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Republic ublic of Indone nesia ia Its All About Reforms January ary 2020 About Investo tor Relatio tions ns Unit of the Republic ublic of Indones nesia ia Investor Relations Unit (IRU) of the Republic of Indonesia has

  1. Indone nesia ia Remain ins the Investme tment Destina inatio tion of Choice The Economist: Indonesia rounds out the top five of Asian economies that Indonesia Enjo joys Large Investments Relative to Peers within the Region 2 can look forward to increased investment spending. . (January 2019) 1 40 China 58.3 35 India stment / GDP (%) 48.7 Indonesia 48.1 30 Vietnam 39.8 25 Singapore 39.2 Thailand 38.5 20 Japan 36.4 Total Invest Australia 15 36.4 Malaysia 34.2 10 Hong Kong 32.1 31.31 31.27 31.78 34.47 34.52 34.55 23.61 22.48 23.14 26.94 27.21 29.56 24.99 24.95 25.31 26.57 26.34 26.26 Philippines 31.9 5 South Korea 26.3 0 Taiwan 25.2 India Indonesia Malaysia Philippines Thailand Vietnam Myanmar 22.5 2018 2019e 2020e 0 10 20 30 40 50 60 70 UNCTA TAD: Indonesia is listed in the top 20 host economies based on FDI I JBIC IC: Among ASEAN countries, Indonesia is one of the most preferred place inflows, 2017 and 2018 (June 2019) 3 for business investment (November 2018) 4 300 China 52.2 India 46.2 250 Thailand 37.1 2018 2017 200 Vietnam 33.9 Billion USD Indonesia 30.4 150 US 28.8 Mexico 13.7 100 Philippines 10.0 (x) = 2017 ranking 50 Myanmar 8.6 Malaysia 8.4 0 Germany 5.8 Brazil 5.6 Korea 5.1 Taiwan 4.4 % of surveyed who consider each country has promising prospects Russia 3.7 0.0 10.0 20.0 30.0 40.0 50.0 60.0 1. Source: The Economist – Asia Business Outlook Survey 2019 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2019 2. Source: IMF World Economic Outlook, Database October 2019 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey) 8

  2. 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 on Job Cre reatio ion and Omnib ibus Law on on 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). Omnibus Law on job creation includes 11 clusters, namely: Taxation includes 6 clusters, namely: 1. Simplification of Licensing Endeavors, 1. Investment Funding, 2. Investment Regulations, 2. Territory System, 3. Labor Reform, 3. Individual Tax Subject, 4. Ease, Empowerment and Protection of MSMEs, 4. Taxpayer Compliance, 5. Ease of Doing Business, 5. Equity of Business, 6. Research and Innovation Support, 6. Taxation facility. 7. Government Administration, 8. Penalty, The Omnibus law on taxation consists of 28 9. Land Acquisition, articles but amends 7 Laws specifically, the 10. Ease of Government Investment and Projects, Income Tax Law, VAT Law, Taxation general 11. Special Economic Zone. provisions and procedures Law, Customs Law, Excise Law, regional tax and levies law and As of 12 December 2019, 82 laws and 1,194 articles were identified the regional government law. that will be harmonized through the Omnibus Law in Job Creation. Source: Coordinating Ministry for Economic Affairs 9

  3. Natio iona nal Strateg tegic ic Develo elopment nt Plan (Nawa Cita) The 3 Dimension ons on Economic Develop opment Priority Sector Human Development Equitable Development Development Food Security ity Educatio ion Inter- Income Group Energy & Electr tric ical Security ity Health Inter-Regi egion on: Maritim itime & Marin ine (1) Rural Area, Housi sing ng (2) Periph pher ery, Touris ism & Industr try (3) Outsid side Java, Character er Water r Securit rity, Basic (4) Easter ern Area. Infrastruct cture & Conn nnect ctiv ivit ity Necessary Condition Legal Certainty & Governance Politic & Democracy Security & Order Law Enforcement 10

  4. Economic ic Equalit lity Polic icies ies to suppo port sustain inabl ble public ic welfar fare. e... .. Build a fair land distribution scheme • Build a priority scale of Tanah Objek Reforma Agraria (TORA) recipient based on land gini ratio, • Agraria ian Refor orm Econo nomic poverty, & land demand Developing an agricultural industry by agglomeration or cluster method • Equalit ity Define Lahan Pertanian Pangan Berkelanjutan LP2B to prevent land usage for non-agriculture • Polic icie ies purposes Agri riculture re (Landless Land consolidation for agriculture • Farm rmer) r) Improve research on seeds and agriculture method, off-farm infrastructure, integrated logistic • system, build seeds market, tools and machinery Data collection & law enforcement on palm oil land area, including land bank data collection • Land Building a database and arranging policy on planting non-agriculture commodities • Plantatio ion Improve cooperative performance by encouraging SOEs and private sectors involvement • Research support, market synergies, off-takers, and supply chain on downstream business • Social Housing • Urban Poor or & Affor ordable House financing • Housin ing Land banks and affordable land prices • Law enforcement on spatial policies • Integrating fishing and seaweeds sectors Fishe herm rmen & Seaweed • Improve and support aquaculture industry and fishery sector value chain • Cultiv ivation ion Encourage Private sector investment on seaweed sector (process and off-taker) • Develop and improve progressive tax, capital gain tax and tax on unutilized asset • Fair r Tax System supporting fiscal spending • Developing natural resources industries and value chains • Manufacture re and ICT Minimize interest gap between large companies and small companies • Protect market share from integrated businesses and strong capital • Oppo portuni tunity ty Regulate and build a database on traditional/modern market, traditional and modern shops • Regulate the distances, location, and zone of the market and modern stores • Retail il and Marke rket Compulsory mandates to maximize the usage of Local products • Fair access to the logistic system • Financin ing & Gov overnme rnment Improving Kredit Usaha Rakyat (KUR) scheme to support non-bankable SME • Budget Improving procurement scheme to support SME accessibility to finance • Identified and built priority scale on sectors, sub-sectors of leading industries and profession • Vocatio ional, , Improving link and match scheme between industries and vocation Human Resour urce ce • Entre repre preneurship hip & & Labor or Early childhood education • Capacity ty Marke rket Encourage education system to be more skill, collaborative, flexibility and impact oriented instead • of degree consideration Source: Coordinating Ministry for Economic Affairs Priority 11

  5. The Economic ic Polic icy Packag ages es “To improve national industry competitiveness, export and investment to generate significant economic growth” Harmo moni nizing ng Regul ulations ons Simp mplif ifying ing Burea eauc ucratic ic Proces ess Ensur uring ng Law Enfo forceabi bility Phase I (9 Sept ’15) Phase IX (27 Jan ’16) Improving national industry competitiveness Accelerating electricity generation, stabilizing meat prices and improving rural – urban logistics sector Phase II (29 Sept ’15) Easing permit requirement and simplifying export proceeds Phase X (11 Feb ’16) requirement Revising the Negative investment List and improving Phase III (7 Oct t ’15) protection for SMEs Financial services facilitation, export financing and elimination Phase XI (29 29 Mar r ’16) of business unnecessary burden Stimulating national economy through facilitation to SMEs Phase IV (15 Oct t ’15) and industries Social safety net and betterment of people welfare Phase V (22 Oct t ’15) Phase XII II (28 28 Apr ’16) Improving industry and investment climate through tax Improving Indonesia’s rank on Ease of Doing Business (EODB) incentives and deregulation on sharia banking Phase XIII (24 Aug ’1 6) Phase VI (5 Nov ’15) Low Cost Housing for Low-Income Communities Stimulating economic activities in border areas and facilitating strategic commodities availability Phase XI XI V (10 Nov ’1 6) Roadmap for E-commerce Phase VII (7 De Dec ’15) Stimulating business activities in labor-intensive industries Phase XV (15 Jun ’1 7) nation-wide through incentives in the form of accelerating Improving logistics land certification process for individuals Phase XVI (1 (16 Nov Nov ’1 8) Phase VIII (21 De Dec ’15) Improving the competitiveness and domestic economy Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries In addition ion to the 16 Policy Packa kages, on August 31, 2017 17 the Gov overn 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 Source: Coordinating Ministry for Economic Affairs 12

  6. Improving ing the Competit etitiv ivenes ness and Domestic tic Economy th Econo The 16 th nomic ic Policy cy Pack ckage has been en launc nched ed TAX HOLIDAY EXPANSION EXPORT RT PROCEEDS (DHE) SCHEME ME Backg kground In order to further increase investment value in Indonesia, there is a need for expansion of sector and standard classification of Indonesian Business Fields (KBLI) that are given tax holiday, complemented with a process simplification to receive the tax holiday according to the Online Single Submission (OSS). 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 Tax Rates on Deposit it Tax Rates on Deposit it Interest Income Interest Income and tax holiday facilities provision Source: Coordinating Ministry for Economic Affairs 13

  7. Progr gres ess of the Economic ic Polic icy Packag ages* 236 36 I – XVI I – XII Initially, there are 236 regulations which need to be TOTAL INI NITI TIAL REGUL ULATI TION ONS deregulated 11 11 I – XVI I – XII Based on the further assessment, 11 regulations has been REVOKE OKED revoked from deregulation process REGUL ULATI TION ONS 225 25 I – XVI I – XII Total regulation subject to be deregulated: 225 TOTAL REGUL ULATI TION ONS regulations 99% 99% 223 223 SET As of October 1 st , 2019, deregulation of 223 regulations 99% 99% PRESIDENTIAL LEVE VEL 54 PRESI SIDENTI TIAL are finished (99%), comprising 53 regulations at 53 53 FINISHED 47 47 42 42 TOTAL Presidential level and 170 regulations at VEL 99% SELESAI Ministerial/Institutional level MINISTERIAL/INSTITUTIONAL LEVE 99% 171 171 170 FINISHED TOTAL 1% 2 ON GOI OING NG Total regulation which are still discussed: 2 DISC SCUSS USSION ON *as of October 1 st , 2019 Source: Coordinating Ministry for Economic Affairs 14

  8. Other Progr gres ess on Economic ic Polic icy Packag ages es Devel elopm pmen ent of Fair, Simpl plified ified & & Spesial Economic ic Zone (SEZ) Projec ectabl ble Wage System em 29 Provinces have set 2016 Minimum Wage Investment commitments in SEZ up to System in accordance to the Government 2017 reach 41 T, with 3 hour licenses Regulation (GR) No. 78/2015 already applied in 4 SEZ’s Administrators in 2017 Industrial Zone Deregul egulatio ion on Logi gistic ics Sector 52 Bonded Logistic Center has been • The Provinces of Central Java proposed 3 launched to support various industries IZ’s : Kendal, Demak, and Ungaran • Pharmaceutical IZ in Bitung (North Sulawesi) in 2017 15

  9. Investment Incentiv tives to Boost Indus ustr try Sector BUSINESS SS EXPANSION INDUSTRIAL ZONE Tax allo lowanc nce • VAT exempti tion n on import or delivery of capital goods, • Exempti tion n or reli lief of import t duty on capital tal goods, machine nery or • Import t Duty exempti tion n on machineries/goods/materials, • equi uipm pment nt for production purposes that can not be produced Tax Allo lowanc nce and Tax Holi liday • 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; FREE TRADE ZONES AND PORTS Exempti tion n or suspe pens nsion n of VAT T on the import t of capi pital tal goods • or machine nery or equipm pment nt for production purposes that have not been produced domestically for a certain period of time; Exempti tion n of: Accelerate depreci ciati tion n or amorti tizati tion n (part of tax allowance); Import t Duty • • and VAT • Prope perty ty tax reli lief, especially for certain business sectors in Luxury Goods Sales Tax (PPnBM PnBM) • • certain regions; Custo toms duty • Combine with Online Single Submission (OSS) • MICRO, SMALL, L, MEDIUM ENTERPR PRISES (MSMES) S) PIONEER INDUSTRIES Decreasing ng MSME MEs Tax x from 1% to 0.5% of gross revenue Tax holi liday of corporate income tax in a certain amount and time SPECIAL ECONOMIC MIC ZONE E-COMME MERCE No coll llecti ction n of VAT and Luxu xury Goods Sales Tax (PPnB PnBM), ), • Sales from customs areas for non-small ll entrepre prene neur urs through • Custo toms tax exempti tion, n, • the market place will be subject to 0.5% inco come tax and 1% Tax Allo lowanc nce and Tax Holi liday, • VAT Suspe pension of Import t Duty, • Sales from customs areas for small entrepr preneurs through the • 0% Import t Duty for goods produced using local components of • market place will be subject to 0.5% inco come tax a certain level Source: Coordinating Ministry for Economic Affairs 16

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

  11. Enhanc ncing ing Busines ness Licens nse Servic ice Stand ndar ard Presiden identia ial Regulatio ion to Accel eler erate Ease of Doing ng Busin ines ess has been launc nched ed Improve efficient, streamlined, Provide business licensing Overcome the barriers & integrated business license process assurance in terms to doing business in service standards of the costs and lead times Indonesia y Goals 2 4 6 1 3 5 Policy Accelerate the Increase coordination & Implement integrated business licensing synergy between central & licensing process process regional government (single submission) nd Phase st Phase 2 nd 1 st Forming a Task Force to Business license identify & overcome the end- regulatory reforms Main Policy to-end licensing barriers Implementing a licensing checklist Implementation of the for Special Economic Zones (KEK), Single Submission Free Trade Zones (FTZ), Industrial system Zones & Tourist Zones Utilizing data sharing Note: 1 st and 2 nd Phase are implemented in parallel Source: Coordinating Ministry for Economic Affairs 18

  12. Improving oving Inves vestment ment Clima mate Online ne Sing ngle Subm bmiss ission (OSS) S) Has Been Launched ed... ... OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors s Lorem Ipsum Envir ironme ment Public ic Works Electr tric icity ity Industr try Health th Secto tor Suitable for all & Forestr try & Housin ing Sector Sector category, Sector Sector Informatio tion & Marin ine & Medic icin ine & Transporta tatio tion Trade Secto tor Communic icatio tion Fishery Sector Food Secto tor Sector Sector Other Sector The Advanta tage of Using OSS Business licenses Standardized Ellectronically can be secured in business licenses integrated under an hour are available The whole licensing Accessible at More practical process is monitored anytime and by the Task Force anywhere Source: Coordinating Ministry for Economic Affairs 19

  13. Improving ing Inves estme tment Climate te …Bonded Logistic Center to Improve Indonesia’s Competitiveness Bonded Logistic Center To To date, 52 Bond nded ed Logi gist stic Cen enter has as been be en launched ed to to suppor ort various us indus ustrie ies. (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the Small and Food & implementation of the mediu dium beverages 1 st Economic Policy Package. industry industry Personal Oil il and PLB facility aims to improve care/ gas, ga s, and home care minin ing efficiency and reduce the cost of Synthetic tic industry industry transportation and logistics in textil tile Auto- (chemic ical Indonesia; support the growth of motiv ive substa tances) the domestic industry, including industry indu dustry. Textil ile Heavy small and medium (cotto tton) Equip ipment industries; increase indu dustry industry investment; and to make Aircraft MRO Indonesia to become a logistics Defence industry industry hub in Asia Pacific. 20

  14. Improving ing Inves estme tment Climate te …revising the Negative Investment List Introduc ucti tion n of New Foreign n Owne nership p Regula ulati tion n for Strate tegic c Secto tors Sports s Center, Phar armac aceuti utical al Raw Material als s Cold storag age Restau tauran ants ts, Bars Film Process ssing ng Lab, b, Crumb b Rubb bber Manuf nufac actur uring ng After Before After Before After Before After Before 100% 100% 100% 100% 33% 85% 49% 51% Privat ate Muse seum, Catering ng, appar arel Toll Road ad Operat ator, Dist stribu bution, n, Warehousi sing ng Key Refor orms ms in Nega gative e Foreign eign Manuf nufac actur uring ng, Exhibi bitions ns & Telecommuni unicat ation n Test sting ng Compan any Inves estmen ent t List Conventi ntions ns Before After Before After Before After Revision on of "Partner ership" categ egor ory to refer er to part rtners ership with Micro, cro, Small and Medium m Enterp rpris rises es 100% 67% 67% (MSMEs) 95% 33% 51% Gra randfather er Law: If a part rticu cular sect ctor or is tighten ened in future, e, existing Profe fessi ssiona nal Trai aini ning ng, Golf f Course urse Telecommuni unicat ation n Provider foreig reign inves estor or does es not need ed to Manag nagement nt, Air Transp ansport Sup upport Services, s, Cons nsul ultan ancy for Cons nstruc uction 1 with Integrat ated Services com omply with tigh ghter er stake ke Trav avel Bureau au Before After Before After Before After Stren rengt gthen en implemen ementation on of nega gative e inves estmen ment law throu ough gh active e roles es from om ministries ries, agen gencies cies 67% 67% 67% 49% 55% 65% and regi gion onal govern ernme ments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) 21

  15. Inves estme tment nt Realiza izatio tion (Q4-201 2019) 9) Direct ct Investm tments nts Top 8 FDI I Reali lizati tion n by Secto ctors (Q4-2019 vs Q4-2018) IDR R tn Metal, l, Exce cept pt Machi chine nery, 220 and Equi uipm pment nt Indus ustry try FDI DDI TOTAL 208.3 200 180 US$ US$1,501.9 mn mn 160 Vehicle cle and Other 140 190.4% Trans nspo portati tation n Electr ctrici city ty, Gas, and 120 Indus ustr try 100 Water Suppl ply 80 US$25 US$ 256.9 mn US$1,490.3 mn US$ mn 60 105.3 80.6% 6% 40 6.0% 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Food Indus ustry try Mini ning ng 2017 2019 2015 2016 2018 2013 2014 Inves estmen ent US$ US$269.3 mn mn US$ US$683.7 mn mn 19.6% Realiz izatio ion 15.3% IDR208.3tn Rp159.4 T IDR185.9tn 434,463 434 463 37 375,982 Rp145.4 T Housing ng, Indus ustri trial l Trans nspo portati tation, n, * Estate te, and Office ce 12.0% Warehous use, and 9.6% 15.6% Build lding ng Telecommunicati tion US$293.5 mn US$ mn US$ US$635.8 mn Q4-2018 Q4-2019 72.4% 17.8% Q1-2016Q1-2017 Q1-2016 Q1-2017 * person * Chemica cal l and IDR105.3tn Pharmace ceuti utica cal l Indus ustry try IDR103.0tn IDR99.0tn IDR86.9tn US$46 US$ 465.5 mn mn 9.4% 6.4% 18.5% Q4-2018 Q4-2019 Q4-2018 Q4-2019 Source: Investment Coordinating Board (BKPM), compared to Q4-2018 period 22

  16. Sec ection on 2 Econom nomic ic Factor tor: Stron ong and Stab able le Growth Prospec pects ts Remain main Intact tact

  17. Condu duciv ive Envir ironment nt Underp erpinn inning ing Strong Growth wth Fundam amenta entals ls 4th Most Tax base e to be Budge get ref eform orm as broa oadened ed from m Largest Econo nomy Popul ulous us country a a part of large ger one e reduce ce in South East in the World; ; econ onomi omic c refor orm m dependen ency cy on Asia 64% in initi tiative com ommod modities es product ductiv ive age Large e and Consi sist stent nt Fuel el subsidies es Stable Rising ing Middle Budget et Reform sign gnifica cantly Economy Manag nageabl able Class and reduced ced and Pru rudent debt Infl flat atio ion n Rate Afflue uent nt spen ending g redirect ected ed manage gemen ment to more ore prod oductive e Customers alloca ocatio tion Reform-Or Orie iente ted Admin inist istration ion Three ee main sources rces of financi cing g for r From om commodity-based ed to manufact cturing g inves estmen ment need eds: State e and regi gion onal and serv rvice ce sector ors via infrastru ruct cture e budget get, State Owned ed Enter erprises es and PPP devel elop opmen ment New High gh Continuing from om 2015 policy cy, infra rastructure re Econom omic ic Infrast struc uctur ure e From om consumpti tion on-led ed to investmen tment-led ed will be higher er than fuel el subsidy grow owth via a stron ronger ger manufact cturin ring g sect ctor or Structure Invest stment ents and more ore investmen ment initiatives es Infrastru ruct cture e spen ending g focu cused ed on basic c infrastru ruct cture e proj oject cts Policies es to maintain purc rchasing g power er to stimu mulate e dom omestic c econ onomy omy in the midst Fisca cal and non-fisca cal incen centives es to att ttra ract ct of weake kening g macro croeco econom omic c condition ons infrastru ruct cture e inves estmen ment and promote romote PPP 24

  18. Indonesia’s Strong GDP Strong ng GDP Growth th 1 Indonesia has maintained economic growth momentum against a backdrop of • % QoQ YoY worsening global economic moderation. Economic growth in the third quarter 7.0 of 2019 was recorded at 5.02% (yoy), relatively unchanged compared with 5.06 5.275.17 5.18 5.07 5.05 5.02 4.77 5.17 5.18 5.12 5.19 5.05 5.06 5.01 5.01 the 5.05% (yoy) posted in the previous period. Such developments were 4.94 5.01 4.82 4.93 4.94 4.92 4.74 5.0 influenced by solid domestic demand and improving external sector 4.21 4.20 4.01 4.01 3.83 3.74 performance despite dwindling global demand and lower international 3.06 3.31 3.27 3.19 3.14 3.09 3.0 commodity prices. In the third quarter of 2019, exports achieved positive 0.02% (yoy) growth • 1.0 and imports experienced a deeper contraction to 8.61% (yoy). Meanwhile, 0.04 solid domestic demand has been maintained, primarily on the back of (0.16) (0.30) -1.0 (0.36) (0.41) expansive household consumption growth. In addition, investment is also (0.52) expanding, led by 5.03% (yoy) building investment growth. (1.69) (1.73) (1.81) (1.70) (2.07) -3.0 In terms of production, a number of economic sectors have achieved • Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 stronger growth, including mining and quarrying in the primary sector; the manufacturing industry in the secondary sector; and wholesale and retail 2014 2015 2016 2017 2018 2019 trade, transportation and storage, as well as financial services and insurance in the tertiary sector. Favour urable ble GDP Growth th Compared to Peers 2 Growth th Prospe pect % 9.0 8.0 Institution ons 2020 0 GDP growth (%YoY) oY) 7.0 7.0 6.1 2020 Budget 5.3 6.2 6.0 5.7 Bank Indonesia 5.1 – 5.5 5.1 5.0 5.0 3.7 4.0 3.6 IMF (WEO October 5.1 2019) 3.0 3.2 3.4 2.0 World Bank 5.1 1.0 ADB 5.2 0.0 2012 2013 2014 2015 2016 2017 2018 2019* 2020* Consensus Forecast 5.0 (January 2020) Bulgaria Colombia India Indonesia Philippines 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2019; * indicates estimated figure 25

  19. GDP Growth wth Breakdo akdown wn GDP Growth th Based on Expe pend nditur tures (%, YoY YoY) 1 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 By expenditure 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 5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 4.9 5.0 4.9 5.0 4.9 4.9 5.2 5.0 5.1 5.0 5.0 5.2 5.0 HH. Consumption Non profit HH. 23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 5.3 6.9 8.1 8.8 8.6 10.8 9.1 16.9 15.3 7.4 consumption Government 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 consumption Gross Fixed Cap. 5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 7.9 5.9 7.0 6.0 6.7 5.0 5.0 4.2 Formation 3.1 1.5 4.9 (4.4) 1.1 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (1.7) 8.4 2.7 16.5 8.4 8.9 5.9 7.6 8.1 4.3 6.5 (1.9) (2.0) 0.0 Exports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 (2.4) 4.8 0.2 15.4 11.9 8.1 12.6 15.2 14.0 7.1 12.0 (7.4) (6.8) (8.6) Imports 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 5.0 GDP 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption GDP GDP Growth th by Secto ctor (%, YoY YoY) 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 2019 2019 By sectors 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, 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 and fishery 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 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 and Motorcycle Transportation and 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 Storage Information and 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 communication 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 Financial service Other Services * 5.4 4.7 5.9 6.5 5.7 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 6.0 4,6 5.4 6.2 6.7 6.4 6.2 6.8 7.3 6.4 GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 5.0 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 26

  20. 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) 27

  21. Sec ection on 3 Exte terna rnal Factor tor: Improved ed Exter ernal nal Resil silie ience nce

  22. Externa rnal l Balanc nce under r Contro rol l Suppo port rted d by Adequate ate Reserv rves es Balance ance of Payment nts Portrait ait Current nt Acco count unt Defi fici cit within in Safe fe Threshold Indone nesi sia' a's s Balanc ance of Payment nts 2013: 2014: 2015: 2016: 201 201 2017: 2018: CA Deficit CA Deficit CA Deficit CA Deficit CA Defici cit CA Deficit US$bn US$bn US$bn (US$29.1bn) n) (US$27.5bn) n) (US$17.5bn) n) (US$ S$17.0bn) n) (US$16.2bn) n) (US$30.5bn) n) Current Account Capital and Financial Account 20 160 8 0.0 Overall Balance Reserve Asset (rhs) 6 -0.5 15 1.3 124.3 .3 4 1.8 -1.0 120 10 2 -1.5 0 5 -2.0 7.6 -2 80 -2.7 -2.5 0 -4 -3.0 0.0 -6 -5 -8.4 -3.5 -8 40 -7.7 -4.0 -10 -10 -2.3 -4.5 -12 -15 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* Q1* Q2*Q3** 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** 2013 2014 2015 2016 2017 2018* 2019** Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs) Source: Bank Indonesia Source: Bank Indonesia Subs bstant antial ial FX Reserves to Mitig igat ate External nal Chal alleng nges Trade Balanc ance Portrai ait 2019: 2018: 2013: 2013 2014: 2014 2015: 201 2016: : 2017: FX Reserves s as of December 2019: US$129.2 bn n US$bn Defic icit it Defic icit it Defic icit it Defic icit it Surplus us Surplus us Surplus us (US$3.2bn) n) (Equiv. to 7.3 months s of imports + servicing g of gover ernment debt) (US$8.7bn) n) (US$4.10bn) n) (US$2.37bn) n) US$7.59bn US$8.83b 3bn US$11.83bn bn 3.00 US$bn Month FX Reserves (LHS) Month of Import & Debt Service (RHS) 130 15 14 2.00 120 13 12 1.00 110 11 10 100 9 0.00 8 90 7 6 -1.00 80 5 4 70 OG Non-OG Total -2.00 3 2 60 1 -3.00 50 - 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 11 11 11 11 11 11 11 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 * Preliminary Figure ** Very Preliminary Figure Source: Bank Indonesia Source: BPS 29

  23. Exchang ange Rate In Line with Fundam amenta entals ls Movement nt of Rupi piah IDR/US$ The rupiah co continues es to to appreci reciate, e, suppor orted ed by by improv roving BOP per erfor orma mance ce. As of 22nd January 2020, the rupiah strengthened by IDR/USD Quarterly Average Monthly Average 15,500 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 15,000 14,798 from exporters and maintained foreign capital inflows due to the 14,220 promising national economic outlook, highly attractive domestic financial 14,381 14,232 14,065 markets and less uncertainty in the global financial markets. Furthermore, 14,500 14,134 14,601 the structure of the foreign exchange market is improving, characterised 14,120 14,113 14,006 by an uptick of transaction volume and more efficient quotations as well as further development of the DNDF market, which will increase foreign 14,000 exchange market efficiency. Bank Indonesia is confident that rupiah 14,254 13,952 14,100 14,064 14,141 exchange rate appreciation is in line with the currency’s fundamental 14,031 value and improving market mechanisms, coupled with growing market 13,500 13,645 confidence in the policies instituted by Bank Indonesia and the 13,576 Government. Overall, rupiah appreciation is having a positive impact on *data as of January 22, 2020 economic growth momentum and macroeconomic stability. Looking ahead, 13,000 Bank Indonesia predicts rupiah stability in line with the currency’s 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 fundamental value and maintained market mechanisms. Rupi piah Exch chang nge Rate Fared Relati tively ly Well ll Compared to Peers Rupi piah Exch chang nge Rate Volati latilt lty YTD 20 2020 20 vs 201 019 % 20 -4.35 *data as of Jan 22, 2020 BRL *data as of Jan 22, 2020 17.7 -4.21 18 0.23 TRY point-to-point -3.98 Dec-19 Jan-20 15.55 0.24 INR 16 -1.16 14.28 average -1.10 EUR -0.54 12.9 14 12.52 -1.23 JPY -0.34 11.70 0.84 12 CNY -0.08 10.2 10.1 -0.71 KRW 0.35 10 -3.21 ZAR 0.86 7.4 8 -0.27 SGD 1.18 5.47 0.63 5.13 MYR 6 4.8 1.55 4.46 4.5 3.72 -0.50 3.5 3.52 PHP 1.90 4 2.74 2.5 -2.03 2.67 2.1 THB 2 1.74 % IDR 2.78 - -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Source: Bank Indonesia 30

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

  25. Ample Lines of Defens nse Agains nst Extern ernal al Shocks ks Ample Reserves Ample level of FX reserves to buffer against external shock  FX Reserve FX Reserves as of December 2019: US$129.2 billion  Swap p Arrang ngement nt Renewed a 3 year USD22.76 billion swap line with Japan on October 14 th , 2018  Japan The facility is available in USD and JPY  South Korea Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2017  teral Austr tralia ia Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018  Bilate Singapore Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2019  Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in  China November 2018 Malaysia ia Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019  Entitled to a maximum swap amount of USD600 million under ASA  ASEAN Swap p The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million  Arra rangement (ASA) ional Doubled to USD2 billion in 2005  Regio Chi hiang Mai Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool  created under the agreement Ini nitia iativ ive Multil ilatera raliz izatio ion Came into effect in 2010 with a pool of US$120 bn  (CMIM) Agre reement Doubled to US$240 bn effective July 2014  IMF Global Global bal Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem  Financia ial Safety ty Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)  Net - GSFN Source: Bank Indonesia 32

  26. Solid id Polic icy Coordina inatio tion In Mana naging ing Fina nanc ncial ial Markets Volatil ilit ity The enactment of Law No. 9/201 016 6 regarding Preve vention on and Mitigation on of Financial System Crises Gov’t Securities Crisis is Management t Protocol (CMP) as a legal foundation for the government to serves Indicators: at the time of financial crisis in the form of Fi Financial  - Yield of benchmark series; System Stability Committee (KSSK) - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Policies to address the crisis at every level :  Deposit Insurance Corporation - Repurchase the government securities at secondary market - Postpone or stop the issuance Bond Stabil iliza izatio ion Framework Swap facility arrangements based on international cooperation First Line of Defense Buyback fund at DG of Budget Financing and Risk Management State’s Budget Investment fund at Public Service Enhancing coordination between government Agency (BLU) (min. level Aware) institutions and continuous dialogue with market State Owned Enterpr pris ises s Related SOEs (min. level Aware) participants (BUMN)’s Budget Social Security BPJS (min. level Aware) Organiz nizing Agency (BPJS)’s Budget CMP Implementing Crisis Management Protocol (CMP) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget Accumulated cash surplus (SAL) (min. Level Crisis) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 33

  27. Streng ength thened ned Private te Extern ernal al Debt Risk Manag agem ement nt 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 Hedgi dging g Ratio io* External Debt/GDP (%) 2020F 160 , 54.3 261 , Bulgaria 56.5 6% 2019F 57.3 10% 42.3 2018 Colombia 42.9 39.9 21.4 India 20.9 ≤ 3 months ths > 3 - 6 months ths 20.0 37.0 Indonesia 36.7 36.2 2,327 , 2,428 21.9 Philippines 90% 23.0 , 94% 23.9 0 10 20 30 40 50 60 70 Source: Moody’s Statistical Handbook, November 2019 Liqui quidi dity Ratio io* Regul ulat atio ion n on Prudent ntia ial Princ incip iple in Manag naging ing External nal Debt bt 309 , Phase e 1 Phase e 2 Phase e 3 12% Regu gulation Key Points Jan 1,2015 – Jan 1,2016 – Jan 1, 2017 Dec 31,2015 2015 Dec 31,2016 2016 & beyon & ond Object of Regulation ion Governs all Foreign Currency Debt Hedgin ing Ratio io < 3 months 20%* 25%** 2,279 , > 3 – 6 months 20%* 25%** 88% Liquid idit ity Ratio (< 3 months) 50% 70% Credit it Rating Not applicable Minimum rating of BB- Must be done Comply Not Comply Hedgin ing transaction ion to meet not necessarily be done with a with a bank in hedge ratio bank in Indonesia Indonesia *Data as of Q3 2019, with total population 2.588 corporates Sanctio ion As of Q IV-2015 Applied Source: Bank Indonesia Source: Bank Indonesia 34

  28. Health thy External ernal Debt Compositio ition Exte terna nal l Debt Struc uctur ture The Struc uctur ture of Exte terna nal Debt is Domina nate ted by Long ng-Te Term Debt Private External Debt Public External Debt Short Term External Debt Long Term External Debt 100% 100% 90% 90% 80% 80% 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 70% 70% 60% 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 60% 50% 50% 40% 40% 30% 30% 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 20% 20% 10% 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 10% 0% 0% 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 % % % External Debt / Export Ratio External Debt / GDP Ratio (rhs) External Debt External Debt Growth (rhs) 450,000 20.0 37.0 200 36.7 40 36.3 36.1 36.2 17.1 34.7 34.3 18.0 400,000 32.9 31.8 35 16.0 180 350,000 29.1 27.4 26.5 30 14.0 169.9 173.6 178.4 12.0 25.0 176.1 300,000 11.5 11.3 160 168.4 168.0 12.0 10.2 25 10.1 9.8 162.3 250,000 9.5 10.0 8.0 140 20 200,000 6.5 8.0 139.5 5.9 15 5.4 150,000 120 6.0 123.1 121.8 10 3.0 100,000 4.0 114.9 113.8 100 50,000 5 2.0 101.0 0 0.0 80 0 *Provisional Figures Source: Bank Indonesia, External Debt Statistics of Indonesia, January 2020 35

  29. Manag ageable able External rnal Debt Profile file Shor ort term rm non-ban bank corpor rporate deb ebt (non on affil ilia iatio ion) represents only 9.9% of total priv ivate extern ernal al debt bt Publ blic ic Long Term 1 Priv ivat ate Bank Af Affiliation on US$201.4bn US$149.0bn US$19.4bn or or or 50.2% 74.5% 9.7% US$11.9 .9bn of Total Ext. of Private Ext. of Private or or Debt Debt Ext. Debt 5.9% External nal Debt bt of Private Posit itio ion Ext. . Debt US$200.1bn 1bn US$51.1bn bn US$31.6bn or or or 49 49.8% US$401.4bn bn 25.5% 15.8% of total of Private of Private Ext. Debt Ext. Debt Ext. Debt Priv ivat ate Non-Bank ank US$19.7bn Short-Term 1 or or 9.9% Priv ivat ate of Private Ext. . Debt External Debt Position as of November 2019 1 Based on remaining maturity Non Af Affiliation on Source rce: External Debt Statistics of Indonesia, January 2020 36

  30. Sec ection on 4 Fiscal al Perf rform ormance nce and Flex exib ibil ilit ity: More Fiscal al Stimu imulus lus with th Prude dent nt Fiscal al Polic olicy

  31. Integr grate ted Reform rm to Provide Highe her Qual ality ty of 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 Fisc scal Synergy in reform to boost the more susta tain inable and inclusiv ive • Monetary policy to support Monetary & • Efficient, competitive, and Real Sector or growth macroeconomic stability Financ ncial innovative real sectors • Price stability and sustainable Sector • Job-creation current account deficit • Trade and investment • Efficient and credible policies that support growth, financial sector efficiency, and stability Source: Ministry of Finance 38

  32. 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 Key Driver vers Strat ategie egies to Encourage Growth Main inta tain inin ing purchasin ing power, boostin ing domestic tic • Consu sumption ion remains robust among others • demand and d supportin ting busin iness activ ivity ity. supported by benign inflation Improve distribution channels  Increased shopping events, creative industries  Investme ment grows stably supported by • and festivals in tourism areas infrastructure acceleration, business climate improvement, rating upgrades, economic Incentives for manufacture  packages Developing e-commerce industry  Export and Import keeps improving driven by • Encouragin ing private te secto tor's role in investme tment • increasing demand and improving prices Strengthening and deepening financial  markets Support from several importa tant events ts such as • Making a stable investment climate through  Asian Games, Regional Elections, and IMF-WB political stability annual meeting Expand servic ices sector, especia ially touris ism • Increasing foreign tourists arrival through  Risks ks & Challeng nges es cooperation with other countries by increasing the direct flight schedule Global economic ic uncerta tain intie ties: China economic rebalancing Encouraging national creative industry growth  and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change 39

  33. 2019 State Budget (APBN 2019) Healthier ier, More Equit itabl ble, e, Self-Suff ffic icien ient Macroec economic ic Healthier ier Assum umpt ption ion Growt wth Infla lation Exchange Rate 3 months T-bill lls Deficit 1.84% of GDP, the • 5.3% 3.5% 15,000/US$ 5.3% lowest since 2013 Towards positive primary • balance ICP Oil Lifting Gas Lifting Debt to GDP ratio below • 70/barrel 775 thousands barrel/day 1,250 thousands barrel/day 30% of GDP More equitable Developm opment ent Unem employ oyment ent Poverty Gini ni ratio HDI Strengthening • Targe get 4.8% – 5.2% 8.5 – 9.5 0.38 – 0.39 71.98 decentralization (increasing fiscal transfer to regions) EXPENDITUR TURE REVENUE Strengthening social • Rp2,461.1 T Rp2,165.1 T protection programs  Central Governm nmen ent  Tax Focusing on human capital • Rp1,634.3T Rp1,786.4 T quality improvement  Transfe fer to Region  Non Tax (inter-generational Rp756.8 T fairness) Rp378.3 T  Village Fund  Grant Self suffi ficie ient nt Rp70.0 T Rp0.4T Increasing tax revenue • Increasing the share of • local currency bond Deficit icit Primary Balance issuance Rp296.0 T (1.84% of GDP) (Rp20.1 T) Domestic financial • Debt Financin ing deepening Investme tment Rp359.3 T Driving export Rp75.9T • Source: Ministry of Finance 40

  34. Credible ible and Health thier ier Budget et …providing more certainty to all stakeholders Macroec croecon onomi mic c Assump mption on for or 2018 & 2019 Budge get 2018 Budget realization showed healthy and credible • 2017 2017 2017 2018 2018 2019 2019 performances: Indic icator or R-Budget Realiz ization ion Budget Budget - with tax revenues grew relatively high Economic growth (%, yoy ) 5.2 5.1 5.4 5.3 - improving tax ratio Inflatio ion (%, yoy ) 4.3 3.6 3.5 3.5 - optimal level of expenditure 3-Month Treasury Bill (SPN) (%) 5.2 5.0 5.2 5.3 2019 Budget is healthier, more equitable, and self-sufficient • Exchange Rate (Average, IDR/USD) 13,400 13,384 13,400 15,000 - towards positive primary balance ICP (USD/barrel) - strengthening decentralization 48 51.2 48 70 - increasing tax revenue Oil Production ion (thousand barrel/day) 815 804 800 775 Gas Production ion (million ons s barrel/day) 1.15 1.14 1.20 1.25 2019* 2016 2016 2017 2018 Descr cription on (IDR Trillion on) Audited Audited Audited Prop opos osed ed Realization on % Realization on Budge get Realization on Realization on Realization on Budge get (a.o. o. Decemb cember er 31) 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 2,142.1 2,164.7 1,950.4 90.1 1,654.8 1,928.1 1. Tax Revenue 1,285.0 1,343.5 1,518.8 1,781.0 1,786.4 1,545.3 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 1,607.3 1,634.3 1,498.9 91.7 1,265.3 1,455.3 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 710.3 832.3 826.8 811.3 98.1 742.0 757.8 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 *Preliminary Source: Ministry of Finance 41

  35. 2020 State te Budget (APBN 2020) 2020) Indonesia ia 2045: Becomin ing a Developed Countr try Macroec croecon onomi mic c Assump mption on for or 2020 Budget get 2036 2036-2045 2045 2019 2019 2020 2020 Indic icator or ADVANCED Sovereign, Advanced, Just, and Prosperous Country Outlook ok Budget INDONE NESIA Economic growth (%, yoy ) 5.2 5.3 2031-2035 2035 Inflatio ion (%, yoy ) 3.1 3.1 Strengthening Competitiveness 3-Month Treasury Bill (SPN) (%) 5.6 5.4 TRANSITION Exchange Rate (Average, IDR/USD) 14,250 14,400 ICP (USD/barrel) 63 63 2020 2020-2030 2030 Oil Production ion (thousand barrel/day) 754 755 STRE RENGT GTHENING G THE Improving Competitiveness Gas Production ion (million ons s barrel/day) FUNDA NDAMENTAL 1.07 1.19 2020 2020 Fiscal Competitiveness Theme 2020 2019 9 Grow rowth Description on (IDR Trillion on) Prop opos osed ed Grow rowth Grow rowth “ State Budget to Accelerate Outl tloo ook (%) Budge get Budge get (%) (%) Competitiveness through Innovation and A. A. Reven enues es and Gra rants 2,030.8 4.5 2,221.5 9.4 2,233.2 10.0 Strengthening Quality of Human I. Domestic Revenue Resources ” 1. Tax Revenue 1,861.8 13.3 1,865.7 13.5 1,643.1 8.2 FISC SCAL POLICY STRATE TEGY FOR 2020 2. Non Tax Revenue 386.3 (5.6) 359.3 (7.0) 367.0 (5.0) II. Grants 0.5 (61.5) 0.5 (61.5) 1.3 (91.7) B. Expen enditure re 2,528.8 8.0 2,540.4 8.5 2,341.6 5.8 I. Central Government Expenditure 1,670.0 9.4 1,683.5 10.2 1,527.2 4.9 II. Transfer to Region and Village Fund 585.8 5.5 856.9 5.2 814.4 7.5 Revenue Mobil iliz izatio ion 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 -1.76 (8.81) -1.76 (8.81) -1.93 6.04 Effectiv ive state spending E. Financi cing 310.8 1.7 307.2 (1.2) 307.2 (1.2) Creativ ive financin ing Source: Ministry of Finance 42

  36. 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. Kuliah Tax Ince centi ntives for suppo porti ting ng human Improvement nt In Human Resour urce ce Quali lity ty and Accele lerate ted comple leti tion n of 4 super priority ty resour urce ces developm pment nt & competi titi tivene ness Social l Assista tance tourism desti tina nati tions ns Indone nesian n Smart Card Colle lege/KIP Kuliah ah • Super deduction for vocational program and The development of Danau Toba, Supporting the poor people to achieve the higher R&D Borobudur, Labuan Bajo and Mandalika, education level • Mini tax holiday for investment commitment synergy among line ministries and local under 500 billion rupiah Pre Worke kers Card government • Investment allowance for human intensive Improving the job seekers’ productivity industry Food Aid Card Protecting the food access for poors Streng ngth theni ning ng The Trans nsfer to Regions ns and Streng ngtheni ning ng The Curre rent nt Account unt Endowment nt Fund for Human Resour urce ce and Vill llage Fund nds Balanc ance Cultur ture • Strengthening The Physical Specific Supporting the reducing current account The Utilization of endowment fund investment to Allocation Fund for social and marine deficit in the short and long term improve the the quality of higher education and transportation sectors; promotion of national culture, through: • Additional General Allocation Fund DAU for equalization village officials’ Culture Endowment Fund  fixed income and remuneration of Higher Education Endowment Fund  Government Employees with Work Significant additional endowment fund for  Agreements (PPPK) research and development Source: Ministry of Finance 43

  37. 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 0.0 0.00 Deficit to GDP ratio in 2020 will be the • (11.5) (12.0) (50.0) (34.7) lower deficit in the past five years (0.50) (100.0) Primary balance deficit will be decreased • (1.00) gradually to positive direction (150.0) (124.4) (125.6) (142.5) Tax revenue for supporting the • (200.0) (1.50) (1.76) (1.82) competitiveness with the realistic and (1.93) (250.0) (2.00) optimal target (269.4) (300.0) Budget spending will be prioritized for • (298.5) (308.3) (341.0) (307.2) (2.50) (310.8) productive spending (350.0) (2.49) (2.51) (2.59) Budget financing will be decreased and • (400.0) (3.00) 2015 2016 2017 2018 2019 2020 Budget will be utilized for competitiveness Outlook improvements Budget Deficit (Trillion IDR) Primary Balance % Deficit to GDP 11.6 11.6 11.4 11.1 10.8 10.7 TAX RATIO IO 2015 2016 2017 2018 2019 Outlook 2020 Budget Source: Ministry of Finance 44

  38. 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. Tax Revenu nue (Trillio ion Rupiah) Improvem vement ent to Suppor ort Taxation 2,000 1,861.8 1,865.7 Increasing the tax compliance • 1,643.1 1,518.8 Service quality improvement, counseling, and • 1,500 1,343.5 supervision through the strengthen IT system and 1,285.0 1,240.4 14.8 tax and administration 13.4 10.5 Equalizing the level playing field 1,000 • 12.6 13.0 13.5 8.2 8.2 Improving the business process especially for VAT • 5.8 refund 4.6 500 3.6 Implementing the AEoI • Extensification of excise goods • 2.9 - Adjusting the excise duty rates on tobacco • 2020 2015 2016 2017 2018 2019 2020 2020 2020 Budget Budget Outlook RAPBN APBN Plan Kepabeanan dan Cukai Pajak nonmigas Oil & Gas Non Oil & Gas Tax PPh Migas Pertumbuhan Penerimaan Perpajakan (%) Custom & Excises Tax Revenue Growth (%) Non Tax Revenu nue (Trillion on IDR) Pertumbuhan Pajak nonmigas (%) Non Oil & Gas Tax Revenue Growth (%) 450.0 40.0 409,3 31.5 386,3 400.0 The role of the non-oi oil and gas PNBP sector or 30.0 370,0 359,3 311,2 350.0 continue ues to be streng engthen ened ed accompani panied ed 20.0 18.8 300.0 by increase sed servi vices es to the communi nity 262,0 10.0 255,6 250.0 - 200.0 2.5 Management and Utilization of Optimal, Effective • (5.6) (5,0) (10.0) (7,0) and Efficient Natural Resources 150.0 (20.0) Service Improvement and Tariff Adjustment 100.0 • Improvement of BUMN Efficiency and BLU (30.0) • 50.0 (35.9) Performance - (40.0) 2020 2020 Improving Governance • 2015 2016 2017 2018 Outlook RAPBN 2020 APBN 2020 Budget Budget 2019 Plan Non Oil & Gas(Trillion Oil & Gas (Trillion Rp) Growth (%) PNBP Migas (Triliun Rp) PNBP Nonmigas (Triliun Rp) Pertumbuhan (%) Rp) Source: Ministry of Finance 45

  39. 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 46

  40. 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  Human an Resour urce Quality Improvem ovement 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 of job seekers • Sustain inabil ility ity of health th servic ice provis isio ion (increased premium aid by Government)  Social Protec ection on Strengt ngtheni ening ng • Food access improvement (Food Card)  Infrast structure Developm pmen ent • Equalizing inter-region development • Accelerating development of 4 destination of super-priority tourism Source: Ministry of Finance 47

  41. Budget et for Improving ing the Human Resour urce Quality lity Higher gher qualit ity of human resource ces for achiev ievin ing the welfar fare and just societ iety. y. National Educ ucation • Culture Endowm wment Fund • Development (DPPN) N) Rp1,0 T Rp18,0 8,0 T • Ensure the continuity of culture scholarships for 5.000 new students  promotion for the next generation (higher degree level) scholarships for 12.333 students (higher  degree level) Financing 104 researches  Investm tment nt Financ ncing ing Rp29,0 9,0 T Higher Educ ucatio ion • Resear arch Endowment Fund • Endowment Fund Rp5,0 T Rp5,0 T • Increasing the human resource quality  and competitiveness Human resources and education Increasing the research which infrastructure for achieving the World  supported the university stakeholders Class University Incresing the research contribution to  economic growth Source: Ministry of Finance 48

  42. The Natio iona nal Budget et is to Prepar pare the Young nger Gener eratio tion to Improve the Quality ity of Human Resour urces es Educatio ion Budget et Rp508,1 8,1 T Source: Ministry of Finance 49

  43. The Natio iona nal Budget et is Preparin aring the Youth throug ugh Job Trainin ining Total al Budget Definitio tion of Pre-Empl mployme yment Card “It is a card given to job seekers or workers to get vocational training Rp10 T (skil illin ing and re-skil killin ing) and / or job competency certification" Target Design gn of Implem emen entatio ion of Digital and 2 Billion ion Regular Acces ess partic rticip ipan ants ts Regular Digi gital Training + Certification + Training + Digital: 1.5 Mill Regular: 0.5 Mill Incentives Incentives Skilling ng • Participants • Training and Targets : Fresh graduate job seekers choose the type Certification in Objectives : skill adjustment, vocational skill to work of training Government Job Outcome : reduce unemployment through a digital training Center (LPK) platform (GoJek, (including Vocational Re Re-Ski killing ng Tokopedia, Center/BLK), Private Jobstreet etc.). LPK, and Industrial Targets : Workers who are laid off or potentially laid off • Private training * Taining Center Objective : to equip new/different vocational skills for new profession/entrepreneur Online ( e-learning ) Outcome : prevent unemployment from returning Offline training (class) and Offline (Class) Source: Ministry of Finance 50

  44. 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- • Tota tal Budget Pematang Panggang – Kayu Agung PT PLN Rp 5.0 T for fulfilling electrification target 100 % by 2020 • Rp423,3 3,3 T 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 • Clean Water &Sanita tatio tions 49 49 18,758 km Development of drinking water pipelines • Bridges Dams Development of domestic wastewater • treatment systems Provision of infrastructure for processing • waste 3 19,879 ha 6,346 km Airports ts Irrigatio tions Roads Internet Housing for Low Income me 238.8 km Connectiv ivity ity Society ety Development Rail ilroads (Palapa Ring) Source: Ministry of Finance 51

  45. 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 Budget 2020 Outlook 2019 Subsidy 125.3 T 142.6 T Policy :  Continuing fix subsidy for diesel of Rp1.000/litre  Price differential subsidy for kerosene and LPG 3 kg canister  Electricity subsidy is given to 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 Non Energy Budget 2020 Outlook 2019 Subsidy 69.8 T 62.3 T Policy : Expanding capita ital access of Micro, Small, Mediu ium • Data validation of beneficiaries and their needs of subsidized • Enterpris ises through interest subsidy of KUR fertilizer  e-RDKK (Definitive Plan of Group Needs) Allocating down payment and interest differential • • Expanding the use of Farmer Card to buy subsidized fertilizer subsidy to encourage house ownership of low • Improving public service in transportation and public information income people Source: Ministry of Finance 52

  46. Trans nsfe fer to Region and Villag age Fund Rp856.9 T Increased by Rp42.5 triliun from the Outlook 2019 that is directed to: Accelerating ng Prom omot oting ing productive ive Impr proving ving basic public compet etit itiven iveness ess spending ing servi vice delive very Accelerate the provision of public • infrastructure and strengthen the quality of human resources, especially through education, health, drinking water, social protection, and inter-regional connectivity. Increase competitiveness through • innovation, ease of doing business, governance, and incentive policies that support the investment climate. Increase productivity, especially • export-oriented through the development of regional economic potential. Source: Ministry of Finance 53

  47. 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 Financ ncing ing Strategy egy Debt Finan ancin ing Directio ion Prudent nt • Optimizing community participation in the debt ratio control within the safe limit ranges domestic bond market (financial deepening) • from 29.4 - 30.1 percent of GDP to support fiscal • Active debt management through liability sustainability and asset management. Maint ntaini aining ng macro balance by mai aint ntaini aining ng the • composition of domestic and foreign debt in a controlled limit and deepening the financial markets Source: Ministry of Finance 54

  48. 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 31 st st , 2017) Repatriation Preliminary 3% Evidence Payment SMEs 1% 2% Tax Arrears Companies ​Offshore 147.1 .1 Payment 12% 1.7 Declaration 14% 85.59 59 21% 18.8 594.99 .99 1,036 Individual SMEs 18% 861.8 .81 3,323.3 .36 ​Onshore 3,698 114.2 Declaration Individuals Redemption 76% 68% Money 85% Revenue Asset Declared Composi sition ion of Partic icip ipants s IDR 134.8tn (~1.1% GDP) IDR 4,881tn (~39.4% of GDP) Based on Asset Declared Redempti tion n Mone ney Assets ts Declar lared 39.3 1.10 % of GDP % of GDP 0.62 0.58 8.3 0.20 5.2 5.2 0.17 0.15 3.9 0.12 0.12 3.6 2.1 0.04 0.04 0.3 Germany Belgium Italy Chile Indonesia India South Spain Australia India Spain Chile Indonesia Italy South Australia (2004) (2004) (2009) (2015) (2016) (1997) Africa (2012) (2014) (1997) (2012) (2015) (2016) (2009) Africa (2014) (2003) (2003) Source: Ministry of Finance 55

  49. 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 56

  50. Governm ernment ent Securi rities ties Indic icativ ive Financ ncin ing Plan for 2019 Auction: • Conventional Securities – 24x • Islamic Securities – 24x • Non-auction: • Retail GDS (tradable/ORI & non-tradable), Retail • Sovereign Sukuk (tradable/Sukri & non-tradable); Private Placement – based on request. • Auction GS Net GS Rupi piah [74% – 76%] Domestic [446.49] [83% - 86%] GS Issuance Non-auction Need [9% - 10%] Issuance Composition [904.09] Foreign Denomin inated GS GS GS Matured International [457.60] [14% - 17%] *in IDR Trillion Foreign denominated GS as co compl plementa ntary •  Avoid crowding ng out in domestic market. The Th ta target amount unt can be be adjuste ted to the • potential of other financing sources and financing needs. Source: Ministry of Finance 57

  51. Governm rnment nt Securitie ities Realiz izatio tion As of Decem ember ber 31, 2019 – in Tril illio ion IDR Government Securities realization as of December 31, 2019 IDR903.36 T T or 99.92% from the target From om IDR903 03.36 .36 T T consi sist st of: 903.36 29.52 Isua uance nce Ne Need d fo for 3% 2019 904.09 228.76 26% 526.03 58% 119.06 13% 445.77 Governm nment nt Secur urit itie ies Ne Net 446.49 IDR Government Debt Securities FX Government Debt Securities IDR Sovereign Sharia Securities FX Sovereign Sharia Securities Realization as of Dec 31, 2019 Budget 2019 Source: Ministry of Finance 58

  52. Discip iplined lined and Sophis istic ticated ted Debt Portf tfolio lio Manag agem ement ent Stable ble Debt to GDP Ratio Over the Years Prudent nt Fisca cal l Defici cit IDR Tn Government Debt / GDP (%) 600 0.0% 442 442 35.0% 407 407 29.9% 29.8% 29.4% 362 362 358 358 28.3% -0.5% 5,000.0 27.4% 400 30.0% 265 265 24.9% 24.7% 764.5 -1.0% 4,000.0 810.7 25.0% 200 746.2 19 19 14 14 -1.5% 20.0% 734.8 3,000.0 - 755.1 (9) (7) (4) -2.0% (20) 15.0% 677.6 (66) (69) (56) -1.8% (58) 2,000.0 714.4 4,014.8 (200) 3,612.7 -2.2% -2.5% 3,248.6 10.0% (227) 2,780.6 2,410.0 1,000.0 (298) (308) -2.5% (269) 1,931.2 -2.5% (400) -2.6% (341) -3.0% 1,661.1 5.0% 2014 2015 2016 2017 2018 - 0.0% 2013 2014 2015 2016 2017 2018 *) 2019**) Bonds (Net) Loans (Net) SBN (neto) Pinjaman DN & LN (neto) Non Debt (Net) Budget Surplus/Deficit Non Utang (neto) Surplus (Defisit) APBN Bond Loan Debt/GDP Ratio [RHS] Fiscal Deficit (%GDP, RHS) Rasio Defisit APBN thd. PDB (RHS) Source: Ministry of Finance Source: MoF Weighte ted Average Debt t Matur urity ty of ~8. 8.5 Years rs Well l Diversified Across Different nt Currenc ncies % of Yearly Issuance 1% 1% 1% 1% 1% 1% 100% 9.8 ATM (in years) 6% 6% 5% 5% 7% 6% 4% 4% 4% 4% 4% 4% 9.4 80% 28% 27% 27% 9.1 30% 30% 31% 60% 8.7 8.5 8.4 40% 62% 62% 62% 59% 58% 57% 20% 0% 2016 2017 2018 Oct' 19 Nov' 19 Dec' 19 2014 2015 2016 2017 2018 2019 IDR USD EUR JPY OTHER Source: Ministry of Finance Source: Ministry of Finance Note: *2018 LKPP number exc. Prefunding **as of Dec 31, 2019 59

  53. Well Balanc nced ed Matur turity ity Profile file With Strong Resilienc lience Agains nst External rnal Shocks ks Decli lini ning ng Exch chang nge Rate Risks ks Decli lini ning ng Interest t Rate Risks ks FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) Variable rate ratio [%] Refixing [%] 21.0 20.7 44.5 19.7 43.4 19.2 42.6 41.3 41.0 17.5 37.9 16.1 14.8 13.7 12.1 10.6 10.6 9.8 12.2 12.1 12.1 12.3 11.3 10.7 2014 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 2019 Debt t Maturity ty Profile le Upcoming Maturiti ties (Next t 5 Years) IDR tn tn in 1 year (%) in 3 year (%) in 5 year (%) 450 IDR Denominated (Triliun Rp) 41.0 40.4 39.3 400 36.0 34.7 Other Currencies (Triliun Rp) 350 33.9 154 150 300 129 165 25.5 25.0 24.3 250 160 79 22.7 21.4 116 20.1 200 119 149 259 42 102 16 150 208 273 257 10.6 141 9.9 30 211 25 100 22 8 31 8.4 8.1 7.7 139 3 6.5 150 143 203 132 49 50 101 101 96 94 99 33 89 2 2 33 29 26 25 62 23 36 19 30 29 27 23 22 28 - 26 - 20 20 - 15 - 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049-2058 2014 2015 2016 2017 2018 2019 Note: using GDP assumption Source: Ministry of Finance 60

  54. Holders ers of Tradable able Centr tral al Governm ernment ent Securi rities ties More Balanc nce Owner ership ip In Terms of Holder ers and Tenors Holders of of Tradable Gov’t Domestic Debt Securities Fore reign n Owne nership p of Gov’t Domestic Debt Secu curiti ties by Teno nor 100% 37.5% 38.1% 37.7% 38.2% 38.6% 34.8% 39.8% 36.0% 37.0% 38.6% 80% 42.8% 44.7% 60% 30.8% 39.8% 38.55% 37.8% 38.1% 38.2% 39.9% 37.5% 37.7% 36.8% 42.0% 40.3% 40% 34.1% 35.6% 37.4% 36.8% 33.6% 20% 22.0% 39.0% 17.3% 17.8% 15.2% 18.4% 31.0% 23.9% 23.4% 11.8% 22.5% 21.1% 20.3% 5.1% 3.7% 5.3% 1.9% 6.7% 1.3% 5.0% 4.3% 3.5% 3.2% 4.6% 2.4% 0% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 31-Dec-19 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 0-1 ≥ 1-2 ≥ 2-5 ≥ 5-10 Domestic Banks Domestic Non-Banks Foreign Holders ≥ 10 %Foreign Ownership of Total Source: Ministry of Finance 61

  55. Ownersh rship ip of IDR Tradable able Central ral Governm ernment nt Securi rities ties (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 221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50 % 471.67 17.13% Fund 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% 2,368.45 100.00% 100 2,752.74 100.00% 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance 62

  56. Sec ection on 5 Mone netary ary and Finan nancial ial Facto tor: r: Credib edible le Mone neta tary ry Polic icy Trac ack Recor ord and Favour ourab able le Fina nancial ncial Secto tor

  57. Bank Indonesia’s Policy Mix To Maintain ain Macroeconomic ic and Finan ancial ial Sy System Stabil ilit ity Pre-emptive, front loading and  Implementing Macro prudential  ahead-of-the-curve policy rate Intermediation Ratio (RIM) response Implementing Macro prudential Liquidity  Stabilize exchange rate  Buffer (MLB) 2 consistent with fundamentals 1 Accelerate implementation of  Macro- reserve requirement averaging prudentia ial Moneta tary Electronification: Social Maintaining a monetary   Polic icy Polic icy program, e-payment for operations strategy oriented Government towards increasing available liquidity (FX swap) Financial technology  3 National Payment Gateway  (NPG) Payment QRIS (QR Indonesia Standard)  Coordin inatio tion System Expanding National Clearing with th other  Polic icy System (SKNBI) services Controlling inflation: TPIP, TPID  Authoritie ities 4 5 Structural reforms: Government  Developing market instruments for financing  Financial deepening & stability:  infrastructure Financia ial Marke ket KSSK (Financial System Stability Developing financial market infrastructures Committee), OJK (Financial Deepenin ing  Services Authority) Rupiah Interest Rate Swaps (IRS) and Overnight  Index Swap (OIS) Coordinating efforts in reducing  Current Account Deficit Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat  Berharga Komersial) Source: Bank Indonesia 64

  58. Bank Indones esia ia Polic icy Mix: January ry 2020 nd and rd Janua The e BI Board rd of Governo rnors rs agree reed on 22 22 nd nd 23 rd uary ry 2020 to hold the BI 7-Day ay Revers erse Rep epo o Rate e at 5.00%, whil ile also o maint aintainin aining the Depos osit it Facil ilit ity y (DF) and Lending ing Facil ilit ity y (LF) ) rates es at 4.25% and 5.75%. Continues to strengthen Maintains accommodative Monetary policy Continues to Monitors domestic coordination with the macroprudential policy to remains orient monetary and global economic Government and other stimulate economic financing accommodative and operations Holds development in using relevant authorities in is consistent with in line with the suboptimal towards the BI its room to implement order to maintain financial cycle, while also controlled inflation 7-Day maintaining an accommodative economic stability and in the target paying due consideration to adequate liquidity Reverse policy mix in order to catalyse domestic corridor, maintained prudential principles. and supporting demand, while boosting Repo maintain controlled Payment system policy and external stability as the transmission Rate at inflation and external exports and tourism well as efforts to financial market deepening of an 5.00% stability as well as to and attracting foreign will be strengthened further sustain domestic accommodative support economic capital flows, including in order to support economic growth policy mix. growth momentum. Foreign Direct momentum. economic growth. Investment (FDI). 65 Source: Bank Indonesia

  59. Principle iples of Aver erage e Reser erve ve Requir irement Ratio ios Improve vement ent Consid ideratio tions for the Average Reserve Requir irement t Effectiv ive Substance Old New Date Ratio ios Improvement a. Additional rupiah 16 th July Improvement in average reserve requirement is a • average reserve Fixed RR: 5% Fixed RR: 4.5% follow up to the monetary policy operational requirement for Average RR: 1.5% Average RR: 2% 2018 framework reform implemented by Bank Indonesia conventional RR: 6.5% RR: 6.5% since 2016. commercial banks Monetary policy operational framework reform • 16 th July b. Annulment of started in August 2016 as BI7DRR replaced BI Rate 2.5% (from 1.5% demand deposit 0% 2018 as policy rate. This was then strengthened in 1st RR) renumeration July 2017, by the implementation of the average reserve requirement in rupiah for conventional c. Implementation of commercial banks at 1.5% out of the total 6.5% of foreign exchange Fixed RR: 8% Fixed RR: 6% 1 st GDP reserve requirement in Rupiah. The average reserve Average RR: 0% Average RR: 2% October reformulation is also backed by various efforts in requirement for RR: 8% RR: 8%* 2018 financial market deepening. conventional commercial banks The current improvement aims to elevate flexibility in • banking liquidity management, enhance banking d. Implementation of 1 st intermediation function, and support efforts in Fixed RR: 5% Fixed RR: 3% average reserve October financial market deepening. This multiple targets will Average RR: 0% Average RR: 2% requirement for 2018 in turn improve the effectiveness of monetary policy RR: 5% RR: 5%* Islamic banks transmission in maintaining economic stability. * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 66

  60. Princ ncip iple les of Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR) and Macropr pruden udential tial Liquidity uidity Buffe fer (MLB) B) Consider erati tions ns for Macrop oprud udent ential al Instr truments ts Macrop oprudent ential Intermediation on Rat atio (MIR) and Macrop oprudent ential Liquidity ty Buffer (MLB) 1 2 3 4 Striving to stimulate the bank The policy is expected to This The regulation is intermediation function and stimulate the bank macroprudential effective for liquidity management, Bank intermediation function to the policy instrument is conventional Indonesia issued Bank Indonesia real sector congruent with countercyclical and commercial banks from 16 th July Regulation (PBI) No. sectoral capacity and the can be adjusted in 2018 and for 20/4/PBI/2018 and Board of economic growth target in line with prevailing sharia banks from 1 st Governors Regulation (PADG) No. compliance with prudential economic and October 2018. 20/11/PADG/2018 concerning principles, while also financial dynamics. the Macroprudential overcoming the issue of Intermediation Ratio (MIR) and liquidity procyclicality. Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. Source: Bank Indonesia 67

  61. Princ ncip iple les of Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR)* )* MIR Sharia (Sharia ia Banks and Sharia Regulation ion MIR (Conven entio iona nal Commer ercial Bank) Busine ness ss Units) s) 1 MIR Accounting Formula Credit + Owned Bond Financing + Owned Sharia Bond Deposit + Issued Bond Deposit + Issued Sharia Bond 2 Rate and Parameters Ceiling 94% Ceiling 94%    Floor 84%  Floor 84% Minimum Capital Adequacy Requirement Minimum Capital Adequacy Requirement 14%   14% For Sharia business units, the Minimum Capital  Upper disincentive parameter 0.2 Adequacy Requirement is the same as that of the  parent conventional commercial bank Lower disincentive parameter 0.1  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1  3 Scope of credit/financing Credit: rupiah and foreign currency Financing: rupiah and foreign currency   and deposits to calculate  Deposits in rupiah and a foreign currency:  Deposits in rupiah and a foreign currency: (i) MIR / MIR Sharia (i) demand deposits, (ii) savings deposits; wadiah savings; and (ii) unrestricted investment and (iii) term deposits, excluding interbank funds, excluding interbank funds 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 68 *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019

  62. Princ ncip iple les of Macroprud ruden ential tial Interm ermediatio tion Ratio io (MIR)* )* Regulation on MIR (Convent entio iona nal Commer ercial Bank) MIR Sharia (Sharia ia Banks and Sharia Busine ness ss Units) s) 6 Percentage of the 100% securities held 7 Criteria for securities medium-term notes (MTN), floating rate notes sharia-compliant medium-term notes (MTN)   issued (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds 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 Average daily total deposits in rupiah at all Average daily total deposits in rupiah at all   meet DD MIR /DD MIR branch offices in Indonesia branch offices and sharia business units in Sharia Indonesia Including rupiah liabilities to a resident and  non-resident third-party nonbank, consisting Including rupiah liabilities to a resident and non-  of: (i) demand deposits, (ii) savings deposits; resident third-party nonbank, consisting of: (i) (iii) term deposits, and (iv) other liabilities wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 10 Relaxation of DD Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing  MIR/Sharia DD MIR 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 69 *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019

  63. Adjustme tment of Macropr oprudent dentia ial Inter ermed edia iatio tion Ratio io (MIR)/ )/Sha Sharia ia Macropru oprude denti tial Interm termedia diati tion on Rati tio (Sha haria ria MIR)* )* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backg kgrounds Main in Regulato tory Points ts Including loan received by conventional commercial banks and financing received by Islamic banks • In response to global and domestic • and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. economic developments, BI is maintaining an accommodative policy The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia • mix to maintain the economic growth MIR calculation are as follows: while also maintaining macroeconomic a. Loans/financing received in Rupiah and foreign currency; and financial system stability. b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; BI relaxed MIR/sharia MIR policy in • c. Loans/financing excludes interbank loans/financing. March 2019, which stimulated bank d. Loans/financing received with a maturity of no less than 1 year; and lending. Nevertheless, the e. Loans/financing received based on a loan agreement. macroprudential intermediation ratio (MIR) is again approaching the upper Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: • bound, thus necessitating efforts to Credit dit + Owned ed Bond increase bank lending capacity. Deposit it + Issue ued d Bond + Loan/ n/Financi inancing ng Rece ceiv ived Considering the potential of bank • Lower disince incent ntiv ive param ameter Upper er disince incent ntiv ive param ameter funding sources that are not included in the MIR ratio, for example the expanding MIR/s /sharia MIR RR RR= MIR/s /sharia MIR RR RR= share of loans/financing received by Lower Disincentives Parameter x (Lower Bound of 0.2 x (Bank’s MIR/sharia MIR - Upper Bound of banks, BI decides to adjust MIR/sharia MIR/Sharia MIR Target – Bank’s MIR/Sharia MIR) x Deposit MIR/Sharia MIR Target – ) x Deposit MIR policy in order to optimize loans/financing received for bank lending. *This disincentive applies for banks with CAR below 14%. This policy to stimulate credit growth • will comply with prudential principles. Therefore, BI is only encouraging banks with low non-performing loans and The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy • adequate capital resilience to expand will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index credit/financing. Average (IndONIA). *This adjustment will be effective from December 2 nd , 2019 70 Source: Bank Indonesia

  64. Princ ncip iple les of 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 4% of rupiah deposits deposits) 2 Components Securities denominated in rupiah held by a Sharia-complaint securities denominated in   conventional commercial bank that may be used rupiah held by an Sharia bank that may be for monetary operations (including SBI/SDBI/SBN); used for sharia-compliant monetary operations and (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah  held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet Under certain conditions, the securities used to the MLB may be used for repo transactions to Bank meet the sharia MLB may be used for repo Indonesia for open market operations, totalling no transactions to Bank Indonesia for open market more than 2% of rupiah deposits operations, totalling no more than 2% of rupiah deposits 5 Sources of Data on Monthly Commercial Bank Reports Monthly Sharia Bank Reports   Deposits Rupiah deposits to calculate MLB are the average Rupiah deposits to calculate sharia MLB are   daily total deposits at all branches in Indonesia 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 Rupiah deposits include: (i) wadiah savings; (ii)  liabilities unrestricted investment funds, and (iii) other liabilities 71

  65. 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 of pruden ential ial and consumer umer protect ctio ion* n* 2. Relaxing the amount of loan/financing facility through indent 1. Increasing opportunities of first time buyers to fulfill their housing mechanism to a maximum of 5 facilities without taking needs through housing loan, specifically by adjusting the LTV ratio account of the orders for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for 3. Adjusting the arrangement of stages and amount of property property credit and FTV ratio for property financing as shown in the loan/financing disbursement of indent property: table below. “ - “= The LTV rate depends on each bank’s risk management *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019 Source: Bank Indonesia 72

  66. Rela laxin xing the Loan-to to-Valu lue (LTV TV) and Financin ing-to to-Valu lue (FTV) Ratios tios* Pruden dentia ial aspects cts of Relaxin ing the Loan-to to-Value (LTV) and Financ ncin ing-to to-Value (FTV) Ratio ios 1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank’s risk management policy (e.g.the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debitor and developer/seller’s bank account. LTV / FTV Exem empt ptio ions Central government or local government loan / financing programs are exempt from this regulation. Source: Bank Indonesia 73

  67. Adjustme tment of LTV Ratio io for Proper perty ty Loa oans, FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts on Autom omotive otive Loans/Fin inancin ing* g* 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 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property In response to global and domestic economic • developments, BI is maintaining an accommodative Financing. policy mix to maintain the economic growth while a. BI decides to relax the LTV ratio for property loans and FTV ratio for also maintaining macroeconomic and financial property financing by 5% from current ratio as follows: system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the • property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support • sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be • given to borrower with strong repayment capacity and low credit/financing risk. BI will regularly evaluate this policy at least once a • year. *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 74

  68. Adjustme tment of LTV Ratio io for Proper perty ty Loa oans, FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts on Autom omotive otive Loans/Fin inancin ing* g* Main in Regulato tory Points ts 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria refers to the standards/certificates issued by a nationally or internationally recognized environmental institution. b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is 3. Adjustment of Down Payments on Automotive considered to meet the criteria. Loans/Financing ii. In case that the residential area/building is not a a. Down Payments on Automotive Loans/Financing is certified green belt area, an evaluation will be adjusted as follows: conducted on each unit as follows: i. Relaxation on the down payments of automotive loans  For buildings < 2500m 2 , the bank may conduct a or automotive financing 5%-10% from current self-assessment using the tools/applications regulations; provided by a recognized institution.  For buildings > 2500m 2 , the assessment must be ii. The relaxation should consider the gross NPL/NPF conducted by a recognized institution; ratios and gross NPL/NPF ratios on automotive  For new buildings constructed in an area by one loans/financing; developer or group of developers, the assessment iii. The adjustment of down payments of automotive must be conducted by a recognized institution and loans/financing in points a and b is as follows: 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: *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 75

  69. Adjustme tment of LTV Ratio io for Proper perty ty Loa oans, FTV Ratio tio for Prope perty rty Financin ing, and Down Paymen ents ts on Autom omotive otive Loans/Fin inancin ing* g* Main in Regulato tory Points ts 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2 nd , 2019 *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 76

  70. Princ ncip iple les of Domestic tic Non Deliv iverable able Forwa ward (DNDF) Trans nsact actio ion Purposes General al Provi visio ions  Domest stic ic Non-Del eliver verable Forward Transa sactio ion (DNDF Transa saction ion) 1. To support the effort of Plain vanilla derivatif transaction of foreign exchange against rupiah in the form stabilizing the Rupiah exchange of forward transaction with fixing mechanism in the domestic market rate through the additional of  Forward Transaction ions alternative hedging instruments Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the delivery of funds shall be performed in more than 2 days after the 2. To support the development and transaction date deepening of the domestic  Fixing ing Mechani nism financial market Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference 3. To increase the confidence of rate in JISDOR on a specified future time agreed in the contract (fixing date) exporters, importers, and investors in conducting  Other Defini nitions ions economic and investment The definition of derivative transaction of foreign exchange againts rupiah, activities through the flexibility of Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to hedging transactions against Bank Indonesia regulations regarding foreign exchange transaction againts Rupiah currency risk rupiah Source: Bank Indonesia 77

  71. Princ ncip iple les of Domestic tic Non Deliv iverable able Forwa ward (DNDF) Trans nsact actio ion Bank can perform DNDF Transactio ions as follows ws: 1. Must have Under erlyin ing Transa sactio ions: Transactio ion betwee een: Includin ing all follow owin 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) Can only be performed to Bank – Customer Excluding follow owin ing activ ivitie ies: hedge rupiah a. Bank Indonesia certificates; b. Placement of funds with bank; exchange rate c. Unwithdrawn credit facilities; risk. d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities. Bank – Foreign Party 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank – Bank Source: Bank Indonesia 78

  72. Princ ncip iple les of 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 over and early termination are not allowed • termin inatio ion for Roll over and early DNDF is prohibi ibited ed However, unwind can be done by opening 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 • Over ersea eas Custom omer er / / Bank nk Cover Hedging Bank Forei eign gn Party Hedging Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. Source: Bank Indonesia 79

  73. Amendm dment nt on 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 Regulatio ion No. 21/7/PB PBI/201 2019 BI Regul ulatio ion No. 20/10 10/PB PBI/201 018 AMENDMENT Article 3 Article 3 1. Sell FX/IDR through DNDF up to $ 5 mio can be done 1. DNDF transactions must have Underlying without underlying documents Articl cle 6 Article 6 2. Not Regulated; 2. DNDF can be terminated (unwind); Article 11 Article 11 3. Underlying documents for buy FX/IDR for DNDF is : 3. Underlying documents must be final (firm) with additional Final (firm commitment) + Supporting documents supporting documents • 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: Final (firm commitment) + Supporting documents • Projection (anticipatory basis) + Supporting documents • Article 11 Article 11 5. In using estimate underlying transaction documents in the 4. Not Regulated; form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. *Effective on May 17 th , 2019; English version of the regulation is available in BI website. Source: Bank Indonesia 80

  74. Overn rnigh ight Index ex Swaps (OIS) & Inter eres est Rate Swaps (IRS) IRS is a contract between two parties to As hedging ging inst strument nts s against nst Rupiah inter erest est rate changes es periodically exchange rupiah interest rate 4 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 3 on a daily overnight reference rate (IndoNIA) Improvement of IRS transaction 2 liquidity Alignment between JIBOR Encourage price transparency in the  and OIS interest rupiah money market rate OIS transaction 1 Strengthen monetary policy  with IndoNIA as transmission benchmark rate Provide alternative hedging instruments  against rupiah interest rate changes IndoNIA & JIBOR Support securities market deepening in  Indonesia Strengthening reference rate based on real transactions Source: Bank Indonesia 81

  75. OIS and IRS Transactio tions ns: Gener eral al Provis isio ions Mar arke ket Pla layer ers. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions 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 Calculatio ion OIS Quotatio ion rat ates Inter erest est Paymen ent foreign party is required to have an analysis on the Base based ed on 2 based ed on Nettin ing need of rupiah interest rate derivative transactions. ACT/ T/360 decimal als Notio ional al of Net IndONIA Quotatio ion : 1W, Mar arke ket Co Conven nventi tions ns. When performing IRS and OIS Index inter erest est paymen ent in in 2W, 1M, 2M, 3M, transactions, the respective bank is bound by IDR with 0 0 with 5 5 4M, 5M, 6M market conventions agreed upon by market players decimal als decimal als through industry association including the Indonesian Foreign Exchange Market Committee. At the 1st phase, e, Compound Settlem emen ent Dat ate = OIS settlem emen ent will Floatin ing Rat ates es Settle ettlement. Settlement can be performed as a 1 busin iness ess days only be done at at the (CFR) based ed netting payment and every transaction has to be after er Mat aturit ity Dat ate end of the OIS on 5 settled in Rupiah. Cl Close ose-ou out ne netti tting ng can be applied (MD) decimal als tenor (MD+1bd). ). under predetermined conditions. Source: Bank Indonesia 82

  76. Bank nk Indones onesia ia Policy Mix: 2015 – 2017 2015 2015 2017 2017 2016 2016 BI 7-day RR Rate cut of BI Rate cut of 25bps (Feb) Policy Rate cuts of 150bps • 1. 1. Monetar ary Polic icy •  25bps to 4.50% (Aug) Moving from BI Rate (12  Further BI 7-day RR Rate month) to BI 7-day Reverse • Polic icy Rate cut of 25 bps to 4.25% Repo Rate (Aug) (Sept) Reserve Lowering RR by 50bps to Further lowering RR by • Implementation of RR • • Requi quirement nt 7.5% (Nov) 100bps to 6.5% (Feb) Averaging (Aug): RR fixed 5%; RR Averaging 1.5% Market-based exchange rate stability consistent with fundamental  2. 2. Exch chang ange Rate Dual intervention in the FX market and purchases of government bonds from secondary market in  Polic icy time of distress (capital reversal) or large mis-alignment Relaxation of LTV for Further relaxation of LTV for •  Initiative to issue  property and automotive property loans (Sept) macroprudential regulation 3. 3. Macr croprude udent ntial ial loans (June) Strengthening systemic  on Financing to Funding Polic icy surveillance & Crisis Ratio (FFR) Management Protocol (April) Obligation to use IDR in E-money for social transfer   National Payment Gateway  4. 4. Payment nt domestic transaction (Nov) (June) System Policy cy (March) Financial Technology  Modernized cash  Non-cash movement (FinTech) Office (Nov)  management underway (GNNT) New Rupiah issuance (Dec)  Source: Bank Indonesia 83

  77. Stable ble Moneta etary ry Envir ironm nment ent Despit ite Chall llen enges es 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 (%) (%) 20 9.00 19 August st 2016 8.38 8.36 8.00 The New 18 CPI (%, yoy) - rhs 8.00 Monet etary Operation 16 Volatile Food (%, yoy) - lhs 7.00 7.00 Framew ework 14 LF Rate: 7.00 Administered (%, yoy) - lhs 6.00 12 BI Rate: 6.50 Core (%, yoy) - lhs 6.00 5.00 10 LF Rate: 5.75 75 8 4.00 3.35 3.61 3.13 5.00 3.02 6 2.72 BI 7Day RR Rate: 5.00 3.00 4 4.00 2.00 DF Rate: 4.25 2 1.00 0 3.00 -2 0.00 2013 2014 2015 2016 2017 2018 2019 Rupi piah Exch chang nge Rate Remains ns Comparabl rable to Peers rs Credit t Growth th Profile le YTD 20 2020 20 vs 201 019 %,yoy 20 Total Growth -4.35 *data as of Jan 22, 2020 BRL -4.21 Working Capital Loans 18 0.23 TRY point-to-point -3.98 Investment Loans 0.24 INR 16 -1.16 Consumption Loans average -1.10 EUR -0.54 14 13.7 -1.23 JPY -0.34 12 0.84 CNY -0.08 -0.71 10 KRW 0.35 -3.21 ZAR 8 0.86 7.1 -0.27 SGD 1.18 6 6.1 0.63 MYR 1.55 4 4.2 -0.50 PHP 1.90 -2.03 2.67 2 THB % 1.74 IDR 2.78 0 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 -5.0 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 2015 2016 2017 2018 2019 Source: Bank Indonesia 84

  78. 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 85

  79. 4 Strate tegie ies to Achieve the Infla latio tion Target 2018-2019 Target get 20 2020 20-20 2021 Target get Achieving inflation at 3,5%±1% Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining core inflation • • Maintaining volatile food stability at 4-5% Maintaining volatile food inflation less than 4% • • Controlling administered price inflation Controlling administered price inflation • • 4 Strategie egies 1. Price Afforda dabili lity 2. Supply ly Availa labili lity 3. Well l Managed d Distri ribution 4. Effective Communication Strengthening production, Encouraging Government trade Improving Strengthening Stabilizing Managing Strengthening Improving data food reserves cooperation trade central-regional the price demand side institution quality and food between infrastructure coordination export-import regions management Source: Bank Indonesia 86

  80. Improving ing the Effectiv tivene eness of Moneta etary ry Polic icy Trans nsmis missio ion Bank k Indone onesia has instit ituted a Refor ormulatio ion of Monetary ry Policy Opera rations ions Framewor ork which h consis ists of 3 pillars rs; (1) implementatio ion of BI 7day Revers rse Repo o 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. Reformulatio tion of Moneta tary Policy Operatio tional Framework Implementa tatio ion of Money Implementa tatio ion of Reserve Implementa tatio ion of BI 7 Marke ket Deepenin ing Requir irement (RR) Day Reverse Repo Rate te Program Averagin ing Enhancement of monetary policy Enhancement of banking liquidity Enhancement of instruments signal management and transactions Source: Bank Indonesia 87

  81. Enhanc ncem ement nt of Moneta etary ry Operatio tions ns Framew ework rk PREVIOUS JIBOR Can be traded among contributor banks for 10 • minutes. Up to the amount of Rp10 billion. • Up to 1-month tenor. • CURRENT JIBOR (as per June 1 st , 2016) Can be traded among contributor banks for 20 • minutes. Up to a total of Rp20 billion. • Up to 3-month tenor. • Source: Bank Indonesia 88

  82. 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 od, domestic ic capi pital marke rkets and insurance premiu ium is is also rising. Banki nking ng interm rmediati ation n still grows moderately ately at 7.05% in Nov-19 Meanw nwhile le, Fina nanc ncing ng distri tribu bute ted by multi-fina nanc nce compani nies is despite the econo nomic c slowdown. n. conti ntinu nued to grow at level l of 4.47% yoy. IDR tn yoy yoy IDR Tn Bank Loans YoY Growth (rhs) Financing Growth (rhs) 6,000 16% 500 12% 470.7 5524.2 14% 450 5,500 10% 400 12% 350 8% 10% 5,000 300 7.05% 8% 250 6% 4.47% 4,500 6% 200 4% 150 4% 4,000 100 2% 2% 50 3,500 0% 0 0% 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 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 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. The gross premium um revenu nue growth th picks ks up in 2019. IDR Tn Life Insurance Premium Growth 180 60.00 General & Reinsurance Premium Growth IPO Rights Issue Corporate Bond & Sukuk 160 50.00 140 123 120 40.00 100 Nov-19, 20.07 30.00 80 20.00 60 29 40 10.00 Nov-19, -0.20 20 14 0.00 0 Jan-16 Jan-17 Jan-18 Jan-19 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 23 Des -10.00 2019 -20.00 Source: Financial Service Authority (OJK) 89

  83. Financ ncial ial Instit itutio tions ns Remain in Robus ust Dom omestic 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 ofit itabil ilit ity and levera rage are still constantly at a sufficie ient level. 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 CAR of the banking nking sector remaine ined d high and stabl ble at 23.81% with Tier reported d up to 725% in Nov-19. 19. 1 capit ital al at 22.20% as of Nov-19. Life Insurance (Lhs) General Insurance (rhs) 26.0 329 22.20 CAR Tier 1 800 350 23.81 24.0 700 300 22.0 600 250 725 20.0 500 200 18.0 400 150 16.0 300 14.0 100 200 12.0 50 100 10.0 0 0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Profi fitabil abilit ity of the banking king sector has been n relatively stable during ing the Gear aring ing ratio io of multi-fina finance e compan anie ies is low and steadil adily maintain ained ed last three years with the highest net interest margin in in the regio ion. n. at 2.63 times in Nov-19. 19. Net Interest Margin Return on Assets 4.0 % 6.0 3.5 4.89 5.0 3.0 2.63 2.5 4.0 2.0 3.0 1.5 2.47 1.0 2.0 0.5 1.0 0.0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Source: Financial Service Authority (OJK) 90

  84. 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 onstra rates a suffic icient level of of 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 ormin ing financin ing remain ins below ow the thresho hold. Investment nt adequacy quacy ratio io in the insur urance ance indus ustry was kept above The ratio io of liquid id assets to deposit it and LA/NCD NCD in the banking king 100% 100% sector is maintaine ained d at a suffi fici cient nt level. % 250 % 140 Liquid Assets to Non-Core Deposits (lhs) 30 130 Liquid Assets to Deposit (rhs) Life Insurance General Insurance 21.1 25 200 185.1 120 110 20 100 150 90 15 80 99.6 100 116 10 70 threshold LA to Deposit = 10% 60 5 50 threshold LA/ NCD= 50% 50 40 0 0 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 As of Nov-19, the gross & net NPL ratio ios of the banking king sector were NPF ratio io of the multi-fi finance nance indus dustry constant antly remaine ned d below 3% 2.77% & 1.20% respectiv ively, well maintai aine ned far below the threshold. in 2019, and current ntly at 2.52% as of Nov-19. NPL Net NPL Gross % 4.00 3.5 3.50 2.77 3.0 3.00 2.52 2.5 2.50 2.0 2.00 1.20 1.5 1.50 1.0 1.00 0.5 0.50 0.0 0.00 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Jan-17 Feb-17 Mar-17 Apr-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 May-17 Nov-17 May-18 Nov-18 May-19 Nov-19 Source: Financial Service Authority (OJK) 91

  85. Manag ageable able Marke ket Risks ks Amidst the incre reasing marke rket vol olatility, the he ris isk pro profile of of financial institutions ons re remains manageable. Ne Net ope open pos position on of of the he banking sector or was main intain ined at at a low level, level, while the investment value of of domestic ic instit itutiona ional investor ors 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 Mutua Mu tual funds’ ne net asset value lue (NAV) is is ste teadily ly inc ncreasing ng with lo low belo low the maximum limit (20 20%). vola lati tili lity ty. % IDR Tn NAV Mutual Funds IDX (rhs) 3 6,800 530 6,600 2.13 500 6,400 470 2 6,200 440 6,000 410 5,800 380 1 5,600 350 5,400 320 5,200 290 0 260 5,000 Apr-19 Sep-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 May-19 Jun-19 Jul-19 Aug-19 Oct-19 Nov-19 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 Multi ti- finance companies’ exposures to foreign debt has generally been The investment nt value ue of insura urance nce & pension n funds are continuo nuous usly mitigate ted throug ugh company ny hedging ng measures. incre creas asing ng. IDR tn IDR Tn IDR Tn 174.77 1,500 400 180 Insurance Pension Funds (rhs) 1102 160 1,200 350 140 900 Domestic Debt Foreign Debt 300 120 600 100 250 102.33 300 277 80 0 200 60 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Source: Financial Service Authority (OJK) 92

  86. Domestic tic Capita ital Marke kets ts Maintain ntained ed Positiv itive Growth wth Dom omestic ic capi pital marke rket perfor ormance is is positiv ive amid the developm opment of of geopol polit itic ics and dynamic ic global econom omy. JCI I the beginning of 2020 is slightly weakened compared to the end of 2019. 2019. Domestic capital al markets perform rmance nce tends to streng ngthen. n. Stock Index x Performance 9 Jan 2020 (compared to 31 Dec’19) Comp Bond Index Comp Stock Index (rhs) 290 7,000 WORLD 1.0 Jan-20, 277 280 THAI 6,500 0.0 S KOREA -0.5 270 6,000 INDO -0.4 260 HKN 1.3 Jan-20, 6,274 5,500 SIN 250 0.8 5,000 PHIL -0.2 240 CHIN 1.5 4,500 230 MAL 0.4 4,000 JPN 0.4 220 EU 1.0 3,500 210 AS 1.5 200 3,000 BRAZ 0.3 TURK Jan-19 Feb-19Mar-19 Apr-19 May- Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 3.1 19 -1 0 1 2 3 4 Indonesia’s bond prices extended its upside movement due to Foreign n porto tofoli lio shows conf nfidenc nce as it recorded signi nifica cant nt net attracti ctive retur urn n and stable ble rupiah buy in the beginn nning ng of 2020. Yield (%) 15500 Gov't Debt Securities Equity 70 10 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs) 15000 50 9 14500 9 Jan’20, 1.86 30 8 14000 10 7 13500 -10 6 13000 8 Jan’20, 1.62 5 12500 -30 Apr-18 Jul-18 Sep-18 Dec-18 Apr-19 Jul-19 Sep-19 Dec-19 Mar-18 May-18 Jun-18 Aug-18 Oct-18 Nov-18 Jan-19 Feb-19 Mar-19 May-19 Jun-19 Aug-19 Oct-19 Nov-19 Jan-20 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 Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance 93

  87. Strateg tegic ic Polic icies ies in Financ ncial ial Secto tor Providing financing alternatives for Goverment Priority Sectors Supporting acceleration of national economic growth Providing financial access to MSMEs especially in remote areas Preparing financial services industry to cope with Industrial Revolution 4.0 Improvement of business process in the industry Source: Financial Service Authority (OJK) 94

  88. Continu tinuous us Progr gram on Capital ital Marke ket Deepening ning …continuously strengthened, including through capital market deepening initia iativ ives es Enhancin ing the supply-sid side Stren engt gthenin ening marke ket infr frast struc ucture  Product: QIB offering and private placements, private  Development of Integrated Licensing (SPRINT). fund, asset-backed securities, REITs, infrastructure  Enhancement of electronic reporting system. fund, IGBF (Indonesia Government Bonds Future) &  Development of electronic public offering. equity crowdfunding.  Integrated data warehouse and supervisory system.  Issuer: Financial conglomerates, big bank debtors, local government, IDX incubators, SMEs, SOEs & big tax payers. Stren engt gthenin ening governa nance & Enhancin ing the demand nd-sid side custom omer er protec ection ion Enhancing the role of the domestic institutional  Development of market players’ capacity  investors (insurers & pension funds) in capital  Enhancement of GCG for publicly-listed companies markets .  Establishment of disgorgement fund Development of the domestic investor base  (conducting investor education programs). Simplification in opening securities account.  Development of regional securities companies.  Development of e-bookbuilding.  Online marketing initiative  Source: Financial Service Authority (OJK) 95

  89. Enhanc ncing ing Financia ial Liter eracy acy & Inclus usio ion 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 oduc ucts & servic ices es by Indon onesia esians ns of all social classe sses. . Such init nitia iativ ives es also so includ ude the enhanc ncement ent of fina nanc ncial ial liter eracy and fina nanc ncial ial consu nsumer er prot otec ection. ion. Promoting the Developing Developing Strengthening establishment financial micro-credit Enhancing the the role of of Islamic education role of the products with Financial Access microfinance models utilizing additional “Investment Acceleration institutions various delivery business support Alert Taskforce ” Taskforce (TPAKD) (“ Bank Wakaf channels (“ KUR Klaster ”) in local areas Mikro ”) The result of OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among ng Indon onesia esians ns compar pared ed to that of 2016. 21.8 .8% 29.7% 38.03% 59 59.7% 67 67.8% 76.1 .19% Financ ncia ial 2013 201 2016 201 2019 Financ ncia ial 2013 2016 201 2019 201 Literacy Inclusio ion 2019 Target: 35% 2019 Target: 75% Source: Financial Service Authority (OJK) 96

  90. A A Comprehens nsiv ive Financ ncial ial Deepe pening ning Program am … strategy egy to tackle challenges in deepening Indonesia’s financial markets In Apr-2016, the Minis ister r of Finance, the Gov overnor rnor of Bank k Indone onesia ia, and the Chair irman of the Board rd of Com ommis issioners rs of the Financia ial Services Autho horit rity launche hed a Coor ordin inatio ion Foru rum for r Developm opment 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 opment ” Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN 1 2 3 POLICY COORDINATION, ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars HARMONIZATION & RISK MANAGEMENT DEVELOPMENT EDUCATION Structure Product Money Bond Stock Syariah FX Market 6 Markets Market Market Market Market Market Fund Market Regulatory 7 Elements Infrastructure Framework of Financial Instrument Market Coordination & Benchmark Rate & Ecosystem Standardization Education Intermediaries Source: Bank Indonesia 97

  91. BI’s Roles in Supporting Distribution of Non -Cas ash Social al Assistan tance (NCSA) BI supports government nt ’s program of 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 onic payment nt system. In the futur ure, electron onic mec echani nism disb sbur urse sement nt will be also applied ed to LPG subsi sidy. . NCSA Program ams Pilot Pi Projec ect Famil ily Hope Program Smart Indonesia ia (Program Keluarga Program (Program Harapan -PKH) Indonesia ia Pinta tar-PIP) Gradual al Impl plem ement entation ion 2016-2020 9876543210 XXYYZZ 1234567 5678 Full Non Cash Impl plem ement entation ion Food Assista tance (Bantu tuan Pangan Non Tunai – BPNT) LPG Subsid idy Inter erconnec ected ed & inter eroperab able paymen ent system Source: Bank Indonesia 98

  92. Progress of NCSA Program ams Family ly Hope Program Non Cash Food Assist stance (Progr gram Keluarga ga Harapan - (Bantuan Pangan Non Tunai - PKH) BPNT) • BPNT is a poverty alleviation and social • The Family Hope Program (PKH) is a program protection program that is managed by the that provides cash to very poor households. central government. It provides subsidized rice Rp 1,89 million /year will be granted for each and eggs to low-income households. Rp 110 household. PKH will be granted every February, thousand/month will be granted for each May, August, and November. household as BPNT that can be used in certain stores which called e-warong. • As of December 2017, PKH has been • As of December 2017, BPNT was distributed to distributed to 6,0 million households on non- 1,2 million households in 44 cities. cash basis. • In 2018, BPNT has been distributed to 10.1 • In 2018, PKH has been distributed to 10 million households (65.1% of the target of 15.5 million households on non-cash basis. million households target). • As of Sept-2019, BPNT has been • As of Sept-2019, PKH has been distributed to distributed to 13.0 million 9.8 million households on non-cash basis with households with realization of realization of 82.52% of the 2019 budget. 68.04% of the 2019 budget. Source: Bank Indonesia 99

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