Thailand Vietnam 2018 2019e 2020e

50 100 150 200 250 300 Billion USD 2018 2017 22.5 25.2 26.3 31.9 32.1 34.2 36.4 36.4 38.5 39.2 39.8 48.1 48.7 58.3 10 20 30 40 50 60 70 Myanmar Taiwan South Korea Philippines Hong Kong Malaysia Australia Japan Thailand Singapore Vietnam Indonesia India China 3.7 4.4 5.1 5.6 5.8 8.4 8.6 10.0 13.7 28.8 30.4 33.9 37.1 46.2 52.2 0.0 10.0 20.0 30.0 40.0 50.0 60.0 Russia Taiwan Korea Brazil Germany Malaysia Myanmar Philippines Mexico US Indonesia Vietnam Thailand India China

Indone nesia ia Remain ins the Investme tment Destina inatio tion

f

Choice

1. Source: The Economist – Asia Business Outlook Survey 2019 2. Source: IMF World Economic Outlook, Database October 2019 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2019 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey)

Total Invest stment / GDP (%)

Indonesia Enjo joys Large Investments Relative to Peers within the Region2 JBIC IC: Among ASEAN countries, Indonesia is one of the most preferred place for business investment (November 2018)4 The Economist: Indonesia rounds out the top five of Asian economies that can look forward to increased investment spending. . (January 2019)1

% of surveyed who consider each country has promising prospects

UNCTA TAD: Indonesia is listed in the top 20 host economies based on FDI I inflows, 2017 and 2018 (June 2019)3

(x) = 2017 ranking

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Omnibus bus Law

Simpl plifying ifying regu gulatio ion to improve the inves estmen ent envir ironm nmen ent and to boost compet petit itiv iven enes ess, MSME, ME, and employm ymen ent.

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 Omnib ibus Law on

n Job Cre

reatio ion and Omnib ibus Law on

n Taxation

ion.

The draft law will be submitted to Parliament in January 2020 and is targeted to be

completed in three months (March or April 2020). Taxation includes 6 clusters, namely: 1. Investment Funding, 2. Territory System, 3. Individual Tax Subject, 4. Taxpayer Compliance, 5. Equity of Business, 6. Taxation facility. The Omnibus law on taxation consists of 28 articles but amends 7 Laws specifically, the Income Tax Law, VAT Law, Taxation general provisions and procedures Law, Customs Law, Excise Law, regional tax and levies law and the regional government law. Omnibus Law on job creation includes 11 clusters, namely: 1. Simplification of Licensing Endeavors, 2. Investment Regulations, 3. Labor Reform, 4. Ease, Empowerment and Protection of MSMEs, 5. Ease of Doing Business, 6. Research and Innovation Support, 7. Government Administration, 8. Penalty, 9. Land Acquisition,

10. Ease of Government Investment and Projects,
11. Special Economic Zone.

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

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

Human Development

Educatio ion Health Housi sing ng Character er

Priority Sector Development

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

Water r Securit rity, Basic Infrastruct cture & Conn nnect ctiv ivit ity

Equitable Development

Inter- Income Group Inter-Regi egion

n:

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

Security & Order Politic & Democracy Governance

The 3 Dimension

ns
n

Economic Develop

pment

Necessary Condition

Legal Certainty & Law Enforcement

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Identified and built priority scale on sectors, sub-sectors of leading industries and profession
Improving link and match scheme between industries and vocation
Early childhood education
Encourage education system to be more skill, collaborative, flexibility and impact oriented instead
f degree consideration
Improving Kredit Usaha Rakyat (KUR) scheme to support non-bankable SME
Improving procurement scheme to support SME accessibility to finance
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
Compulsory mandates to maximize the usage of Local products
Fair access to the logistic system
Developing natural resources industries and value chains
Minimize interest gap between large companies and small companies
Protect market share from integrated businesses and strong capital
Develop and improve progressive tax, capital gain tax and tax on unutilized asset
supporting fiscal spending
Integrating fishing and seaweeds sectors
Improve and support aquaculture industry and fishery sector value chain
Encourage Private sector investment on seaweed sector (process and off-taker)
Social Housing
House financing
Land banks and affordable land prices
Law enforcement on spatial policies
Data collection & law enforcement on palm oil land area, including land bank data collection
Building a database and arranging policy on planting non-agriculture commodities
Improve cooperative performance by encouraging SOEs and private sectors involvement
Research support, market synergies, off-takers, and supply chain on downstream business
Define Lahan Pertanian Pangan Berkelanjutan LP2B to prevent land usage for non-agriculture

purposes

Land consolidation for agriculture
Improve research on seeds and agriculture method, off-farm infrastructure, integrated logistic

system, build seeds market, tools and machinery

Build a fair land distribution scheme
Build a priority scale of Tanah Objek Reforma Agraria (TORA) recipient based on land gini ratio,

poverty, & land demand

Developing an agricultural industry by agglomeration or cluster method

Economic ic Equalit lity Polic icies ies

to suppo port sustain inabl ble public ic welfar fare. e... ..

Source: Coordinating Ministry for Economic Affairs

Econo nomic Equalit ity Polic icie ies

Human Resour urce ce Capacity ty

Land

Oppo portuni tunity ty

Agraria ian Refor

rm

Agri riculture re (Landless Farm rmer) r) Plantatio ion Urban Poor

r & Affor
rdable

Housin ing Fishe herm rmen & Seaweed Cultiv ivation ion Fair r Tax System Manufacture re and ICT Retail il and Marke rket Financin ing & Gov

vernme

rnment Budget Vocatio ional, , Entre repre preneurship hip & & Labor

r

Marke rket

Priority

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12

The Economic ic Polic icy Packag ages es

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

Phase III (7 Oct t ’15) Financial services facilitation, export financing and elimination

f business unnecessary burden

Phase IV (15 Oct t ’15) Social safety net and betterment of people welfare Phase V (22 Oct t ’15) Improving industry and investment climate through tax incentives and deregulation on sharia banking

Harmo moni nizing ng Regul ulations

ns

Simp mplif ifying ing Burea eauc ucratic ic Proces ess Ensur uring ng Law Enfo forceabi bility

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

Source: Coordinating Ministry for Economic Affairs

Phase XV (15 Jun ’17) Improving logistics In addition ion to the 16 Policy Packa kages, on August 31, 2017 17 the Gov

vern

rnme ment has issued a Presid identia ial Regulatio ion No.91/2017 for enhanc ncin ing busine ness lice cens nse service ce stand ndard Phase XVI (1 (16 Nov Nov ’18) Improving the competitiveness and domestic economy

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13

Improving ing the Competit etitiv ivenes ness and Domestic tic Economy

The 16th

th Econo

nomic ic Policy cy Pack ckage has been en launc nched ed

Source: Coordinating Ministry for Economic Affairs

TAX HOLIDAY EXPANSION

Backg kground In

rder

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). Objectiv tives and benefits its 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 provision

EXPORT RT PROCEEDS (DHE) SCHEME ME

Tax Rates on Deposit it Interest Income Tax Rates on Deposit it Interest Income

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14

Progr gres ess

f

the Economic ic Polic icy Packag ages*

Initially, there are 236 regulations which need to be deregulated As of October 1st, 2019, deregulation of 223 regulations are finished (99%), comprising 53 regulations at Presidential level and 170 regulations at Ministerial/Institutional level Total regulation which are still discussed: 2

I–XII

223 223

SET

99% 99% 11 11

REVOKE OKED REGUL ULATI TION ONS

2

ON GOI OING NG DISC SCUSS USSION ON

1%

171 171 TOTAL

170

MINISTERIAL/INSTITUTIONAL LEVE VEL 99%

99%

47 47 42 42

SELESAI

PRESI SIDENTI TIAL

54 TOTAL

53 53 FINISHED

PRESIDENTIAL LEVE VEL

99% 99% I–XVI

FINISHED

I–XII

236 36

TOTAL INI NITI TIAL REGUL ULATI TION ONS

I–XVI

I–XII

225 25

TOTAL REGUL ULATI TION ONS

I–XVI

Based

n

the further assessment, 11 regulations has been revoked from deregulation process Total regulation subject to be deregulated: 225 regulations

Source: Coordinating Ministry for Economic Affairs *as of October 1st, 2019

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15

Other Progr gres ess

n

Economic ic Polic icy Packag ages es

29 Provinces have set 2016 Minimum Wage System in accordance to the Government Regulation (GR) No. 78/2015

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

The Provinces of Central Java proposed 3

IZ’s: Kendal, Demak, and Ungaran

Pharmaceutical

IZ in Bitung (North Sulawesi) in 2017

Industrial Zone Devel elopm pmen ent

f

Spesial Economic ic Zone (SEZ)

Investment commitments in SEZ up to 2017 reach 41 T, with 3 hour licenses already applied in 4 SEZ’s Administrators in 2017 52 Bonded Logistic Center has been launched to support various industries

Deregul egulatio ion

n

Logi gistic ics Sector

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Investment Incentiv tives to Boost Indus ustr try Sector

BUSINESS SS EXPANSION

Tax allo

lowanc nce

Exempti

tion n or reli lief of import t duty on capital tal goods, machine nery or equi uipm pment nt for production purposes that can not be produced domestically;

Exempti

tion n or reli lief of import t duty on raw materials ls or auxi xili liary material l for production purposes for a certain period of time and certain conditions;

Exempti

tion n or suspe pens nsion n of VAT T on the import t of capi pital tal goods

r machine

nery or equipm pment nt for production purposes that have not been produced domestically for a certain period of time;

Accelerate depreci

ciati tion n or amorti tizati tion n (part of tax allowance); and

Prope

perty ty tax reli lief, especially for certain business sectors in certain regions;

Combine with Online Single Submission (OSS)

Tax holi liday of corporate income tax in a certain amount and time

PIONEER INDUSTRIES SPECIAL ECONOMIC MIC ZONE

No coll

llecti ction n of VAT and Luxu xury Goods Sales Tax (PPnB PnBM), ),

Custo

toms tax exempti tion, n,

Tax Allo

lowanc nce and Tax Holi liday,

Suspe

pension of Import t Duty,

0% Import

t Duty for goods produced using local components of a certain level

INDUSTRIAL ZONE FREE TRADE ZONES AND PORTS MICRO, SMALL, L, MEDIUM ENTERPR PRISES (MSMES) S) E-COMME MERCE

VAT exempti

tion n on import or delivery of capital goods,

Import

t Duty exempti tion n on machineries/goods/materials,

Tax Allo

lowanc nce and Tax Holi liday Exempti tion n of:

Import

t Duty

VAT
Luxury Goods Sales Tax (PPnBM

PnBM)

Custo

toms duty Decreasing ng MSME MEs Tax x from 1% to 0.5% of gross revenue

Sales from customs areas for non-small

ll entrepre prene neur urs through the market place will be subject to 0.5% inco come tax and 1% VAT

Sales from customs areas for small entrepr

preneurs through the market place will be subject to 0.5% inco come tax

Source: Coordinating Ministry for Economic Affairs

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17

New Tax Holida iday Polic icy* y*

to boost industry sector

Taxpay payer Pioneer Industry with minimum investment value of 1 trillion Rupiah (minimum investment value

f

500bn Rupiah for telecommunication sector) Corporat ate Inco come Tax (CIT) reduct uctio ion n rate Conce cession n period Trans nsiti tion After Tax Holid iday ay Not available 100% (single rate)

5 – 15 years; or
Can be extended to 20 years; subject to MoF

discretion 1. 500Bn – 1Tn : 5 years 2. 1Tn – 5Tn : 7 years 3. 5Tn – 15Tn : 10 years Pioneer Industry with minimum investment value

f

500bn Rupiah Applied to 8 industry groups: (i) upstream basic metal industry; (ii)

il and

gas refinery industry; (iii) organic basic chemicals industry; (iv) machinery industry; (v) plantation, forest, and fishery products processing industry; (vi) telecommunication, information and communication industry; (vii) marine transportation; and (viii) economic infrastructure Applied to 17 industry groups: (i) upstream base metal; (ii)

il

and gas refinery; (iii) petrochemical (oil, gas, or coal based); (iv) non-organic base chemical; (v) organic base chemical; (vi) pharmaceutical materials; (vii) semiconductor and other components; (viii) communication devices components; (ix) medical devices components; (x) machine manufacturing for industry; (xi) machine main components manufacturing; (xii) robotic components manufacturing; (xiii) ship components manufacturing; (xiv) airplane components manufacturing; (xv) train components manufacturing; (xvi) power plants; and (xvii) economic infrastructure PROVISIO SION

BEFORE RE AFTE TER 5 – 20 years depends on the investment value (in IDR):

4. 15Tn – 30Tn : 15 years 5. ≥ 5Tn : 20 years 50% CIT reduction for the next 2 years 10 – 100% Tax allowance not provided Tax allowance for business expansion can be provided with terms and conditions applied

Source: Coordinating Ministry for Economic Affairs *) MoF has issued a new Tax Holiday policy through Regulation No. 35/PMK.010/2018 (PMK

35) dated 4 April 2018.

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18

Enhanc ncing ing Busines ness Licens nse Servic ice Stand ndar ard

Presiden identia ial Regulatio ion to Accel eler erate Ease

f

Doing ng Busin ines ess has been launc nched ed

Source: Coordinating Ministry for Economic Affairs

Policy y Goals

1 2 3 4 5 6

Improve efficient, streamlined, & integrated business license service standards Accelerate the business licensing process Provide business licensing process assurance in terms

f the costs and lead times

Increase coordination & synergy between central & regional government Overcome the barriers to doing business in Indonesia Implement integrated licensing process (single submission)

Main Policy

Forming a Task Force to identify & overcome the end- to-end licensing barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing

Business license regulatory reforms Implementation

f

the Single Submission system

1st

st Phase

2nd

nd Phase

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

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19

Improving

ving

Inves vestment ment Clima mate

Online ne Sing ngle Subm bmiss ission (OSS) S) Has Been Launched ed... ...

Source: Coordinating Ministry for Economic Affairs

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

Lorem Ipsum Suitable for all category, Envir ironme ment & Forestr try Sector Electr tric icity ity Sector Public ic Works & Housin ing Sector Health th Secto tor Industr try Sector Marin ine & Fishery Sector Medic icin ine & Food Secto tor Transporta tatio tion Sector Trade Secto tor Informatio tion & Communic icatio tion Sector Other Sector Sectors s The Advanta tage of Using OSS Business licenses can be secured in under an hour Standardized business licenses are available Ellectronically integrated The whole licensing process is monitored by the Task Force More practical Accessible at anytime and anywhere

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20

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

f

the implementation

f

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

To To date, 52 Bond nded ed Logi gist stic Cen enter has as be been en launched ed to to suppor

rt various

us indus ustrie ies.

Improving ing Inves estme tment Climate te

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil il and ga gas, s, and minin ing industry Food & beverages industry Auto- motiv ive industry Personal care/ home care industry Textil ile (cotto tton) indu dustry Small and mediu dium industry Synthetic tic textil tile (chemic ical substa tances) indu dustry.

Bonded Logistic Center

Heavy Equip ipment industry Defence industry Aircraft MRO industry

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21

Improving ing Inves estme tment Climate te

…revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

Cold storag age Restau tauran ants ts, Bars Phar armac aceuti utical al Raw Material als s Manuf nufac actur uring ng Sports s Center, Film Process ssing ng Lab, b, Crumb b Rubb bber

Revision

n of "Partner

ership" categ egor

ry to

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

r is tighten

ened in future, e, existing foreig reign inves estor

r does

es not need ed to com

mply with tigh

ghter er stake ke Key Refor

rms

ms in Nega gative e Foreign eign Inves estmen ent t List Stren rengt gthen en implemen ementation

n of

nega gative e inves estmen ment law throu

ugh

gh active e roles es from

m ministries

ries, agen gencies cies and regi gion

nal govern

ernme ments

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

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

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

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

SLIDE 23

22 105.3 208.3

20 40 60 80 100 120 140 160 180 200 220 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FDI DDI TOTAL

Inves estme tment nt Realiza izatio tion (Q4-201 2019) 9)

IDR R tn

2013 2014 2015

Direct ct Investm tments nts

2016

Mini ning ng Housing ng, Indus ustri trial l Estate te, and Office ce Build lding ng Food Indus ustry try Electr ctrici city ty, Gas, and Water Suppl ply US$ US$635.8 mn US$ US$1,501.9 mn mn US$ US$269.3 mn mn US$ US$683.7 mn mn US$ US$1,490.3 mn mn US$ US$293.5 mn mn Trans nspo portati tation, n, Warehous use, and Telecommunicati tion

72.4%

US$ US$46 465.5 mn mn

9.4% 6.0% 15.3% 19.6% 17.8% 190.4% Inves estmen ent Realiz izatio ion

Top 8 FDI I Reali lizati tion n by Secto ctors (Q4-2019 vs Q4-2018)

Source: Investment Coordinating Board (BKPM), compared to Q4-2018 period

2017

Rp145.4 T Rp159.4 T IDR105.3tn 434 434,463 463

9.6% 15.6%

6.4% 18.5%

Q1-2016 Q1-2017 Q4-2018 Q4-2019 Q1-2016Q1-2017 Q4-2018 Q4-2019

*

* * person 37 375,982 IDR208.3tn

12.0%

Q4-2018 Q4-2019

IDR185.9tn IDR86.9tn IDR99.0tn IDR103.0tn Chemica cal l and Pharmace ceuti utica cal l Indus ustry try Metal, l, Exce cept pt Machi chine nery, and Equi uipm pment nt Indus ustry try

2018 2019

Vehicle cle and Other Trans nspo portati tation n Indus ustr try

US$ US$25 256.9 mn

80.6% 6%

SLIDE 24

Econom nomic ic Factor tor: Stron

ng

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

Sec ection

n

2

SLIDE 25

24

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

Largest Econo nomy in South East Asia 4th Most Popul ulous us country in the World; ; 64% in product ductiv ive age Manag nageabl able Infl flat atio ion n Rate Rising ing Middle Class and Afflue uent nt Customers

From

m commodity-based

ed to manufact cturing g and serv rvice ce sector

rs via infrastru

ruct cture e devel elop

pmen

ment From

m consumpti

tion

n-led

ed to investmen tment-led ed grow

wth via a stron

ronger ger manufact cturin ring g sect ctor

r

and more

re investmen

ment initiatives es Policies es to maintain purc rchasing g power er to stimu mulate e dom

mestic

c econ

nomy
my in the midst
f weake

kening g macro croeco econom

mic

c condition

ns

Budge get ref eform

rm as

a a part of large ger econ

nomi
mic

c refor

rm

m initi tiative Tax base e to be broa

adened

ed from m

ne

e reduce ce dependen ency cy on com

mmod

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

re prod
ductive

e alloca

catio

tion Pru rudent debt manage gemen ment

Reform-Or Orie iente ted Admin inist istration ion

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

nal

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

m 2015 policy

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

ject

cts

Large e and Stable Economy Consi sist stent nt Budget et Reform New Econom

mic

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

SLIDE 26

25

Indonesia’s Strong GDP

Growth th Prospe pect Strong ng GDP Growth th1

%

Institution

ns

2020 0 GDP growth (%YoY)

Y)

2020 Budget 5.3 Bank Indonesia 5.1 – 5.5 IMF (WEO October 2019) 5.1 World Bank 5.1 ADB 5.2 Consensus Forecast (January 2020) 5.0

Favour urable ble GDP Growth th Compared to Peers2

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 %

Indonesia has maintained economic growth momentum against a backdrop of

worsening global economic moderation. Economic growth in the third quarter

f 2019 was recorded at 5.02% (yoy), relatively unchanged compared with

the 5.05% (yoy) posted in the previous

period. Such developments were

influenced by solid domestic demand and improving external sector performance despite dwindling global demand and lower international commodity prices.

In the third quarter of 2019, exports achieved positive 0.02% (yoy) growth

and imports experienced a deeper contraction to 8.61% (yoy). Meanwhile, solid domestic demand has been maintained, primarily

n

the back

f

expansive household consumption growth. In addition, investment is also expanding, led by 5.03% (yoy) building investment growth.

In

terms

f

production, a number

f

economic sectors have achieved stronger growth, including mining and quarrying in the primary sector; the manufacturing industry in the secondary sector; and wholesale and retail trade, transportation and storage, as well as financial services and insurance in the tertiary sector.

0.04 3.83 3.27 (2.07) (0.16) 3.74 3.31 (1.73) (0.36) 4.01 3.14 (1.81) (0.30) 4.01 3.19 (1.70) (0.41) 4.21 3.09 (1.69) (0.52) 4.20 3.06 5.12 4.94 4.93 5.05 4.82 4.74 4.77 5.17 4.92 5.18 5.01 4.94 5.01 5.01 5.06 5.19 5.06 5.275.17 5.18 5.07 5.05 5.02

3.0
1.0

1.0 3.0 5.0 7.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 2018 2019 QoQ YoY 3.7 3.2 3.4 3.6 6.1 7.0 5.0 5.1 5.7 6.2 0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 2012 2013 2014 2015 2016 2017 2018 2019* 2020* Bulgaria Colombia India Indonesia Philippines

SLIDE 27

26

GDP Growth wth Breakdo akdown wn

GDP GDP Growth th by Secto ctor (%, YoY YoY)

By sectors 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 Q3 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 of Car and Motorcycle 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 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)

GDP Growth th Based on Expe pend nditur tures (%, YoY YoY)1

By expenditure 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 Q3 Q3

HH. Consumption

5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 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 Non profit HH. consumption 23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 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 Government consumption 6.1 (1.8) 1.2 0.9 1.2 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (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 Gross Fixed Cap. Formation 5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 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 Exports 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 Imports 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) 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 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption

SLIDE 28

27

Regiona nal Economic ic Growth wth

Econo nomic growt wth was suppo ported ed by robu bust househ ehold cons nsumpt ptio ion in vario ious regio ions ns, coupl pled ed with strong ng investmen ent from natio iona nal strategic egic projec ects in Sulawes wesi, i, Kalim imanta ntan and Java.

Source: Central Bureau of Statistics of Indonesia (BPS)

SLIDE 29

Exte terna rnal Factor tor: Improved ed Exter ernal nal Resil silie ience nce

Sec ection

n

3

SLIDE 30

29

1.8

8.4
2.3

1.3

2.7
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5

0.0

12
10
8
6
4
2

2 4 6 8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2*Q3** 2013 2014 2015 2016 2017 2018* 2019**

Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs) US$bn

1

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

Month US$bn

3.00
2.00
1.00

0.00 1.00 2.00 3.00 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2013 2014 2015 2016 2017 2018 2019 OG Non-OG Total

Externa rnal l Balanc nce under r Contro rol l Suppo port rted d by Adequate ate Reserv rves es

Current nt Acco count unt Defi fici cit within in Safe fe Threshold Balance ance of Payment nts Portrait ait Subs bstant antial ial FX Reserves to Mitig igat ate External nal Chal alleng nges Trade Balanc ance Portrai ait

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

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

Source: Bank Indonesia FX Reserves s as of December 2019: US$129.2 bn n (Equiv. to 7.3 months s of imports + servicing g of gover ernment debt) US$bn

2015: CA Deficit (US$17.5bn) n) 2013: CA Deficit (US$29.1bn) n) 2014: CA Deficit (US$27.5bn) n) 201 2016: CA Deficit (US$ S$17.0bn) n) 201 2017: CA Defici cit (US$16.2bn) n)

2018: Defic icit it (US$8.7bn) n)

2018: CA Deficit (US$30.5bn) n)

7.7

7.6 0.0 124.3 .3 40 80 120 160

15
10
5

5 10 15 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q1*Q2*Q3*Q4*Q1*Q2* Q3** 2013 2014 2015 2016 2017 2018* 2019**

Indone nesi sia' a's s Balanc ance of Payment nts

Current Account Capital and Financial Account Overall Balance Reserve Asset (rhs) US$bn US$bn

2019: Defic icit it (US$3.2bn) n)

SLIDE 31

30

2.78 2.67 1.90 1.55 1.18 0.86 0.35

0.08
0.34
0.54
1.16
3.98
4.21

1.74

2.03
0.50

0.63

0.27
3.21
0.71

0.84

1.23
1.10

0.24 0.23

4.35
5.0
4.0
3.0
2.0
1.0

0.0 1.0 2.0 3.0 4.0 IDR THB PHP MYR SGD ZAR KRW CNY JPY EUR INR TRY BRL point-to-point average % *data as of Jan 22, 2020

Exchang ange Rate In Line with Fundam amenta entals ls

Movement nt of Rupi piah Rupi piah Exch chang nge Rate Fared Relati tively ly Well ll Compared to Peers

IDR/US$

The rupiah co continues es to to appreci reciate, e, suppor

rted

ed by by improv roving BOP per erfor

rma

mance ce. As

f

22nd January 2020, the rupiah strengthened by 1.74% (ptp) compared to 31 December 2019 level, thus maintaining the appreciatory trend recorded in 2019 at 3.58% (ptp) or by an average of 0.76%. The strong rupiah is supported by the supply of foreign exchange from exporters and maintained foreign capital inflows due to the promising national economic outlook, highly attractive domestic financial markets and less uncertainty in the global financial markets. Furthermore, the structure of the foreign exchange market is improving, characterised by an uptick of transaction volume and more efficient quotations as well as further development of the DNDF market, which will increase foreign exchange market efficiency. Bank Indonesia is confident that rupiah exchange rate appreciation is in line with the currency’s fundamental value and improving market mechanisms, coupled with growing market confidence in the policies instituted by Bank Indonesia and the

Government. Overall, rupiah appreciation is having a positive impact on

economic growth momentum and macroeconomic stability. Looking ahead, Bank Indonesia predicts rupiah stability in line with the currency’s fundamental value and maintained market mechanisms.

Source: Bank Indonesia

YTD 20 2020 20 vs 201 019

Rupi piah Exch chang nge Rate Volati latilt lty

13,645 13,576 13,952 14,601 14,798 14,134 14,254 14,120 14,064 14,141 14,381 14,220 14,031 14,232 14,100 14,113 14,065 14,006 13,000 13,500 14,000 14,500 15,000 15,500 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 16-Jan IDR/USD Quarterly Average Monthly Average *data as of January 22, 2020 14.28 15.55 11.70 4.46 12.52 2.74 5.47 5.13 3.72 3.52 17.7 12.9 10.1 10.2 4.5 3.5 4.8 7.4 2.5 2.1

2

4 6 8 10 12 14 16 18 20 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Dec-19 Jan-20 % *data as of Jan 22, 2020

SLIDE 32

31

Bank Indonesia’s Polic icy Directio tion

To maintain in Rupia piah stabi bilit ity and suppo port growt wth

A pre-emptive, front- loading and ahead-of- the-curve policy response Strengthening the monetary operations in the foreign exchange and money markets To stabilise the rupiah exchange rate, while consistently controlling inflation within the 2018-2019 target range of 3.5±1% To stabilise the rupiah exchange rate, adjust fair prices in the financial markets and maintain adequate liquidity in the money market To maintain adequate liquidity in the rupiah money market and interbank swap market To form rational expectations, thus helping to mitigate the rupiah overshooting its fundamental level. Dual intervention in the foreign exchange market and government securities (Surat Berharga Negara – SBN) market in a measured way Intensive communication, especially to market players, banks, businesses, and economists

4 3 2

Measure res To To Stabil ilize ze Rupi piah h Excha hange Rate Measure res To Support rt Gro rowt wth

Further easing of macroprudential policy Payment system development to support digital economy To bolster the growth of the property sector which has positive impact to the economy Coordination with the Coordinating Ministry of Economic Affairs, the Ministry of Finance, and the Financial Services Authority to accelerate financial market deepening, particularly in private financing for infrastructure. Electronification to support social assistance disbursement and financial transcation of the central and regional government Sharia economy and finance development to create halal value chain, sharia financal sector development both for commercial and social purposes, including its education and communication Policy coordination to accelerate financial market deepening Sharia economy and finance development

4 3 2 1 1

Source: Bank Indonesia

SLIDE 33

32

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



Ample level of FX reserves to buffer against external shock



FX Reserves as of December 2019: US$129.2 billion

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

Austr tralia ia



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

Chi hiang Mai Ini nitia iativ ive Multil ilatera raliz izatio ion (CMIM) Agre reement



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



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



Doubled to US$240 bn effective July 2014

Japan



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



The facility is available in USD and JPY

IMF Global Financia ial Safety ty Net

GSFN



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



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

Bilate teral Regio ional Global bal FX Reserve

Ample Reserves Swap p Arrang ngement nt

Source: Bank Indonesia

ASEAN Swap p Arra rangement (ASA)



Entitled to a maximum swap amount of USD600 million under ASA



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



Doubled to USD2 billion in 2005

Singapore



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

China



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

Malaysia ia



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

SLIDE 34

33

Solid id Polic icy Coordina inatio tion

In Mana naging ing Fina nanc ncial ial Markets Volatil ilit ity

Source: Ministry of Finance First Line of Defense State’s Budget Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) State Owned Enterpr pris ises s (BUMN)’s Budget Related SOEs (min. level Aware) Social Security Organiz nizing Agency (BPJS)’s Budget BPJS (min. level Aware) Second Line of Defense State’s Budget

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

Gov’t Securities Crisis is Management t Protocol (CMP)

Indicators:
Yield of benchmark series;
Exchange rate;
Jakarta Composite Index;
Foreign ownership in government securities
Policies to address the crisis at every level :
Repurchase the government securities at secondary market
Postpone or stop the issuance

Bond Stabil iliza izatio ion Framework

The enactment of Law No. 9/201 016 6 regarding Preve vention

n and Mitigation
n of Financial System Crises

as a legal foundation for the government to serves at the time of financial crisis in the form of Fi Financial System Stability Committee (KSSK) KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP)

CMP

Implementing Bond Stabilization Framework (BSF)

BSF

SLIDE 35

34

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

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

nd

Object of Regulation ion Governs all Foreign Currency Debt Hedgin ing Ratio io < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** Liquid idit ity Ratio (< 3 months) 50% 70% Credit it Rating Not applicable Minimum rating of BB- Hedgin ing transaction ion to meet hedge ratio not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanctio ion As of Q IV-2015 Applied External Debt/GDP (%)

Debt bt Burde den n Indi dicat cator (External nal Debt/GDP) Remains ins Compar arabl able to Peers Rat ating ing Enco cour uraging ng Corpo porate tes Compli lianc nce on Hedging ng Rati tio & Liqui uidity ty Ratio

Source: Bank Indonesia

Liqui quidi dity Ratio io* Hedgi dging g Ratio io*

*Data as of Q3 2019, with total population 2.588 corporates

Regul ulat atio ion n on Prudent ntia ial Princ incip iple in Manag naging ing External nal Debt bt

Source: Bank Indonesia

Source: Moody’s Statistical Handbook, November 2019

23.9 36.2 20.0 39.9 57.3 23.0 36.7 20.9 42.9 56.5 21.9 37.0 21.4 42.3 54.3 10 20 30 40 50 60 70 Philippines Indonesia India Colombia Bulgaria 2020F 2019F 2018

2,327 , 90% 261 , 10%

≤ 3 months ths

2,428 , 94% 160 , 6%

> 3

6

months ths

2,279 , 88% 309 , 12% Comply Not Comply

SLIDE 36

35

11.5 17.1 11.3 12.0 5.4 10.2 5.9 3.0 10.1 6.5 8.0 9.5 9.8 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 External Debt External Debt Growth (rhs)

Health thy External ernal Debt Compositio ition

Exte terna nal l Debt Struc uctur ture

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

The Struc uctur ture of Exte terna nal Debt is Domina nate ted by Long ng-Te Term Debt Exte ternal l Debt t Remains Manageable ble Exte terna nal l Debt t to GDP Ratio & Debt to Expo port t Rati tio

Million USD % 121.8 114.9 101.0 113.8 123.1 139.5 168.4 176.1 168.0 162.3 169.9 173.6 178.4 31.8 26.5 25.0 27.4 29.1 32.9 36.1 34.3 34.7 36.2 37.0 36.7 36.3 5 10 15 20 25 30 35 40 80 100 120 140 160 180 200 External Debt / Export Ratio External Debt / GDP Ratio (rhs) % % 42.6 41.4 47.4 50.0 53.6 55.8 54.1 50.5 48.8 50.4 50.2 49.8 50.7 51.2 50.9 49.8 49.8 49.9 50.0 49.6 49.8 57.4 58.6 52.6 50.0 46.4 44.2 45.9 49.5 51.2 49.6 49.8 50.2 49.3 48.8 49.1 50.2 50.2 50.1 50.0 50.4 50.2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private External Debt Public External Debt 18.3 21.2 20.7 21.7 21.2 20.2 17.9 17.1 15.6 16.0 16.1 15.2 15.7 16.8 16.1 15.8 14.7 14.3 14.1 14.3 15.5 81.7 78.8 79.3 78.3 78.8 79.8 82.1 82.9 84.4 84.0 83.9 84.8 84.3 83.2 83.9 84.2 85.3 85.7 85.9 85.7 84.5 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Short Term External Debt Long Term External Debt

SLIDE 37

36

Manag ageable able External rnal Debt Profile file

Shor

rt term

rm non-ban bank corpor rporate deb ebt (non

n

affil ilia iatio ion) represents

nly

9.9%

f

total priv ivate extern ernal al debt bt

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

Af Affiliation

n

Non Af Affiliation

n

US$149.0bn

r

74.5%

f Private Ext.

Debt US$19.4bn

r

9.7%

f Private
Ext. Debt

US$11.9 .9bn

r
r

5.9%

f Private

Ext. . Debt US$19.7bn

r
r

9.9%

f Private

Ext. . Debt

Publ blic ic Long Term 1 Priv ivat ate Bank

US$31.6bn

r

15.8%

f Private
Ext. Debt

US$200.1bn 1bn

r

49 49.8%

f total
Ext. Debt

US$51.1bn bn

r

25.5%

f Private
Ext. Debt

External Debt Position as of November 2019

1 Based on remaining maturity

Source rce: External Debt Statistics of Indonesia, January 2020

US$401.4bn bn

US$201.4bn

r

50.2%

f Total Ext.

Debt

SLIDE 38

Fiscal al Perf rform

rmance

nce and Flex exib ibil ilit ity: More Fiscal al Stimu imulus lus with th Prude dent nt Fiscal al Polic

licy

Sec ection

n

4

SLIDE 39

38

Integr grate ted Reform rm to Provide Highe her Qual ality ty

f

Economic Growth th

Structur ctural reforms to enhanc nce poten entia ial growt wth and naviga igate through gh challen enges es

Fair

State Budget that declines poverty and income inequality

Efficient,

competitive, and innovative real sectors

Job-creation
Trade

and investment policies that support growth, efficiency, and stability

Monetary

policy to support macroeconomic stability

Price

stability and sustainable current account deficit

Efficient

and credible financial sector Fisc scal Real Sector

r

Monetary & Financ ncial Sector

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

Source: Ministry of Finance

SLIDE 40

39

Growth wth Momentu ntum is Expected ted to Continue tinue

Sever eral key driv iver ers and strategie egies to accel eler erate growt wth

Strat ategie egies to Encourage Growth Key Driver vers

Consu

sumption ion remains robust among

thers

supported by benign inflation

Investme

ment grows stably supported by infrastructure acceleration, business climate improvement, rating upgrades, economic packages

Export

and Import keeps improving driven by increasing demand and improving prices

Support

from several importa tant events ts such as Asian Games, Regional Elections, and IMF-WB annual meeting

Main

inta tain inin ing purchasin ing power, boostin ing domestic tic demand and d supportin ting busin iness activ ivity ity.  Improve distribution channels  Increased shopping events, creative industries and festivals in tourism areas  Incentives for manufacture  Developing e-commerce industry

Encouragin

ing private te secto tor's role in investme tment  Strengthening and deepening financial markets  Making a stable investment climate through political stability

Expand servic

ices sector, especia ially touris ism  Increasing foreign tourists arrival through cooperation with other countries by increasing the direct flight schedule  Encouraging national creative industry growth

Risks ks & Challeng nges es

Global economic ic uncerta tain intie ties: China economic rebalancing and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change

SLIDE 41

40

2019 State Budget (APBN 2019)

Healthier ier, More Equit itabl ble, e, Self-Suff ffic icien ient

Healthier ier

Deficit

1.84%

f

GDP, the lowest since 2013

Towards

positive primary balance

Debt

to GDP ratio below 30%

f

GDP

More equitable

Strengthening

decentralization (increasing fiscal transfer to regions)

Strengthening

social protection programs

Focusing
n

human capital quality improvement (inter-generational fairness)

Self suffi ficie ient nt

Increasing

tax revenue

Increasing

the share

f

local currency bond issuance

Domestic

financial deepening

Driving

export

Macroec economic ic Assum umpt ption ion

Growt wth 5.3% Infla lation 3.5% 3 months T-bill lls 5.3% Exchange Rate 15,000/US$ ICP 70/barrel Oil Lifting 775 thousands barrel/day Gas Lifting 1,250 thousands barrel/day

Developm

pment

ent Targe get Unem employ

yment

ent 4.8% – 5.2% Poverty 8.5 – 9.5 Gini ni ratio 0.38 – 0.39 HDI 71.98 REVENUE Rp2,165.1 T  Tax Rp1,786.4 T  Non Tax Rp378.3 T  Grant Rp0.4T EXPENDITUR TURE Rp2,461.1 T  Central Governm nmen ent Rp1,634.3T  Transfe fer to Region Rp756.8 T  Village Fund Rp70.0 T

Deficit icit Rp296.0 T (1.84%

f

GDP) Primary Balance (Rp20.1 T) Debt Financin ing Rp359.3 T Investme tment Rp75.9T

Source: Ministry of Finance

SLIDE 42

41

Credible ible and Health thier ier Budget et

…providing more certainty to all stakeholders

Indic icator

r

2017 2017

2017

2018 2018 2019 2019 R-Budget Realiz ization ion Budget Budget Economic growth (%, yoy)

5.2 5.1 5.4 5.3

Inflatio ion (%, yoy)

4.3 3.6 3.5 3.5

3-Month Treasury Bill (SPN) (%)

5.2 5.0 5.2 5.3

Exchange Rate (Average, IDR/USD)

13,400 13,384 13,400 15,000

ICP (USD/barrel)

48 51.2 48 70

Oil Production ion (thousand barrel/day)

815 804 800 775

Gas Production ion (million

ns

s barrel/day)

1.15 1.14 1.20 1.25 Macroec croecon

nomi

mic c Assump mption

n for
r 2018 & 2019 Budge

get

*Preliminary Source: Ministry of Finance

2018

Budget realization showed healthy and credible performances:

with tax revenues grew relatively high
improving tax ratio
ptimal level of expenditure
2019 Budget is healthier, more equitable, and self-sufficient
towards positive primary balance
strengthening decentralization
increasing tax revenue

Descr cription

n (IDR Trillion
n)

2016 2016 Audited Realization

n

2017 Audited Realization

n

2018 Audited Realization

n

2019* Prop

pos
sed

ed Budge get Budge get Realization

n

(a.o.

. Decemb

cember er 31) % Realization

n

to Budget get A. A. Reven enues es and Gra rants 1,555.9 1,666.4 1,943.7 2,142.5 2,165.1 1,957.2 90.4

I. Domestic Revenue

1,546.9 1,654.8 1,928.1 2,142.1 2,164.7 1,950.4 90.1

1. Tax Revenue

1,285.0 1,343.5 1,518.8 1,781.0 1,786.4 1,545.3 86.5

2. Non Tax Revenue

262.0 311.2 409.3 361.1 378.3 405.0 107.1

II. Grants

9.0 11.6 15.6 0.4 0.4 6.8 1,560.7 B. Expen enditure re 1,864.3 2,007.3 2,213.1 2,439.7 2,461.1 2,310.2 93.9

I. Central Government Expenditure

1,154.0 1,265.3 1,455.3 1,607.3 1,634.3 1,498.9 91.7

1. Ministerial Spending

684.2 765.1 846.5 840.3 855.4 876.4 102.4

2. Non Ministerial Spending

469.8 500.2 608.8 767.1 778.9 622.6 79.9

II. Transfer to Region and Village Fund

710.3 742.0 757.8 832.3 826.8 811.3 98.1 C. C. Prima mary Balance ce

125.6
124.4
11.5
21.7
20.1
77.5

385.3 D. Surp rplus (Defici eficit)

308.3
340.9
269.4
297.2
296.0
353.0

% of GDP

2.49
2.51
1.81
1.84
2.20

E. Financi cing 334.5 366.6 305.7 297.2 296.0 399.5 134.9

SLIDE 43

42

2020 State te Budget (APBN 2020) 2020)

Indic icator

r

2019 2019 2020 2020 Outlook

k

Budget Economic growth (%, yoy)

5.2 5.3

Inflatio ion (%, yoy)

3.1 3.1

3-Month Treasury Bill (SPN) (%)

5.6 5.4

Exchange Rate (Average, IDR/USD)

14,250 14,400

ICP (USD/barrel)

63 63

Oil Production ion (thousand barrel/day)

754 755

Gas Production ion (million

ns

s barrel/day)

1.07 1.19 Macroec croecon

nomi

mic c Assump mption

n for
r 2020 Budget

get

Source: Ministry of Finance

Description

n (IDR Trillion
n)

2019 9 Outl tloo

ok

Grow rowth (%) 2020 2020 Prop

pos
sed

ed Budge get Grow rowth (%) Budge get Grow rowth (%) A. A. Reven enues es and Gra rants 2,030.8 4.5 2,221.5 9.4 2,233.2 10.0

I. Domestic Revenue
1. Tax Revenue

1,643.1 8.2 1,861.8 13.3 1,865.7 13.5

2. Non Tax Revenue

386.3 (5.6) 359.3 (7.0) 367.0 (5.0)

II. Grants

1.3 (91.7) 0.5 (61.5) 0.5 (61.5)

B. Expen

enditure re 2,341.6 5.8 2,528.8 8.0 2,540.4 8.5

I. Central Government Expenditure

1,527.2 4.9 1,670.0 9.4 1,683.5 10.2

II. Transfer to Region and Village Fund

814.4 7.5 585.8 5.5 856.9 5.2 C. C. Prima mary Balance ce

34.7

201.7

12.0

(65.4)

12.0

(65.4)

D. Surp

rplus (Def eficit cit)

310.8

15.4

307.2

(1.2)

307.2

(1.2) % of GDP

1.93

6.04

1.76

(8.81)

1.76

(8.81)

E. Financi

cing 310.8 1.7 307.2 (1.2) 307.2 (1.2)

2020 2020-2030 2030

Improving Competitiveness

STRE RENGT GTHENING G THE FUNDA NDAMENTAL TRANSITION ADVANCED INDONE NESIA

2031-2035 2035

Strengthening Competitiveness

2036 2036-2045 2045

Sovereign, Advanced, Just, and Prosperous Country

Indonesia ia 2045: Becomin ing a Developed Countr try

Fiscal Competitiveness Theme 2020 “State Budget to Accelerate Competitiveness through Innovation and Strengthening Quality of Human Resources” Revenue Mobil iliz izatio ion Effectiv ive state spending Creativ ive financin ing FISC SCAL POLICY STRATE TEGY FOR 2020

SLIDE 44

43

New and Strateg tegic ic Progr grams ms

The polici cies es and initia iatives es in State Budget et 2020 for Improvem emen ent in human resource qualit ity and compet petit itiv iven enes ess.

Source: Ministry of Finance

Tax Ince centi ntives for suppo porti ting ng human resour urce ces developm pment nt & competi titi tivene ness

Super deduction for vocational program and

R&D

Mini tax holiday for investment commitment

under 500 billion rupiah

Investment allowance for human intensive

industry

Kuliah

Improvement nt In Human Resour urce ce Quali lity ty and Social l Assista tance Indone nesian n Smart Card Colle lege/KIP Kuliah ah Pre Worke kers Card Improving the job seekers’ productivity Food Aid Card Supporting the poor people to achieve the higher education level Protecting the food access for poors Accele lerate ted comple leti tion n of 4 super priority ty tourism desti tina nati tions ns The development of Danau Toba, Borobudur, Labuan Bajo and Mandalika, synergy among line ministries and local government Streng ngth theni ning ng The Trans nsfer to Regions ns and Vill llage Fund nds

Strengthening The Physical Specific

Allocation Fund for social and marine transportation sectors;

Additional General Allocation Fund

DAU for equalization village officials’ fixed income and remuneration of Government Employees with Work Agreements (PPPK) Endowment nt Fund for Human Resour urce ce and

Cultur ture  Culture Endowment Fund  Higher Education Endowment Fund  Significant additional endowment fund for research and development The Utilization of endowment fund investment to improve the the quality of higher education and promotion of national culture, through:

Supporting the reducing current account deficit in the short and long term Streng ngtheni ning ng The Curre rent nt Account unt Balanc ance

SLIDE 45

44

In 2020, Budget et Defic icit it will be Main intaine tained at level 1.76% GDP

Direc ected ed to be healthier er and adapt ptive to face ce the econo nomic ic risks

Source: Ministry of Finance

Deficit

to GDP ratio in 2020 will be the lower deficit in the past five years

Primary

balance deficit will be decreased gradually to positive direction

Tax

revenue for supporting the competitiveness with the realistic and

ptimal

target

Budget

spending will be prioritized for productive spending

Budget

financing will be decreased and will be utilized for competitiveness improvements

11.6 10.8 10.7 11.4 11.1 11.6 2015 2016 2017 2018 2019 Outlook 2020 Budget

TAX RATIO IO

(298.5) (308.3) (341.0) (269.4) (310.8) (307.2) (142.5) (125.6) (124.4) (11.5) (34.7) (12.0) (2.59) (2.49) (2.51) (1.82) (1.93) (1.76) (3.00) (2.50) (2.00) (1.50) (1.00) (0.50) 0.00 (400.0) (350.0) (300.0) (250.0) (200.0) (150.0) (100.0) (50.0) 0.0 2015 2016 2017 2018 2019 Outlook 2020 Budget Budget Deficit (Trillion IDR) Primary Balance % Deficit to GDP

SLIDE 46

45

State te Revenue ue Optim imiza izatio tion

Followed wed by tax reforms for suppo portin ing the econo nomy and busin ines ess clim imate. e.

Source: Ministry of Finance

Improvem vement ent to Suppor

rt

Taxation

Increasing

the tax compliance

Service

quality improvement, counseling, and supervision through the strengthen IT system and tax and administration

Equalizing

the level playing field

Improving

the business process especially for VAT refund

Implementing

the AEoI

Extensification
f

excise goods

Adjusting

the excise duty rates

n

tobacco

1,240.4 1,285.0 1,343.5 1,518.8 1,643.1 1,861.8 1,865.7 8.2 3.6 4.6 13.0 8.2 12.6 5.8 2.9 13.4 10.5 13.5 14.8

500

1,000 1,500 2,000 2015 2016 2017 2018 2019 Outlook 2020 RAPBN 2020 APBN Kepabeanan dan Cukai Pajak nonmigas PPh Migas Pertumbuhan Penerimaan Perpajakan (%) Pertumbuhan Pajak nonmigas (%)

Tax Revenu nue (Trillio ion Rupiah)

(35.9) 2.5 18.8 31.5 (5.6) (40.0) (30.0) (20.0) (10.0)

10.0

20.0 30.0 40.0

50.0

100.0 150.0 200.0 250.0 300.0 350.0 400.0 450.0 2015 2016 2017 2018 Outlook 2019 RAPBN 2020 APBN 2020

PNBP Migas (Triliun Rp) PNBP Nonmigas (Triliun Rp) Pertumbuhan (%)

(7,0) (5,0) 255,6 262,0 311,2 409,3 386,3 359,3 370,0

Non Tax Revenu nue (Trillion

n

IDR)

Management

and Utilization

f

Optimal, Effective and Efficient Natural Resources

Service

Improvement and Tariff Adjustment

Improvement
f

BUMN Efficiency and BLU Performance

Improving

Governance

The role

f

the non-oi

il

and gas PNBP sector

r

continue ues to be streng engthen ened ed accompani panied ed by increase sed servi vices es to the communi nity

Oil & Gas Custom & Excises Non Oil & Gas Tax Revenue Growth (%) Non Oil & Gas Tax Tax Revenue Growth (%) Oil & Gas (Trillion Rp) Non Oil & Gas(Trillion Rp) Growth (%) 2020 Budget Plan 2020 Budget 2020 Budget Plan 2020 Budget

SLIDE 47

46

Governm ernment ent expenditur enditure in 2020

A better er spendi nding ng to suppo portin ing devel elopm pmen ent to be effici ficien ent and effec ectiv ive. e.

Source: Ministry of Finance

SLIDE 48

47

Central al Governm ernment ent Expenditur enditure

Direct ected ed to suppo port Human Capit ital improvem emen ent and sever eral strategic egic progr grams

Source: Ministry of Finance

 Human an Resour urce Quality Improvem

vement

ent

Smart Indo donesia ian Card (KIP) for Higher Ecuatio tion Supporting the poors to continue their education to higher education Pre-Em Employment Card To Improve the productivity

f

job seekers

Sustain

inabil ility ity

f

health th servic ice provis isio ion (increased premium aid by Government)

 Social Protec ection

n

Strengt ngtheni ening ng

Food

access improvement (Food Card)

 Infrast structure Developm pmen ent

Equalizing

inter-region development

Accelerating development
f

4 destination of super-priority tourism

SLIDE 49

48

Budget et for Improving ing the Human Resour urce Quality lity

Higher gher qualit ity

f

human resource ces for achiev ievin ing the welfar fare and just societ iety. y.

Source: Ministry of Finance

Investm tment nt Financ ncing ing

Rp29,0 9,0 T

National

Educ ucation Development (DPPN) N)

Rp18,0

8,0 T

scholarships

for 5.000 new students (higher degree level)

scholarships

for 12.333 students (higher degree level)

Financing

104 researches

Culture

Endowm wment Fund Rp1,0 T

Ensure the continuity

f

culture promotion for the next generation

Resear

arch Endowment Fund Rp5,0 T

Increasing

the human resource quality and competitiveness

Increasing

the research which supported the university stakeholders

Incresing

the research contribution to economic growth

Higher

Educ ucatio ion Endowment Fund

Rp5,0

T

Human resources and education infrastructure for achieving the World Class University

SLIDE 50

49

The Natio iona nal Budget et is to Prepar pare the Young nger Gener eratio tion to Improve the Quality ity

f

Human Resour urces es

Source: Ministry of Finance

Educatio ion Budget et

Rp508,1 8,1 T

SLIDE 51

50

The Natio iona nal Budget et is Preparin aring the Youth throug ugh Job Trainin ining

Source: Ministry of Finance

Total al Budget Rp10 T Target 2 Billion ion partic rticip ipan ants ts

Digital: 1.5 Mill Regular: 0.5 Mill

Definitio tion

f

Pre-Empl mployme yment Card

“It is a card given to job seekers

r

workers to get vocational training (skil illin ing and re-skil killin ing) and / or job competency certification"

Skilling ng Targets : Fresh graduate job seekers Objectives : skill adjustment, vocational skill to work Outcome : reduce unemployment Re Re-Ski killing ng Targets : Workers who are laid

ff
r

potentially laid

ff

Objective : to equip new/different vocational skills for new profession/entrepreneur Outcome : prevent unemployment from returning

Design gn

f

Implem emen entatio ion

f

Digital and Regular Acces ess

Participants

choose the type

f

training through a digital platform (GoJek, Tokopedia, Jobstreet etc.).

Private

training * Online (e-learning) and Offline (Class) Digi gital Training + Incentives

Training

and Certification in Government Job training Center (LPK) (including Vocational Center/BLK), Private LPK, and Industrial Taining Center Offline training (class) Regular Training + Certification + Incentives

SLIDE 52

51

Source: Ministry of Finance

Tota tal Budget Rp423,3 3,3 T

Infras astr truc uctur ture Budget et

To build infr frastructur cture and remote areas Inves estmen ent for accel eler eratin ing infrastructure devel elopm pmen ent (SOE OE and PSA): ):

PT

HK Rp 3.5 T for building toll road Pekanbaru- Dumai and Terbanggi Besar- Pematang Panggang – Kayu Agung

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

PSA

LMAN Rp 10.5 T for land clearing to support national strategic project

PPPDP

Rp 9.0 T for financing credit housing FLPP

18,758 km

Bridges

3

Airports ts

19,879 ha

Irrigatio tions

238.8 km

Rail ilroads Internet Connectiv ivity ity Development (Palapa Ring)

Development of drinking water pipelines
Development of domestic wastewater

treatment systems

Provision of infrastructure for processing

waste

Clean Water &Sanita tatio tions

6,346 km

Roads

Housing for Low Income me Society ety

49 49

Dams

SLIDE 53

52

Source: Ministry of Finance

Subsidy idy is Directed ted to Improve Effectiv tivity ity and Efficie iency throug ugh Attem empts ts in Accuracy acy Improvem ement ent

Energy Subsidy

Budget 2020 Outlook 2019 125.3 T 142.6 T

Continuing

fix subsidy for diesel

f

Rp1.000/litre

Price

differential subsidy for kerosene and LPG 3 kg canister

Electricity subsidy is given to certa

tain in tarif iff groups.

Electricity subsidy is given accurately for household

customer of 450 VA and 900 VA

Improving electricity ratio

and reducing inter- regions disparity

Policy :

Non Energy Subsidy

62.3 T 69.8 T Budget 2020 Outlook 2019

Data

validation

f

beneficiaries and their needs

f

subsidized fertilizer  e-RDKK (Definitive Plan

f

Group Needs)

Expanding

the use

f

Farmer Card to buy subsidized fertilizer

Improving

public service in transportation and public information

Policy :

Expanding capita

ital access

f

Micro, Small, Mediu ium Enterpris ises through interest subsidy

f

KUR

Allocating

down payment and interest differential subsidy to encourage house

wnership
f

low income people

SLIDE 54

53

Source: Ministry of Finance

Trans nsfe fer to Region and Villag age Fund

Increased by Rp42.5 triliun from the Outlook 2019 that is directed to:

Impr proving ving basic public servi vice delive very Accelerating ng compet etit itiven iveness ess Prom

mot
ting

ing productive ive spending ing

Rp856.9 T

Accelerate the provision of public

infrastructure and strengthen the quality

f

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.

SLIDE 55

54

Source: Ministry of Finance

Debt Financ ncing ing Polic icy 2020 2020

Debt financ ncin ing that is produ ductive ctive, effi fici cien ent, fulfil fills pruden dentia ial aspec ects and suppo ported ed by good gover erna nanc nce and risk managem emen ent system ems.

Debt Finan ancin ing Directio ion

Prudent nt

debt

ratio control within the safe limit ranges from 29.4

30.1

percent

f

GDP to support fiscal sustainability

Maint

ntaini aining ng macro balance by mai aint ntaini aining ng the composition

f

domestic and foreign debt in a controlled limit and deepening the financial markets

Debt Financ ncing ing Strategy egy

Optimizing

community participation in the domestic bond market (financial deepening)

Active

debt management through liability and asset management.

SLIDE 56

55

Indonesia’s Tax Amnesty Program – A Success Story ry

With more than 965, 965,900 00 taxpa payer yers partic icipa ipatin ing in the progr gram

Tax Amnesty ty Result lt (as of the end of March ch 31st

st, 2017)

Redempti tion n Mone ney Assets ts Declar lared

114.2 18.8

1.7 Preliminary Evidence Payment 1% Redemption Money 85% Tax Arrears Payment 14%

Revenue IDR 134.8tn (~1.1% GDP)

3,323.3 .36 861.8 .81 594.99 .99 85.59 59 Individuals 68% Individual SMEs 18% Companies 12% SMEs 2%

Composi sition ion of Partic icip ipants s Based on Asset Declared

0.04 0.15 0.20 0.62 1.10 0.58 0.17 0.12 0.12 0.04 Germany (2004) Belgium (2004) Italy (2009) Chile (2015) Indonesia (2016) India (1997) South Africa (2003) Spain (2012) Australia (2014) % of GDP 2.1 3.9 8.3 39.3 5.2 5.2 3.6 0.3

India (1997) Spain (2012) Chile (2015) Indonesia (2016) Italy (2009) South Africa (2003) Australia (2014)

% of GDP 3,698 1,036 147.1 .1

Onshore Declaration 76% Offshore Declaration 21%

Repatriation 3%

Asset Declared IDR 4,881tn (~39.4% of GDP) Source: Ministry of Finance

SLIDE 57

56

2019 Financ ncing ing Needs

Fulfil filled ed from Gover ernm nmen ent Securities ies IDR 903.37 .37 tn tn (92.4 .41% 1%) and Loan IDR74. 74.22 22 tn tn (7.5 .59% 9%)

Source: Ministry of Finance

SLIDE 58

57

Governm ernment ent Securi rities ties

Indic icativ ive Financ ncin ing Plan for 2019

Source: Ministry of Finance

GS Net [446.49] GS Matured [457.60]

GS Issuance Need [904.09]

Issuance

Composition

GS Rupi piah Domestic [83% - 86%]

Auction [74% – 76%] Non-auction [9%

10%]

Foreign Denomin inated GS GS International [14% - 17%]

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.
Foreign

denominated GS as co compl plementa ntary  Avoid crowding ng out in domestic market.

Th

The ta target amount unt can be be adjuste ted to the potential of other financing sources and financing needs.

*in IDR Trillion

SLIDE 59

58

Governm rnment nt Securitie ities Realiz izatio tion

As

f

Decem ember ber 31, 2019 – in Tril illio ion IDR

Government Securities realization as

f

December 31, 2019 IDR903.36 T T

r

99.92% from the target From

m

IDR903 03.36 .36 T T consi sist st

f:

526.03 58% 119.06 13% 228.76 26% 29.52 3% IDR Government Debt Securities FX Government Debt Securities IDR Sovereign Sharia Securities FX Sovereign Sharia Securities

Source: Ministry of Finance

446.49 904.09 445.77 903.36 Governm nment nt Secur urit itie ies Ne Net Isua uance nce Ne Need d fo for 2019 Realization as of Dec 31, 2019 Budget 2019

SLIDE 60

59

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

Weighte ted Average Debt t Matur urity ty of ~8. 8.5 Years rs Prudent nt Fisca cal l Defici cit

Source: MoF

Well l Diversified Across Different nt Currenc ncies

% of Yearly Issuance Source: Ministry of Finance Source: Ministry of Finance Source: Ministry of Finance

Stable ble Debt to GDP Ratio Over the Years

IDR Tn Government Debt / GDP (%) Note: *2018 LKPP number exc. Prefunding **as of Dec 31, 2019 265 265 362 362 407 407 442 442 358 358 (9) 19 19 (4) (20) 14 14 (7) (58) (69) (56) (66) (227) (298) (308) (341) (269)

2.2%
2.6%
2.5%
2.5%
1.8%
3.0%
2.5%
2.0%
1.5%
1.0%
0.5%

0.0% (400) (200)

200

400 600 2014 2015 2016 2017 2018 SBN (neto) Pinjaman DN & LN (neto) Non Utang (neto) Surplus (Defisit) APBN Rasio Defisit APBN thd. PDB (RHS) Non Debt (Net) Bonds (Net) Loans (Net) Budget Surplus/Deficit Fiscal Deficit (%GDP, RHS) 1,661.1 1,931.2 2,410.0 2,780.6 3,248.6 3,612.7 4,014.8 714.4 677.6 755.1 734.8 746.2 810.7 764.5 24.9% 24.7% 27.4% 28.3% 29.4% 29.8% 29.9% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

1,000.0

2,000.0 3,000.0 4,000.0 5,000.0 2013 2014 2015 2016 2017 2018 *) 2019**) Bond Loan Debt/GDP Ratio [RHS]

9.8 9.4 9.1 8.7 8.4 8.5

2014 2015 2016 2017 2018 2019 ATM (in years) 57% 59% 58% 62% 62% 62% 31% 30% 30% 28% 27% 27% 4% 4% 4% 4% 4% 4% 7% 6% 6% 6% 5% 5% 1% 1% 1% 1% 1% 1% 0% 20% 40% 60% 80% 100% 2016 2017 2018 Oct' 19 Nov' 19 Dec' 19 IDR USD EUR JPY OTHER

SLIDE 61

60

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

Decli lini ning ng Interest t Rate Risks ks Debt t Maturity ty Profile le Decli lini ning ng Exch chang nge Rate Risks ks Upcoming Maturiti ties (Next t 5 Years)

IDR tn tn

Note: using GDP assumption

Source: Ministry of Finance

14.8 13.7 12.1 10.6 10.6 9.8 21.0 20.7 17.5 19.2 19.7 16.1 2014 2015 2016 2017 2018 2019 Variable rate ratio [%] Refixing [%] 257 259 203 211 273 101 139 141 132 208 101 143 96 94 150 30 99 27 89 62 20 23 20 22 28 -

15

26 - 129 150 165 160 154 149 116 102 119 79 30 42 25 22 16 33 8 26 31 3 2 2 33 23 29 29 19 36 25 49

50

100 150 200 250 300 350 400 450 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 IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 7.7 8.4 6.5 9.9 10.6 8.1 20.1 21.4 22.7 25.0 25.5 24.3 33.9 34.7 36.0 39.3 40.4 41.0 2014 2015 2016 2017 2018 2019 in 1 year (%) in 3 year (%) in 5 year (%) 10.7 12.2 12.1 12.1 12.3 11.3 43.4 44.5 42.6 41.3 41.0 37.9 2014 2015 2016 2017 2018 2019 FX Debt to GDP ratio (%) FX Debt to total debt ratio (%)

SLIDE 62

61

Holders ers

f

Tradable able Centr tral al Governm ernment ent Securi rities ties

More Balanc nce Owner ership ip In Terms

f

Holder ers and Tenors

Fore reign n Owne nership p of Gov’t Domestic Debt Secu curiti ties by Teno nor Holders of

f Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

31.0% 23.9% 22.5% 23.4% 20.3% 21.1% 30.8% 37.8% 39.9% 36.8% 42.0% 40.3% 38.1% 38.2% 37.5% 39.8% 37.7% 38.6% Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Domestic Banks Domestic Non-Banks Foreign Holders 4.6% 3.2% 3.5% 5.0% 4.3% 2.4% 3.7% 1.3% 5.3% 5.1% 1.9% 6.7% 15.2% 11.8% 17.8% 17.3% 18.4% 22.0% 33.6% 39.0% 37.4% 35.6% 36.8% 34.1% 42.8% 44.7% 36.0% 37.0% 38.6% 34.8% 38.1% 38.2% 37.5% 39.8% 37.7% 38.55% 0% 20% 40% 60% 80% 100% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 31-Dec-19 0-1 ≥1-2 ≥2-5 ≥5-10 ≥10 %Foreign Ownership of Total

SLIDE 63

62

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

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

(IDR tn) Descr cript ption Dec-15 15 Dec-16 16 Dec-17 17 Dec-18 18 Dec-19 19 Banks nks*

350.07 07 23.95 95% 399.46 46 22.53 53% 491.61 61 23.41 41% 481.33 33 20.32 32% 581.37 37 21.12 12%

Govt Institut utions ns (Bank ank Indone nesia** a**)

148.91 91 10.19 19% 134.25 25 7.57% 7% 141.83 83 6.75% 5% 253.47 47 10.70 70% 262.49 49 9.54% 4%

Bank Indonesia (gross)

157.88 8.90% 179.84 8.56% 217.36 9.18% 273.21 9.93%

GS used for Monetary Operation

23.63 1.33% 38.01 1.81% (36.15) (1.52%) 10.72 0.39%

Non-Ban anks ks

962.86 86 65.87 87% 1,239 39.57 57 69.90 90% 1,466 66.33 33 69.83 83% 1,633 33.65 65 68.98 98% 1,908 08.88 88 69.34 34%

Mutual Funds

61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01% 130.86 4.75%

Insurance Company and Pension Fund

221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50% 471.67 17.13%

Foreign n Holders

558.52 52 38.21 21% 665.81 81 37.55 55% 836.15 15 39.82% 82% 893.25 25 37.71 71% 1,061. 61.86 86 38.57% 57% Foreign Govt's & Central Banks 110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91% 194.45 7.06%

Individual

42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95%

Others

78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93%

Total 1,461.85 100.00% 1,773.28 100.00% 2,099.77 100.00% 2,368.45 100 100.00% 2,752.74 100.00%

Source: Ministry of Finance

SLIDE 64

Mone netary ary and Finan nancial ial Facto tor: r: Credib edible le Mone neta tary ry Polic icy Trac ack Recor

rd

and Favour

urab

able le Fina nancial ncial Secto tor

Sec ection

n

5

SLIDE 65

64

Bank Indonesia’s Policy Mix

To Maintain ain Macroeconomic ic and Finan ancial ial Sy System Stabil ilit ity

Source: Bank Indonesia

 Implementing Macro prudential Intermediation Ratio (RIM)  Implementing Macro prudential Liquidity Buffer (MLB)  Electronification: Social program, e-payment for Government  Financial technology  National Payment Gateway (NPG)  QRIS (QR Indonesia Standard)  Expanding National Clearing System (SKNBI) services  Developing market instruments for financing infrastructure  Developing financial market infrastructures  Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS)  Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat Berharga Komersial)  Controlling inflation: TPIP, TPID  Structural reforms: Government  Financial deepening & stability: KSSK (Financial System Stability Committee), OJK (Financial Services Authority)  Coordinating efforts in reducing Current Account Deficit  Pre-emptive, front loading and ahead-of-the-curve policy rate response  Stabilize exchange rate consistent with fundamentals  Accelerate implementation of reserve requirement averaging  Maintaining a monetary

perations strategy oriented

towards increasing available liquidity (FX swap)

Moneta tary Polic icy Coordin inatio tion with th

ther

Authoritie ities Financia ial Marke ket Deepenin ing Macro- prudentia ial Polic icy Payment System Polic icy

1 2 3 4 5

SLIDE 66

65

Bank Indones esia ia Polic icy Mix: January ry 2020

The e BI Board rd of Governo rnors rs agree reed on 22 22nd

nd and

nd 23rd

rd Janua

uary ry 2020 to hold the BI 7-Day ay Revers erse Rep epo

Rate

e at 5.00%, whil ile also

maint

aintainin aining the Depos

sit

it Facil ilit ity y (DF) and Lending ing Facil ilit ity y (LF) ) rates es at 4.25% and 5.75%.

Continues to

rient monetary
perations

towards maintaining adequate liquidity and supporting the transmission

f an

accommodative policy mix. Holds the BI 7-Day Reverse Repo Rate at 5.00% Continues to strengthen coordination with the Government and other relevant authorities in

rder to maintain

economic stability and catalyse domestic demand, while boosting exports and tourism and attracting foreign capital flows, including Foreign Direct Investment (FDI).

Source: Bank Indonesia

Maintains accommodative macroprudential policy to stimulate economic financing in line with the suboptimal financial cycle, while also paying due consideration to prudential principles. Payment system policy and financial market deepening will be strengthened further in order to support economic growth. Monitors domestic and global economic development in using its room to implement an accommodative policy mix in order to maintain controlled inflation and external stability as well as to support economic growth momentum. Monetary policy remains accommodative and is consistent with controlled inflation in the target corridor, maintained external stability as well as efforts to sustain domestic economic growth momentum.

SLIDE 67

66

Principle iples

f

Aver erage e Reser erve ve Requir irement Ratio ios Improve vement ent

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

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

Improvement

in average reserve requirement is a follow up to the monetary policy

perational

framework reform implemented by Bank Indonesia since 2016.

Monetary

policy

perational

framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation

f the average

reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening.

The current improvement aims to elevate flexibility in

banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness of monetary policy transmission in maintaining economic stability.

Consid ideratio tions for the Average Reserve Requir irement t Ratio ios Improvement

Source: Bank Indonesia

SLIDE 68

67

Princ ncip iple les

f

Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR) and Macropr pruden udential tial Liquidity uidity Buffe fer (MLB) B)

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

f

Governors Regulation (PADG) No. 20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also

vercoming

the issue

f

liquidity procyclicality. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018.

Consider erati tions ns for Macrop

prud

udent ential al Instr truments ts Macrop

prudent

ential Intermediation

n

Rat atio (MIR) and Macrop

prudent

ential Liquidity ty Buffer (MLB)

1 2 3 4

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

Source: Bank Indonesia

SLIDE 69

68

Princ ncip iple les

f

Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR)* )*

Regulation ion MIR (Conven entio iona nal Commer ercial Bank) MIR Sharia (Sharia ia Banks and Sharia Busine ness ss Units) s)

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

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

SLIDE 70

69

Princ ncip iple les

f

Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR)* )*

Regulation

n

MIR (Convent entio iona nal Commer ercial Bank) MIR Sharia (Sharia ia Banks and Sharia Busine ness ss Units) s)

6 Percentage

f

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

f: (i) demand deposits, (ii) savings deposits;

(iii) term deposits, and (iv) other liabilities  Average daily total deposits in rupiah at all branch

ffices

and sharia business units in Indonesia  Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting

f:

(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

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

SLIDE 71

70

Adjustme tment

f

Macropr

prudent

dentia ial Inter ermed edia iatio tion Ratio io (MIR)/ )/Sha Sharia ia Macropru

prude

denti tial Interm termedia diati tion

n

Rati tio (Sha haria ria MIR)* )*

In response to global and domestic

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

BI relaxed MIR/sharia MIR policy in

March 2019, which stimulated bank

lending. Nevertheless, the

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

Considering the potential of bank

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

This policy to stimulate credit growth

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

Policy Backg kgrounds

Source: Bank Indonesia

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

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

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

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

MIR calculation are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form

f

bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement.

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

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

Main in Regulato tory Points ts

Credit dit + Owned ed Bond Deposit it + Issue ued d Bond + Loan/ n/Financi inancing ng Rece ceiv ived Lower disince incent ntiv ive param ameter

MIR/s /sharia MIR RR RR= Lower Disincentives Parameter x (Lower Bound

f

MIR/Sharia MIR Target – Bank’s MIR/Sharia MIR) x Deposit

Upper er disince incent ntiv ive param ameter

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

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

SLIDE 72

71

Princ ncip iple les

f

Macroprud ruden ential tial Liquidit uidity Buffe fer (MLB) B)

Regulation ion MLB (Conven entio iona nal Commer ercial 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 may be used for monetary operations (including SBI/SDBI/SBN); and  Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN)  Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia-compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional commercial bank to rupiah deposits Percentage

f sharia-compliant

rupiah securities held by an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for

pen

market

perations,

totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market

perations, totalling no more than 2% of rupiah

deposits 5 Sources

f

Data

n

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

ther

liabilities

SLIDE 73

72

Rela laxin xing the Loan-to to-Valu lue (LTV TV) and Financin ing-to to-Valu lue (FTV) Ratios tios*

The LTV/FTV relaxatio ion is conduct ucted ed while taking ng into account unt aspect cts

f

pruden ential ial and consumer umer protect ctio ion* n*

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

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

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

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

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

3. Adjusting the arrangement of stages and amount of property

loan/financing disbursement of indent property:

Source: Bank Indonesia

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

SLIDE 74

73

Pruden dentia ial aspects cts

f

Relaxin ing the Loan-to to-Value (LTV) and Financ ncin ing-to to-Value (FTV) Ratio ios

1. The requirements

f

the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio

f

NPL to total credit

r

NPF to total financing must not exceed 5%; and ii. The gross ratio

f

property NPL to total property credit

r

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

r

different bank for tenors

f

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

nly

allowed for developers that comply with bank’s risk management policy (e.g.the business feasibility

f

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 Exem empt ptio ions

Central government

r local

government loan / financing programs are exempt from this regulation.

Rela laxin xing the Loan-to to-Valu lue (LTV TV) and Financin ing-to to-Valu lue (FTV) Ratios tios*

Source: Bank Indonesia

SLIDE 75

74

Adjustme tment

f

LTV Ratio io for Proper perty ty Loa

ans,

FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts

n

Autom

motive
tive

Loans/Fin inancin ing* g*

1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property

Financing.

a. BI decides to relax the LTV ratio for property loans and FTV ratio for

property financing by 5% from current ratio as follows:

Source: Bank Indonesia

Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. Policy Backg kgrounds Main in Regulato tory Points ts

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

In

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

Considering

the

ngoing

needs to stimulate the property and automotive sectors which have a huge backward and forward linkages to

ther

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

rder to reduce potential disruptions to financial

system stability stemming from environmental degradation.

As a prudential mitigation, those relaxations will be

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

BI will regularly evaluate this policy at least once a

year.

SLIDE 76

75

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

and FTV ratio for green property financing.

a. The

Green Property criteria refers to the standards/certificates issued by a nationally

r

internationally recognized environmental institution.

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

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

For buildings < 2500m2, the bank may conduct a

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

For buildings > 2500m2,

the assessment must be conducted by a recognized institution;

For new buildings constructed in an area by one

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

Adjustme tment

f

LTV Ratio io for Proper perty ty Loa

ans,

FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts

n

Autom

motive
tive

Loans/Fin inancin ing* g*

Source: Bank Indonesia

Main in Regulato tory Points ts

3. Adjustment
f

Down Payments

n

Automotive Loans/Financing

a. Down

Payments

n

Automotive Loans/Financing is adjusted as follows: i. Relaxation on the down payments of automotive loans

r

automotive financing 5%-10% from current regulations; ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios

n

automotive loans/financing; iii. The adjustment of down payments of automotive loans/financing in points a and b is as follows:

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

SLIDE 77

76

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

n

automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows:

Adjustme tment

f

LTV Ratio io for Proper perty ty Loa

ans,

FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts

n

Autom

motive
tive

Loans/Fin inancin ing* g*

Source: Bank Indonesia

Main in Regulato tory Points ts

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

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

SLIDE 78

77

Princ ncip iple les

f

Domestic tic Non Deliv iverable able Forwa ward (DNDF) Trans nsact actio ion

Purposes

1. To support the effort

f

stabilizing the Rupiah exchange rate through the additional

f

alternative hedging instruments 2. To support the development and deepening

f

the domestic financial market 3. To increase the confidence

f

exporters, importers, and investors in conducting economic and investment activities through the flexibility

f

hedging transactions against Rupiah currency risk

General al Provi visio ions

 Domest stic ic Non-Del eliver verable Forward Transa sactio ion (DNDF Transa saction ion)

Plain vanilla derivatif transaction

f

foreign exchange against rupiah in the form

f

forward transaction with fixing mechanism in the domestic market

 Forward Transaction ions

Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the delivery

f

funds shall be performed in more than 2 days after the transaction date

 Fixing ing Mechani nism

Transaction settlement mechanism without full movement

f

funds by calculating the difference between rate

n

the transaction date and reference rate in JISDOR

n

a specified future time agreed in the contract (fixing date)

 Other Defini nitions ions

The definition

f

derivative transaction

f

foreign exchange againts rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction againts rupiah

Source: Bank Indonesia

SLIDE 79

78

Princ ncip iple les

f

Domestic tic Non Deliv iverable able Forwa ward (DNDF) Trans nsact actio ion

Bank can perform DNDF Transactio ions as follows ws:

Bank – Customer Bank – Foreign Party

Bank – Bank

Transactio ion betwee een:

Can

nly

be performed to hedge rupiah exchange rate risk.

1. Must

have Under erlyin ing Transa sactio ions:

Includin ing all follow

win

ing activit itie ies : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excluding follow

win

ing activ ivitie ies: a. Bank Indonesia certificates; b. Placement of funds with bank; c. Unwithdrawn credit facilities; d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities.

2. Nominal

f

DNDF Transactions ≤ Nominal

f

Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions

Source: Bank Indonesia

SLIDE 80

79

Princ ncip iple les

f

Domestic tic Non Deliv iverable able Forwa ward (DNDF) Trans nsact actio ion

Transactio ion Settlem emen ent

Use

Fixing mechanism

Reference

rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR

Settlement

currency : IDR

Roll
ver

and early termination are not allowed Roll

ver

and early termin

inatio ion for

DNDF is prohibi ibited ed However, unwind can be done by

pening

the reverse DNDF transactions

Cover er Hedgin ging

Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose.

Underlying

Transactions: DNDF Transaction between Bank and Customer/Foreign

Purpose:

Hedging Custom

mer

er / / Forei eign gn Party

Bank nk Over ersea eas Bank

Hedging

Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with

verseas

Bank for the purpose

f

cover hedge.

Cover Hedging

Source: Bank Indonesia

SLIDE 81

80

Amendm dment nt

n

DNDF Regula latio tion

*to provid vide more flexib ibil ilit ity in DNDF tran ansac action *to increas ase liquid uidity and efficienc ncy in domestic foreig ign exchan ange mar arket

BI Regul ulatio ion

No. 20/10

10/PB PBI/201 018

Source: Bank Indonesia

BI Regulatio ion

No. 21/7/PB

PBI/201 2019

AMENDMENT

Article 3

1. DNDF

transactions must have Underlying Article 3

1. Sell

FX/IDR through DNDF up to $ 5 mio can be done without underlying documents Articl cle 6

2. Not

Regulated; Article 6

2. DNDF

can be terminated (unwind); Article 11

3. Underlying

documents must be final (firm) with additional supporting documents Article 11

3. Underlying

documents for buy FX/IDR for DNDF is :

Final

(firm commitment) + Supporting documents

4. Underlying

documents for sell FX/IDR for DNDF above threshold $ 5 mio can be:

Final

(firm commitment) + Supporting documents

Projection

(anticipatory basis) + Supporting documents Article 11

4. Not

Regulated; Article 11

5. In

using estimate underlying transaction documents in the form

f

cash flow projection, Bank must evaluate the appropriateness through:

a. Supplementary

documents;

b. Historical

data within at least 1 year before; and

c. Track

record

f

the Customer

r

Foreign Party.

*Effective on May 17th, 2019; English version of the regulation is available in BI website.

SLIDE 82

81

Overn rnigh ight Index ex Swaps (OIS) & Inter eres est Rate Swaps (IRS)

Source: Bank Indonesia

As hedging ging inst strument nts s against nst Rupiah inter erest est rate changes es

IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based

n a daily overnight reference rate (IndoNIA)

 Encourage price transparency in the rupiah money market  Strengthen monetary policy transmission  Provide alternative hedging instruments against rupiah interest rate changes  Support securities market deepening in Indonesia

1 2 3 4

IndoNIA & JIBOR OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest rate Improvement of IRS transaction liquidity

Strengthening reference rate based on real transactions

SLIDE 83

82

OIS and IRS Transactio tions ns: Gener eral al Provis isio ions

Source: Bank Indonesia

Mar arke ket Pla layer

ers. Banks, bank clients, both individual

and non-bank institutions, and also foreign parties. Transa ansaction Need eeds Anal nalysi

sis. 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 of rupiah interest rate derivative transactions. Mar arke ket Co Conven nventi tions

ns. When performing IRS and OIS

transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Settle ettlement. Settlement can be performed as a netting payment and every transaction has to be settled in Rupiah. Cl Close

se-ou
ut ne

netti tting ng can be applied under predetermined conditions.

Market Conventions

Calculatio ion Base ACT/ T/360 IndONIA Index with 5 5 decimal als Compound Floatin ing Rat ates es (CFR) based ed

n

5 decimal als Inter erest est Paymen ent based ed

n

Nettin ing Notio ional al

f

Net inter erest est paymen ent in in IDR with decimal als Settlem emen ent Dat ate = 1 busin iness ess days after er Mat aturit ity Dat ate (MD) OIS Quotatio ion rat ates based ed

n

2 decimal als Quotatio ion : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, e, OIS settlem emen ent will

nly

be done at at the end

f

the OIS tenor (MD+1bd). ).

SLIDE 84

83

Bank nk Indones

nesia

ia Policy Mix: 2015 – 2017

Further relaxation of LTV for

property loans (Sept)

Strengthening systemic

surveillance & Crisis Management Protocol (April)

E-money for social transfer

(Nov)

Financial Technology

(FinTech) Office (Nov)

New Rupiah issuance (Dec)
Obligation to use IDR in

domestic transaction (March)

Non-cash movement

(GNNT)

Market-based exchange rate stability consistent with fundamental
Dual intervention in the FX market and purchases of government bonds from secondary market in

time of distress (capital reversal) or large mis-alignment

BI 7-day RR Rate cut of

25bps to 4.50% (Aug)

Further BI 7-day RR Rate

cut of 25 bps to 4.25% (Sept)

Further lowering RR by

100bps to 6.5% (Feb)

Lowering RR by 50bps to

7.5% (Nov)

Policy Rate cuts of 150bps
Moving from BI Rate (12

month) to BI 7-day Reverse Repo Rate (Aug) 1. 1. Monetar ary Polic icy Polic icy Rate Reserve Requi quirement nt 2. 2. Exch chang ange Rate Polic icy 3. 3. Macr croprude udent ntial ial Polic icy

Relaxation of LTV for

property and automotive loans (June)

BI Rate cut of 25bps (Feb)
Implementation of RR

Averaging (Aug): RR fixed 5%; RR Averaging 1.5%

Initiative to issue

macroprudential regulation

n Financing to Funding

Ratio (FFR) 4. 4. Payment nt System Policy cy

National Payment Gateway

(June)

Modernized cash

management underway 2015 2015 2016 2016 2017 2017

Source: Bank Indonesia

SLIDE 85

84

3.00 4.00 5.00 6.00 7.00 8.00

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

Rupi piah Exch chang nge Rate Remains ns Comparabl rable to Peers rs Well l Mainta ntaine ned Inflati lation Ensur ured Price ce Stabi bili lity ty Streng ngth thene ned Mone netary Poli licy cy Framework Credit t Growth th Profile le

BI 7Day RR Rate: 5.00

(%)

LF Rate: 7.00 LF Rate: 5.75 75 BI Rate: 6.50 DF Rate: 4.25

19 August st 2016

The New Monet etary Operation Framew ework Source: Bank Indonesia

YTD 20 2020 20 vs 201 019

8.38 8.36 3.35 3.02 3.61 3.13 2.72 0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00 8.00 9.00

2

2 4 6 8 10 12 14 16 18 20 2013 2014 2015 2016 2017 2018 2019 (%) CPI (%, yoy) - rhs Volatile Food (%, yoy) - lhs Administered (%, yoy) - lhs Core (%, yoy) - lhs 7.1 4.2 13.7 6.1 2 4 6 8 10 12 14 16 18 20 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2015 2016 2017 2018 2019 %,yoy Total Growth Working Capital Loans Investment Loans Consumption Loans 2.78 2.67 1.90 1.55 1.18 0.86 0.35

0.08
0.34
0.54
1.16
3.98
4.21

1.74

2.03
0.50

0.63

0.27
3.21
0.71

0.84

1.23
1.10

0.24 0.23

4.35
5.0
4.0
3.0
2.0
1.0

0.0 1.0 2.0 3.0 4.0 IDR THB PHP MYR SGD ZAR KRW CNY JPY EUR INR TRY BRL point-to-point average % *data as of Jan 22, 2020

SLIDE 86

85

Regional nal Inflatio ion Remains ins under Contr trol

Again ints ts the backd kdrop of risin ing inflatio tionary pressures from year-end seasonal patterns, inflatio tion in most regio ions remain ins under contr trolled, supporte ted by policy coordin inatio tion between Bank k Indonesia ia and Governments ts in regio ional level.

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

SLIDE 87

86

4 Strate tegie ies to Achieve the Infla latio tion Target

Achieving inflation at 3,5%±1%

Maintaining

core inflation

Maintaining

volatile food stability at 4-5%

Controlling

administered price inflation

2018-2019 Target get

Stabilizing the price

1. Price Afforda

dabili lity Achieving inflation at 3,0%±1%

Maintaining

core inflation

Maintaining

volatile food inflation less than 4%

Controlling

administered price inflation

20 2020 20-20 2021 Target get

Managing demand side Strengthening production, Government food reserves and food export-import management

2. Supply

ly Availa labili lity

Strengthening institution Encouraging trade cooperation between regions

3. Well

l Managed d Distri ribution

Improving trade infrastructure Improving data quality

4. Effective Communication

Strengthening central-regional coordination

Source: Bank Indonesia

4 Strategie egies

SLIDE 88

87

Improving ing the Effectiv tivene eness

f

Moneta etary ry Polic icy Trans nsmis missio ion

Bank k Indone

nesia has instit

ituted a Refor

rmulatio

ion of Monetary ry Policy Opera rations ions Framewor

rk which

h consis ists of 3 pillars rs; (1) implementatio ion of BI 7day Revers rse Repo

Rate;

(2) impleme mentatio ion of reserv rve requir ireme ment avera raging; and (3) contin inue to impl plement nt mone ney marke ket deepenin ning program.

Enhancement

f

monetary policy signal Enhancement

f

banking liquidity management Implementa tatio ion

f

BI 7 Day Reverse Repo Rate te Implementa tatio ion

f

Reserve Requir irement (RR) Averagin ing Reformulatio tion

f

Moneta tary Policy Operatio tional Framework Enhancement

f

instruments and transactions Implementa tatio ion

f

Money Marke ket Deepenin ing Program

Source: Bank Indonesia

SLIDE 89

88

Enhanc ncem ement nt

f

Moneta etary ry Operatio tions ns Framew ework rk

Can be traded among contributor banks for 10

minutes.

Up to the amount of Rp10 billion.
Up to 1-month tenor.
Can be traded among contributor banks for 20

minutes.

Up to a total of Rp20 billion.
Up to 3-month tenor.

CURRENT JIBOR (as per June 1st, 2016) PREVIOUS JIBOR

Source: Bank Indonesia

SLIDE 90

89

Financ ncial ial Interm ermedia ediatio tion is Expec ecte ted to Expand and

Bankin king and multi-fin inance intermedia iation ion are managed to to grow at at their potentia ial level level. While at at the same peri riod

d, domestic

ic capi pital marke rkets and insurance premiu ium is is also rising.

Source: Financial Service Authority (OJK)

Meanw nwhile le, Fina nanc ncing ng distri tribu bute ted by multi-fina nanc nce compani nies is conti ntinu nued to grow at level l of 4.47% yoy. The gross premium um revenu nue growth th picks ks up in 2019. Capital tal raising ng throug ugh corpo porate te issua uanc nce conti tinu nues to incr crease sinc nce early ly 2019 and it has reache ched IDR 166 tn tn as of 23 Dec’19. Banki nking ng interm rmediati ation n still grows moderately ately at 7.05% in Nov-19 despite the econo nomic c slowdown. n.

5524.2 7.05% 0% 2% 4% 6% 8% 10% 12% 14% 16% 3,500 4,000 4,500 5,000 5,500 6,000 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 IDR Tn yoy Bank Loans YoY Growth (rhs) 14 29 123 20 40 60 80 100 120 140 160 180 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 23 Des 2019 IDR Tn IPO Rights Issue Corporate Bond & Sukuk Nov-19, -0.20 Nov-19, 20.07

20.00
10.00

0.00 10.00 20.00 30.00 40.00 50.00 60.00 Jan-16 Jan-17 Jan-18 Jan-19 Life Insurance Premium Growth General & Reinsurance Premium Growth 470.7 4.47% 0% 2% 4% 6% 8% 10% 12% 50 100 150 200 250 300 350 400 450 500 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 Nov-19 yoy IDR tn Financing Growth (rhs)

SLIDE 91

90

Financ ncial ial Instit itutio tions ns Remain in Robus ust

CAR of the banking nking sector remaine ined d high and stabl ble at 23.81% with Tier 1 capit ital al at 22.20% as of Nov-19. Risk-bas based capit ital al (RBC) C) of the insur uranc ance indus ustry remaine ned high and well above the minimum threshold d (120%). RBC of the life insur urance ance is reported d up to 725% in Nov-19. 19. Gear aring ing ratio io of multi-fina finance e compan anie ies is low and steadil adily maintain ained ed at 2.63 times in Nov-19. 19. Profi fitabil abilit ity of the banking king sector has been n relatively stable during ing the last three years with the highest net interest margin in in the regio ion. n.

Dom

mestic

ic financia ial instit itutions ions exhibit it a genera rally robust condit itio

ion. The capi

pital is steadily well above the minim imum requir irements, while prof

fit

itabil ilit ity and levera rage are still constantly at a sufficie ient level.

Source: Financial Service Authority (OJK) 23.81 22.20 10.0 12.0 14.0 16.0 18.0 20.0 22.0 24.0 26.0 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 Nov-19 CAR Tier 1 4.89 2.47 1.0 2.0 3.0 4.0 5.0 6.0 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 Nov-19 % Net Interest Margin Return on Assets 2.63 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 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 Nov-19 725 329 50 100 150 200 250 300 350 100 200 300 400 500 600 700 800 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 Nov-19 Life Insurance (Lhs) General Insurance (rhs)

SLIDE 92

91

Manag ageable able Credit it Risks ks with Adequa uate te Liquidit uidity

Ba Banks are re equipped with sufficient liquid assets. Insura rance industry ry also demon

nstra

rates a suffic icient level of

f investment adequacy ra

ratio. Credit risk is is also mana naged at at a low level level as as non-pe perf rform rming loan and non-pe perf rfor

rmin

ing financin ing remain ins below

w the thresho

hold.

The ratio io of liquid id assets to deposit it and LA/NCD NCD in the banking king sector is maintaine ained d at a suffi fici cient nt level. As of Nov-19, the gross & net NPL ratio ios of the banking king sector were 2.77% & 1.20% respectiv ively, well maintai aine ned far below the threshold. NPF ratio io of the multi-fi finance nance indus dustry constant antly remaine ned d below 3% in 2019, and current ntly at 2.52% as of Nov-19. Investment nt adequacy quacy ratio io in the insur urance ance indus ustry was kept above 100% 100%

Source: Financial Service Authority (OJK) 99.6 21.1 5 10 15 20 25 30 40 50 60 70 80 90 100 110 120 130 140 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 % % Liquid Assets to Non-Core Deposits (lhs) Liquid Assets to Deposit (rhs) threshold LA to Deposit = 10% threshold LA/ NCD= 50% 1.20 2.77 0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 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 Nov-19 % NPL Net NPL Gross 2.52 0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 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 Nov-19 116 185.1 50 100 150 200 250 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Life Insurance General Insurance

SLIDE 93

92

Manag ageable able Marke ket Risks ks

Amidst the incre reasing marke rket vol

latility, the

he ris isk pro profile of

f financial institutions
ns re

remains manageable. Ne Net ope

pen pos

position

n of
f the

he banking sector

r was main

intain ined at at a low level, level, while the investment value of

f domestic

ic instit itutiona ional investor

rs was still relativ

ively stable. Net ope pen positi tion in in the ba bank nking ng secto ctor maintai taine ned significa cantly ntly far belo low the maximum limit (20 20%). The investment nt value ue of insura urance nce & pension n funds are continuo nuous usly incre creas asing ng. Multi ti-finance companies’ exposures to foreign debt has generally been mitigate ted throug ugh company ny hedging ng measures. Mu Mutua tual funds’ ne net asset value lue (NAV) is is ste teadily ly inc ncreasing ng with lo low vola lati tili lity ty.

Source: Financial Service Authority (OJK) 2.13 1 2 3 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 Nov-19 % 1102 277 200 250 300 350 400 300 600 900 1,200 1,500 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 Nov-19 IDR Tn IDR Tn Insurance Pension Funds (rhs) 174.77 102.33 60 80 100 120 140 160 180 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 Nov-19 IDR tn Domestic Debt Foreign Debt 5,000 5,200 5,400 5,600 5,800 6,000 6,200 6,400 6,600 6,800 260 290 320 350 380 410 440 470 500 530 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 IDR Tn NAV Mutual Funds IDX (rhs)

SLIDE 94

93

Domestic tic Capita ital Marke kets ts Maintain ntained ed Positiv itive Growth wth

Dom

mestic

ic capi pital marke rket perfor

rmance is

is positiv ive amid the developm

pment of
f geopol

polit itic ics and dynamic ic global econom

my.

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

Domestic capital al markets perform rmance nce tends to streng ngthen. n. Foreign n porto tofoli lio shows conf nfidenc nce as it recorded signi nifica cant nt net buy in the beginn nning ng of 2020. JCI I the beginning of 2020 is slightly weakened compared to the end

f 2019.

2019. Indonesia’s bond prices extended its upside movement due to attracti ctive retur urn n and stable ble rupiah

Stock Index x Performance 9 Jan 2020 (compared to 31 Dec’19) 3.1 0.3 1.5 1.0 0.4 0.4 1.5

0.2

0.8 1.3

0.4
0.5

0.0 1.0

1

1 2 3 4 TURK BRAZ AS EU JPN MAL CHIN PHIL SIN HKN INDO S KOREA THAI WORLD 8 Jan’20, 1.62 9 Jan’20, 1.86

30
10

10 30 50 70 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Gov't Debt Securities Equity 12500 13000 13500 14000 14500 15000 15500 5 6 7 8 9 10 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Yield (%) 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs) Jan-20, 277 Jan-20, 6,274 3,000 3,500 4,000 4,500 5,000 5,500 6,000 6,500 7,000 200 210 220 230 240 250 260 270 280 290

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

Comp Bond Index Comp Stock Index (rhs)

SLIDE 95

94

Strateg tegic ic Polic icies ies in Financ ncial ial Secto tor

Source: Financial Service Authority (OJK)

Providing financing alternatives for Goverment Priority Sectors Supporting acceleration

f

national economic growth Providing financial access to MSMEs especially in remote areas Preparing financial services industry to cope with Industrial Revolution 4.0 Improvement

f

business process in the industry

SLIDE 96

95

Continu tinuous us Progr gram

n

Capital ital Marke ket Deepening ning

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

Stren engt gthenin ening marke ket infr frast struc ucture

Development
f

Integrated Licensing (SPRINT).

Enhancement
f

electronic reporting system.

Development
f

electronic public

ffering.
Integrated

data warehouse and supervisory system.

Enhancin ing the supply-sid side

Product:

QIB

ffering

and private placements, private fund, asset-backed securities, REITs, infrastructure fund, IGBF (Indonesia Government Bonds Future) & equity crowdfunding.

Issuer:

Financial conglomerates, big bank debtors, local government, IDX incubators, SMEs, SOEs & big tax payers.

Enhancin ing the demand nd-sid side Stren engt gthenin ening governa nance & custom

mer

er protec ection ion

Development of market players’ capacity
Enhancement of GCG for publicly-listed companies
Establishment of disgorgement fund

Source: Financial Service Authority (OJK)

Enhancing

the role

f

the domestic institutional investors (insurers & pension funds) in capital markets .

Development
f

the domestic investor base (conducting investor education programs).

Simplification

in

pening

securities account.

Development
f

regional securities companies.

Development
f

e-bookbuilding.

Online

marketing initiative

SLIDE 97

96

Enhanc ncing ing Financia ial Liter eracy acy & Inclus usio ion

Source: Financial Service Authority (OJK)

OJK striv ives es to build a strong ng found ndation ion for fina nanc ncia ial inclusio sion progr grams, s, to ensu sure acces ess to fina nanc ncia ial prod

duc

ucts & servic ices es by Indon

nesia

esians ns

f

all social classe sses. . Such init nitia iativ ives es also so includ ude the enhanc ncement ent

f

fina nanc ncial ial liter eracy and fina nanc ncial ial consu nsumer er prot

tec

ection. ion. Developing financial education models utilizing various delivery channels Enhancing the role

f

the “Investment Alert Taskforce” The result

f

OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among ng Indon

nesia

esians ns compar pared ed to that

f

2016.

Financ ncia ial Literacy Financ ncia ial Inclusio ion

21.8 .8%

2013

Developing micro-credit products with additional business support (“KUR Klaster”) Promoting the establishment

f

Islamic microfinance institutions (“Bank Wakaf Mikro”) Strengthening the role

f

Financial Access Acceleration Taskforce (TPAKD) in local areas 29.7%

201 2016

38.03%

201 2019

2019 Target: 35%

59 59.7%

2013

67 67.8%

201 2016

76.1 .19%

201 2019

2019 Target: 75%

SLIDE 98

97

A A Comprehens nsiv ive Financ ncial ial Deepe pening ning Program am …strategy

egy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

In Apr-2016, the Minis ister r of Finance, the Gov

vernor

rnor of Bank k Indone

nesia

ia, and the Chair irman of the Board rd of Com

mmis

issioners rs of the Financia ial Services Autho horit rity launche hed a Coor

rdin

inatio ion Foru rum for r Developm

pment Fina

nanc ncing ing through Fina nanc ncia ial Marke ket (FK-PPPK) PPPK). The thre ree autho horit itie ies have agreed to form rmulate “The Nation ional Stra rategy of Financia ial Marke rket Developme

pment”

Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market

ECONOMIC FUNDING & RISK MANAGEMENT MARKET INFRASTRUCTURE DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION Benchmark Rate & Standardization Instrument Fund Regulatory Framework Market Infrastructure Intermediaries Coordination & Education

Mission: Financial Market as Sources of National Development Financing

1 2 3

Money Market FX Market Bond Market Stock Market Syariah Market Structure Product Market

3 Pilars 6 Markets 7 Elements

f

Financial Market Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

SLIDE 99

98

BI’s Roles in Supporting Distribution

f

Non-Cas ash Social al Assistan tance (NCSA)

BI supports government nt’s program

f shift

fting ing social assist stanc nce to targe geted ed non cash social assi sist stanc nce disbu sbursem sement ent throug ugh the electron

nic

payment nt

system. In

the futur ure, electron

nic

mec echani nism disb sbur urse sement nt will be also applied ed to LPG subsi sidy. . NCSA Program ams

Famil ily Hope Program (Program Keluarga Harapan

PKH)

Smart Indonesia ia Program (Program Indonesia ia Pinta tar-PIP) Non Cash Food Assista tance (Bantu tuan Pangan Non Tunai – BPNT)

2016-2020

Pi Pilot Projec ect Gradual al Impl plem ement entation ion

Inter erconnec ected ed & inter eroperab able paymen ent system

LPG Subsid idy

Full Impl plem ement entation ion

XXYYZZ 1234567 5678

9876543210

Source: Bank Indonesia

SLIDE 100

99

Progress

f

NCSA Program ams

Family ly Hope Program (Progr gram Keluarga ga Harapan

PKH)

Non Cash Food Assist stance (Bantuan Pangan Non Tunai - BPNT)

The

Family Hope Program (PKH) is a program that provides cash to very poor households. Rp 1,89 million /year will be granted for each

household. PKH

will be granted every February, May, August, and November.

As
f

December 2017, PKH has been distributed to 6,0 million households on non- cash basis.

In 2018, PKH has been distributed to 10

million households on non-cash basis.

BPNT

is a poverty alleviation and social protection program that is managed by the central government. It provides subsidized rice and eggs to low-income households. Rp 110 thousand/month will be granted for each household as BPNT that can be used in certain stores which called e-warong.

As of December 2017, BPNT was distributed to

1,2 million households in 44 cities.

In 2018, BPNT has been distributed to 10.1

million households (65.1% of the target of 15.5 million households target).

Source: Bank Indonesia

As of Sept-2019, PKH has been distributed to

9.8 million households on non-cash basis with realization of 82.52% of the 2019 budget.

As of Sept-2019, BPNT has been

distributed to 13.0 million households with realization

f

68.04% of the 2019 budget.

SLIDE 101

100

1.74

35

35

197

197 22-Jan-20 2008 1998

Strong nger er Fundam amentals ntals Facing the Headwinds winds

82.4 12.1 6.8 1998 2008 Sep-15 30 30 3.8 2.8 1998 2008 Aug-15 17.4 50.2 1998 2008 Sep-15

Infla lati tion Rate (%) IDR Movement nt (%) Non-Perf rform rming ng Loan/NPL PL (% (%) Governm nment nt Debt/ t/GDP Foreign n Reserves (USD SD bn)

100.0% 1998 1998 27.4% 2008 2008 29.7% Q3 - 201 2019 8.6x 1998 1998 3.1x 2008 2008 3.2x Q3 - 201 2019 116.8% 1998 1998 33.2% 2008 2008 36.3% Q3 - 2019 019

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

Infla lation controlle lled within the target get range ge IDR apprec eciated ed year-to to-date e in Decem ember er 2019 NPL level el (gross) is belo low the maximum threshold of 5% Consisten ently ly well-maintained ed Significa cantly ly higher er than 1998 8 & 2008, 08, ample le to cover er 7.3 months of import and exter ernal l debt repaymen ent Significa cantly ly lower er than 1998 8 crisis Sligh ghtly ly higher er than 2008, 08, but significa cantly ly lower er than 1998 98 Dec ’19 129.2

2019

2.72 (yoy)

Nov ‘19 2.8 62 62 10.5 5.7 1998 2008 Jul-15

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

Dec ‘19

4.8 (ytd)

SLIDE 102

101

Outlo look

f

Domestic stic Economy my Remains ins Robust ust

...d .domes estic ic econo nomic ic growt wth is predic dicted ed to be higher in 2019 and 2020

201 2019 and 2020 Econom

mic

ic Outlook

k

 Economic growth in 2019 is projected to grow at around 5.1% before increasing towards the middle of the 5.1-5.5% range in

2020.

 Bank Indonesia projects inflation in 2019 at around 3.1% and within the target range for 2020, namely 3.0%±1%.  Bank Indonesia projects growth of outstanding loans disbursed by the banking industry to be around 8% in 2019 and 11–

13% (yoy) in 2020. Economic Growth

Infla lation

n

CAD (% (% of

f GDP)

Credit Growth

Source : Bank Indonesia

2018 Realizat zation ion 5.17% 3.13% 2.98% 11.75% 201 2019 Around nd 5.1% 2.72% Around nd 2.7% Around nd 8.0% 20 2020 20 5.1–5. 5.5 % 3. 3.0±1% 2.5-3.0 .0 % 11.0-13.0 .0%

SLIDE 103

Progr

gres

essive sive Infrast astructu ructure Developme lopment: Stron

ng

Commitm itment nt

n

Accele eleration tion

f

Infrast astru ructu ture Prov

vision

ision

Sec ection

n

6

SLIDE 104

103

IIGF has the potential to provide project guarantee for non-PPP projects

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

Fisc scal Reforms Institut ution ional Reforms Regulator

ry

Reforms

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

Viabil ilit ity Gap p Fundin ing (VGF) KPPIP Dire rect Lending Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Availabil ility Payment Land Revol

lvin

ing Fund Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF Reg. No. 190/2015 for Central Gov’r and MoHA Reg. No. 96/2016 for Regional Gov’t.) A revolving-fund sourced from State Budget, to accelerate land acquisition (MoF Reg. No. 220/2010) KPPIP is actively involved in accelerating delivery of priority infrastructure projects

PT. Sarana Multi

i Infra rastru rukt ktur Merging between PT. SMI and Gov’t Investment Center (PIP) to become an infrastructure funding company Indone

nesia Infra

ras. . Guara rantee Fund (IIGF) PPP Unit Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land Acquis isition ion Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg.

No. 148/2015) and land acquisition fee

payment for impacted community (Presidential Reg. No.56/2017) Economy Packa kages Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation Risk-sha harin ring Guidelin ines IIGF has issued risk allocation and mitigation guidelines for PPP project Tax Incentiv ives (Tax x Holiday) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 – 20 years depending on the investment value Indon

nesia Infra

rastructure re Guara rantee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects

SLIDE 105

104

Some

f

Most Recent Reform rms

Polic icy reforms are aiming ng to crea eate a more condu nduci cive inves estmen ent climate for infrastructur cture deliv iver ery

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

Preside identia tial

Reg. No. 20/2018
n

Use

f

Foreig ign Labor – released

n

March 2018

This regulation aims at simpli lifying ng the permit appli lica cati tion n proce cess for foreign n worke kers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia

Presid identia tial

Reg. No. 56/2017
n

Socia ial Impact Handlin ing in Land Acquis isitio ition Process for PSN – released

n

June 2017

This Presidential Reg. allows the Executi ting Agency to pay land acquisiti tion compensati tion to the impacte ted community ty who does not have offici cial l rights ts over the land requi uired for PSN. . This regulation helps to solve the land acquisition problem due to community

bjection over the land use.

MoF No. 60/2017

n

Procedures for the Provis isio ion

f

Centr tral Government Guarante tee for the Acceleratio tion

f

the Natio tional Strate tegic ic Projects ts Implementa tatio tion – released

n

May 2017

The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regula ulati tion n regula ulate tes the scope pe and general l requi uirements nts and proce cedur ures to propo pose and grant nt guarante ntees, as well ll as allo locate te state budget t obli ligati tion on government guarante tees to all PSN. . The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

Government

Reg. No. 13/2017
n

Natio ional Spatia ial Plan (RTRWN) – released

n

April 2017

The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Mini nister r of Agrar arian an and Spati tial l can issue ue a recommendati tion n of spati tial l utili lizati tion; n; so that t the proce cess of obtaini ning ng project ct permission n can n be done.

MoF No. 21/2017

n

Procedures for Land Acquis isit itio ion for Natio tional Strate tegic ic Projects ts and Asset Management

f

Land Acquis isitio ition by State te Asset Management Agency – released

n

February 2017

The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN.

SLIDE 106

105

Reforms Along the Project’s Life Cycle

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

f

Indones esia ia

Projec ect Developm pmen ent Facility (PDF) Viabil bility Funding ng Gap (VGF) Guarant ntee Fund Tax Facilities ies Availabil bility Payment ent Land Acquisit sition ion Preparation Bidding Process Construction

Project development facility contributing to assist GCA on PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI PT IIF, and Ministry of Finance A facility with contribution to construction cost to increase project financial viability Managing Entitiy: Ministry of Finance based

n GCA

proposal Gov’t. commitment: 49% max. Per project cost Guaranteeing Govt. contractual

bligations

under infrastructure concession agreements and Mof Regulation No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt’s comitment: US$ 450 mn MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment

industries. Sector

will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion of an asset. MoF Regulation, and MoHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov’t. commitment: US$ 12 mn (2016)

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

SLIDE 107

106

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

Regu gulatio ion improvem emen ent to to acceler erate land procurem emen ent process ess

The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty

about the land acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process.

For its implementation, the Law No. 2 of 2012 was supported by the Presidential

Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30

f 2015. The Amendment to the Regulation allows a Business Entity to allocate

funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement.

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

Law No

No. 2/2012 was successfully applie

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

f the

he Tra rans Sumatera ra Toll Road Proj

ject

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

ject

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

SLIDE 108

107

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

…the establishment

f

Indone nesia ia Asset et Managem emen ent Agenc ncy (LMA MAN)

Source: Ministry of Finance

Gover ernm nmen ent has establ blis ished ed State Asset et Managem emen ent Unit (LMA MAN) as a solutio ion to accel eler erate the land nd acquis isit itio ion through gh the provis isio ion

f

land acquis isit itio ion fund nd

1. Unutilized fund can be allocated for the following year 2. Non-project-specific land acquisition fund

allocation. Unused

allocated fund can flexibly be made available for the other project 3. Land acquisition fund for PSN projects is managed under

ne

agency

1. LMAN

was established in December 2015 through the issuance

f

MoF Reg. 219/2015 concerning State Assets Management

2. In

2016, BLU LMAN was mandated to provide land acquisition fund as a support to Ministry

f

Public Works due to US$ 1,081 Mio shortage

f

fund to acquire land for priority toll roads

3. The

scope

f

support is broaden for all National Strategic Projects through the issuance

f

MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN

4. In

January 2018, LMAN has disbursed up to US$ 881.48 Million (IDR 11.9 Trillion) through bridging finance scheme for 27 toll road projects, and planned to start the implementation

f

direct payment scheme

Land Acquis isitio ition Budg dgetin eting Schem eme LMAN AN at a Glanc nce This LMA MAN initiativ ive provid ides es better er flex exibi ibility ity, coordin inatio ion and managem emen ent

f

land nd acquisit itio ion fund provis isio ion for Nationa nal Strategic egic Projec ects (PSN)

SLIDE 109

108

New ew Fundam amental ntal Regula latio tions ns Have Been een Initia tiated ted in 2017

to accel eler erate infrastructur cture projec ects deliver ery

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

1

Government

Reg. No. 13/2017
n

Natio ional Spatia ial Plan (RTRWN) The issuance

f

RTRWN can resolve spatial planning mismatch in the implementation

f

infrastructure projects listed in the annex

f

Government

Reg. No. 13/2017. A

number

f

breakthroughs were developed, and

ne
f

them is that the Minister

f Agrarian

and Spatial can issue a recommendation

f

spatial utilization; so that the process

f
btaining

project permission can be done.

2

MoF No. 60/2017

n

Procedures for the Provis isio ion

f

Centr tral Government Guarante tee for the Acceleratio tion

f

the Natio ional Strate tegic ic Projects ts Impleme menta tatio tion The supporting regulation for Presidential

Reg. No. 3/2016
n

the Acceleration

f

the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget

bligation
n

government guarantees to all

PSN. The

guarantee provision is expected to increase the feasibility and trust

f

investors to participate in the implementation

f

PSN.

3

Presid identia tial

Reg. No. 56/2017
n

Socia ial Impact Handlin ing in Land Acquis isitio ition Process for PSN This Presidential

Reg. allows

the Executing Agency to pay land acquisition compensation to the impacted community who does not have

fficial

rights

ver

the land required for

PSN. This

regulation helps to solve the land acquisition problem due to community

bjection
ver

the land use.

4

MoF No. 21/2017

n

Procedures for Land Acquis isit itio ion for Natio tional Strate tegic ic Projects ts and Asset Manageme ment

f

Land Acquis isitio ition by State te Asset Manageme ment Agency The implementing regulation

f

Presidential

Reg. No.102/2016
n

Financing

f

Land Acquisition for the Development

f

Public Interest in the Framework

f

the National Strategic

Implementation. This

regulation becomes the legal basis for the financing

f the

procurement

f

National Strategic and Priority Projects by BLU LMAN

SLIDE 110

109

Under Preside idential ntial

Reg. No.56/2018,

, PSN list has been revis ised into 223 Proje jects ts and 3 Progr gram ams

projects

26 26

Projects

53 53

Projects

18 18

Projects

12 12

Projects

Sulaw awesi

US$22.8 B

Kalim imant antan

US$35.6 B

Sumatra

US$40.4 B

Maluku uku & Papua

US$34.4 B

89 89 3

Programs

Projects

Natio ional nal

Projects

1 2

Projects

Jav ava

US$73.8 B US$99.7 B

13 13

Bali & Nusa Tengga ggara ra US$0.7 B

Exchange rate: US$ 1 = IDR 13,500

Road 69 Projects Dams 51 Projects SEZs & IEs 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation 8 Projects Airports 7 Projects Irigation 6 Projects Smelter 6 Projects Electricity 1 Program Technology 4 Projects Housing 3 Projects Fisheries/Farming 1 Projects Sea Dike 1 Projects Education 1 Projects Economic Equality 1 Program Aeroplane Industry 1 Program

Project Program

PSN includes es 15 sectors at projec ect level el and 3 sectors at progr gram level el

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

Projects

SLIDE 111

110

PSN may receive ive privil vileg eges es as stip ipul ulated ed in the Presid ident ential ial Reg. g.

No. 3/201

2016 j.o. the Presid ident entia ial Reg. . No. 58/201 /2017

01 01 02 03

Determination of National Strategic Projects

04 05 06 07 08 09 10 10 11 12

Permit & Non- permit Completion Spatial Planning Land clearing acceleration Local Content Utilization Government Guarantee Provision Projects Monitoring via KPPIP IT System SOE’s Assignment Problems and Hindrance Completion Accelerate Goods and Service Procurement Settlement of Legal Issues Acceleration of Non- State Budget Projects

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

SLIDE 112

111

Progr gres ess

n

223 Projec ects ts and 3 Progr grams PSN

The Estimated ed Invest stmen ent Value for 223 Projects s + 3 Programs s PSN1

1Exclude 7 projects which investment value are still unknown

Exchange rate : US$ 1 = IDR 13,500

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

State Budget 10% SOEs/ RSOEs 31% Private 59% Total Invest stment nt Value2

US$ 307.4 Billio lion

State Budget US$ 31.6 Bn Bn SOEs/RSOEs US$ 96.6 Bn Bn Private US$ 179.2 Bn Bn

5 Sectors with Highes ghest Inves estmen ent Value

Energy 11 Projects US$ 89.8 Bn Electr tric icity ity 1 Program US$ 76.7 Bn Roads 69 Projects US$ 49.7 Bn Rail ilways 16 Projects US$ 29.2 Bn SEZs and IEs 31 Projects US$ 31 Bn

SLIDE 113

112

Progr gres ess

n

223 Projec ects ts and 3 Progr grams PSN

Progress ss of Nationa nal Strateg egic Projec ects s (as of Decem embe ber 2018)

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

32 projects already completed 32 projects, 1 electricity program, and 1 economic equality program in construction and partial-operation phase 48 projects in construction and will start operating in 2019 52 projects in construction and will start operating after 2019 14% 14% 15% 15% 21% 21% 23% 23% 3% 3% 24% 24% 6 projects in transaction 53 projects and 1 Aircraft Industry Program in preparation phase

Progress ss of Nation

nal Strategi

egic Projec ects s (as of Septem ember er 2019)

51 projects already completed 27 projects, 1 electricity program, and 1 economic equality program in construction and partial-operation phase 22 projects in construction and will start operating in 2019 80 projects in construction and will start operating after 2019 4 projects in transaction 39 projects and 1 Aircraft Industry Program in preparation phase

22% 13% 12% 33% 3% 18%

SLIDE 114

113

In 2016

2018,

, 62 PSNs have been Complet eted ed with Total Estimate ted Investm tment nt Value

f

USD23.7 Billio ion

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

SLIDE 115

114

Progr gres ess

n

37 Priori rity ty Projec ects ts

From

m

the revise sed Nationa nal Strat ategi egic Projec ects, s, the Government nt has selected ed a l list

f

37 Priorit ity Projec ects to be the focus

f
f infr

frast struc uctur ure provi visio sion. n.

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

1. Balikpapan-Samarinda Toll Road 2. Manado-Bitung Toll Road 3. Panimbang-Serang Toll Road 4. 15 Segments of Trans – Sumatera Toll Road 5. Probolinggo – Banyuwangi Toll Road 6. Yogyakarta – Bawean Toll Road 7. SHIA Express Railway 8. MRT Jakarta South-North Line 9. Makassar-Parepare Railway 10. Light Rail Transit (LRT) of Jakarta- Depok-Bogor-Bekasi 11. LRT of South Sumatera 12. East Kalimantan Railway 13. LRT of DKI Jakarta 14. Kuala Tanjung International Hub Seaport 15. Bitung International Hub Seaport 16. Patimban Port 17. Inland Waterways Cikarang-Bekasi-Laut (CBL) 18. Palapa Ring Broadband 19. Batang, Central Java Power Plant (CJPP) 20. Central – West Java Transmission Line 500 kV 21. Indramayu Coal-fired Power Plant 22. Sumatera 500 kV Transmission (4 Provinces) 23. Mulut Tambang Coal-fired Power Plant (6 Provinces) 24. PLTGU (16 Provinces) 25. Bontang Oil Refinery 26. Tuban Oil Refinery 27. RDMP/Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) 28. Abadi WK Masela Field 29. Unilization Field Has Jambaran-Tiung Biru 30. Indonesian Deepwater Development (IDD) 31. Tangguh LNG Train 3 Development 32. West Semarang Drinking Water Supply System 33. Jakarta Sewerage System 34. National Capital Integrated Coastal Development (NCICD) Phase A 35. Jatiluhur Drinking Water Supply 36. Lampung Drinking Water Supply 37. Waste to Energy Program in 8 cities

SLIDE 116

115

Progr gres ess

n

37 Priori rity ty Projec ects ts

Recent Milestone

nes

Prog

gre

ress of 37 Prior

rit

ity Project cts (as of Septembe ber, 2019) Fundin ing Scheme of 37 Pri rior

rit

ity Proj

jects

Loan Agreement has been signed on 15 November 2017. On March 2018, pre-qualification stage has resulted 4 shortlisted bidders Allocation of repayment liability on additional-loan for Phase I and Phase II has been decided in the KPPIP Ministerial meeting – 49% will be borne by Central Government and 51% will be borne Provincial Government of DKI Jakarta.

Pat atim imban an Port

West Semarang Wate ter Supply System:

Mass Rapid Transit sit (MRT) Jakarta South-North

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

66% 66% 26% 26% 8% 8%

US$120.7 billion from Private/ PPP US$47.7 billion from SOE/ Regional SOE US$15.5 billion State/ Regional Budget (including G-to-G loan)

Exchange rate : US$ 1 = IDR 13,500

Total Investment Value US$ 183.9 Billion

West package has been fully operasional since April 2018.

Palapa Ring

Note: This data is still going to be verified by The Executive Office of President (KSP) and Indonesia’s National Government Internal Auditor (BPKP)

Outline Business Case has been done on December 2017.

Yogyakar karta-Ba Bawen en Toll Road

6% 6% 16% 16% 30% 30% 24% 24% 8% 8% 16% 16% 3 projects in transaction 6 projects in preparation 6 projects in construction and partial operation phase 2 project is completed 11 projects in construction and will start operating in 2019 9 projects in construction and will start operating after 2019

SLIDE 117

116

Energy gy Sector: r: the Progr gress

f

35.000 MW Progr gram

No No Phase MW MW % 1 Operating 3,792 11 2 Construction 22,739 62 3 Signed Power-purchase Agreement 6,923 21 4 Procurement 1,279 4 5 Planning 734 2 17 Dec ‘14 Cabine binet Meeting ing “There’s electricity crisis in Indonesia, requires construction

f large capacity plant "

Jan ‘15

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

Jan ‘15

Debo bottlene neck cking ing throug ugh regul ulat atio ion: n:

1. Regulation No.1/2015 concerning electricity

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

2. Regulation

No.3/2015, concerning Procedures

f

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

16 Mar ‘15 4 May ‘15 June‘17

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

Sulawesi si PLN: 2,000 MW Private: 1,470 MW Transmission: 5,275 ckt.km Substation: 4,390 MVA Maluku PLN: 260 MW Private: 12 MW Transmission: 653 ckt.km Substation: 620 MVA Papua PLN : 220 MW Private: 0 MW Transmission: 364 ckt.km Substation: 460 MVA Kalimantan PLN: 900 MW Private: 1,735 MW Transmission: 5,604 ckt.km Substation: 3,500 MVA Nusa Tenggara PLN: 670 MW Private: 0 MW Transmission: 2,347 ckt.km Substation: 1,410 MVA Sumatera PLN: 1,100 MW Private: 8,990 MW Transmission: 18,729 ckt.km Substation: 35,521 MVA Jawa & Bali PLN: 5,000 MW Private: 13,697 MW Transmission: 9,185 ckt.km Substation: 66,265 MVA

35,000 MW Prog

gra

ram Distrib ibution ion

Source: PLN

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

Note : Progress of 35,000 MW Electricity Program as of August 2019

SLIDE 118

117

Energy gy Sector: r: the Progr gress

f

35.000 MW Progr gram

Decem ember er 2016

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

706 MW in operating phase 10,141 MW in construction phase 8,478 MW sighned Power-purchase Agreement 10,560 MW in procurement phase

2% 2% 28% 28% 24% 24% 30% 30% 16% 16%

5,824 MW in planning phase

3% 3% 44% 44% 38% 38% 9% 9% 6% 6% 8% 8% 52% 52% 32% 32% 5% 5% 3% 3% 14% 14% 62% 62% 20% 20% 2% 2% 2% 2%

998 MW in operating phase 15,676 MW in construction phase 13,782 MW sighned Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase 2,899 MW in operating phase 18,207 MW in construction phase 11,467 MW sighned Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 5,071 MW in operating phase 21,824.8 MW in construction phase 6,877.6 MW sighned Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase

Novem embe ber 2017 17 Decem ember er 2018 Novem embe ber 2019 19

SLIDE 119

118

Acceler eratio tion

f

35.000 MW Progr gram am

Governm nment ent PT PLN

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

int Venture

re) Independent Power r Producer r

Strength then Equity ity 2B 2B 1

Govern rnme ment Suppor

rt (outsid

ide Guara rantee)

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

Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content.

2A 2A

Assignment SJKU* U* Minis istry ry of Finance

Strength then PLN‘s Balance Sheet

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

vernme

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

jects

Prov

vision

ion of Electric icit ity Refinancin ing Hedging Financia ial Asset Optimiz imizatio ion Direct Lending Direct Lending Bond issuance by PT PLN Company Tax Holiday PT PLN’s divident allocation Loan from independent lenders Asset Revaluation Other types

f funding

Equity Injection by the Government

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

SLIDE 120

119

Signific nifican ant Progr gres ess

n

Infras astr tructur ture Proje jects ts

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

utlook

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

KPPIP developed an integrated IT System for monitoring

f

national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision-making purposes. Impro proving Monit itorin ring System on Infra rastructure re Proj

jects1

Roads

Trans-Sumatra Toll Road Merah Putih Bridge, Ambon

Dams

Jatigede Dam (Operational)

Trans nspo portati tation

Jakarta MRT Project2

Drinki nking ng Water Proce cessing ng

Umbulan Drinking Water Provisi sion Syst stem, East st Java 1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2 Not funded from National Budget Terminal 3 Ultimate Soekarno-Hatta2 New Tanjung Priok Port Project2 Nop Goliat Dekai, Papua

SLIDE 121

120

Infras astr truc uctur ture Proje jects ts and Financ ncing ing Schemes es

Promotio ion

f

Infr frastructur cture Devel elopm pmen ent to Acce celer erate Econo nomic ic Growt wth

Establ ablis ishment nt of PPP Unit

Broa

ad

Object ective  Champion project preparation and acceleration of the PPP agenda in Indonesia Core re Mandates es  Improve quality of project selection under KPPIP – OBC criteria  Support project preparation through PDF support and highly qualified transaction advisors  Act on behalf the Minister of Finance in providing government support and approvals for projects Addition

nal

Mandates es  Coordinate all public finance instruments  Provide input for PPP Policy program Development and Regulations  Implement capacity building for Govt. Contracting Agency (GCAs)  One stop shop for PPP promotion & Information

Budg dget Publ blic ic Priv ivat ate Partne nership SOE & Priv ivat ate Sect ctor

 Cen entral & reg regional budge get (s (speci cial alloc

cation
n fund &

rura ral tra ransfer er)  Pri rimari rily to to suppor

rt basic

infrastruct cture re proj rojec ects: – Food

d secu

ecurity: Irrigation, dams etc. – Marit ritime me: Seaports, shipyards etc. – Connect ctivity: Village roads, public transportation etc.  Cert rtain infrastru ructure e proj

jec

ects to be funded ed and opera erated ed throu

ugh

gh a part rtner ership betw etween een the e Indones esian gov

ver

ernmen ment and the e priv rivate sect ector

r

– Projects ready for auction under the PPP Scheme: – Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung – Railway projects such as an express line into Soekarno-Hatta International Airport – Water supply projects such as the West Semarang Project  Vari riou

us govern

rnmen ent suppor

rt for
r PPP:

– Proje roject ct Develop

pmen

ent Facility (PDF): ): Helps Government Contracting Agencies (GCAs) in project preparation and transaction – Viability Gap Fund: improves financial viability of PPP projects – Gov

ver

ernme ment Guara rantees ees: Supports PPP projects’ bankability by providing sovereign guarantees – Infrastruct cture re Financi cing g Fund: Provided through PT SMI and IIGF – Availability Paymen ment (AP): ): GCA pays private partner based of availability

f infrastructure services

 Gov

ver

ernme ment to injec ect capital into

SOEs:

Intended multiplier effect to develop more infrastructure projects  Key focu

cus area

reas: – Infrastructure and maritime development – Transportation and connectivity – Food security  Medium m ter erm m infrastruct cture re dev evel elop

pmen

ents to focu cus on: – Water Supply – Airports – Seaports – Electricity and power plants – Housing – Mining

Source : Ministry of Finance; Bappenas; KPPIP: “Komite Kebijakan Percepatan Penyediaan Infrastruktur” or National Committee for the Acceleration of Infrastructure Delivery Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity

 Infrastru ruct cture e Devel elop

pmen

ent in order er to:

1. Accelerate growth particularly in rural areas
2. Support industrial development and tourism
3. Reduce unemployment and poverty

 Infrastru ruct cture e fundraising g need eds: $357.9 bn bn (or equivalent to IDR4,796.2 tn)  245 245 Nation

nal Stra

rategy gy Proj

ject

ects under National Medium Term Plan for 2015 – 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn)  37 priori riority infrastru ruct cture e proj

jec

ects with an estimated cost of IDR 2,490 tn (USD 180 billion)  Majority of 37 priority projects are expected to commence commercial operation by 2018 - 2022

Infr fras astruct uctur ure Development nt is a Key Priorit ity

SLIDE 122

121

Governm ernment ent Guarante antee For Basic Infras astr tructur ture Develo lopme ment nt

Refl flec ects strong commitm itmen ent to natio ional devel elopm pmen ent plannin ing

Source: Ministry of Finance No. Central Gov

ver

ernme ment Guarantee ee for Infrastructure e Prog

grams

ms Expos

sure/

re/ Outstanding g (USD bn bn) 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 1.86 2 Clean Water Supply Program 0.01 3 Direct Lending from International Financial Institution to SOEs 1.37 4 Sumatra Toll Road 1.27 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 6.16 6 Public-Private Partnerships (PPP) 3.15 7 Regional Infrastructure Financing 0.19 8 Public Transportation (Light Rail Transit) 0.07 9 Electricity Infrastructure Fast Track Program (35GW) 0.06 Tota tal 14.13

Conti ting ngent nt Liabi bili liti ties from Governm nment nt Guarante ntees Government t Guarantee Program Credi dit Guarant antee PPP Guarant antee

Busines ess Viability Guarantee ee (BVG) VG)  Power er (Elect ectric ricity) – Full credit guarantee for PT PLN’s debt payment obligation under FTP 1 10,000MW and 35GW programs*.  Cl Clean Water er – Guarantee for 70% of PDAM’s debt principal payment obligations.  Toll road – Full credit guarantee for PT Hutama Karya’s debt payment obligations for the development of Sumatra Toll Roads.  Infrastru ruct cture - Full credit guarantee on SOE’s borrowing from international financial institution & guarantee for PT SMI’s local infrastructure financing.  Public c Transport rtation

n (Ligh

ght Rail Tra ransit) ) – Full credit guarantee for PT Kereta Api Indonesia’s debt payment obligations for the development of LRT Jabodebek.  Power er (Elect ectric ricity) ) – Guarantee for PT PLN’s

bligations under Power Purchase Agreements

with IPPs (off-take and political risk) under FTP-2 10.000MW and 35GW programs*  Infrastru ruct cture – Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements  From 2008 to Q2-2019, the Government has issued 83 guarantee documents with total value of USD35.13 billion, 21 of which (worth USD3.44 billion) have expired.  The Maximum Guarantee Limit for the period 2018 – 2021 is set at 6% of GDP.  The space for guarantee issuance for the period 2018-2021 is approximately IDR 1,200 trillion (cumulative). As of end of June 2019; currency conversion of IDR 14,141/USD1 (June 28, 2019)

Polit itic ical al Risk k Guarant antee

 Infrastru ruct cture – Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by

ther type of guarantees

*) MOF provides both credit guarantees and BVGs for 35GW program

SLIDE 123

122

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

Financia cial Facil cilit itie ies to Attract ct More Private Particip icipation ion

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

f the following PPP projects:

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

PT. SMI

and

PT. IIF

Avail ilabil ility ity Payment Schemes More Fundin ding Schemes are

n

the Pipelin ines

Project Financing funded ded by the priv ivate ate sector through the granting of concessions for an

perating asset owned by the

Government/SOE (based on the policy of the Government) to the private sector to be

perated & managed.

Project Financing funded by any source ce of funds ds other than Government’s budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas.

Asset is owned by public sector
Operating asset, not greenfield project
Records positive cash flow for the last

several years

Predicted revenue
Asset is owned by private sector
Greenfield / brownfield / operating projects

Scheme Char aract acteris istic ics Scheme Char aract acteris istic ics

LCS (Lim imite ited Concessio ion Scheme) PINA (Non-Go Government Budg dget Infrastr tructu ture Financin cing)

Source: Ministry of Finance

SLIDE 124

123

Progr gres ess

f

PPP Infras astr truc uctur ture Proje jects ts

No No Project ct Name Project ct Cost (IDR tn tn) Financial nancial Faci cilit ities Status us 1 Central Java Power Plant 40 Guarantee (MoF & IIGF) FC on June 6th, 2016; Construction 30%; COD Target: May 2020 2 Palapa Ring – West Package 1.28 PDF, IIGF Guarantee & AP FC on August 11th, 2016; COD target: February 2018 3 Palapa Ring – Central Package 1.38 PDF, IIGF Guarantee & AP FC on September 29th, 2016; COD target: March 2018 4 Palapa Ring – East Package 5.13 PDF, IIGF Guarantee & AP FC on March 29th, 2017; COD target: September 2018 5 Umbulan Water 2.1 PDF, VGF & IIGF Guarantee FC on August 30th, 2016; COD target: July 2019

Successful Projects ts Reachin ing Financia ial Close in 2016 and 2017

No No Project ct Name Project ct Cost (IDR tn tn) Financial nancial Faci cilit ities Status us 1 Batang–Semarang Toll Road 11 IIGF Guarantee PPP & guarantee contracts signed on April 27th, 2016 2 Manado–Bitung Toll Road 5.1 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 3 Samarinda–Balikpapan Toll Road 9.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 4 Pandaan–Malang Toll Road 5.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 5 Serpong–Balaraja Toll Road 6.0

PPP contracts signed on June 8th, 2016

6 Jakarta–Cikampek Elevated Toll Road 14.8 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 7 Krian–Legundi-Krian Toll Road 9.0 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 8 Serang–Panimbang Toll Road 5.3 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017 9 Cileunyi–Sumedang-Dawuan Toll Road 8.2 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017

Signed PPP Projects ts in 2016 and 2017

Source: Ministry of Finance, as of July 2017

SLIDE 125

124

New Guarantee ntee Schemes for Non-PPP Proje jects ts

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

f Fin

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

n

SOE Direct Lendin ing from Internati tional Financia ial Instit ituti tions (IFIs) s) Guarantee for Region ional Infrastructu cture Financin cing Provision ision State te finance soundness Fiscal susta tain inabil iliy iy Best practic tice

f

fiscal risk management The

bjective
f

this guarantee is to provid ide credit it enhancement in terms

f

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

The Government had issued Ministry ry

f
f Finance

Regulation

n

No No 174 174 of

f 2016 to provide guarantee

to PT SMI

n the

assignment

f

regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. Based

n

Gov

vern

rnment Regulation

n

No No. 95 95/2015 and Ministry ry

f
f

Finance Regulation

n

No No. 23 232/201 015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry

ut functions in providing loan to

local government, as previously carried

ut

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

n
f
f

loc

cal

infra rastru ructure re develop

pment

through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in

rder

to meet local infrastructure development needs and to reduce reliance

n

state/local budget.

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125

Its All About Reforms January ary 2020 About Investo tor - - PowerPoint PPT Presentation

January ary 2020

It’s All About Reforms

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Investm tment nt Financ ncing ing

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