June ne 202 020 About t Invest estor or Relati lations ons - - PowerPoint PPT Presentation

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June ne 202 020 About t Invest estor or Relati lations ons - - PowerPoint PPT Presentation

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Republic ublic of Indon onesi esia Main intain inin ing Stabil ilit ity y and S d Supporti ting Growt wth, Mit itig igat atin ing g Covid id-19 9 Ris isk June ne 202 020 About t Invest estor or Relati lations ons Uni

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SLIDE 1

June ne 202 020

Republic ublic of Indon

  • nesi

esia

Main intain inin ing Stabil ilit ity y and S d Supporti ting Growt wth, Mit itig igat atin ing g Covid id-19 9 Ris isk

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SLIDE 2

1

About t Invest estor

  • r Relati

lations

  • ns Uni

Unit t of the Repub ublic lic of Indonesi esia

Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part

  • f

its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit – Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Wiwit Widyastuti (International Department - Bank Indonesia, Phone: +6221 2981 8279) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +62213510714) Phone: +62213510714) E-mail: contactIRU-DL@bi.go.id This Presentation Book also can be downloaded from: http://www.bi.go.id/en/iru/presentation/red/Default.aspx

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SLIDE 3

2

What’s New in This Edition

Fiscal l Polic icy Up Updat ates es

…page 49-61

Authorities’ Concerted Efforts towar ard Covi vid-19 19

…page 11-22

Bank Indones

  • nesia

ia low

  • wer

ered ed the BI 7- day Rev ever erse se Repo

  • Rate

te by 25 bps to 4,25% %

…page 82

Comm mmitme itment t to Sustainabil tainability ity and d Climate imate Change e Mitig igat atio ion

…page 73-79

Financ ancin ing g Polic icy Up Updat ates es

…page 62

Outlo look of Domest mestic ic Econom nomy

…page 131

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SLIDE 4

3

Overvie view

1 2 3 4 5 6

Instit ituti tional

  • nal and Govern

ernance nce Effec ecti tiven enes ess: : Ac Accele elera rated ed Reform rms Agen enda da with Instit ituti tional

  • nal Improvem

emen ent Econom nomic ic Factor: Stable le Growth h Prospects ects Amid id Temporary

  • rary Moderat

ration ion External nal Factor: tor: Improved

  • ved Extern

rnal al Resilience lience Fiscal l Performa

  • rmanc

nce and Flexib ibilit ility: : The Design gn of

  • f Econom

nomic ic Recovery

  • very Program

ram Commit itmen ent t to Sustainab inabilit ility and Climate ate Change ge Mitigati igation

  • n

Moneta tary ry and Financi ncial al Factor: tor: Credib ible le Moneta tary ry Polic icy Track k Recor

  • rd

and Favou

  • urab

rable le Financi ncial l Sector tor

7

Progres ressiv ive Infras rastruct ructur ure e Develop velopmen ent: t: Strong ng Commit itmen ent t on Accelera elerati tion

  • n
  • f
  • f Infras

astr tructure ture Provis ision ion

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SLIDE 5

Ins nstit itution utional al an and d Govern ernmen ment t Effectiv ectiven eness: ess: Accel celer erat ated ed Ref eform

  • rms Age

genda da wit ith Instit itution utional l Impr mprovem emen ent

Sec Section tion 1

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SLIDE 6

5

Improving ving Global al Percepti eption

  • n

…with recent impr mprovem ements ents on corrup upti tion n percept ption

  • n inde

dex x and governa rnanc nce e indica dicator

  • r

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

World ldwid ide Govern ernance e Indica icators tors3 Ease se of Doing ing Busine iness ss2 Globa

  • bal Competiti

petitiven enes ess s Index ex1 Corru ruption ption Perceptio ception Index ex4

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

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

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

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SLIDE 7

6

Continuou tinuous s Improvem ement nt of Investmen estment t Clima imate e

…another

  • ther leap on Indonesia’s Rank on Ease of Doing

ng Busines ness (EODB)*

EoDB DB 2020 Rank EoDB DB 2019 Rank Change e in Rank EoDB DB 2020 Points ts EoDB DB 2019 Points ts Change e in Points ts

Ove verall rall 73 73 73 73 69.6 .6 68.0 .0 1.6 Startin ting g a busines ess 140 40 134 134 6 81.2 1.2 81.2 1.2 0.0 Dealing ling with Constr truct uction ion Pe Permit its 110 112 2 66.8 .8 66.6 .6 0.2 Gett tting ing Electri tricit ity 33 33 33 33 87.3 .3 86.4 .4 0.9 Registerin ering g Proper erty ty 106 100 6 60.0 .0 61.7 .7 1.7 Gett tting ing Credit it 48 48 44 44 4 70.0 .0 70.0 .0 0.0 Prot

  • tecti

ting ng Minor

  • rit

ity Inves vestor

  • rs

37 37 51 51 14 70.0 .0 63.3 .3 6.7 Paying ing Taxes 81 81 112 31 75.8 .8 68.0 .0 7.8 Trading ing Acros

  • ss Borders

116 116 67.5 .5 67.3 .3 0.2 Enfor

  • rcing

ing Contrac racts 139 139 146 7 49.1 47.2 .2 1.9 Resolvin lving g Insolv lven ency 38 38 36 36 2 68.1 67.9 .9 0.2

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

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

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SLIDE 8

7

BBB / Stable Baa2 2 / Stable BBB / Negati tive

Feb 2020, Rating g Affi firm rmed at Baa2/St Stabl ble “The affirmation of the ratings is underpinned by a number of credit strengths – including Indonesia’s robust and stable growth rates and a low government debt burden, preserved by consistent fiscal discipline and emphasis on macroeconomic stability – as well as persistent credit challenges.” Apri ril 2020, Rating g Affi firm rmed at BBB, Outloo

  • ok Revi

vise sed from

  • m Stabl

ble e to Nega egative ve “The affirmation reflects Indonesia’s stable institutional settings, strong growth prospects, and historically prudent fiscal policy

  • settings. The negative outlook reflects S&P expectation that

Indonesia faces additional fiscal and external risks related to the COVID-19 pandemic in the next 24 months .” January ry 2020, Rating Affi firm rmed d at BBB/St Stable Indonesia's rating balances a favourable medium-term growth outlook and a small government debt burden compared with 'BBB’ category peers against challenges that include a strong dependence on external financing, low government revenue, and lagging structural indicators such as governance indicators and GDP per capita.

BBB+ BBB+ / Stable

January ry 2020, Rating Upgra grade ded at BBB+/St Stable “The ratings mainly reflect the country’s solid domestic consumption-led economic growth, restrained budget deficit and public debt, and resilience to external shocks supported by flexible exchange rate and credible monetary policies and accumulation of foreign exchange reserves. Since its previous rating review, JCR has been paying particular attention to the continuing reform initiatives pushed by the administration of President Joko Widodo and the content and progress of the economic policy taken by his second administration which took office in October

  • 2019. Among the reform agenda, infrastructure development has continued to progress faster than JCR had

expected.”.

Indone nesia sia Has s Been Rated ed as Investmen stment t Grade de Countr ntry sinc nce e 2017

BBB+ / Stable

March 2020, Rating g Upgra graded ded at BBB+/St Stabl ble “The upgrade reflects the firm implementation of policies to strengthen economic growth potential on the back of a solidified political foundation. As the global spread of the novel coronavirus could strain growth in the Indonesia economy, the government and the central bank are working to shore up the economy and maintain macroeconomic stability. Given the country’s underlying economic strength which remains intact, R&I expects the economy to start to recover if the epidemic is brought under control”

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SLIDE 9

8

Con

  • nce

certed ed Effor

  • rts

ts to

  • Mitigat

tigate Covi vid-19 9 Risk

General al Measures ures

Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. Extension of the emergency status for COVID-19 until 29th May 2020. Permission for civil servants to work from home, while maintaining the continuity of public services. Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols.

5 3 2 1

Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities.

6

Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds.

4

Conducting Rapid Test in 17 provinces with positive patients

  • f Covid-19.

7

Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. Establishment of Contingency Plans in the regions level.

12 10 9 8

Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production.

13

Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations.

11

Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel.

14

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SLIDE 10

9

Government ernment Measur asures es to

  • Mitigat

tigate e Covid vid-19 Risk

Fisc scal and Non Fisc scal al Stimuli muli

Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. Increased disbursements of the Noncash Food Assistance Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. Provided incentives for domestic and international travellers. Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020.

6 4 2 1

Reduced the air passenger service fee (PSF) by 20% for March-May 2020.

5

Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities.

7

Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion.

3

Non Non-Fisc iscal Stimuli li

Relaxation of Income Tax (PPh Article 21). Relaxation of Income Tax on Imports (PPh Article 22). Relaxation of Value Added Tax (VAT) Restitution.

4 2 1

Relaxation of Income Tax (PPh Article 25).

3

Reduce and simplify restrictions on export activities to maintain export performance and competitiveness.

1

Reduce and simplify restrictions on import activities to ensure the availability of raw materials.

2

Fiscal l Stimul muli i Phase e 2 Fiscal l Stimuli li Phase e 1

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SLIDE 11

10

Bank Indonesia’s Meas easure ures to

  • Miti

tigat gate Covi vid-19 9 Risk

To mainta ntain n Monet etary y and Fina nanci ncial Mark rket t Stability

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms Reducing the foreign currency reserve requirement ratio for conventional commercial banks from 8% to 4%, effective 16th March 2020. Reducing the rupiah reserve requirement ratio by 50bps for banks engaged in export-import financing activity in coordination with the Government. Expanding the types of underlying transactions available to foreign investors as hedging alternatives against rupiah holdings in Indonesia.

4 3 2

Measu asures s Launched hed on March 2, 2020 Measu asures s Launched hed on March 18-19, , 2020

1

Source: Bank Indonesia

Global investors may utilise global and domestic custodian banks for investment activity in Indonesia.

5

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- month tenors from three times per week to daily auctions in

  • rder to ensure adequate liquidity.

Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings.

5 3 2 1

Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors.

6

Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market.

4

Strengthening payment system policy to support COVID-19 mitigation efforts .

7

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SLIDE 12

11

Exit it Strat rategy egy

The Urgency of Exit Strategy for Indonesia

Source: Coordinating Ministry for Economic Affairs

The Indonesian economy is experiencing very heavy pressures, both in the supply side (business, industry - production) and in the demand side (people's purchasing power - consumption) Health Issues  Potential Economic and/or Financial Crisis  Potential Social Problems. New ew Norm

  • rmal

al is a Scenario to Maintain a Balance between Health Aspects that must be safeguarded, and Social-Economic Aspects that must continue to maintain welfare (livelihood) The New Normal al Scenar nario io is is implem lemen ented ed by by:

  • Data-based Public Health Indicators:
  • Epidemiology
  • Public Health Surveillance
  • Health Care Facilities

which becomes a Neces essary ary Condition ition that must be met.

  • Requires readiness from the Public Sector to be opened :
  • Health protocol (SOP) in each public sector
  • Community awareness, compliance and discipline

New Normal Imp mpleme menta ntati tion n in Indonesi nesia

The e possib ibili ility of shiftin ing communit

  • mmunity grou
  • ups

s due e to prolo

  • longed

ed loc

  • ckdown

Vulnerable community Low saving Informal sector

Poverty Line

Poor People

Informal sector

56.50% or 74.03 million Indonesian work in informal sectors with an average income of USD 100 – 200 per month. Savings and the accumulation of wealth to survive (especially informal workers) are very small

  • The fiscal capacity of the state is very limited
  • The Government is unable to fund all communities affected by COVID-19.

Social Aid is prepared within a limited period (3 months, 6 months)

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SLIDE 13

12

New Normal mal

Achieving Productive and Safe Indonesia from Covid-19

Source: Coordinating Ministry for Economic Affairs

  • Covid

id-19 Cases ► A declining number of cases, number of suspects, and deaths within 14 days ► Rt < 1

  • Monit

itorin

  • ring

g of the virus / P Public ic Healt lth ► The number of tests and contact tracing increases (not

  • nly in big cities but also in regions)

► The application of the use of masks is increasingly expanded (mask for all)

  • Health

th servic ices es capac acit ity ► Medical personnel, PPE ► Availability of drugs, ICU room, ventilator

  • Busines

ess sector tor prepara arati tion

  • n

► Establishing new SOPs/guidelines at work (temperature measurement, masks at work, distance keeping, etc.)

  • Public

lic Respons nse ► Discipline the application of new protocols for activities ► Submission of information that is accurate, official and transparent by the government to the public

Necess ssary y Conditi ditions ns New Prot

  • toc
  • col (General

al)

Make sure to clean your hands with soap and clean water Wear a mask when doing activities outside (mask for all) Apply physical distancing (1.5 - 2 m) Self-isolation if exposed to positive cases and illness Temperature check-in each building Under the Decree of the Minister of Health (KMK) number HK.01.07 / MENKES / 328/2020, the new protocol includes:

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SLIDE 14

13

Protocols cols in Every y Economic

  • mic-Socia

Social l Sect ctor

  • r

Source: Coordinating Ministry for Economic Affairs

Sec ector

  • r

Prot

  • toc
  • col

Impo mportan tant Point

GENERA RAL

Decree of the Minister of Health (KMK) number HK / 01.07 / MENKES / 328/2020 about Covid-19 Prevention and Control Guidelines in Office and Industrial Workplaces in Supporting Business Sustainability in Pandemic Situations Regulate:

  • Rules at Work
  • Rules for Workers
  • Alleged

Covid-19 Management (OTG, PDP, ODP,

  • r

Confirmation)

  • Coordination between workplace and Regional Government

INDUSTRY

Minister

  • f

Industry Circular No.4 / 2020 about Implementation of Factory Operations in the Corona Virus Disease-19 Public Health Emergency Regulate:

  • Rules for Industrial Estates
  • Rules for Workers
  • Cleaning and Disinfection Guide
  • Social Distancing Guide

TOURIS RISM

Standard Operational Procedure (SOP) is in the process of harmonization with the Task Force Arranging SOPs for Hotels, Homestay, Restaurants, Travel Attractions, Art Venues, Film Production, TV Coverage

TRANSP SPOR ORTATION ION Transportation Minister Regulation No.18 of 2020 about

Transportation Control in order to Prevent the Spread of Covid-19 Virus Regulate:

  • Transportation control for the whole region
  • Transportation control in areas designated as PSBB (Large-scale

Social Restrictions)

  • Transportation control for homecoming activities in 2020

TRADE

  • SOP
  • n

Health Protocol for Modern and People’s/Traditional Market and Retail - Ministry of Trade

  • Protocol
  • n

Prevention

  • f

Covid-19 Distribution in Shopping Centers - Source: Association of Indonesian Shopping Center Management Regulate:

  • Rules in the Market Environment
  • Rules for Traders and Management
  • Rules for Consumers
  • Operating Time
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SLIDE 15

14

Govern ernment ment Measure ures s to Mitigat igate e Covid id-19 Risk

Government Regulation In UU 2/2020, Previously Perppu No.1 2020

Source: Coordinating Ministry for Economic Affairs

Regulat ates es two topi pics: s: (1) Nationa nal Budget t (APBN) and (2) Fina nanci ncial Sector

  • r Policy

Natio ional al Budget t (APBN) N)

1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Lending to LPS. 5. Issuance of SUN and SBSN can be purchased by BI, BUMN, coIDRorate investors and / or retail investors. 6. Use of alternative budget sources for example SAL, education endowment funds, and funds managed by the Public Service Agency. 7. Taxation Policy: a) Decrease in CoIDRorate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19.

Financi ancial al Sec ector

  • r Polic

icy

1. Improved Coordination among KSSK members 2. Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys SUN on the primary market, lending to LPS and OJK may request a merger or consolidation of Financial Services Institutions. 3. Foreign exchange management (LLD) management for residents 4. Increase public confidence without causing moral hazard.

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SLIDE 16

15

Govern ernment ment Measure ures s to Mitigat igate e Covid id-19 Risk

Budget Refocusing Policy

Source: Coordinating Ministry for Economic Affairs

I. I. Pr Pres esid idential Regula latio ion (Perp rpres res) No No 7/2020 2020 on

  • n Tas

askforce to to Manage CO COVI VID-19 19 Outb tbrea eak → Renewed th through Pres eside dentia ial Regula lation (Per erpr pres es) No No 9/2020 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources II. II. Pr Pres esid idential Instru ruction

  • n (In

Inpres res) No No 4/2020 2020 con

  • ncern

rning Refocusing of

  • f Activiti

ties es, Reallo locatio ion of

  • f Minis

istry/Ag Agency Bud udget, and Pr Procurem ement nt of

  • f Goods
  • ds an

and Ser ervices es in in th the Framework of

  • f Mitiga

gatin ing COVID-19 19 Outbreak ak and Min inis istr try of

  • f Fin

inance Circula lar (SE) E) No No 6/2020 on

  • n Ref

efoc

  • cusing

ng Acti tivity and nd Reall ealloc

  • cation
  • n of
  • f Mini

Ministry/Agen ency Budge udget in in the the Frame ramework of

  • f Miti

Mitigati ting CO COVID ID-19 19 Outbre Outbreak ak 1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak in accordance with COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly, simply and accountably) III. I. Poli

  • licy to

to sup uppor

  • rt ef

effor

  • rts to

to adj adjus ust region regional allo allocat ations ns and and relax relax trans transfers rs for

  • r handli

handling Co Covid vid-19 19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation (Permendagri) 20/2020 on acceleration of COVID-19 Mitigation in the Scope of Regional Government IV.

  • V. Govern

rnmen ent Regulat ation

  • n Number

er 23 23 of

  • f 2020 for Im

Imple lemen entat ation of

  • f the Nati

tional al Econ

  • nomic Recover

ery Pr Progr gram in in the Context of

  • f

Sup Suppor

  • rti

ting St Stat ate Fi Finan nancial al Poli

  • licies

es for

  • r Han

Handli dling Cor Corona

  • na Virus

irus Dise isease ase 2019 (CO COVID ID-19 19) and and / or

  • r Fac

acin ing Threa hreats ts that that Harm Harm Nati tion

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SLIDE 17

16

Mechanism nism of Interest erest Subsid sidy y Alloc

  • cation

ation to MSMEs Es

Source: Ministry of Finance

CRIT ITER ERIA IA OF DEBT BTORS ORS DISTR TRIBUT IBUTORS RS PERIOD OD

 Bank  Financial Companies  Government credit channeling institution in SOEs, BLUs, and / or cooperatives Period of 6 months starting from May 2020  MSMEs with a maximum loan ceiling of 10 billion  Not on the National Blacklist for loans  Credit quality before Covid-19 (29 Feb 2020) Collectability 1 / Collectability 2  Have a Tax Identification Number (NPWP) or register a TIN/NPWP  Restructuring credit, especially for debtors with loans

  • f more than IDR500 million to IDR10 billion.

Interest erest subsid idy polic icy is a relie lief aid d for ultra ra micro and MSMEs MEs that have e loan ans in finan ancial ial instit itutio ions, , so that they can an survi vive even en though their ir business ess has dropp

  • pped

ed signif ifican icantly ly

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SLIDE 18

17

People's ple's Business iness Loans ns (KUR) UR) Polic licy y During ing the Covid id-19 9 Pa Pandemic ndemic Period riod

Source: Ministry of Finance

17 17 A.

  • A. Additional

dditional KU KUR In Inter eres est/Ma Margin rgin Subsidi idies

  • In order to provide interest relief

for KUR installments / margins in the Covid-19 period, the government provides additional KUR interest/margin subsidies for 6 months until 31 December 2020.

  • Additional interest subsidies /

KUR margins during the Covid-19 period were 6% for

  • r the

the fir irst 3 mon

  • nth

ths and nd 3% for

  • r the

the sec econd nd 3 months hs.

B. B. Speci pecial al KUR UR pr prov

  • vision

isions for

  • r

KUR UR rec ecip ipient ients affected ected by by Covid id-19 19: The relaxation of KUR special provisions for KUR recipients affected by Covid-19 is in the form of:

  • a. Provision of pos

postponem ponement ent of

  • f KUR

KUR pr principa incipal ins install llmen ments for

  • r

a ma maximum imum pe perio iod

  • f
  • f

6 mon months according to the assessment of KUR Distributors shall take effect on 1 April 2020 until no later than 31 December 2020; and/or b.

  • b. KUR

UR restructur ucturing ing provisio isions ns in in the form of

  • f:

i. Extension of KUR period; ii. Additional KUR ceiling limit; and / or iii. Delay fulfillment

  • f

administrative requirements in the restructuring process until the end of national disaster period of Covid-19 pandemic. Specia pecial Provi

  • visions

ions for

  • r KUR

UR for

  • r Pros
  • specti

pective KUR UR Recipients cipients affected ected by by Covid id-19 19:

  • Relaxa

elaxation ion of

  • f ful

ulfil illment lment of

  • f adminis

ministrativ ive requir equiremen ements in in the pr proc

  • ces

ess of

  • f KUR

UR Appl pplica ication ion, such as the Business Registration Number (NIB) or micro and small business certificate issued by authorized

  • fficials

and/or

  • ther

equivalent certificates, NPWP, additional collateral documents, and/or

  • ther

administrative documents ; and/or

  • Relaxat

elaxation ion of

  • f ful

ulfil illme lment nt in in the he for

  • rm of
  • f a

temporary emporary delay elay in in the admini ministration ion of

  • f

admini ministrativ ive doc

  • cume

ument nts until the end

  • f

national disaster

  • f

Covid-19 pandemic set by the government.

People's le's Busines iness s Loan ans s (KUR UR) ) Policy icy durin ing the Covi vid-19 Pandem demic ic Perio iod

Awarded to KUR Recip ipie ients nts who have credit dit qualit ality as of 29 Feb 2020 in the category of perform

  • rming

ing loans Col

  • l. 1 or 2.

Awarded to KUR Recip ipie ients nts affec ected ed by by Covid id-19 according to specific criteria and requirements. (Article 3: for recipients of Micro KUR, Small KUR, Special KUR; Article 4 for KUR TKI recipients) Awarded to prospective KUR recipients affected by Covid-19 in accordance with established criteria and requirements (Article 5) For KUR Recipients ients For KUR Recipient ient Candida idates es

slide-19
SLIDE 19

18

Pre-Em Emplo ployment yment Card d Program

  • gram

Source: Coordinating Ministry for Economic Affairs Not t curren entl tly y atte tending forma mal educati tion

  • n

Indon

  • nesia

esian Nati tion

  • nal

≥ 18 years-ol

  • ld

ELIGIBLE BLE TO REGISTER ER

The program is also aimed at workers who are laid off or lost their jobs, and Micro and Small Business Actors (MSEs) who close their businesses due to the impact of the Covid-19 pandemic.

Terms of Rec ecip ipie ient Prior

  • rit

itie ies s on Affec ected ed Workers

Covid-19 affected workers are prioritized, based on reconciliation data (Ministry of Manpower & BPJS Employment) there are 1,722 722,958 958 affected cted worker kers.

  • A. Form

rmal l Worker: rker:

1.032.794 people 375.331 people Formal Workers are dismissed Formal Workers are laid-off

  • B. Inform
  • rmal

l Worke ker:

Affected Informal Workers 314.833 people Date as of 27 April 2020

Each recipient of the Pre-Employment Card receives a total benefit package of IDR3,55 550,000 000, consisting of: a. a. The The trainin ining fee assistan istance ce is IDR1,000 000,00 000 which can be used to purchase one or more trainings on the digital platform’s partners. b. b. The The incen entiv ives es will be transferred to the participant's bank acco count unt or e-wallet LinkAj nkAja, Ovo or GoPay. This incentive consists of 2 parts: 1. 1. The The first post-compl completion ion training ining incent centiv ive is IDR 600,000 per month for 4 months = IDR2,400 400,000 000; 2. 2. Incenti entives es for fill lling ing out

  • ut the evalua

luatio ion surveys eys of IDR 50,000 per survey for 3 surveys = IDR15 150,000 000.

Benef nefit it Amoun

  • unt
  • Indonesia needs to prepare human resources for economic transformation in the Industrial Revolution 4.0 and the Digital Economy, as well as increase the

Productivity and Competitiveness of Indonesian HR.

  • To prepare these HR needs, one of them is through the Pre-Employment Card Program which provides training costs for developing work competencies

including Skilling, Upskilling and Reskilling.

  • On 11 April 2020, this program was officially launched and received a positive response from the community.
slide-20
SLIDE 20

19

Pre-Em Emplo ployment yment Card d Program:

  • gram:

Statistical Data & Recipient of Pre-Employment Cards

Source: Coordinating Ministry for Economic Affairs

  • From the 3 registration period, there are 10.9 million people who have registered for the Pre-Employment Card. A total of 7.8 million

people have verified email and 5.6 million people have done NIK (Identity Card) validation.

  • There were 680,918 participants who had received the Pre-Employment Card.

Note: Data as of 22 June 2020

Total Train inin ing g Purcha chases ses

573,00 000

Partic ticip ipan ants s Receiv iving ing Incentiv ives

361,0 1,000 00

Partic ticip ipan ants s Comple letin ting One Train ining ing

477,00 000

Pre-Em Emplo loymen ent t Card Recipient ient Progres ress Regis istered ered Accoun

  • unt

Verif ified ied email il Verif ified ied NIK Join in Batc tch

10,998,3 ,315 7,846,46 ,465 5,706,33 ,333 5,028,7 ,729

Approve

  • ved

d Partic icipan ants ts

680 680,918 Enrolme

  • lment

t Progress ss

53371 403190 51548 169275 3535

Elementary… High… D1,D2, D3 Undergradu… Master & PhD

Male 61% Female 39%

Pre-Emplo loymen yment t Card d Recipien ient Profil iles es

268571 292978 83418 30910 5043

18 - 24 25 - 34 35 - 44 45 - 54 55 and…

Gender der Age e Grou

  • up

Educatio ion Leve vel

slide-21
SLIDE 21

20

Fiscal cal Incentiv tives es

Source: Coordinating Ministry for Economic Affairs

TAX ALLOW LOWANCE CE TAX HOLID IDAY SUPER DEDUCTIO CTION (VOCA CATION IONAL & R&D R&D) INVESTMENT ALLOWA OWANCE

  • Government support for

employment creation and employment programs

  • The facility is in the form
  • f a 60% reduction in net

income from the total investment for specific labor-intensive industries

  • For investment in the

pioneering industry which has broad links, provides added value and high externalities, introduces new technologies, and has strategic value for the economy

  • Facility

for reducing coIDRorate income tax by 100% (for a minimum investment of IDR 500 billion) or by 50% (for a minimum investment of IDR 100 billion) Vocati ationa

  • nal Super

er Dedu educt ction ion

  • Involve

the industry in vocational activities to provide knowledge and encourage the transfer of knowledge

  • Maximum gross income

reduction

  • f

200%

  • f

costs in the context of providing work practices, apprenticeship, and / or learning activities R&D R&D Super er Ded eduction uction

  • Increasing the role of the

industry in fostering innovation and utilizing the latest technology in the production process

  • Maximum

reduction in gross income of 300% of R&D costs carried out in Indonesia

  • Invest in priority sectors with

criteria for having high investment

  • r

export

  • riented,

absorbing high labor

  • r

using high local component

  • Facilities in the form of an

investment allowance

  • f

30%, depreciation and amortization are accelerated with a 10% dividend income tax and additional compensation for losses that are longer than 5 years

Trust & Verify

  • The initial easiness process is in line with the

principle of self assessment

  • Verification process conducted under

framework of supervision Simplicity & Certainty

  • Procedure simplification
  • Provide clear rights and obligations

The The Go Governmen ment

  • f
  • f

In Indones donesia ia iss issues es var arious

  • us fisc

iscal al incen incentiv ives es to to de develop elop the he man manufactu turin ing indu industr try, attra ttract investm estmen ent, t, abso absorb em emplo loymen ent, t, and enhanci ancing econom

  • nomic

ic growth wth

slide-22
SLIDE 22

21

Fiscal cal Incentiv tives: es:

Tax Holiday Realization as of 31 May 2020

Source: Coordinating Ministry for Economic Affairs

Not

  • tes

MoF MoF Regulat lation ion 150/2018

Type e of Taxpay xpayer ers New investment in pioneer Industry with a minimum investment value of IDR500 Billion

  • 18 sectors
  • 169 ISIC

Percen centage ge Reduction uction T/H

  • 100% (Tax Holiday)
  • 50% (Mini Tax Holiday)

Time e Frame me Tax Holid iday: ay:

  • Investment value IDR500 B to < IDR1 T –>

5 years

  • Investment value IDR1 T to < IDR5 T –> 7

years

  • Investment value IDR5 T to < IDR15 T –>

10 years

  • Investment value IDR15 T to < IDR30 T –>

15 years

  • Minimum Investment IDR30 T –> 20 years

Mini i tax holid iday ay:

  • Investment value IDR100 B to < IDR500 B

Trans nsition ion Period iod

  • 50% for 2 years (tax holiday)
  • 25% for 2 years (mini tax holiday)

Proces cess Using OSS 18 Sectors ctors accordi ccording to MoF Regula latio tion No. No.150 150/2 /2018

  • a. Upstream base metal industry (steel and non-steel)
  • b. Oil and gas purifying and / or refining industries
  • c. Petrochemical industry based on petroleum, natural gas or coal
  • d. Basic inorganic chemical industry
  • e. Organic-based chemical industry sourced from agricultural products, & plantations

f. Raw material for pharmaceutical industry

  • g. Manufacture of irradiated, electromedical or electrotherapy equipment
  • h. Manufacture of main components of electronic or telematics equipment, such as

semiconductor wafers, backlights for Liquid Crystal Display (LCD), electrical drivers,

  • r displays

i. Manufacture of machinery and major components of machinery j. Robotics component manufacturing industry that supports machinery industry

  • k. Manufacture of main components of electric power generator machinery

l. Manufacture of motorised vehicles and major components of motorised vehicles

  • m. Shipyard
  • n. Train and railways manufacturing industry
  • . Manufacture of major components of aircraft and supporting activities of the

aerospace industry

  • p. Agriculture, plantation, or forestry-based processing industries that produce pulp

without or with any of its derivatives

  • q. Economic infrastructure
  • r. Digital economy which includes data processing, hosting, and activities related to it

Fisc scal Incenti ntives es To A Attrac ract t Invest stment ent And Boost t Expor

  • rts

ts

  • Tax holiday facility is given to 75

75 taxpay xpayer ers

  • The capital investment plan is ID

IDR1,249 249.23 23 trill illion ion, with the largest investment reaching IDR123 trillion. Those investments are estimated to absorb 59 59,016 016 worker kers.

  • Project location : 21

21 provinc inces es

  • Investor’s Country of Origin: 14

14 Countr ntries ies

slide-23
SLIDE 23

22

Fiscal cal Incentiv tives: es:

Super Deduction For Research & Development

Source: Coordinating Ministry for Economic Affairs

Subje ject

Object ct

Domestic coIDRorate taxpayers who carry

  • ut

certain research and development (R&D) activities in Indonesia. Certain R&D activities in Indonesia, the costs of which are charged within a certain period.

Am Amoun

  • unt

t of faciliti lities es (propos

  • posed)

d)

Stages es RPMK Real Cost 100% Addit ditional ional:

  • Commercialisasion

100%

  • Registration of Intellectual Property Rights (IPR) in the form of

Patents or Plant Variety Protection Rights (PVT) in the country 50%

  • Registration of IPR abroad / product innovation

25%

  • Collaboration with government / private R&D institutions

25% Tot

  • tal

al 300%

The The Go Governme ment develo elopin ing a su super de deduction ion tax ax sc scheme me to to pr provi vide de busin sines esse ses wi with in incen centiv tives es to to condu

  • nduct res

esear arch an and de developmen elopment in in the the hopes of

  • f spurrin

ing innovat ation ion

Incom

  • me Tax Law (Law No.7

.7/1983 jo. Law No. 36/2018)

Law No.

  • No. 45/20

/2019

Article 35: Matters that have not been sufficiently regulated by law are further regulated by Government Regulation Article 29C:

  • Facility for reducing gross income for domestic

taxpayers condu

  • nducti

ting ng cer ertain ain re resear earch and nd devel velop

  • pmen

ent activities in Indonesia

  • The maximum gross income reduction facility is

300% of the cost

  • Further

arrangements through technical regulations

Tec echn hnical ical Regulati lations (RP RPMK MK)

In the process of coordinating the drafting of the Minister of Finance Regulation (IDRMK) with the Ministry of Finance, the Ministry of Research and Technology, and the Ministry of Industry

slide-24
SLIDE 24

23

Medium um-Term erm Nation ional al Developm lopmen ent t Plan n (RPJM JMN) N) 2020 2020-2024

President’s Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based

  • n Mutual

ual Coopera rati tion". n".

Source: Coordinating Ministry for Economic Affairs

1

Improvin ing the Qualit ity of the Indon

  • nesia

esian Labou

  • ur

Force ce

2

Achie ieving ing Prod

  • ducti

ctive, , Indepen ependen ent t and Comp mpetit etitiv ive e Eco conomic mic Struct cture

3

Atta tain inin ing Equitabl quitable and Pros

  • sperou

perous Nati tion

  • nal

Develop elopme ment

4

Achie ieving ing Sust staina inable Enviro ironment mental Climat ate

5

Devel elop

  • ping

ing Cultu tural Prog

  • gres

ess Reflecti ting g the Nation ion's Personalit ity

6

Develop evelopin ing a a Dignified ed and Trust stwor worth thy y Lega egal Sys ystem em Free Free from

  • m Cor
  • rruption

7

Protect

  • tectio

ion of All All Nati tion

  • ns and

and Prov

  • vision

sion of Secu curit ity y to All Citizen ens

8

Attain ining Good

  • d,

, Ef Effecti ective, , and and Reliable Govern ernance

9

Achie ieving ing Synerg ergy y of Gov

  • vern

ernmen menta tal Framewo mework with the Region

  • nal Governmen

ent Stren ength then ening ing Econ conomi

  • mic

c Resi esilien ence ce to Achie ieve Superio perior Econ

  • nomi
  • mic Growth
  • wth

Devel elop

  • ping

ing Mor

  • re

e Remo mote Region gions to to Reduce e Econ

  • nomi
  • mic Gaps

ps and Improv

  • ve Equa

qualit ity Impr prov

  • vement

ment of Qualit ity and Compet mpetit itiv ivenes ess of the e Labour Force ce Enga gaging ing in Menta tal Revolu evoluti tion and Cultu ture e Devel elop

  • pmen

ment Stren ength then ening ing Infrastructu cture e to

  • Supp

pport

  • rt Econo

conomi mic Devel velopm pmen ent t and Improv prove Basi sic Services ces Conse servati tion

  • n of Enviro

ironmen ment, t, Supp pporti ting Clima mate te Change, e, and Enhanci cing Disa saster ter Resil silie ience ce Enhanci cing Polit itical, ical, Lega egal, Defen ense e and Stab ability ty and Transformi

  • rming Public

ic Servi vice ces

1

HR HR Develo lopmen ent

2

Infrastruc ucture Develo lopmen ent

3

Regulat lation ion Simp mplif ific ication

  • n

5

Econom

  • mic

c Tran ansformation

  • n

4

Simplifi lifica cation ion of Bureau aucr cracy cy

Presid esident‘s Miss ssions Top 5 Presid esidentia tial l Prio ioriti ities 7 7 RP RPJM JMN N De Development Agenda

slide-25
SLIDE 25

24

Simplify plifying ing Regulat ulations ions throu

  • ugh

gh Omnibu ibus s Laws

Omnibus us Laws Group p a D Diverse Range of Issues sues into Legisl slati tion, n, Aimed d at Creati ting ng Jobs and Empoweri ering ng SMEs. s.

1Under discussion

Source: Coordinating Ministry for Economic Affairs

Financial Sector1 T axes

Investment

Labour

Omni Omnibus Law Pri riori

  • rity Sect

ctors

  • rs

1) Simplification ofLicensing 2) Investment Requirements 3) Employment 4) Ease, Empowerment and Protection of MSMEs 5) Ease of Doing Business 6) Research and Innovation Support 7) Government Administration 8) Imposition of Sanctions 9) Land Acquisition 10) Government Investment and Projects 11) Economic Zone

11 Cluster ters s of Omnibu bus s Law Cipta Lapa pangan Kerja (Job Creati tion

  • n)

) 6 Pillars of Omnibus Law w Perpa pajakan (Taxa xati tion

  • n)

1) Investment Funding 2) Territorial System 3) Personal Taxpayer 4) Taxpayer Compliance 5) Equity of Business 6) Taxation Facility  Following the inauguration of his second presidential term in October 2019, President Joko Widodo announced his administration’s plans to continue regulatory reform by focusing on initiatives such as developing a dynamic and qualified workforce, promoting industry cooperation through technology, further enhancing infrastructure development and economic reform as well as simplifying regulations and bureaucracy.  To achieve such ends, President Widodo’s Government subsequently prepared three bills of omnibus laws, namely an omnibus bill on job creation, an omnibus bill on development and strengthening the financial sector and an omnibus bill on tax provision.  Omnibus laws refer to laws that group diverse and unrelated issues which are drawn into a bill which is accepted in a single vote by a legislature.

slide-26
SLIDE 26

25

The Economic

  • mic Policy

icy Pa Packages ages

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

Phase e III I (7 Oct t ’15) Financial services facilitation, export financing and elimination of business unnecessary burden Phase e IV (15 Oct t ’15) Social safety net and betterment of people welfare Phase e V (22 Oct t ’15) Improving industry and investment climate through tax incentives and deregulation on sharia banking

Harmoni nizing ng Regul ulat ation

  • ns

Simplifying g Bureau eaucrat atic Proc

  • ces

ess Ensurin uring g Law Enfor nforceab eability

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

Source: Coordinating Ministry for Economic Affairs

Phase e XV (15 Jun ’17) Improving logistics In addit ition

  • n to the 16 Policy

icy Packages kages, , on Augus ust 31, 2017 7 the Gover ernment nment has issued sued a Presi sident ential ial Regulat ulation ion No.91/2017 1/2017 for enhanc ancing ing busines siness s license cense service ice stand ndard ard Phase e XVI (1 (16 Nov ’18) Improving the competitiveness and domestic economy

slide-27
SLIDE 27

26

Improving ving the Compe peti titiv tiven eness ess and Domes esti tic c Econom

  • my

The 16th

th Econom

  • mic Policy

y Pac Packa kage has been launched hed

Source: Coordinating Ministry for Economic Affairs

TAX HOLIDAY DAY EXPANSI SION

Backgr groun

  • und

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). Objecti tives es and benefit its 1) Increasing investment and strengthening the industrial sectors from the downstream to the upstream through the expansion of the business sector, KBLI’s pioneer industries, and Special Economic Zones (SEZ) that can receive tax holiday facilities 2) Increasing the process of convenience of filing process and tax holiday facilities provision

EXPORT PROCEEDS DS (DHE) SCHEME

Tax Rates es on Deposit Inter eres est Incom

  • me

Tax Rates es on Deposit Inter eres est Incom

  • me
slide-28
SLIDE 28

27

Other er Progress

  • gress on Econom
  • mic

ic Polic licy y Pa Packages ages

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

Fair, , Simplified mplified & & Project ctable Wage Syst stem

  • The Provinces of Central Java proposed 3

IZ’s: Kendal, Demak, and Ungaran

  • Pharmaceutical IZ in Bitung (North Sulawesi)

in 2017

Indus ustrial trial Zone Developme pment nt of Spesial Economi mic Zone (SEZ)

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

Deregul ulati ation n on Logist stics cs Sector

  • r
slide-29
SLIDE 29

28

Investment estment Incentiv entives es to

  • Boo
  • ost

st Industr ustry y Sect ctor

  • r

BUSINESS INESS EXPAN ANSION ION

  • Tax all

llowa

  • wance

ce

  • Exem

emption ption or relief ief of import port duty ty on capita pital l goods, , machine inery ry or equip ipmen ent for production purposes that can not be produced domestically;

  • Exem

emption ption or relief ief of import port duty ty on raw materi terials ls or auxil ilia iary ry materia terial l for production purposes for a certain period of time and certain conditions;

  • Exem

emption ption or suspe spensio sion of VAT on the e import port of capita pital l goods or machine inery ry or equipm ipmen ent for production purposes that have not been produced domestically for a certain period of time;

  • Accelerate depreci

reciation tion or amortiz

  • rtization

tion (part of tax allowance); and

  • Property

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

  • Combine with Online Single Submission (OSS)

Tax holid

  • liday of corporate income tax in a certain amount and time

PIONEER NEER INDUS USTR TRIE IES SPECIA CIAL L ECONO ONOMIC MIC ZONE NE

  • No coll

llec ection tion of VAT and Luxury ry Goods

  • ds Sales

les Tax (PPnBM BM), ),

  • Custo

toms s tax exem emption ption,

  • Tax Allow

lowance ce and Tax Holi liday,

  • Suspe

spensio sion of Impo port t Duty ty,

  • 0% Import

port Duty ty for goods produced using local components of a certain level

INDUS USTR TRIA IAL ZONE NE FREE EE TRAD ADE E ZONES NES AND D PORTS TS MICRO, O, SMAL ALL, L, MEDIUM IUM ENT NTERPRISES ERPRISES (MSMES MES) E-CO COMM MMERCE CE

  • VAT exem

emption ption on import or delivery of capital goods,

  • Impo

port t Duty ty exem emption ption on machineries/goods/materials,

  • Tax Allow

lowance ce and Tax Holi liday Exem emption ption of:

  • Impo

port t Duty ty

  • VAT
  • Luxury

ry Goo

  • ods

s Sales les Tax (PPnBM BM)

  • Custo

toms s duty ty Decrea creasing ing MSMEs Es Tax from 1% to 0.5 .5% of gross revenue

  • Sales from customs areas for non

non-small ll entrepren repreneu eurs rs through the market place will be subject to 0.5 .5% incom come e tax and 1% VAT

  • Sales from customs areas for small

ll entrepren repreneurs rs through the market place will be subject to 0.5 .5% incom come e tax

Source: Coordinating Ministry for Economic Affairs

slide-30
SLIDE 30

29

New w Tax Hol

  • lida

iday y Pol

  • licy

icy*

to boost t indu dustr stry y sector

Taxpa payer er

Pioneer Industry with minimum investment value of 1 trillion Rupiah (minimum investment value of 500bn Rupiah for telecommunication sector) Corporat ate Incom

  • me Tax (CIT)

reduc uction ion rate

Conces cession ion perio iod Transiti ition

  • n

After Tax Holid iday ay Not available 100% (single rate)

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

discretion 1. 500Bn – 1Tn : 5 years 2. 1Tn – 5Tn : 7 years 3. 5Tn – 15Tn : 10 years Pioneer Industry with minimum investment value of 500bn Rupiah Applied to 8 industry groups: (i) upstream basic metal industry; (ii) oil and gas refinery industry; (iii) organic basic chemicals industry; (iv) machinery industry; (v) plantation, forest, and fishery products processing industry; (vi) telecommunication, information and communication industry; (vii) marine transportation; and (viii) economic infrastructure Applied to 17 industry groups: (i) upstream base metal; (ii) oil and gas refinery; (iii) petrochemical (oil, gas,

  • r coal based); (iv) non-organic base chemical; (v) organic base chemical;

(vi) pharmaceutical materials; (vii) semiconductor and other components; (viii) communication devices components; (ix) medical devices components; (x) machine manufacturing for industry; (xi) machine main components manufacturing; (xii) robotic components manufacturing; (xiii) ship components manufacturing; (xiv) airplane components manufacturing; (xv) train components manufacturing; (xvi) power plants; and (xvii) economic infrastructure

PROVIS VISIO ION BEFORE RE AFTER ER

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

Source: Coordinating Ministry for Economic Affairs *) MoF has issued a new Tax Holiday policy through Regulation No. 35/PMK.010/2018 (PMK-35) dated 4 April 2018.

slide-31
SLIDE 31

30

Enhan ancing cing Busin ines ess s License nse Servic ice e Stand andar ard

Presi side dent ntial al Regulati ation n to Ac Accelerat rate Ease of Doing ng Busi siness ness has been launche ched

Source: Coordinating Ministry for Economic Affairs

Policy cy Goals

1 2 3 4 5 6

Improve efficient, streamlined, & integrated business license service standards Accelerate the business licensing process Provide business licensing process assurance in terms of the costs and lead times Increase coordination & synergy between central & regional government Overcome the barriers to doing business in Indonesia Implement integrated licensing process (single submission)

Main Policy cy

Forming a Task Force to identify &

  • vercome the end-to-end licensing

barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing

Business license regulatory reforms Implementation of the Single Submission system

1st

st Phase

2nd

nd Phase

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

slide-32
SLIDE 32

31

Improving ing Invest estment ment Climat mate

Online e Single le Submiss missio ion (OSS) Has Been en Launched hed.. ...

Source: Coordinating Ministry for Economic Affairs

OSS is a web eb-base based d busines iness s licensin sing system tem intende ded d to cut the red ed tape e invo volv lved d in obtainin taining business s permit mits and integ egrated ated betwe tween en the centr tral al gove vernme ment t and regio ional al admin ministra stratio ions

Lorem Ipsum Suitable for all category, Enviro ironment ment & Forest stry ry Secto tor Electr tric icit ity Secto tor Public lic Works & Housing ng Sector tor Health th Sector

  • r

Indus ustry ry Sector tor Marine ne & Fishery ery Secto tor Medic icine ine & Food d Sector

  • r

Transporta

  • rtation

ion Secto tor Trade e Sector tor Infor

  • rmation

ation & Commun unic icati ation

  • n

Secto tor Other r Sector

  • r

Secto tors rs The Adva vanta tage ge of Using g OSS Business licenses can be secured in under an hour Standardized business licenses are available Ellectronically integrated The whole licensing process is monitored by the Task Force More practical Accessible at anytime and anywhere

slide-33
SLIDE 33

32

(Pusat Logistik Berikat/PLB) is a facility provided by Ministry

  • f

Finance as part

  • f

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

To To dat ate, e, 52 Bond

  • nded

ed Log Logis istic tic Cen enter er has has be been en lau launche hed to to suppor

  • rt var

ario ious us industries stries.

Improving ving Investmen stment t Clima imate

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil il and ga gas, s, and mining ing indus ustry Food d & beverages verages indus ustry Auto- motive ive indus ustry ry Pe Personal

  • nal

care/ home care e industry Textile ile (cott

  • tton
  • n)

indus ustry Small ll and mediu ium m indus ustry y Synthet thetic ic textile le (chem emic ical al substanc ances) industry. .

Bonded Logistic Center

Heavy vy Equip uipmen ent t indus ustry Defen ence indus ustry Aircraf raft t MRO RO indus ustry

slide-34
SLIDE 34

33

Improving ving Investmen stment t Clima imate e

…revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

Cold storage ge Restaurants, s, Bars Pharmace ceutica ical l Raw Materia ials ls Manufact cturing Sports Center, Film Proces essi sing g Lab, Crumb Rubber

Revision ision of "Partn tnership ip" catego egory y to refer to partn tners ership p with Micro,

  • , Small and

Medium m Ente terprises ses (MSMEs) s) Grandfath ther er Law: w: If a parti ticu cular sector tor is tightened tened in future, e, existi ting g foreign gn invest estor r does s not t need to compl ply y with tighter ter stake Key Reforms ms in Negative e Foreign ign Investmen estment t List st Stren ength then en implementa mentati tion

  • n of nega

gati tive investmen estment t law throu

  • ugh active

ive roles es from ministr strie ies, s, agen encie ies s and regiona ional gov

  • vernments

ments

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

Distrib ibutio ion, Warehousi sing Priva ivate e Museum, m, Caterin ing, g, apparel el Manufact cturing, g, Exhibit bitio ions s & Conventio ions Toll l Road Operator

  • r,

Teleco comm mmunica icatio ion Testin ing g Company Consult ltancy cy for Construct ctio ion1 Teleco comm mmunica icatio ion Provi vider er with Integrated ed Service ices Profess essio ional l Train inin ing, g, Golf Course Management, Air Transp spor

  • rt Support Service

ices, s, Travel el Bureau

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

Introduc roduction tion of New Foreign reign Owners ership ip Regula lati tion

  • n for Stra

rategi tegic c Sectors ctors Source: Investment Coordinating Board (BKPM)

slide-35
SLIDE 35

34

Investment estment Realization lization (Q1-20 2020) 0)

IDR tn

2013 2014 2015

Direct rect Inves estm tmen ents ts

2016

Mining ing Housi sing, g, Industria strial l Esta tate, te, and Offic ice e Build lding ing Food

  • d Industry

try Electrici ectricity ty, , Gas, s, and Water ter Supply pply US$602.9 02.9 mn mn US$1,523.8 ,523.8 mn mn US$298.4 98.4 mn mn US$482.7 82.7 mn mn US$868.6 68.6 mn mn US$806.9 06.9 mn mn Transporta portation tion, , Wareh rehou

  • use,

e, and Telec ecom

  • mmunica

cation tion

50.9%

US$569.4 69.4 mn mn

81. 1.3% 43.1% 21. 1.5% 22.1% 36.5% 149.1% Investme stment nt Realizat zation

Top p 8 FDI I Reali lizatio zation by Sectors tors (Q1-2020 vs Q1-2019) 2019)

Source: Investment Coordinating Board (BKPM), compared to Q1-2019 period

2017

Rp145.4 5.4 T Rp159.4 9.4 T IDR98 98tn tn 434 434,463 463

9.6% 15.6 .6%

9.2% 29.3%

Q1-2016 Q1-2017 Q1-2019 Q1-20 2020 20 Q1-2016 Q1-2017 Q1-2019 Q1-20 2020 20

*

* * person

  • n

37 375,982 ,982 IDR21 210.7tn 0.7tn

8.0%

Q1-2019 Q1-20 2020 20

IDR195 95.1tn .1tn IDR87 87.2tn .2tn IDR10 107.9tn 7.9tn IDR11 112.7tn 2.7tn Chem emica cal l and Pharm rmaceu ceutic tical l Industry stry Meta tal, , Except ept Mach chine inery ry, , and Equipm ipmen ent Industry stry

2018 2019

Food

  • d Crops,

ps, Planta tation tions, s, and Lives esto tock ck US$478.8 78.8 mn mn

120.5% 5%

98,0 112,7 ,7 210,7 20 40 60 80 100 120 140 160 180 200 220 240 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1 FDI DDI TOTAL

2020

decre reasi sing

slide-36
SLIDE 36

Econom

  • nomic

ic Factor

  • r:

Stable le Growth wth Prospect spects Amid id Tempo empora rary y Mode derati tion

  • n

Se Section tion 2

slide-37
SLIDE 37

36

Condu duciv cive e Envir ironmen

  • nment

t

Un Under derpinn inning ing Stable ble Growth wth Fun undamen damental tals s Am Amid d Tempora porary y Modera derati tion

  • n

Larges gest Economy in South h East Asia 4th Most Populous us count ntry in the World ld; 64% in produc uctiv ive age Manag ageab eable le Inflat flation ion Rate Rising ing Middle le Clas ass and Afflue luent nt Customer ers

From commod

  • dity

ty-based sed to manufactu cturing and service ce sectors tors via infrastr structu ture developme

  • pment

From consu sumpti mption

  • n-led to invest

estme ment-led growth

  • wth

via a stron

  • nge

ger manufactu cturin ing sector tor and more investmen estment t initiatives iatives Polici cies es to mainta tain in purch chasin sing g power er to stimu mulate te domesti estic c economy

  • my in the midst

t of weaken ening ing macroe

  • econ

conomic ic condit ition

  • ns

Budget et reform m as a a part t of larger ger economi

  • mic

c reform initiative iative Tax base e to be broadened ed from m

  • ne reduce

e dependen ency cy on commod moditi ties es Fuel subsi sidie ies s sign gnifican icantl tly y reduce ced and spen ending redirec ected ted to more prod

  • ducti

tive e alloca cati tion

  • n

Pruden ent t debt managem gemen ent

Refo form rm-Or Orien iented ed Admin inis istra ration ion

Three e main sources ces of financing ing for investm estmen ent t needs: s: State te and region

  • nal budget,

et, State te Owned ed Ente terprises ises and PPP Conti tinuing ing from 2015 15 polic icy, y, infrastr structu ture will be high gher than fuel subsid sidy Fiscal and non

  • n-fisca

iscal incenti tives es to attra tract ct infrastru tructu cture e investmen estment t and promote mote PPP Infra rastru tructure cture spend ending ing focuse sed on basic ic infrastru tructu cture e proj

  • jec

ects ts

Large e and Stable table Econ

  • nomy
  • my

Consis sisten tent Budget et Refor form New w Economic

  • nomic

Structure High Infrastructu astructure Inve vest stme ments ts

slide-38
SLIDE 38

37

Indonesia’s GDP Growth Momentum Moderated

Grow

  • wth

th Prospe spect Stron

  • ng

g GDP DP Growt

  • wth1

%

Institu stituti tion

  • ns

2020 20 GDP P growth

  • wth

(%YoY

  • Y)

2020 Budget 5.3 Bank Indonesia 0,9-1,9 World Bank (GEP June 2020) 0.0 ADB (ADOS June 2020)

  • 1.0

Consensus Forecast (June 2020)

  • 0.6

Favou

  • ura

rabl ble GDP P Growt

  • wth Compa

pared red to Peers rs2

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – April 2020; * indicates estimated figure %

  • COVID-19 pandemic, which broke out at the beginning of 2020, has affected

Indonesia’s economic growth in the first quarter of 2020. Indonesia’s economic growth stood at 2.97% (yoy) in the first quarter of 2020, down from 4.97% (yoy) in the previous quarter. The drop in domestic demand was largely due to the impact of COVID-19 amid the positive performance of external sector. Moving forward, Bank Indonesia will continue to monitor the dynamic spread of COVID-19 and its impacts on Indonesia’s economy, and will consistently strengthen coordination with the Government and the relevant authority to maintain macroeconomic and financial system stability, and boost national economic recovery.

  • On the expenditure side, the economic growth deceleration in the first quarter of

2020 is primarily affected by the declining domestic demand. Domestic consumption stood at 2.84% (yoy), far lower than the performance in the fourth quarter of 2019 of 4.97% (yoy). Growth in investment also declined by 1.7% (yoy), chiefly affected by building investment slowdown. The Government’s stimulus response through the Government’s consumption, which grew at 3.74% (yoy), curb deeper domestic demand slowdown. In addition, net export has positively contributed as influenced by export, which grows to 0.24% (yoy), and import, which recorded contraction of 2.19% (yoy). By sector, economic slowdown was primarily driven by activities of trade and accommodation as well as transport and storage, resulting from declining public mobility as an impact of COVID-19 mitigation efforts. In addition, agriculture sector performance declined due to unfavorable weather condition.

0,04 3,83 3,27 (2,07) (0,16) 3,74 3,31 (1,73) (0,36) 4,01 3,14 (1,81) (0,30) 4,01 3,19 (1,70) (0,41) 4,21 3,09 (1,69) (0,52) 4,20 3,06 (1,74) (2,41) 5,12 4,94 4,93 5,05 4,82 4,74 4,77 5,17 4,92 5,18 5,01 4,94 5,01 5,01 5,06 5,19 5,065,275,175,185,075,055,024,97 2,97

  • 3,0
  • 1,0

1,0 3,0 5,0 7,0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2014 2015 2016 2017 2018 2019 2020 QoQ YoY

4,23 1,87 7,43 5,03 0,50 8,20 5,91 0,65 7,62

  • 6,00
  • 4,00
  • 2,00
  • 2,00

4,00 6,00 8,00 10,00 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021* Bulgaria Colombia India Indonesia Philippines

slide-39
SLIDE 39

38

GDP Growt wth Brea eakdo kdown

GDP DP Growth th by Sector ctor (%, YoY)

Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008)

GDP DP Growth th Based sed on Expend endit itures ures (%, YoY)1

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption

Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4

  • Tot. Q1

Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1

  • HH. Consumption

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 5.0 5.2 5.0 5.1 5.1 5.0 5.2 5.0 5.0 5.0 2.8 Non profit HH. consumption (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 17.0 15.3 7.4 3.5 10.6 (4.9) Government consumption 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 0.5 3.2 3.7 Gross Fixed Cap. Formation 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 5.8 6.9 6.0 6.6 5.0 4.6 4.2 4.1 4.4 1.7 Exports (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 5.8 7.5 8.3 4.6 6.5 (1.6) (1.7) 0.1 (0.4) (0.9) 0.2 Imports (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 12.5 14.9 13.8 7.1 11.9 (7.5) (6.8) (8.3) (8.0) (7.7) (2.2) GDP 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 5.1 5.0 5.0 5.0 3.0 2020 By expenditure 2015 2016 2017 2018 2019

Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot . Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Agriculture, forestry, and fishery 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 3.4 4.7 3.6 3.8 3.9 1.8 5.3 3.1 4.3 3.6 0.0 Mining and Quarrying 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) 2.3 0.9 1.2 0.4 Manufacturing 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 3.7 3.8 2.1 Construction 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 5.8 5.8 2.9 Wholesale and Retail Trade, Repair of Car and Motorcycle 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 5.2 4.6 4.4 4.2 4.6 1.6 Transportation and Storage 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 8.5 8.7 5.7 5.5 7.1 5.5 5.9 6.7 7.6 6.4 1.3 Information and communication 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 7.1 7.0 9.1 9.6 9.2 9.7 9.4 9.8 Financial service 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 4.3 3.1 3.1 6.2 4.2 7.2 4.5 6.1 8.5 6.6 10.7 Other Services* 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 6.2 6.7 4.6 GDP 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 5.1 5.0 5.0 5.0 3.0 By sectors 2015 2016 2017 2018 2019 2020

slide-40
SLIDE 40

39

Regio gional nal Econom

  • mic

ic Growt wth

Source: Central Bureau of Statistics of Indonesia (BPS)

Decline in domestic demand due to COVID-19 amid a positive growth in non-oil and gas exports suppressed economic growth in all regions in the first quarter of 2020

REGIONAL

IONAL ECONO ONOMIC MIC GROWTH FIRST QUAR ARTER ER 20 2020 20 (% (%, YOY)

Aceh 3.17 N.Sumatra 4.65 Riau 2.24

  • W. Sumatra 3.92

Jambi 1.65 Riau Island 2.06 Bengkulu 3.82 Babel Island 1.35

  • S. Sumatra 4.98

Lampung 1.73 SUMAT ATRA RA KAL ALIMAN ANTAN Sulut 4.27 Gorontalo 4.06 Sulteng 4.91 Sulbar 4.92 Sulsel 3.07 Sultra 4.37 Maluku 4.01 North Maluku 3.06 Papua 1.48 West Papua 5.4 SULAW LAWESI, I, MALU LUKU AND PAPUA Banten 3.09 Jakarta 5.06 West Java 2.73 Central Java 2.60 East Java 3.04 Yogyakarta -0.17 JA JAVA Bali -1.14 West Nusa Tenggara 3.19 East Nusa Tenggara 2.84 BALI ALI-NUSA TENG ENGGARA RA West Kalimantan 2.49 Central Kalimantan 2.95 South Kalimantan 5.68 East Kalimantan 1.27 North Kalimantan 5.01 RGDP ≥ 7,0% 6,0% ≤ RGDP < 7,0% 5,0% ≤ RGDP < 6,0% 4,0% ≤ RGDP < 5,0% 0% ≤ RGDP < 4,0% RGDP < 0%

4.57 4.63 4.5 4.61 3.25 I II III IV I 2019 2020

5.23 5.39 5.67 3.73 2.49 I II III IV I 2019 2020 5.65 5.59 5.51 5.34 3.42 I II III IV I 2019 2020

4.59 4.77 5.34 5.52 0.94 I II III IV I 2019 2020

slide-41
SLIDE 41

Exter ernal l Factor: r: Impr mproved ed Exter ernal Res esil ilie ience ce

Se Sect ction ion 3

slide-42
SLIDE 42

41

Ext xtern ernal al Balance nce under r Control ntrol Support ported ed by Adequate uate Reserves erves

Current ent Accoun unt Deficit within hin Safe Thresh eshold ld Balanc lance e of Payment nts Portrait ait Substant antial al FX Reserves es to Mitiga igate Externa nal l Challe alleng nges es Trade Balanc lance Portrai ait

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

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

Source: Bank Indonesia FX Reserve ves as of May 2020: US$130.5 bn n (Equiv. to 8.0 month ths of imports ts + servicing of government debt) t)

US$bn 2015 2015: CA Defici cit (US$17. 17.5bn) n) 2013: 2013: CA Defici cit (US$29. 29.1bn) n) 2014: 2014: CA Defici cit (US$26. 26.7bn) n) 201 2016: CA Defici cit (US$16. 16.9bn) n) 201 2017: CA Defici cit (US$16. 16.2bn) n)

2018: Deficit (US$8.65bn) n)

2018: 2018: CA Defici cit (US$30. 30.6bn) n)

2019: Deficit (US$3.24bn) n)

2019: 2019: CA Defici cit (US$30. 30.4bn) n)

2020: Suplus us (US$4.19bn) n)

(3,92) 92) (2,93) 93) (8,54) 54) 120,97 97 40 80 120 160

  • 15
  • 10
  • 5

5 10 15 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 2017 2018 2019* 2020**

Current Account Capital & Financial Account Overall Balance Reserve Assets (rhs)

US$bn US$bn (8,08) 08) (1,87) 87) 4,40

  • 1,42
  • 4,5
  • 4,0
  • 3,5
  • 3,0
  • 2,5
  • 2,0
  • 1,5
  • 1,0
  • 0,5

0,0

  • 12
  • 10
  • 8
  • 6
  • 4
  • 2

2 4 6 8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2014 2015 2016 2017 2018 2019* 2020**

Goods Service Primary Income Secondary Income Current Account (%GDP)+(rhs)

US$bn 2020: 2020: CA Defici cit (US$3. 3.9bn) n) 2,1 2,09

  • 3,00
  • 2,00
  • 1,00

0,00 1,00 2,00 3,00 4,00

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 2013 2014 2015 2016 2017 2018 2019 2020

OG Non-OG Total 8

  • 1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 50 60 70 80 90 100 110 120 130 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 9 1 5 2013 2014 2015 2016 2017 2018 2019 2020 FX Reserves (LHS) Month of Import & Debt Service (RHS)

Month US$bn

slide-43
SLIDE 43

42

Exch change ange Rate e In Line e with h Fundame ament ntals als

Movem emen ent t of Rupia iah Rupia iah Exch change ge Rate te Fared red Rela lative tively Well ll Compared red to Peers ers

IDR/US$

The rupiah iah is is gaini aining ng stren engt gth as as for forei eign gn capita apital con

  • ntinu

inues es to to flow flow int into dom

  • mest

estic ic fin financ ancial ial market

  • ets. As of 17th June 2020, the rupiah appreciated

3.75% (ptp) or 5.69% on the average level recorded in May 2020. Notwithstanding, the rupiah has still lost around 1.42% of its value compared with the end of 2019. Recent rupiah appreciation is consistent with less global financial market uncertainty, coupled with highly attractive domestic financial assets for investment and maintained foreign investor confidence in the national economic outlook. Bank Indonesia still perceives the rupiah as fundamentally undervalued, leading to potential appreciation and supporting the economic recovery process. Potential rupiah appreciation is underpinned by several fundamentals, such as low and controlled inflation, a narrow current account deficit, competitive yields on domestic financial assets and a lower risk premium. Furthermore, supporting exchange rate policy effectiveness, Bank Indonesia continues to optimise monetary operations in order to safeguard market mechanisms and preserve adequate liquidity in the money market and foreign exchange market.

Source: Bank Indonesia

Rupia iah Exch change ge Rate te Volati latilt lty

14083 14601 14798 14134 14254 14120 14064 14352 15026 14.141 14.381 14.220 14.031 14.232 14.113 14.006 13.714 15.179 15.711 14.855 14.055 13.000 13.500 14.000 14.500 15.000 15.500 16.000 16.500 17.000 17-Jul 6-Aug 26-Aug 15-Sep 5-Oct 25-Oct 14-Nov 4-Dec 24-Dec 13-Jan 2-Feb 22-Feb 14-Mar 3-Apr 23-Apr 13-May 2-Jun 22-Jun 12-Jul 1-Aug 21-Aug 10-Sep 30-Sep 20-Oct 9-Nov 29-Nov 19-Dec 8-Jan 28-Jan 17-Feb 8-Mar 28-Mar 17-Apr 7-May 27-May 16-Jun IDR/USD Quarterly Average Monthly Average data as of June 17th, 2020 2,14 0,61

  • 1,67
  • 2,97
  • 1,58
  • 2,38
  • 2,30
  • 1,83
  • 3,24
  • 4,60
  • 11,76
  • 12,58
  • 18,80

1,23 1,16 0,44

  • 1,42
  • 1,76
  • 3,36
  • 4,36
  • 4,53
  • 4,76
  • 6,32
  • 12,99
  • 18,35
  • 22,53
  • 25,0
  • 20,0
  • 15,0
  • 10,0
  • 5,0

0,0 5,0 PHP JPY EUR IDR CNY SGD MYR THB KRW INR TRY ZAR BRL

point-to-point average

data as of June 17th, 2020

YTD 20 2020 20 vs vs 201 019

18,10 17,00 16,00 7,00 5,40 6,40 6,20 4,70 27,50 35,10 17,60 24,20 5,90 5,90 12,50 9,20

17,23 10,10 ZAR BRL TRY IDR THB PHP INR MYR 2019 YTD 2020 Average YTD 2020 AVG 2019

data as of June 17th, 2020

slide-44
SLIDE 44

43

Ample le Line nes of De Defense nse Against nst Ext xtern ernal al Shocks ks

Ample level of FX reserves to buffer against external shock

FX Reserves as of May 2020: US$130.5 billion

South Korea rea

Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2020

Australia ralia

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

Chiang ng Mai i Initiativ iative e Mult ltilater ilaterali liza zation ion (CMIM IM) ) Agreeme eement nt

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

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

Doubled to US$240 bn effective July 2014

Japan

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

The facility is available in USD and JPY

IMF Global al Financ ancial ial Safety ety Net t - GSFN

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

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

Bilat ateral eral Region ional al Global al FX Reserve

Ampl ple e Reserv erves es Swap p Arra range gemen ent

Source: Bank Indonesia

ASEAN Swap p Arrangemen ngement (ASA)

Entitled to a maximum swap amount of USD600 million under ASA

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

Doubled to USD2 billion in 2005

Singap gapore

  • re

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

China

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

Malaysia ia

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

slide-45
SLIDE 45

44

Solid lid Polic licy y Coordination dination

In Managing ging Financi ncial al Markets ts Volat atility ility

Source: Ministry of Finance Firs rst t Line of Defense State’s Budget Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) State te Owned ed Enterp terprises ises (BUMN)’s Budget Related SOEs (min. level Aware) Social cial Secu curit ity y Orga ganizin izing g Agency (BPJS)’s Budget BPJS (min. level Aware) Second Line of Defense State’s Budget

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

Gov’t Securities Crisis is Managem agemen ent t Protoc

  • col
  • l (CMP)
  • Indicato

tors rs:

  • Yield of benchmark series;
  • Exchange rate;
  • Jakarta Composite Index;
  • Foreign ownership in government securities
  • Policie

licies s to address the crisis at every level :

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

Bond Stabil iliz izati ation

  • n Framew

ewor

  • rk

The e enact ctmen ment of Law No. 9/2016 regarding g Prev even ention and Mitiga gation of Financi cial l Syst stem em Crise ses as a legal foundation for the government to serves at the time of financial crisis in the form of Financi cial l Syst stem em Stabil bility Commi mmittee ee (KSSK SK) KSSK K member mbers: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP)

CMP

Implementing Bond Stabilization Framework (BSF)

BSF

slide-46
SLIDE 46

45

Stren rengt gthen ened d Priv ivat ate e Ext xter ernal al Debt t Risk sk Managem ement nt

Regu gulati tion

  • n Key Points

ints Phase 1 Jan 1,2015 2015 – Dec 31,20 2015 15 Phase 2 Jan 1,2016 2016 – Dec 31,20 2016 16 Phase 3 Jan 1, 2017 17 & & beyond

Object ect of Regul egulation

  • n

Governs all Foreign Currency Debt Hedgi dging g Ratio < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** Liqu quidity y Ratio (< 3 months) 50% 70% Credi edit Rating Not applicable Minimum rating of BB- Hedgi dging g transaction

  • n to meet

eet hedge ge ratio not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanction

  • n

As of Q IV-2015 Applied Extern ernal Debt ebt/GDP (%)

Debt Burden n Indic icat ator (Externa nal l Debt/GDP) Remains ains Compar arab able le to Peers Rating ing

Encou coura ragi ging Corpora porates tes Compli pliance ce on Hedgi ging Ratio tio & Liquid quidity ity Ratio tio

Source: Bank Indonesia

Liquid uidit ity Ratio io* Hedgin ging Ratio io*

*Data as of Q4 2019, with total population 2.585 corporates

Regulat ulation n on Prudentia ential l Principle le in Manag aging ing External nal Debt

Source: Bank Indonesia

Source: Moody’s Statistical Handbook, November 2019

23,9 36,2 20,0 39,9 57,3 23,0 36,7 20,9 42,9 56,5 21,9 37,0 21,4 42,3 54,3 10 20 30 40 50 60 70 Philippines Indonesia India Colombia Bulgaria 2020F 2019F 2018

2.342; 90.6% 243; 9.4%

≤ 3 months

2.425; 93.8% 160; 6.2%

> 3 - 6 months

2.277; 88.1% 308; 11.9% Comply Not Comply

slide-47
SLIDE 47

46

Health althy Ext xternal ernal Debt t Composition

  • sition

Extern ernal l Debt bt Structure cture

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

The e Structure cture of Extern ernal l Debt bt is Dom

  • min

inated ted by Long-Term erm Debt bt Extern ernal l Debt bt Remains ins Managea geable le Extern ernal l Debt bt to GDP DP Ratio tio & Debt bt to Export rt Ratio tio

% % % Million USD

11,5 17,1 11,3 12,0 5,4 10,2 5,9 3,0 10,1 6,5 8,3 10,2 10,5 7,8 0,5 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 450.000 External Debt External Debt Growth (rhs) 121,8 114,9 101,0 113,8 123,1 139,5 168,4 176,1 168,0 160,8 168,9 172,5 177,6 183,8 177,8 31,8 26,5 25,0 27,4 29,1 32,9 36,1 34,3 34,7 36,0 36,8 36,6 36,2 36,1 34,5 5 10 15 20 25 30 35 40 80 100 120 140 160 180 200 Axis Title External Debt / GDP Ratio External Debt / Export Ratio (rhs) 42,6 41,4 47,4 50,0 53,6 55,8 54,1 50,5 48,8 50,4 50,8 49,8 50,0 49,8 49,5 50,2 52,8 51,9 57,4 58,6 52,6 50,0 46,4 44,2 45,9 49,5 51,2 49,6 49,2 50,2 50,0 50,2 50,5 49,8 47,2 48,1 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private External Debt Public External Debt 18,3 21,2 20,7 21,7 21,2 20,2 17,9 17,1 15,6 16,0 16,1 15,7 14,1 15,7 14,5 14,6 15,5 14,8 81,7 78,8 79,3 78,3 78,8 79,8 82,1 82,9 84,4 84,0 83,9 84,3 85,9 84,3 85,5 85,4 84,5 85,2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Short Term External Debt Long Term External Debt

slide-48
SLIDE 48

47

Managea geable ble Ext xtern ernal al Debt t Profile ile

Shor

  • rt term non-ban

ank corp rpor

  • rat

ate e debt (non

  • n affiliation)

) represe sents only ly 9.1% 1% of tot

  • tal private

e externa nal l debt

Privat ate Short-Term1 Privat ate Non-Ba Bank nk External nal Debt Positio ion

Af Affiliati tion

  • n

Non Af Affiliati tion

  • n

US$158.3bn

  • r

76.2%

  • f Private Ext.

Debt US$18.6bn

  • r

8.9%

  • f Private
  • Ext. Debt

US$12.1bn

  • r
  • r

5.8%

  • f Private

e

  • Ext. Debt

US$18.8bn

  • r
  • r

9.1%

  • f Private

e

  • Ext. Debt

Public lic Long g Term 1 Privat ate Bank nk

US$30 30.9bn

  • r

14.9% 9%

  • f Private
  • Ext. Debt

US$2 $207 07.8b 8bn

  • r

51 51.9%

  • f total
  • Ext. Debt

US$49.5bn

  • r

23.8%

  • f Private
  • Ext. Debt

External Debt Position as of April 2020

1 Based on remaining maturity

Source ce: External Debt Statistics of Indonesia, June 2020

US$400 00.2bn bn

US$192.4bn

  • r

48.1%

  • f Total Ext.

Debt

slide-49
SLIDE 49

Fi Fiscal Per erforma

  • rmance

nce and F d Flexib ibil ilit ity: The De e Desig ign of Econom

  • nomic

ic Rec ecover ery y Progr gram am

Se Sect ction ion 4

slide-50
SLIDE 50

49

Indonesia’s Policy Responses in Dealing With COVID-19 Cris isis is

Health Measures:

 Appoint dedicated hospital, emergency hospital, equipment support, and medical personnel support  Testing and tracing  physical distancing, work and study from home, etc.  Large-scale Social Restriction (PSBB)

Business Support:

 Reducing of import restriction including manufacturing support, food and health/medical goods, acceleration of the export-import process, and improvement of services through the National Logistics Ecosystem  Incentives and tax facility  The National Economic Recovery Program (PEN)  Various policies and relaxation in the financial sector: BI, OJK, LPS, and the Government

Social Safety Net:

 PKH improvement and expansion  Basic food cards improvement and expansion  Pre-Work Card expansion and flexibility  Exemption from electricity bills  Additional interest rate subsidy assistance

Prioritizing 3 Aspects: Protecting people’s health and saving lives; maintaining purchasing power particularly the poor, and Preventing bankruptcy

slide-51
SLIDE 51

50

%% T Realokasi Belanja Budget Refocusing & Reallocation

STIMULUS I

(Feb)

IDR8.5 T

STIMULUS II

(March)

IDR22.5 T

STIMULUS III

(March)

IDR405.1 T

Line ministries and regional govt: budget priorities to tackle COVID-19 Strengthening the domestic economy through:

  • Accelerating spending &

encouraging labor- intensive policies

  • Stimulus for specific

sectors Maintaining people's purchasing power and ease of export and import:

  • Fiscal stimulus
  • Non-Fiscal Stimulus
  • Policy in the Financial

Sector Rescuing national health and economy, as well as maintaining the stability of the financial sector (through Perppu No.1/2020)

  • State Financial Policy (health, social safety

net, business support & economic recovery financing support)

  • Policy in the Financial Sector

FISCAL POLICY

MONETARY

  • Reducing BI 7DRR interest rate
  • Increasing triple intervention

intensity

  • Lowering Currency Statutory

Reserves (GWM) in Rupiah & foreign currency

  • Extend SBN tenure
  • Expand the type of underlying

transaction

  • Providing hygienic money, etc

BANKING

  • Relaxation of credit/financing/fund

provision requirements for MSMEs

  • MSMEs credit/financing

restructuring

MONETARY AND FINANCIAL POLICY

IDR190 T Spending cut/saving IDR55 T Spending Reallocation

The Stim imulus ulus Pa Packages ages – Evolving lving

Source: MoF, World Bank

slide-52
SLIDE 52

51

Background:

  • Adjustment of state budget deficit

threshold

  • Utilization of budget funding alternative

sources

  • Adjusment of mandatory spending,

shifting and refocusing central and regional budgets

  • SBN issuance and loan program to

finance the additional deficit

  • Incentives and tax facilities
  • Implementation of the National

Economic Recovery Program for the sustainability of the real sector and financial sector.

MAIN PRINCIPLE/SETTINGS IN PERPPU

State Financial Policy Financial Sector Policy

  • Expanding the authority of KSSK and

the scope of the KKSK meeting

  • Strengthening the authority of the BI,

including in buying long-term SBN in the primary market to support the handling of Covid-19 pandemic

  • Strengthening the authority of

Financial Service Authority (OJK) and Deposit Insurance Corporation (LPS) to prevent risks that endanger financial system stability and protect bank customers.

  • Strengthening the authority of the

government in handling banking problems and financial system stability due to COVID-19 pandemic

PERPPU No. 1/2020

Quick and Extraordinary Steps in Handling COVID-19 and the Impact

CO COVID VID-19 19 PAND ANDEM EMIC: IC:

  • Esc

scalati tion n of confirmed ed case ase an and d fatal alitie ies

  • Gr

Grea eat t ec econom

  • mic

c imp impact

  • Potenti

tial disrup disruption

  • n to the

the stab ability ty of fina inanc ncial system

Need quick and

anticipatory step

Forceful

urgency

1 2

PERPPU No. 1 Tahun 2020

as as a a leg legal l basis basis for

  • r tak

aking ing rapid apid and and extraordin inary ry and and coo

  • ordi

dina nated steps s to

  • cou
  • unter the

he COVI VID-19 pand pandemic.

Perppu No.1/2020 has already been passed into law (Law No.2/2020)

Legal al Aspect ct for COVID ID-19 Handling dling

slide-53
SLIDE 53

52

Funding ing for COVID ID-19 Hand ndli ling

For health, social protection, SMEs, business, and regional government

Health

IDR87.55 T

Social Protection

IDR203.90T

Business Incentives

IDR120.61T

SMEs

IDR123.46 T

Corporate Financing

IDR53.57 T

FUNDI N G FOR COVI D - 19 HAN D LI NG (I DR Rp695. 20 T )*

  • 1. Expenditure for Covid-19 Handling

IDR65.80T;

  • 2. Incentives for Paramedic IDR5.90T;
  • 3. Death Compensation IDR0.30T;
  • 4. National Health Insurance Fee IDR3.00T;
  • 5. Covid-19 Task Force IDR3.50T; &
  • 6. Tax Incentives in Health IDR9.05T
  • 1. Conditional Cash Transfer Program IDR37.40T;
  • 2. Basic Foods IDR43.60T;
  • 3. Social Assistance - Jabodetabek IDR6.80T;
  • 4. Social Assistance – Non - Jabodetabek IDR32.40T;
  • 5. Pre-Working IDR20.00T;
  • 6. Electricity Discount IDR6.90T;
  • 7. Logistical / Foods / Basic Foods IDR25.00T;
  • 8. Village Fund - Cash Transfer IDR31.80T
  • 1. Government-Borne Income Tax IDR39.66T;
  • 2. Income Tax Exemption on Import IDR14.75T;
  • 3. Tax Deduction IDR14.40T;
  • 4. VAT Return IDR5.80T;
  • 5. Corporate IT Rate Reduction IDR20.00T; &
  • 6. Other Stimulus IDR26.00T
  • 1. Interests Subsidy IDR35.28T;
  • 2. Fund Placement IDR78.78T;
  • 3. Guarantee Return IDR5.00T;
  • 4. Working Capital Guarantee (Stop Loss)

IDR1.00T;

  • 5. Government-Borne Final Income Tax

IDR2.40T; &

  • 6. Investment Financing to Cooperatives

IDR1.00T

  • 1. Labor Intensive-Fund Placement IDR3.42T;
  • 2. State Equity Participatiozn (PMN) IDR20.50T;
  • 3. Working Capital Investment IDR29.65T
  • 1. Line Ministries labor Intensive Program

IDR18.44T;

  • 2. Housing Incentives IDR1.30T;
  • 3. Tourism IDR3.80T;
  • 4. Regional Incentive Fund (DID) IDR5.00T;
  • 5. Physical Special Allocation Fund Reserve

IDR8.70;

  • 6. Regional Loan Facility IDR1.00T; &
  • 7. Diversification Reserve IDR58.87T

Sectoral and Regional Government

IDR106.11 T

Source: Ministry of Finance *The number of PEN allocation Fund is still in the process of finalization and the final number will be stated in Revised Perpres No. 54/2020

slide-54
SLIDE 54

53

The e Princi cipl ples es & Financin ancing Channels nnels of The National ional Ec Econ

  • nom
  • mic

c Reco cover ery y Program ram (PEN EN)

 The principle of social justice  The greatest prosperity of the people  Supporting Business Actors  Policy rules: prudence, good governance, transparency, acceleration, fairness and accountability  Does not cause moral hazard  of costs and risks between stakeholders according to their respective duties and authorities

 Capital Injection (PMN)  Funds Placement  Government Investment  Government Guarantees  State Expenditures

PEN’s Principles channels

PP 23/2020

The PEN Program aims to protect, maintain and improve the economic capabilities of Business Actors in running their businesses

article 4 article 5

slide-55
SLIDE 55

54

  • Slow economic activity,

plummeting of oil and commodities price

  • Tax incentive for businesses
  • Focusing for health, social safety net, and businesses

support, including the small and medium one;

  • Reducing the non-priority spending, refocusing, and

reallocating to bolster the management of COVID-19;

  • Enhancing the spending for COVID-19 treatment

Widening (Rp545.8T)

  • The increasing of accumulated cash

surplus utilization (IDR45 trillion)

  • Financing to promote the national

economy recovery (IDR150 trillion)

  • Adding the securities issuance to cover

financing gap

Flexibi ibili lity ty in 2020 Budget et is Used to Respond

  • nd Emerge

gency ncy Cond ndition tion

Widening the deficit above 3 percent of GDP is to accelerate the mitigation of COVID-19, salvage the economy from threatening crisis, and maintain the stable financial system

Spending Deficit

Budget (IDR307.2T) = 1.76% GDP

Perpres No.54/2020 (IDR853.0T) = 5.07% GDP*

Budget IDR2,233.2T

Budget IDR2,540.4T Perpres No.54/2020 IDR2,613.8T

Source: Ministry of Finance

Perpres No.54/2020 IDR1,760.9T

Revenue

slide-56
SLIDE 56

55

Outlook: look: Flexibility xibility in 2020 Budget t is Used d to Respo spond nd Emerge ergency ncy Condit dition ion

State Budget 2020 (In Trillion Rupiah) Budget Perpres 54/2020 Outlook Difference

A. REVENUE 2,233.2 1,760.9 1,699.1 (61.7)

I. DOMESTIC REVENUE 2,232.7 1,760.4 1,698.6 (61.7) 1. TAX REVENUE 1,865.7 1,462.6 1,404.5 (58.1) Tax Ratio % (Broad definition) 11.56 9.14 9.01 2. NON-TAX REVENUE 367.0 297.8 294.1 (3.6) II. GRANT 0.5 0.5 0.5 0.0

B. EXPENDITURE 2,540.4 2,613.8 2,738.4 124.5

I. CENTRAL GOVERNMENT 1,683.5 1,851.1 1,974.4 123.3 1. Line Ministries 909.6 836.5 786.5 (50.0) 2. Non-Line Ministries 773.9 1,014.6 1,187.9 173.3 Of which (o/w). Other Expenditures 128.0 360.1 504.3 144.2

  • /w - Compensation for the diff. in electricity tariff & fuel oil’s retail price

15.0 15.0 91.1 76.1

  • Mitigation for COVID-19’s impact
  • 255.1

328.5 73.4 II. TRANSFER TO REGION AND VILLAGE FUNDS 856.9 762.7 763.9 1.2 1. Transfer to Region 784.9 691.5 692.7 1.2 2. Village Funds 72.0 71.2 71.2 0.0

C. PRIMARY BALANCE (12.0) (517.8) (700.4) (182.7) D. SURPLUS/(DEFICIT) (307.2) (852.9) (1,039.2) (186.3)

% Budget Surplus/(Deficit) to GDP (1.76) (5.07) (6.34)

E. FINANCING 307.2 852.9 1,039.2 186.3

Source: Ministry of Finance * The fix number will be stated in Revised Perpres No. 54/2020

slide-57
SLIDE 57

56

Development lopment of Macroe

  • eco

conomi nomic Assum umpti ption

  • n Indicat

cator

  • rs

s 2020

2019 2020

State Budget

Realization as of 31 May 2020 State Budget Realization as of 31 May 2020

a.

Growth (%)

5.3 5.07 1) 5.3 2.97 1) b.

Inflation

(%, yoy) 3.5 3.32 3.1 2.19 (%, ytd) 1.48 0.90 c.

SPN 3-Month Interest Rate(%)

5.3 5.8 5.4 3.2 d.

Exchange Rate

(Rp/US$) 15,000 14,192 14,400 14,684 (Rp/US$, eop) 14,385 14,733 2) e.

CPI (US$/barel)

70 64 63 41 3) f. Oil Lifting (thousand barrel/day) 775 745 755 710 4) g.

Gas Lifting (thousand barrels of oil equivalent / day)

1,250 1,038 1,191 1,025 4) Notes: 1) Realization of quarter I 2) April average exchange rate: IDR14,906 / USD (April eop IDR14,165 / USD) 3) ICP May US $ 25.7 / barrel 4) Lifting oil and gas in April

Source: Ministry of Finance

slide-58
SLIDE 58

57

Budget (IDRtn) 2018 2019 2020 Realization as

  • f 31 May

% to Audited Budget Growth (%) Unaudited Budget Realization as

  • f 31 May

% to Budget Growth (%) Budget (Perpres No.54/2020) Realization as

  • f 31 May

% to Budget Growth A Revenue and Grant 686.0 35.3 15.5 1,958.6 730.1 37.3 6.4 1.760.9 664.3 37.7 (9.0)

  • I. Domestic Revenue

684.5 35.5 15.3 1,953.3 729.7 37.4 6.6 1.760.4 663.1 37.7 (9.1)

  • 1. Taxation Revenue

538.7 35.5 14.5 1,546.1 571.2 36.9 6.0 1.426.6 526.2 36.0 (7.9) Tax ratio % (board Definition) 3.98 10.69 4.00 9.14 3.50

  • a. Tax Revenue (Include

Oil & Gas Income Tax) 484.9 36.9 14.2 1,332.7 498.5 37.4 2.8 1,254.1 444.6 35.4 (10.8)

  • b. Custom and Excise

53.8 26.2 17.4 213.5 72.7 34.0 35.1 208.5 81.7 39.2 12.4

  • 2. Non Taxation Revenue

145.9 35.6 18.1 407.1 158.5 38.9 8.6 297.8 136.9 46.0 (13.6)

  • II. Grants

1.4 9.3 580.5 5.4 0.5 9.2 (66.0) 0.5 1.2 240.2 143.7 B Expenditure 779.5 35.2 7.9 2,304.3 855.9 37.1 9.8 2,613.8 843.9 32.3 (1.4)

  • I. Central Government Expenditure

458.0 31.5 18.0 1,493.2 530.8 35.6 15.9 1,851.1 537.3 29.0 1.2

  • 1. Line Ministries

Expenditure 231.5 27.3 19.9 870.3 288.2 33.1 24.5 836.5 270.4 32.3 (6.2)

  • 2. Non Line Ministries

Expenditure 226.5 37.2 16.2 622.9 242.6 38.9 7.1 1,014.6 267.0 26.3 10.1

  • III. Transfer to Region and Village

Fund 321.5 42.4 (4.0) 811.1 325.1 40.1 1.1 762.7 306.6 40.2 (5.7)

  • 1. Transfer to Region

300.8 43.1 (1.9) 741.3 304.7 41.1 1.3 691.5 277.7 40.2 (8.8)

  • 2. Village Fund

20.7 34.5 (26.7) 69.8 20.4 29.3 (1.1) 71.2 28.9 40.6 41.3 C Primary Balance 19.0 (164.9) (163.5) (70.1) 1.3 (1.9) (93.1) (517.8) (33.9) 6.6(2,710.4) D Surplus/(Deficit) (93.5) 34.7 (27.3) (342.6) (125.8) 36.4 34.5 (852.9) (179.6) 21.1 42.8 % of GDP (0.63) (2.18) (0.79) (5.07) (1.10) E Financing 179.4 58.7 (8.3) 398.9 159.9 40.1 (10.9) 852.9 356.1 41.7 122.6 Remaining Budget Balance 85.9 34.1

STATE E BUDGET T REALI ALIZA ZATION ION AS OF 31 MAY 2020 Govern rnment nt Revenue ue and Expendi nditure ture experi rienc enced negati tive growth wth as impact ct

  • n Covid-19

9 Pressur ssure

Source: Ministry of Finance

29

slide-59
SLIDE 59

58

1,54% 28,63% 6,8%

Health Incentive for Businesess Social Safety Net There are uncharged medical treatments from the health care facilities to the government The disbursement

  • f preemployment

card and cash transfer through village fund has to be accelerated

1 2 3

Needs to promote this incentives more widely and intensively

1.

  • 1. COV

OVID ID-19 19 trea eatmen ment

  • a. Recovered cases → 87,19%
  • b. Closed cases→ 43,54%

2.

  • 2. Ther

ere are re rigid igid verific rificat ation

  • n proc

rocess ess to disbur burse the e bene nefi fit progr rogram m for

  • r me

medic ical al work

  • rker

ers 3.

  • 3. Ther

ere are re gaps ps betwee een n actual ual trea eatme ment and d healt ealth h care re claim aim to gover ernm nmen ent

  • Trans

ransfer fer for r socia ial l safet fety net is relat elatively ely accele elera rated ed (Cash trasnfer, food subsidy);

  • Addit

ditio iona nal l elec ectric icit ity subsid idy has been een implem mplement ented d (paym aymen ent to PLN is start arted d in June ne 2020) 20);

  • Pre-employment card and cash transfer through

village fund has been slow;

  • Chall

alleng enges es in the e field eld: mi mismat atched hed datab abase e and d

  • verl

erlap apping ing ▪ Elig igible ible taxpa payer ers to receiv eive e incen entiv ives es hav ave e no not enro nroll lled ed for r the e progr rogram; ▪ Intensive promotion is needed

Progress Updates on Fiscal Stimulus and National Economic Recovery Program (1)

The administration process of program’s disbursement has been expedited

Source: Ministry of Finance

slide-60
SLIDE 60

59

0,06% % 3,65% MSME

CORPORATE FINANCING

5 4

  • Regulations are on

progress;

  • Data preparation and IT

infrastructure to support the delivery ▪ Regulations are on progress ▪ Labor intensive program by line ministries is being implemented Completion of the support and regulatory scheme, as well as preparation of supporting tools

Progress Updates on Fiscal Stimulus and National Economic Recovery Program (2)

The administration process of program’s disbursement has been expedited

SECTORAL AND SUBNATIONAL GOVERNMENT

6

Source: Ministry of Finance

slide-61
SLIDE 61

60

  • Closed cases increased to 43.54% compared to the previous week which reached 39.6% and the proportion
  • f recovered cases continued to show an increasing trend reaching 87.19%
  • The Social Safety Net program that has been given is matched with the urgently need by impacted households

14 June 2020

Number % Positive 38,277 100.00

  • 1. Active Cases

21,612 56.46

  • 2. Closed

16,665 43.54 Number % Closed 16,665 100.00

  • 1. Recovered

14,531 87.19

  • 2. Deaths

2,134 12.81

3%

Phone/Internet bill Processed Foods

51% 20% 14% 8%

0% 20% 40% 60%

Food materials Health Electricity

Change of household shopping basket (%)

Ratio of Recovered to Death (Daily)

Recovered Deaths

Source: Indonesia Statistics, Ministry of Finance

Progress Updates on Fiscal Stimulus and National Economic Recovery Program (3)

Improved recovery cases and suited social safety net program

Recovered and Deaths Ratio (Daily)

slide-62
SLIDE 62

61

▪ In general, government’s programs still face challenges in execution stage due to on process regulation, administration and delivery process; ▪ Realization of new health support reached Rp1, 35T (1.54%), mainly due to: delay in the billing process, verification process of claim by BPJS Health, and the budget revision process ▪ The realization of the social protection program was relatively good, namely Rp. 58.37 (28.63%) through various assistance such as cash transfer, food subsidy, pre-employment card, Electricity subsidy ▪ There are still problems at the execution level in the field, among

  • thers: Issues related to target error, overlapping, and pre-

employment card training materials are irrelevant; ▪ Some regulations, data collection, and supporting infrastructure / IT to support the MSME program, tax incentives, corporate financing and local government are still on progress ▪ Identifying restraining factors and formulating an acceleration strategy, specifically in health, MSME, incentives and subnational govenrmente support programs; ▪ Efforts to accelerate the completion of regulations and simplification of administrative procedures; ▪ Immediately delivery the support programs for businesses, both MSMEs and corporations, to drive the economy and support national economic recovery; ▪ Increasing the effectiveness of public communication, to disseminate government program and get constructive input → can be

  • ptimally utilized by the community in

encouraging national economic recovery CONCLUSION ACTION PLAN

Conclusions and Further Action Plan to Accelerate The Delivery

Encourage accelerated execution and program effectiveness

Source: Ministry of Finance

slide-63
SLIDE 63

62

2020 Finan ancin cing g Needs

Fulfilled d from m Government nment Securi urities es IDR1, 1,289.2 289.27 tn tn (89.55%) 55%) and Loan IDR150.48 0.48 tn tn (10.4 .45%) 5%)

Source: Ministry of Finance

Financi ancing Needs eds IDR1, R1,439.75 .75 T

Budget Deficit IDR852.94T

Non-Debt Financing (nett) IDR153.46T

Investment Financing IDR229.32T Lending (IDR5.81T) Liability IDR0.59T Other Financing (IDR70.64T)

Matured Debt IDR433.35 T

GS*** IDR325.85T 75.18%

Loan IDR107.55 T 24.82%

Financi ancing Needs eds IDR1 R1,4 ,439 39.75 .75 T

Domestic Debt 77.53%

Domestic Government Securities

Domestic Loan Foreign Denominated Debt 22.47% Foreign Denominated Bonds Foreign Loan

2020 Matured T-Bills Issuance

Gross ss Gover ernmen ment Securities ties

GDS GDS 70 70 – 75% 75% Sukuk uk 25 25 – 30% 30%

(Through auction & non-auction)

Proj

  • jec

ectio ion

2019 2020

30.2% 36.4%

Debt bt to GDP Ratio atio Reali aliza zatio ion

Note: * preliminary result

slide-64
SLIDE 64

63

Finan ancin cing g Strat trategy egy 2020

Oppor

  • rtu

tunis istic, tic, Measu easured, and d Pruden dent t Financing Strat ateg egie ies s to suppor

  • rt State

e Reven enue e and Expen endi ditu ture e Budget t (APBN) BN) 2020 20 in acceler leratin ating the handlin dling of COVID VID-19 9 and protec ectin ing the econ

  • nom
  • my from
  • m the threa

eat of crisis isis

Source: Ministry of Finance

Budget Financing 2020 Prioritize SBN publishing through market mechanisms (includ ludin ing Ret etail ail IDR50-75 75 T) Optimization of Debt and Non-Debt Financing Sources Flexibility of adding SBN

Non-Debt Financing Sources

  • SAL

L (IDR70 70,64 ,64 T)

  • Government Endowment Fund Post
  • Fund sourced BLU

LU

Cash Loan Flexibility

Upsize Program Loans from Development Partners, both bilateral and multilateral, amounting to USD 6-8 billion

  • ex. World Bank, ADB, AFD, KfW, JICA,

EDCF, and AIIB

1 3 4 5

  • Upsize the issuance of Domestic SBN and Foreign

Denominated SBN (USD10 -12 billion) subject to financial market conditions

  • Open opportunity for Private Placement requests

from SOE/Institution

  • ex. LPS, BPKH, and others

Bank Indonesia support as a last resort / back stop financing source

slide-65
SLIDE 65

64

Govern ernment ment Securi riti ties es

Indi dicati ative Fina nanci ncing ng Plan for 2020 0 according ding to Presidenti dential Regulation ation 54/20 2020 20

Source: Ministry of Finance

Governm rnmen ent t Securi riti ties (gross ss) IDR 1. 1.334T 4T

Gover ernment t Bond d 71% Shar aria ia Bond d 29% 29% Retail etail 4-10% 0% Auction tion 40 40-60% IDR R 87% Forex 13% Fron

  • nt

t Loadin ading 40 40-50 50%

For Semester II 2020, the Government plans to issue Foreign Currency Government Securities in Japanese Currency (Samurai Bond) and Euro

  • Auction:
  • Conventional Securities – 24x
  • Islamic Securities – 24x
  • Non-auction:
  • Retail

GDS (tradable/ORI & non-tradable), Retail Sovereign Sukuk (tradable/Sukri & non- tradable);

  • Private Placement – based on

request.

  • Foreign denominated GS as

com

  • mple

lemen enta tary  Avoid

  • id

crow

  • wding

ding

  • ut
  • ut

in domestic market.

  • The

he target target am amou

  • unt

nt can an be be adj adjusted ed to the potential of

  • ther financing sources and

financing needs.

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SLIDE 66

65

Government ernment Secur curit itie ies Finan anci cing g Realiz ealizat ation ion

(as of May 31, 1, 2020)

Source: Ministry of Finance *Dual-currency bonds issuance using SEC format amounted USD2 bn and EUR1 bn, settlement on January 14, 2020 (BI mid day exchange rate; 1 USD = 13,654 IDR & 1 EUR = 15,207.83 IDR)

  • Including SBR009 issued February 17, 2020
slide-67
SLIDE 67

66

GS Prim imar ary y Mark rket t Perfor

  • rmanc

mance e 2019-2020 2020

Through Auction

Source: Ministry of Finance

Incoming bid 2020 = IDR53.61T/ auction, while awarded bid 2020 = IDR13.80T/auction

slide-68
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67

Repub ublic lic of Indon

  • nesi

esia – USD4.3b .3bn n GLOBA BAL L BONDS DS ISSU SUAN ANCE CE

Source: Ministry of Finance

On April 7, 2020, the Republic of Indonesia priced a transaction comprising USD4.3bn in senior unsecured notes

Iss ssuer Republ blic c of Indon

  • nes

esia ia Issuer Rating Baa2 Moody’s (Stable) BBB S&P (Stable) BBB Fitch (Stable)

  • Exp. Issue Rating

Baa2 Moody’s / BBB S&P / BBB Fitch Format U.S. SEC registered Issue Senior unsecured fixed rate notes Pricing Date April 6, 2020 Settlement Date April 15, 2020 Aggregate Size USD4,300 mm Long 10.5-year year Long 30.5-year year Long 50-year year Maturity Oct 15, 2030 Oct 15, 2050 Apr 15, 2070 Tranche Size USD1,650 mm USD1,650 mm USD1,000 mm Coupon (p.a.) 3.850% 4.200% 4.450% Reoffer Price 99.573 99.150 99.009 Reoffer Yield (p.a.) 3.900% 4.250% 4.500% Listing Singapore, Frankfurt Open Market Law New York Use of Proceeds For general purposes of the Republic of Indonesia, including financing COVID-19 relief and recovery

Transaction Highlights  Net proceeds will be used for general purposes of the Republic, including financing COVID-19 relief and recovery efforts for the Republic to contain the virus and mitigate its impact on Indonesia.  The Republic's fiscal policy amidst volatile market conditions includes support for healthcare, the social safety net, and small and medium enterprises.  The debut 50-year offering on strong demand in the long end of the curve.  The transaction is the largest global offering by the Republic and demonstrates the Republic’s ability to respond swiftly to markets and capture favorable issuance windows.

Investor Breakdown by Investor Type Investor Breakdown by Region

RI103 030 RI047 470 RI105 050

45% 25% 21% 9% 52% 20% 26% 2% 44% 38% 18%

US Europe Asia ex-Indonesia Indonesia

RI1030 RI047 470 RI105 050

Asset Managers Insurance/Pension Fund Central Bank/Sovereign Wealth Fund Banks Private Banks Others

64% 20% 1% 4% 1% 10%

71% 22% 1% 1% 2% 3%

85% 11% 1% 1% 1% 1%
slide-69
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68

1.931,2 2.410,0 2.780,6 3.248,6 3.612,7 4.014,8 4.442,90 714,4 677,6 755,1 734,8 746,2 810,7 764,5 24,74% 27,43% 28,33% 29,40% 29,81% 30,18% 32,09% 0,00% 5,00% 10,00% 15,00% 20,00% 25,00% 30,00% 35,00%

  • 1.000,0

2.000,0 3.000,0 4.000,0 5.000,0 2014 2015 2016 2017 2018 *) 2019**) May-20

Debt bt Outstandi ding (Trillion IDR)

Bond Loan Debt/GDP Ratio [RHS]

Disciplin ciplined ed and Sophistic histicat ated ed Debt t Portf tfolio

  • lio Managemen

gement

Weig ighted ted Avera erage ge Debt bt Maturity turity of ~8. 8.8 Years rs Pruden ent t Fisc scal l Defic icit it Well ll Divers ersif ified ied Acros ross Differen erent t Curren rencie cies

% of Yearl rly y Issuance

Stabl ble Debt bt to GDP DP Ratio tio Over er the e Years rs

IDR R Tn Tn Govern ernmen ent Debt bt / GDP (%) 265 265 362 362 407 407 442 442 358 358 (9) 19 19 (4) (20) 14 14 (7) (58) (69) (56) (66) (227) (298) 8) (308) (341) (269)

  • 2,2%
  • 2,6%
  • 2,5%
  • 2,5%
  • 1,8%
  • 3,0%
  • 2,5%
  • 2,0%
  • 1,5%
  • 1,0%
  • 0,5%

0,0% (400) (300) (200) (100)

  • 100

200 300 400 500 2014 2015 2016 2017 2018 SBN (neto) Pinjaman DN & LN (neto) Non Utang (neto) Surplus (Defisit) APBN Rasio Defisit APBN thd. PDB (RHS) Non Debt (Net) Bonds (Net) Loans (Net) Budget Surplus/Deficit Fiscal Deficit (%GDP, RHS)

Source: Ministry of Finance

9,8 9,4 9,1 8,7 8,4 8,5 8,8 2014 2015 2016 2017 2018 2019 May-20

Average Time To Maturity y

ATM (in years) Note: *) as of end of December 2019, **) Preliminary number using GDP assumption 57% 59% 58% 62% 62% 31% 30% 30% 27% 27% 4% 4% 4% 4% 5% 7% 6% 6% 5% 5% 1% 1% 1% 1% 1% 0% 20% 40% 60% 80% 100% 2016 2017 2018 2019 May-20 IDR USD EUR JPY OTHER

slide-70
SLIDE 70

69

149 281 226 231 291 194 177 153 134 208 162 165 96 94 152 55 99 34 89 62 39 23 20 36 28

  • 20 39
  • 74

157 176 171 166 162 127 128 129 88 77 46 28 24 17 35 8 27 33 3 2 2 35 24 31 31 20 38 27 111,3

  • 50

100 150 200 250 300 350 400 450 500 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 2049-2070 IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp)

Well Bala lanced nced Maturity urity Profile ile Wi With h Strong ng Resilience silience Against nst Ext xtern ernal al Shocks ks

Decl clinin ining g Interes erest t Rate te Risks sks Debt bt Maturity turity Profil ile Decl clinin ining g Exch change ge Rate te Risks ks Upcom coming ing Maturities turities (Next t 5 Yea ears) rs)

IDR tn tn Source: Ministry of Finance

14,8 13,7 12,1 10,6 10,6 9,8 9,3 21,0 20,7 17,5 19,2 19,7 16,1 15,8 2014 2015 2016 2017 2018 2019 May-20 Variable rate ratio [%] Refixing [%] Note: 1. *) as of end of December 2019, preliminary number and using GDP assumption 10,7 12,2 12,1 12,1 12,3 11,3 12,2 43,4 44,5 42,6 41,3 41,0 37,9 38,0 2014 2015 2016 2017 2018 2019 May-20 FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 7,7 8,4 6,5 9,9 10,6 8,1 8,2 20,1 21,4 22,7 25,0 25,5 24,3 24,3 33,9 34,7 36,0 39,3 40,4 41,0 38,7 2014 2015 2016 2017 2018 2019 May-20 in 1 year (%) in 3 year (%) in 5 year (%)

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70

Holder lders s of Trada adable ble Centr tral al Governm rnment nt Securities rities

More Balance ce Ownership hip In Terms ms of Holders and Tenors

Forei eign gn Owners ership ip of Gov’t Domestic Debt Securit ritie ies s by Tenor

  • r

Hold lders ers of Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

23,9% 22,5% 23,4% 20,3% 21,1% 31,1% 37,8% 39,9% 36,8% 42,0% 40,3% 38,3% 38,2% 37,5% 39,8% 37,7% 38,6% 30,5% 0% 20% 40% 60% 80% 100% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 May-20 Foreign Holders Domestic Non -Banks Domestic Banks 3,2% 3,5% 5,0% 4,3% 2,4% 2,9% 1,3% 5,3% 5,1% 1,9% 6,7% 8,9% 11,8% 17,8% 17,3% 18,4% 22,0% 19,2% 39,0% 37,4% 35,6% 36,8% 34,1% 32,8% 44,7% 36,0% 37,0% 38,6% 34,8% 36,2% 38,2% 37,5% 39,8% 37,7% 38,6% 30,5% 0% 20% 40% 60% 80% 100% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 May-20

0-1 >1-2 >2-5 >5-10 >10 % Foreign Ownership of Total

slide-72
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71

Ownership ership of IDR Trada dable ble Centr tral al Governmen rnment t Securitie urities

(as of May 31, 1,2020) 2020)

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

(IDR tn)

Source: Ministry of Finance

Descrip iption Dec-15 15 Dec-16 16 Dec-17 17 Dec-18 18 Dec-19 19 May-2020 2020 Bank nks* 350.07 23.95% 399.46 22.53% 491.61 23.41% 481.33 20.32% 581.37 21.12% 949.35 31.12% Govt Instit itut utions ions (Bank nk Indones nesia* ia**) 148.91 10.19% 134.25 7.57% 141.83 6.75% 253.47 10.70% 262.49 9.54% 248.17 8.13% Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 273.21 9.93% 443.48 14.54% GS used for Monetary Operation 23.63 1.33% 38.01 1.81% (36.15) (1.52%) 10.72 0.39% 195.31 6.40% Non-Banks nks 962.8 .86 65.87 87% 1,239 39.57 57 69.90 90% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% 1,853.23 60.75% Mutual Funds 61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01% 130.86 4.75% 133.55 4.38% Insurance Company and Pension Fund 221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50% 471.67 17.13% 505.80 16.58% Foreign gn Holder ers 558.52 38.21% 665.81 37.55% 836.15 39.82% 893.25 37.71% 1,061.86 38.57% 931.83 30.54% 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% 188.17 6.17% Individual 42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95% 95.66 3.14% Others 78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93% 186.39 6.11% Total 1,461.85 100% 100% 1,773.28 100% 100% 2,099.77 100.00% 2,368.45 100.00% 2,752.74 100.00% 3,050.74 100.00%

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SLIDE 73

Commi mmitme tment t to Susta tain inabil bilit ity y and d Clim imat ate e Chan ange ge Mit itig igat ation ion

Se Sect ction ion 5

slide-74
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73

Commitm itment ent to Sustai stainabi nabili lity y and d Climat mate Change nge Mitigati gation

  • n

Republic of Indonesia’s Commitment to Sustainability Including Climate Change Mitigat ation ion

Background Indonesia’s En Environmental Commitment andObje jectives

Indonesia’s Environmental Law was enacted in 2009 based

  • n the concept of sustainable development, prevention,

precaution and a “polluter pays” principle. To better address environmental issues, the Ministry of Environment and the Ministry of Forestry were merged to become the Ministry of Environment and Forestry in October 2014

For

  • refront of
  • f En

Environmental Pr Protection

The “Nine Agenda Priorities” of the President’s priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs

The President’s NawacitaPr Progr gramme

Mi Mitigation

  • Adopted the National Action Plan for Greenhouse Gas Emission

Reduction in 2011.

  • Focuses on reducing greenhouse gas emission through a National

Determined Contribution with an unconditional reduction target of 29% by 2030 compared to the 2010 baseline. An additional 12% reduction is conditional on technology transfer, capacity building, results for payment and access to finance.

  • Environmental Fund Management Agency (BPLDH): established in

October 2019 with the vision to create a trusted institution to attract national and international donors as well as effectively mobilize public and private fund in order to support protection programmes.

Ada daptation

  • National Action Plan on Climate Change Adaptation: National

framework for adaptation initiatives mainstreamed into the National Development Plan.

  • Medium Term Development Plan 2020-2024 (RPJMN): reflects

Indonesia’s strong commitment to shift to a low carbon development based approach to economic development and a more climate resilient path. Includes key priorities such as renewable energy and energy efficient development, forest conservation and reforestation, waste management, land intensification, food security as well as governance and institutionalization of investment and regulation.

Biod

  • diver

ersity

  • Indonesia is an archipelago made up of 17,504

islands with unique ecosystems containing a large number of diverse species.

  • Indon
  • nesi

sian Bi Biod

  • diversi

sity St Strategy and Action

  • n Plan

2015 2015-202 2020: launched to provide an outline on how biodiversity could be utilized sustainably to improve economic and development

  • pportunities.

Commitment to implement the United Nation’s (“UN”) Sustainable Development Goals (“SDG”) in order to achieve the 2030 development agenda introduced by the UN. Through Presidential Regulation No. 59/2017 relating to the implementation of SDGs in Indonesia, the National Development Planning Agency was instructed to present a roadmap to implement the SDGs

Commitment to

  • Sustainability

Source: Green Sukuk Report 2020, Bank Indonesia, Ministry of Finance

slide-75
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74

Indonesia’s Existing Green Bond and Suk ukuk uk Frame mewor

  • rk

Existin sting g Green n Bond d and Sukuk Framewor

  • rk

k under which h the Republic ublic of Indone

  • nesia

sia can Finance nce and Refina nance nce Select cted ed Eligib ible e Projects cts

Source: Indonesia’s Green Bond & Green Sukuk Framework

The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction

Use of proceeds

  • f Green Bond

and GreenSukuk

Eligible Green Projects must fall into one of the nineeligible sectors

1

Project Evaluation and Selection

Review and approval process by Ministry of Finance and National Development Planning Agency

2

Management of Proceeds Management- Ministry of Finance

The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance.

Line Ministries

The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects

3

Reporting

Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report

  • n the list of projects,

amounts of proceeds allocated to such projects and estimation of beneficial impacts

4

slide-76
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75

Indonesia’s Existing Green Bond and Suk ukuk uk Frame mewor

  • rk

k (Cont’d)

Existin sting g Green n Bond d and Sukuk Framewor

  • rk

k under which h the Republic ublic of Indone

  • nesia

sia can Finance nce and Refin inan ance ce Select cted ed Eligible ible Project cts

Source: Green Sukuk Issuance Allocation and Impact Report (February 2020)

slide-77
SLIDE 77

76

Indonesia’s Green Initiatives: Financing Green Projects

Development of Indonesia’s Green Projects Financing

Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC. Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project *These statistics are based on the HSBC’s in house assessment of investor ESG/ SRI appetite and sophistication, which is developed from Market Intelligence and our own understanding from client conversations. A green classification is assigned to investors taking into account whether they have Green/SRI fund and/or strategy, whether they are signatories of a variety of SRI initiatives and with awareness to their broader activities / public announcements in the SRI market. Classifications evolve over time

The Republic of Indonesia has issued two sovereign global Green Sukuk, consecutively in February 2018 and 2019, with the total amount of USD 2 Billion

2019 Issuance

USD 750 million

(or IDR 11.25 trillion) 2018 Issuance

USD 1.25 billion

(or IDR 16.75 trillion)

51% refinancing existing projects

and 49% financing new projects

Each issuance comprised of: Allocation by Sector Managed by 3 Ministries:

29% allocated to Green investors* 29% allocated to Green investors*

Indonesia has continued to develop the Green market through the introduction of the first Retail Green Sukuk in the world (Savings Retail Sukuk, ST006) in November 2019. The ST006 is an investment instrument based on Sharia principles issued and sold to individual Indonesian citizens in the domestic market with an online platform. Allocation and impact of the Retail Green Sukuk is not included in the Green Sukuk Issuance Allocation and Impact Report issued in February 2020

slide-78
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77

Indonesia’s Green Initiatives: Projected Environmental Benefits

Environmental Benefits Arising from Indonesia’s Green Suk ukuk Issuanc nce

3,21 3,218,0 ,014.41 to tonnes

CO2e emissions reduced, towards a low carbon future

691. 691.4 km km

  • f railway constructed,

linking the nation

7,42 7,429 kW kWh

  • f additional power

generation capacity

2,05 2,056,2 ,200

  • f households benefitting from

improved waste management

Source: Green Sukuk Issuance Allocation and Impact Report (February 2020)

slide-79
SLIDE 79

78

Tangible Results from Indonesia’s Green Sukuk uk Initiativ iatives

Green Projects Refinanced and Financed with Proceeds from Indonesia’s Green Sukuk uk Issua uanc nce

*Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the amount spent on each project

Loc

  • cati

tion

  • ns

Across the country Across the country Across the country Amou mount nt Co Committ mmitted ed to

  • Fi

Fina nanc nce 2019 2019 Projects ts USD4.31 mil USD96.57 mil USD10.83 mil Amou mount nt Co Committ mmitted ed to

  • Refin

efinance 2017 2017 Projects ts USD39.62 mil

  • USD63.13 mil

Targ rget t Impa mpact / Emis missio ions Reductio tion (2017 2017) 134,872.41 tonnes of CO2e

  • In order to achieve 48,000,000 tonnes target set in RAN-GRK

Project Example les Fi Fina nanced ed / Ref efin inanced

  • Pla

Plannin ing, Dev evelo elopmen ent and Super ervisi sion

  • f
  • f

New ew, Ren enew ewable le Ener ergy and Ener ergy Conser ervatio tion Inf nfra rastru tructu ture re (Refinancing and Financing) Construction of new and renewable energy infrastructure, with a focus on areas outside current electricity coverage. The project aims to improve the electrification ratio in off- grid areas across the country. Power generation is sourced from solar, mini hydro, and micro hydro power plants*. Locations spread across 19 provinces in 2017 (Refinancing) and the 2019 development of such infrastructure are spread across all provinces (Financing)

  • Co

Cons nstru tructio tion of

  • f Fl

Flood

  • od Co

Cont ntro rol Fa Facil ilitie ties (Financing) Construction of retention ponds/polders, flood canals, dikes, checkdam, and river maintenance and normalization. It aims to reduce the risk of flooding due to increased rainfall intensity and land use changes. Locations: West Java, Central Java, Yogyakarta, North Sumatera, West Sumatera, South Sulawesi, Maluku, Bali

  • Impro

rovem emen ent of

  • f Munic

icip ipal Soli lid Wast ste Managem emen ent Syste stem (Refinancing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal sites. Locations: All provinces except East Kalimantan

  • Impro

rovem emen ent of

  • f Munic

icip ipal Soli lid Wast ste Managem emen ent Syste stem (Financing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal site. Locations spread across 11 provinces

Ren Renewable le Energy Resilie Resilience ce to Cl Clim imate Ch Change Wast aste an and Waste to Energy Ma Management

slide-80
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79

Tangible Results from Indonesia’s Green Sukuk uk Initi tiativ atives es (Cont’d)

Green Projects Refinanced and Financed with Proceeds from Indonesia’s Green Sukuk uk Issuance

Proceeds from Indonesia’s Green Sukuk Initiative has been Successfully Deployed to a Range of Eligible Green Projects

Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project

Loc

  • cati

tion

  • ns

Jakarta, Sumatera, Java Across the country Amou mount nt Co Committ mmitted ed to

  • Fi

Fina nanc nce 2019 2019 Projects ts USD288.77 mil

  • Amou

mount nt Co Committ mmitted ed to

  • Refin

efinance 2017 2017 Projects ts USD77.95 mil USD202.72 mil Targ rget t Impa mpact / Emis missio ions Reductio tion (2017 2017) 1,543,000 tonnes of CO2e 355,394 tonnes of CO2e Project Example les Fi Fina nanced ed / Refin efinanced d in n 2019 2019

  • Dev

evelo elopmen ent of

  • f Ja

Jabodeta etabek ek Urb rban Tra rain in (Refinancing) Construction of double-double track of the Jabodetabek urban railway network. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi)

  • Co

Constr structio tion and Managem emen ent

  • f
  • f

Rail ilways Infra frastru structu ture re and Supportin rting Facil iliti ities in in Sumater tera (Refinancing and Financing) Construction of the Trans Sumatera Railway from Aceh to Lampung province. The Trans Sumatera Railway causes a mode shift from road transport to rail transport and logistics Locations: Aceh, North Sumatera, West Sumatera and South Sumatera

  • Construction and Management of

Double Track Railways Infrastructure and Supporting Facilities (Refinancing and Financing) The construction of the double track railway project in the Trans Java railway’s northern section, upgrading the single-track railway. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi)

  • Ins

nsta tall llatio tion of

  • f Navig

igatio tion Fa Facil ilitie ties (Refinancing) Construction, rehabilitation and replacement of marine navigation aids and the installation of solar cells to power marine navigation aids. The shift towards solar powered marine navigation aids reduces the use of fossil-fuel sources of power. Locations: spread across 21 provinces in 2017

  • Impro

mprovem ement of

  • f Land Transpo

porta rtati tion

  • n Traffi

ffic Mana nagem ement Syste stem (Refinancing) Installation of road traffic equipment such as traffic signs, area traffic control systems (ATCS) and navigation aids for river and take crossings (SBNP) with energy-saving sensors. Locations: Jakarta, West Java, Central Java, Yogyakarta, East Java

  • Co

Cons nstru tructio tion, Rehabil ilita tatio tion and nd Main inte tena nance of

  • f Airp

rport

  • rt Inf

nfra ra-stru tructu ture res (Refinancing) The installation of solar-powered street lights and solar power plants. It improves the energy efficiency of airports and ensure electricity is sourced from renewable sources Locations: spread across 30 provinces in 2017

Su Sustain inable le Tr Transport rt Energy Effic icie iency cy

slide-81
SLIDE 81

Monet netar ary y an and d Fi Fina nanc ncia ial Fac actor:

  • r:

Cred edib ible e Monet etary y Polic icy y Track k Rec ecor

  • rd

d and d Favoura rable ble Fi Financia ial Sec ector

  • r

Se Sect ction ion 6

slide-82
SLIDE 82

81

Bank Indonesia’s Policy Mix

To Maint ntain in Macroeco

  • econo

nomi mic c and Financi ncial System em Stabil bilit ity

Source: Bank Indonesia

 Implementing Macro prudential Intermediation Ratio (RIM)  Implementing Macro prudential Liquidity Buffer (MLB)  Electronification: Social program, e- payment for Government  Financial technology  National Payment Gateway (NPG)  QRIS (QR Indonesia Standard)  Expanding National Clearing System (SKNBI) services  Developing market instruments for financing infrastructure  Developing financial market infrastructures  Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS)  Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat Berharga Komersial)  Controlling inflation: TPIP, TPID  Structural reforms: Government  Financial deepening & stability: KSSK (Financial System Stability Committee), OJK (Financial Services Authority)  Coordinating efforts in reducing Current Account Deficit  Accommodative monetary policy consistent with controlled inflation in the target corridor, while serving as a pre-emptive measure to maintain domestic economic growth momentum  Stabilize exchange rate consistent with fundamentals  Optimize monetary operations in

  • rder to ensure market

mechanisms and adequate liquidity in the money and foreign exchange markets

Monetar etary Po Polic icy Coordina dinati tion

  • n

with ot

  • ther

Authorit horities ies Financ ncia ial l Market et Deepening pening Macro- pruden enti tial al Po Polic icy Paymen ent System em Po Polic icy

1 2 3 4 5

slide-83
SLIDE 83

82

Bank k Indones esia ia Polic licy y Mix: : June 2020

The e BI Boar

  • ard of Gove

vernor rnors agree reed on 17th h and 18th June e 2020 20 to lowe wer r the BI 7-day day Rever everse e Repo

  • Rate

te by 25 bps to 4,25%, , Depos

  • sit

it Facil ility ity (DF) rate tes low

  • wer

ered ed 25 bps to 3,50% % and Lending ding Facili ility (LF) rates tes low

  • wer

ered d 25 bps to 5,00%

Continues to improve the effectiveness of payment system policy in the New Normal era, particularly in terms

  • f digital economic

activity through broader QRIS implementation in various sectors. Lower the BI 7-day Reverse Repo Rate by 25 bps to 4,25%. Strengthen its policy mix and synergise to implement the follow-up policies required through coordination with the Government and Financial System Stability Committee in order to maintain macroeconomic and financial system stability, while supporting the national economic recovery.

Source: Bank Indonesia

Continues to

  • ptimise monetary
  • perations in order

to safeguard market mechanisms and preserve adequate liquidity in the money market and foreign exchange market. Maintains an accommodative macroprudential policy stance in line with the current policy mix and national policy mix, including various efforts to mitigate risk in the financial sector caused by COVID-19. Consistently maintain price stability and strengthen policy coordination with the central and local governments to control low inflation within the 3.0%±1% target corridor in 2020 and 2021.

slide-84
SLIDE 84

83

Bank k Indones esia ia Polic licy y Mix: : May 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

Mechan anism ism for Bank k Indonesia

  • nesia to purcha

hase se SBN in the primar ary y market et to finan ance e the the State Revenue and Expenditu enditure e Budget et (APBN) – Ab Above e the Line

 In accordance with the joint decree issued by the Minister of Finance and Bank Indonesia Governor, SUN/SBSN purchases by Bank Indonesia in the primary market are based on general practices through transparent market mechanisms to maintain good governance. The mechanism for Bank Indonesia to purchase SUN/SBSN in the primary market is divided into three stages as follows: (i) Phase I: As a non-competitive bidder, Bank Indonesia can purchase SUN/SBSN in the primary market based on the following provisions:

  • Yield commensurate with the weighted average yield of the auction on the same day
  • Maximum SUN bid of up to 25% of the target auction maximum and maximum bid on SBSN > 1 year of up to 30% of the target

auction maximum. (ii) Phase II: A greenshoe option based on the following provisions:

  • Yield commensurate with the weighted average yield of the auction on the previous day.
  • If the incoming bid is lower than the auction target, the maximum offer is the same as the previous offer.

(iii) Phase III: Private placements based on the following provisions:

  • Refer to the latest market price published by the Indonesia Bond Pricing Agency (IBPA).
  • Private placements are implemented if the Government seeks additional financing based on the agreed terms and conditions.

 Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden.  SBN purchases by Bank Indonesia in the primary market as a follow-up action to Act No. 2 of 2020 currently stand at IDR23.98 trillion, with IDR166.21 trillion purchased in the secondary market for stabilisation purposes. Consequently, BI holdings of SBN were recorded at IDR443.48 trillion on 26th May 2020.

slide-85
SLIDE 85

84

 Bank Indonesia is providing liquidity to the banking industry through a repo mechanism for SBN in order to fund loan restructuring as part of the national economic recovery. If SBN purchases are insufficient, banks can apply to the government for fund placements, funded through SBN purchases by Bank Indonesia (below the line).  In accordance with Government Regulation No. 23 of 2020, government fund placements will only occur at participating banks if SBN available for repo to Bank Indonesia are insufficient, provided the participating bank is healthy based on a soundness assessment conducted by OJK and is holding tradeable government securities (SBN), Bank Indonesia certificates of deposit (CD), Bank Indonesia Certificates (SBI), Bank Indonesia Sukuk (SukBI) and Islamic Bank Indonesia certificates (SBIS) that have not been repo totaling more than 6% of third party funds.  Liquidity from Bank Indonesia to the banking industry for loan restructuring is provided through the following mechanisms: (i) Phase I: SBN Repo Total SBN held by the banking industry as of 14th May 2020 was recorded at IDR886.0 trillion. After meeting the Macroprudential Liquidity Buffer (MPLB) requirements for the banking industry, approximately IDR563.6 trillion must be repo to Bank Indonesia prior to applying for government fund placements. The current position of repo SBN to Bank Indonesia stands at IDR43.9 trillion. (ii) Phase II: Government fund placements in accordance with Government Regulation No. 23 of 2020 (iii) Phase III: Repo SBN - Macroprudential Liquidity Buffer (MPLB)

  • Pursuant to Bank Indonesia regulations (Macroprudential Liquidity Buffer - MPLB), banks are required to maintain minimum SBN totaling 6% of

deposits (IDR330 trillion) for liquidity management in addition to the 3.5% reserve requirements

  • All SBN, totaling IDR300 trillion, can be repo through monetary operations in accordance with the Bank Indonesia Act before applying for short-

term liquidity loan/financing facilities (PLJP/S).Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. (iv) Phase IV: Short-term liquidity loan/financing facilities (PLJP/S)in accordance with Act No. 2 of 2020 Banks can apply for the short-term liquidity loan/financing facilities (PLJP/S)if the SBN already repoed are nearly depleted. Pursuant to Act No. 2 of 2020, short-term liquidity loan/financing facilities (PLJP/S) are only available to solvent and healthy banks based on OJK requirements and assessments, with adequate repayment capacity and guaranteed by current loans registered at Bank Indonesia.

Bank k Indones esia ia Polic licy y Mix: : May 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

Nation ional al Economi mic Recover ery y and state e budget et finan ancin ing g mechan anism ism – Below

  • w the Line
slide-86
SLIDE 86

85

Bank k Indones esia ia Polic licy y Mix: : April il 2020

1) To stabilize and strengthen rupiah exchange rates, Bank Indonesia has strengthened the intensity of triple intervention policy through the spot and Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the secondary market. 2) To support national economic recovery efforts from the deleterious COVID-19 impact, Bank Indonesia will increase monetary easing through quantitative easing as follows:

  • a. Expand monetary operations by providing banks and the corporates a term-repo mechanism with SUN/SBSN underlying transactions of tenors up to
  • ne year.
  • b. Lower the rupiah reserve requirement ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units,

effective from 1st May 2020.

  • c. Relax the additional demand deposit obligations to meet the Macroprudential Intermediation Ratio (MIR) for conventional commercial banks as well

as Islamic banks/Islamic business units for a period of one year, effective from 1st May 2020. 3) To strengthen liquidity management in the banking industry and in relation to the lower rupiah requirements, Bank Indonesia has raised the Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. The banking industry is required to meet the additional MLB through purchases of government issued SUN/SBSN in the primary market. 4) To increase the uptake of non-cash payment instruments in order to mitigate the COVID-19 impact, Bank Indonesia is increasing various payment system policy instruments as follows:

  • a. Supporting government programs to accelerate non-cash social aid program (bansos) disbursements to members of the public in conjunction with

payment system service providers by expediting the electronification of relevant social programs, including the Family Hope Program (PKH), Noncash Food Assistance Program (BPNT), Pre-Employment Card and Smart Indonesian Card (KIP).

  • b. Increasing public socialization activities in collaboration with payment system service providers to increase the uptake of non-cash payment

instruments through digital banking, electronic money and broader QRIS acceptance.

  • c. Relaxing credit card policy by lowering the upper limit for credit card interest, minimum payment requirements and the penalties for late payments,

while supporting credit card issuer policy to extend the due date for customers.

The e BI Boar

  • ard of Gove

vernor rnors agree reed on 13th h and 14th Apri ril l 2020 20 to hold ld the BI 7-Day ay Rev ever erse se Repo

  • Rate

te at 4.50%, , while le also so main inta tainin ing the Deposit

  • sit Facili

ility (DF) and Lending ding Facili ility ty (LF) rates tes at 3.75% % and 5.25%. . Rupiah iah Reserv serve Requ quir irem emen ent Lowe wered d by 200 bps

slide-87
SLIDE 87

86

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

As a f follo low-up measure e to strength engthen en monet etar ary y and finan ancial ial market et stabil ility ity in conjunct junction ion with h the Coordin dinat atin ing g Ministr istry y of Econom

  • mic

ic Affair irs, s, Ministr istry y of Finan ance, e, Indon

  • nesian

sian Finan ancia ial l Service ices s Authori

  • rity

ty (OJK) and Deposit sit Insuran ance e Corporat

  • ration

ion (LPS), th the e Govern ernor

  • r of Bank

k Indonesia,

  • nesia, Perry

y Warjiy iyo, , on April il 1st 2020 deliv iver ered d The policy icy mix imp mpleme emented d by Bank k Indonesia

  • nesia to mitiga

gate e the COVID ID-19 imp mpact is as follo lows ws:

1) Lower the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively; 2) Intensify triple intervention policy in the spot and DNDF markets and purchasing SBN in the secondary market; 3) Reduce the foreign currency reserve requirements for conventional commercial banks from 8% to 4%; 4) Extend the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as well as increase the frequency of FX Swap auctions to daily in order to ensure adequate liquidity; 5) Expand the types of underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia; 6) Lower the rupiah reserve requirements by 50bps for banks that are engaged in export-import financing, as well as the financing of MSMEs and other priority sectors; 7) Loosen the Macroprudential Intermediation Ratio (MIR); 8) Provide hygienic currency fit for circulation, reduce the costs of the National Clearing System (SKNBI), maintain a QRIS Merchant Deposit Rate (MDR) of 0% for micro-merchants, and support non-cash disbursements of various government programs, including the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia Card. Bank Indonesia reiterated that rupiah exchange rates are currently adequate and the outlook scenario formulated for the main macroeconomic indicators is a form of forward-looking anticipatory measure towards prevention through joint efforts, while Bank Indonesia continues to maintain rupiah stability.

slide-88
SLIDE 88

87

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

As a f follo low-up measure e to strength engthen en monet etar ary y and finan ancial ial market et stabil ility ity in conjunct junction ion with h the Coordin dinat atin ing g Ministr istry y of Econom

  • mic

ic Affair irs, s, Ministr istry y of Finan ance, e, Indon

  • nesian

sian Finan ancia ial l Service ices s Authori

  • rity

ty (OJK) and Deposit sit Insuran ance e Corporat

  • ration

ion (LPS), th the e Govern ernor

  • r of Bank

k Indonesia,

  • nesia, Perry

y Warjiy iyo, , on April il 1st 2020 deliv iver ered d The policy icy mix imp mpleme emented d by Bank k Indonesia

  • nesia to mitiga

gate e the COVID ID-19 imp mpact is as follo lows ws:

  • Bank Indonesia also backs promulgation of the Government Regulation in Lieu of Law in order to relax prevailing laws to mitigate the COVID-19

impact as an anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary measures, unconventional policies and policies that exceed previous jurisdiction.

  • To that end, Bank Indonesia has reiterated its authority in accordance with Government Regulation in Lieu of Law (Perppu) No. 1 of 2020 as

follows: 1) Expansion of BI authority to purchase long-term government securities (SBN) and government Islamic securities (SBSN) in the primary market in

  • rder to assist the Government finance the handling of the COVID-19 impact on financial system stability.

2) SBN will be purchased in the primary market by Bank Indonesia as a last resort if the market is unable to fully absorb the SBN issued by the

  • Government. Further provisions will be regulated in conjunction with the Minister of Finance and the Governor of Bank Indonesia based on the

following considerations: financial market conditions and the impact on inflation. 3) As an anticipatory measure, Bank Indonesia will purchase repo securities held by the Deposit Insurance Corporation (LPS) in order to finance the handling of solvency issues at systemic and non-systemic banks; 4) Provision of short-term liquidity loan or short-term liquidity financing facilities in compliance with sharia principles to systemic and non-systemic banks; 5) Foreign exchange flow management for residents. The use of foreign exchange by residents, including provisions for the surrender, repatriation and conversion of foreign exchange to maintain macroeconomic and financial system stability as follows: 6) Bank Indonesia would like to stress that this measure is not a form of foreign exchange control but policy to manage foreign exchange applicable

  • nly to residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign direct investment (FDI) are still required for

the Indonesian economy, thus existing policy permitting the free flow of foreign exchange by foreign investors remains effective. 7) Regulating foreign exchange amongst residents is consistent with international prudential principles for macroeconomic management, particularly under economic distress, such as the current COVID-19 pandemic.

slide-89
SLIDE 89

88

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

  • nesia has agree

eed d a repurchase ase agree eement ment line e (repo

  • line)

e) with h the US Federal al reser erve wo worth th USD60 billion ion

  • The agreement may be used by Bank Indonesia to fulfil US dollar liquidity if required. The repo line facility for Foreign and International

Monetary Authorities (FIMA) has only been extended to a few central banks, thus indicating confidence in Indonesia's economic outlook and the macroeconomic policies implemented. In addition, Bank Indonesia has also established repo line facilities with several other institutions, namely the Bank for International Settlements (BIS), worth USD2.5 billion, the Monetary Authority of Singapore (MAS), USD3 billion, as well as other central banks in the region valued at USD500 million-USD1 billion.

  • The agreements will strengthen Bank Indonesia’s second line of defence, encompassing Bilateral Currency Swap Arrangements (BCSA) with

several other central banks, namely the People’s Bank of China (PBoC), worth CNY200 billion (equivalent to USD30 billion), the Bank of Japan (BOJ), USD22.76 billion, Bank of Korea, KRW10.7 trillion (equivalent to IDR115 trillion), and the Monetary Authority of Singapore (MAS), USD10 billion.

slide-90
SLIDE 90

89

Bank k Indones esia ia Polic licy y Mix: : April il 2020 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

  • nesia Issued

ed Imp mpleme ementin ting g Provisi isions

  • ns for Auction
  • n of Govern

ernmen ent Debt Securitie ities s (SUN) and/or /or Govern ernment ment Islam amic ic Securities ities (SBSN) in the Primar mary y Market et

  • Bank Indonesia issued Board Member of Governors Regulation No. 22/5/PADG/2020 on Auction of Government Debt Securities and/or

Government Islamic Securities in the Primary Market to Maintain State Financial Management Sustainability as Implementation of Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management

  • f Corona Virus Disease 2019 (Covid-19) and/or Encounter the Threat to National Economy and/or Stability of Financial Systems. The

regulation starts to take effect on 20 April 2020.

  • The regulation serves as a follow-up to Government Regulation in Lieu of Law Number 1 of 2020, granting authority to Bank Indonesia

among others to purchase Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the primary market . It is necessary as a funding source for the government to recover the national economy including maintaining state financial management sustainability including SUN and/or SBSN issued in response to COVID-19 pandemic. Purchase of SUN and/or SBSN in the primary market is based on principle that Bank Indonesia is a last resort if the market capacity is unable to purchase them and/or result in high yield

  • increase. Further, this regulation specifies the following:

1) Bank Indonesia holds auction of SUN and/or SBSN and auction of additional SUN and/or SBSN for long-term SUN and/or SBSN in the primary market as a follow-up to the implementation of Government Regulation in Lieu of Law Number 1 of 2020. 2) Provisions for offer quote and participants of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Finance Minister Regulation on auction of SUN and/or SBSN in the domestic primary market. 3) Bank Indonesia may quote an offer to purchase long-term SUN and/or SBSN in auction of SUN and/or SBSN and auction of additional SUN and/or SBSN in the following manners: a. directly without using the main dealer and/or SBSN main dealer; b. non-competitive bid. 4) Implementation of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Bank Indonesia provisions for auction of Government securities in the primary market provided that they are not in contravention of this regulation.

slide-91
SLIDE 91

90

Bank k Indones esia ia Polic licy y Mix: : March h 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmiss smissio ion

To

  • stren

engthen then coor

  • ordinat

inatio ion and d the va vario ious s polic icy meas easures s alrea eady dy taken en, , Bank Indones

  • nesia

ia on March 2nd

nd 2020 introduce

  • duced a var

arie iety of five e follo low-up polic icy meas easures s to main intain tain monetar tary and d financ ancial ial market t stabili ility as well ll as mitigat igate e the COVID ID-19 risk sks

1) Intensify triple intervention policy to ensure rupiah exchange rates move in line with the currency's fundamental value and market mechanisms. To that end, Bank Indonesia will optimize its intervention strategy in the DNDF market, spot market and SBN market in order to minimize the risk of increasing rupiah exchange rate volatility. 2) Lower the FX reserve requirements for commercial banks from 8% to 4%, effective 16th March 2020, which will increase FX liquidity in the banking industry by around USD3.2 billion and simultaneously alleviate foreign exchange market pressures. 3) Lower the rupiah reserve requirements by 50bps for banks financing export-import activity in coordination with the

  • Government. Effective from 1st April 2020 for a period of nine months before a further review, this policy is

expected to facilitate export-import activity through lower costs/fees. 4) Expand the range of underlying transactions available to foreign investors in order to provide alternative hedging instruments against rupiah holdings. 5) Reaffirm that global investors can utilize global and domestic custodian banks to conduct investment activity in Indonesia.

slide-92
SLIDE 92

91

Bank k Indones esia ia Polic licy y Mix: : March h 2020

Mitiga igating ting the ri risk of COVID ID-19 tra ransmission smission

Bank k Indonesia

  • nesia on the Boar

ard of Governor nors s Meeti eting g 18th

th and

d 19th

th March 2020 has rein

infor

  • rced

ed its policy icy mix towar

  • wards

ds mitiga gatin ting g the risk sk of COVID ID-19 9 transm smis issi sion

  • n,

, while le mainta tain ining ing money y market et and finan ancia ial l syst stem em stabil ility ity and cataly lyzi zing g econom

  • mic

ic growth wth momentum tum through gh the follo lowi wing g policy icy measures es:

1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market. 2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March 2020. 3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate liquidity, effective from 19th March 2020. 4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes. 5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than 23rd March 2020. 6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing

  • f MSMEs and other priority sectors, effective from 1st April 2020.

7) Strengthening payment system policy to support COVID-19 mitigation efforts by:

  • providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions;
  • encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank

Indonesia from IDR600 to IDR1 and from customers to the banking industry from a maximum of IDR3,500 to IDR2,900, effective from 1st April 2020 until 31st December 2020; and

  • supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program

(BPNT), Pre-Employment Card and College Smart Indonesia Card.

slide-93
SLIDE 93

92

Pri rinc ncipl iples s of Avera rage Reserv rve Requir irem ement nt Ratios

  • s Impr

provement vement

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

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

  • Improvement in average reserve requirement is a follow up

to the monetary policy

  • perational

framework reform implemented by Bank Indonesia since 2016.

  • Monetary policy operational framework reform started in

August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening.

  • The current improvement aims to elevate flexibility in

banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness

  • f

monetary policy transmission in maintaining economic stability.

Consid iderati erations

  • ns for the Average

rage Reserve ve Requir uirem emen ent Ratios ios Improve

  • vemen

ent t

Source: Bank Indonesia

slide-94
SLIDE 94

93

Relaxing laxing Reserve erve Require uirement nt Ratios ios

Regulati ulation

1 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 2 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 3 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export- import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 4 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3%

Source: Bank Indonesia

Lower reserve requirements, effective 1st May 2020

slide-95
SLIDE 95

94

Princ inciples iples of Macroprud pruden entia tial Interm ermed ediation iation Rati tio

  • (MIR)

R) and Macropruden prudenti tial al Liquid uidity ity Buffer er (MLB) B)

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

  • f Governors Regulation (PADG) No.

20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also overcoming the issue of liquidity procyclicality. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018.

Conside ideratio rations ns for r Mac acrop

  • pru

rude dential ntial Instru truments ments Mac acropr

  • prude

udentia ntial Interme ermedia diatio tion n Rat atio io (MIR IR) and d Macropr prude udential ntial Liquidit uidity y Buffer er (MLB) B)

1 2 3 4

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

Source: Bank Indonesia

slide-96
SLIDE 96

95

Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR)* )*

Regulati lation

  • n

MIR (Con

  • nventional

tional Comm mmercial ial Bank) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Un Units) s)

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

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

slide-97
SLIDE 97

96

Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR)* )*

Regulati lation

  • n

MIR (Con

  • nventional

tional Comm mmercial ial Bank) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Un Units) s)

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

  • ffices in Indonesia

 Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting

  • f:

(i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities  Average daily total deposits in rupiah at all branch

  • ffices and sharia business units in Indonesia

 Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii)

  • ther liabilities

10 Relaxation of DD MIR/Sharia DD MIR  Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation  The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK)  Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions

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

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SLIDE 98

97

Adjustment ustment of Macropr prudent udential ial Interme ermediat diatio ion n Ratio io (MIR)/ )/Sharia Sharia Macropru prude dent ntial ial Intermed ermediation ation Ratio io (Sharia aria MIR)*

  • In response to global and domestic economic

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

  • BI relaxed MIR/sharia MIR policy in March

2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity.

  • Considering the potential of bank funding

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

  • ptimize loans/financing received for bank

lending.

  • This policy to stimulate credit growth will

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

Polic icy Backgrou kgrounds nds

Source: Bank Indonesia

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

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

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

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

are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement.

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

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

Main Regulatory latory Points ts

Credit it + Owned Bond Deposit it + Issue ued Bond + Loan/ n/Financ Financing ing Receiv ived ed Lower disinc incent ntiv ive param ameter er

MIR/sh R/sharia ia MIR MIR RR RR= Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR Target – Bank’s MIR/Sharia MIR) x Deposit

Upper disinc incent ntiv ive param ameter er

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

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

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SLIDE 99

98

Principles inciples of Macroprud pruden ential tial Liquidit uidity Buf uffer er (MLB) LB)

Regulati lation

  • n

MLB (Conventional tional Comm mmercial ial Bank) MLB Shar aria ia (Shar aria ia Banks)

1 Rate 4% of rupiah deposits (including Sharia Business Units deposits) 4% of rupiah deposits 2 Components  Securities denominated in rupiah held by a conventional commercial bank that may be used for monetary

  • perations (including SBI/SDBI/SBN); and

 Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia- compliant monetary operations (including SBIS/SBSN)  Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia- compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional commercial bank to rupiah deposits Percentage of sharia-compliant rupiah securities held by an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits 5 Sources

  • f

Data

  • n

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

slide-100
SLIDE 100

99

Macropru prude dent ntial ial Liquidi uidity ty Buffer r (MLB) ) Policy y and d Cre redit it card policy cy

Regulati lation

  • n

Befor

  • re

After er

1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% of rupiah deposits 6% of rupiah deposits 2 Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits

Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020.

Regulati lation

  • n

Befor

  • re

After er Effec ectiv tive Perio iod

1 Lower upper limit on credit card interest 2.25% per month 2% per month 1st May 2020 2 Temporary reduction of minimum payment requirements 10% 5% 1st May 2020 – 31st December 2020 3 Temporary reduction

  • f

late payment penalties 3% or maximum of IDR150,000 1% or maximum of IDR100,000 1st May 2020 – 31st December 2020 4 Supporting credit card issuer policy to extend the due date for customers Issuer discretion 1st May 2020 – 31st December 2020

Credit card policy, effective 1st May 2020.

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SLIDE 101

100

Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios* s*

The e LTV/F V/FTV relaxa axation tion is cond nduct ucted while le taking aking into

  • account
  • unt aspects

spects of prude udential ntial and consu nsume mer r protect ectio ion* n*

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

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

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

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

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

  • 3. Adjusting the arrangement of stages and amount of property

loan/financing disbursement of indent property:

Source: Bank Indonesia

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

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SLIDE 102

101

Prude denti ntial aspects cts of Relaxing xing the Loan-to to-Value ue (LTV) and Fina nanci ncing ng-to to-Value ue (FTV) Ratios

  • s

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 debtor and developer/seller’s bank account.

LTV / F FTV Exempt mptions

  • ns

Central government or local government loan / financing programs are exempt from this regulation.

Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios* s*

Source: Bank Indonesia

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SLIDE 103

102

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

  • 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing.
  • a. BI decides to relax the LTV ratio for property loans and FTV ratio for property

financing by 5% from current ratio as follows:

Source: Bank Indonesia

Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. Polic icy Backgrou kgrounds nds Main n Regulatory latory Points ts

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

  • In

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

  • Considering the 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.
slide-104
SLIDE 104

103

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

FTV ratio for green property financing.

  • a. The Green Property criteria refers to the standards/certificates

issued by a nationally

  • r

internationally recognized environmental institution.

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

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

  • For buildings < 2500m2, the bank may conduct a self-

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

  • For buildings > 2500m2,

the assessment must be conducted by a recognized institution;

  • For new buildings constructed in an area by one

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

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

Source: Bank Indonesia

Main n Regulatory latory Points ts

  • 3. Adjustment of Down Payments on Automotive Loans/Financing
  • a. Down Payments on Automotive Loans/Financing is adjusted as

follows: i. Relaxation on the down payments of automotive loans or automotive financing 5%-10% from current regulations; ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment

  • f

down payments

  • f

automotive loans/financing in points a and b is as follows:

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

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SLIDE 105

104

  • 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:

Adjustment ustment of LTV Ratio for Property ty Loans, ns, FTV Ratio io for Proper erty ty Financ nancing ing, , and Do Down Pa Payments ments on Automot motive Loans/Fin ns/Financ ancing* ing*

Source: Bank Indonesia

Main n Regulatory latory Points ts

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

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

slide-106
SLIDE 106

105

Princ inciples iples of Domest estic ic Non Deliv iver erable ble Forwar ard (DNDF NDF) ) Transa ansaction ction

Purposes ses

1. To support the effort of stabilizing the Rupiah exchange rate through the additional of alternative hedging instruments 2. To support the development and deepening of the domestic financial market 3. To increase the confidence of exporters, importers, and investors in conducting economic and investment activities through the flexibility of hedging transactions against Rupiah currency risk

Genera eral Provisi sions

  • ns

 Domes mestic tic Non-De Deliv liverable ble Forwar ard d Tran ansa saction tion (DNDF Trans ansac actio ion)

Plain vanilla derivative transaction of foreign exchange against rupiah in the form of forward transaction with fixing mechanism in the domestic market

 Forward Trans ansac actio ions

Forward Transactions are sell/purchase foreign currencies against rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date

 Fixing Mec echan hanism sm

Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date)

 Other er Definit initio ions

The definition of derivative transaction of foreign exchange against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah

Source: Bank Indonesia

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SLIDE 107

106

Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction

Bank can perform

  • rm DNDF Transa

nsacti ctions ns as follows: ws:

Bank – Customer Bank – Foreign Party

Bank – Bank

Tran ansac saction tion bet etween en:

Can only be performed to hedge rupiah exchange rate risk.

  • 1. Must have Underly

lyin ing Transac sactions tions:

Includ cluding ing all foll llow

  • wing

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

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

Source: Bank Indonesia

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SLIDE 108

107

Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction

Transac nsacti tion

  • n Set

ettl tlement 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

Roll ll over er and d early ly termi

mina nati tion for DNDF is proh

  • hib

ibit ited ed However, unwind can be done by opening the reverse DNDF transactions

Cover He Hedging ng

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

  • Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign
  • Purpose: Hedging

Custom

  • mer

er / / Foreign eign Party ty

Bank Overseas seas Bank

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.

Cover Hedging

Source: Bank Indonesia

slide-109
SLIDE 109

108

Amendmen ndment t on DNDF F Regulation ulation

*to provide de more flexib ibilit ity in DNDF F transact saction

  • n

*to increase rease liquidi idity ty and efficiency iciency in domesti estic c forei reign gn excha hange ge market

BI Regula lati tion n No. 20/10/ 0/PBI/20 2018

Source: Bank Indonesia

BI Regulati tion n No. 21/7/PBI BI/20 2019

AMENDMENT

Artic icle le 3

  • 1. DNDF transactions must have Underlying

Artic icle le 3

  • 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without

underlying documents Artic icle le 6

  • 2. Not Regulated;

Artic icle le 6

  • 2. DNDF can be terminated (unwind);

Artic icle le 11

  • 3. Underlying documents must be final (firm) with additional

supporting documents Artic icle le 11

  • 3. Underlying documents for buy FX/IDR for DNDF is :
  • Final (firm commitment) + Supporting documents
  • 4. Underlying documents for sell FX/IDR for DNDF above

threshold $ 5 mio can be:

  • Final (firm commitment) + Supporting documents
  • Projection (anticipatory basis) + Supporting documents

Artic icle le 11

  • 4. Not Regulated;

Artic icle le 11

  • 5. In using estimate underlying transaction documents in the

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

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SLIDE 110

109

Overn rnig ight ht Index x Swaps ps (OIS) IS) & I Interest erest Rate e Swaps ps (IRS RS)

Source: Bank Indonesia

As hedg dging ing instr trume ments ts agains ainst t Rupiah ah inter erest est rate te chang anges es

IR IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion

  • f

the contract based

  • n certain notional
  • amount. IRS pricing is based on JIBOR.

OIS IS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA)  Encourage price transparency in the rupiah money market  Strengthen monetary policy transmission  Provide alternative hedging instruments against rupiah interest rate changes  Support securities market deepening in Indonesia

1 2 3 4

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

Strengthening reference rate based on real transactions

slide-111
SLIDE 111

110

OIS and IRS Transa ansactions: ctions: General eral Provisi visions

  • ns

Source: Bank Indonesia

Mar arket Pl Player

  • ers. Banks, bank clients, both individual

and non-bank institutions, and also foreign parties. Trans ransacti tion

  • n Nee

Needs ds Analys nalysis

  • is. A bank performing an IRS
  • r OIS transaction with a customer and/or foreign party
  • n behalf of the customer and/or foreign party is

required to have an analysis on the need of rupiah interest rate derivative transactions. Mar arket Con

  • nventio

entions

  • ns. When performing IRS and OIS

transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Se Sett ttlem ement

  • ent. Settlement can be performed as a netting

payment and every transaction has to be settled in Rupiah. Close lose-out

  • ut

ne nett tting ing can be applied under predetermined conditions.

Market Conventions

Calculat lation ion Base ACT/360 IndONIA ONIA Index x with 5 5 decimals mals Comp mpou

  • und

d Floatin ting Rates s (CFR) based d

  • n 5 decima

mals ls Interest rest Payment based d on Net etting ing Not

  • tion
  • nal

al of Net et inter erest st paymen ent in IDR with 0 d decim imals als Set ettlem emen ent Date e = 1 busin ines ess s days s after Maturity ity Date (MD) OIS Quot

  • tation

ion rates s based d on 2 d decim imals als Quot

  • tation

tion : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, e, OIS set ettle lement ment will l only ly be done at the end

  • f the OIS tenor
  • r

(MD+1bd) bd).

slide-112
SLIDE 112

111

3,00 4,00 5,00 6,00 7,00 8,00

LF Rate BI Rate BI-7Day RR Rate DF Rate LF Rate (Dummy)

Well ll Maint intaine ined Infla lation tion Ensu sured red Price ice Stabi bility ity Stren engt gthened ed Moneta etary ry Poli licy cy Framew ework

  • rk

Credit it Growt

  • wth Profil

ile

BI 7Day RR Rate: e: 4.25

(%)

LF Rate: e: 7.00 LF Rate: e: 5.00 00 BI Rate: e: 6.50 DF Rate: e: 3.50

19 Augu gust 2016

The New Moneta tary ry Opera ratio tion Framework

8,38 8,36 3,35 3,02 3,61 3,13 2,72 2,19

0,00 1,00 2,00 3,00 4,00 5,00 6,00 7,00 8,00 9,00

  • 2

2 4 6 8 10 12 14 16 18 20

2013 2014 2015 2016 2017 2018 2019 May-2020 (%) (%) CPI (%, yoy) rhs Core (%, yoy) - lhs Volatile Food (%, yoy) - lhs2 Administered (%, yoy) - lhs

Stable able Mone netar tary Envir ironment

  • nment Despi

pite Chall llenges nges

Rupia iah Exch change ge Rate te Fared red Rela lative tively Well ll Compared red to Peers ers

Source: Bank Indonesia 2,14 0,61

  • 1,67
  • 2,97
  • 1,58
  • 2,38
  • 2,30
  • 1,83
  • 3,24
  • 4,60
  • 11,76
  • 12,58
  • 18,80

1,23 1,16 0,44

  • 1,42
  • 1,76
  • 3,36
  • 4,36
  • 4,53
  • 4,76
  • 6,32
  • 12,99
  • 18,35
  • 22,53
  • 25,0
  • 20,0
  • 15,0
  • 10,0
  • 5,0

0,0 5,0 PHP JPY EUR IDR CNY SGD MYR THB KRW INR TRY ZAR BRL

point-to-point average

data as of June 17th, 2020

YTD 20 2020 20 vs vs 201 019 %

11,0 10,5 14,3 9,1 2 4 6 8 10 12 14 16 18 20 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 2015 2016 2017 2018 2019 %,yo yoy Total Growth Working Capital Loans Investment Loans Consumption Loans

slide-113
SLIDE 113

112

Regio gional nal Inflation ation Remai mains ns under r Contr ntrol

  • l

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

Low inflation occurs in all regions, with deflation recorded in North Kalimantan (-0.7%) and Southeast Sulawesi (-0.2%).

REGIONA IONAL INFLA LATION, ION, MAY 2020 (%, YOY)

slide-114
SLIDE 114

113

4 Strat ategies gies to

  • Achie

hieve e the he Inflat ation ion Targe get

Achieving inflation at 3,5%±1%

  • Maintaining core inflation
  • Maintaining volatile food stability at 4-5%
  • Controlling administered price inflation

2018-2019 Target

Stabilizing the price

  • 1. Price

e Affordabil dabilit ity Achieving inflation at 3,0%±1%

  • Maintaining core inflation
  • Maintaining volatile food inflation less than 4%
  • Controlling administered price inflation

20 2020 20-20 2021 Targe get

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

  • 2. Supply

ly Availabi lability lity

Strengthening institution Encouraging trade cooperation between regions

  • 3. Well

l Managed ged Distr trib ibution ion

Improving trade infrastructure Improving data quality

  • 4. Effec

ectiv ive e Communic ication ation

Strengthening central-regional coordination

Source: Bank Indonesia

4 Strat ateg egies ies

slide-115
SLIDE 115

114

Improving ving the Effecti ctiveness eness of Monetar etary y Policy icy Transmi ansmissi ssion

  • n

Bank nk Indon

  • nes

esia ia has instit ituted uted a Reformulation

  • rmulation of Monetary

netary Policy icy Operations ions Framewo mework k which ich consists of 3 pill llars; ; (1) (1) impleme lement ntation

  • n of BI 7day Reverse Repo
  • Rate;

e; (2) (2) impleme lement ntation

  • n of reser

erve e requir uiremen ement averaging ging; ; and (3) (3) continue inue to impl plemen ement money ey market ket deepening epening progr

  • gram.

Enhancement of monetary policy signal Enhancement of banking liquidity management Implem lemen entat tation ion of BI 7 Day Rever verse e Repo Rate Implem lemen entat tation ion of Reserve e Requiremen quirement t (RR) Aver veragin aging Reform rmula ulati tion

  • n of

Moneta etary Po Polic icy Operat ational ional Framewor

  • rk

Enhancement of instruments and transactions Implem lemen entat tation ion of Money Market et Deepen ening ing Program ram

Source: Bank Indonesia

slide-116
SLIDE 116

115

Enhan ancemen cement t of Monetar tary y Operation ations s Frame mewor

  • rk
  • Can be traded among contributor banks for 10

minutes.

  • Up to the amount of IDR10 billion.
  • Up to 1-month tenor.
  • Can be traded among contributor banks for 20

minutes.

  • Up to a total of IDR20 billion.
  • Up to 3-month tenor.

CURR RRENT ENT JIBOR OR (as per June 1st, 2016) PREVIOU VIOUS JIBOR OR

Source: Bank Indonesia

slide-117
SLIDE 117

116

Finan ancial cial Interm ermed ediation iation Manages ges to Maintai tain n Moderat rate e Growth th

Financial industry’s intermediation still grows positively in April 2020 despite external pressures and economic slowdown.

Source: Financial Service Authority (OJK)

As of May 2020, the total l of 2020 capit ital l rais ising ing reaches hes IDR 32.63 Tn Tn Bank nking ing intermedia iatio ion n growt wth h maint intai aine ned at a moderat ate e level of 5.73% % YoY in April l 2020 in line ne with h the econom

  • mic

ic slowdo wdown wn Growth h of financ ancing ing declin lined to 0.82% YoY in April l 2020 as there are slowing wing demand ands and increas asing ing analy alysis is level on new loans ns Life fe and general al insur uranc ance premium ium nega gativ ive e growth h star arted to decreas ase in April l 2020

  • 14,83
  • 0,67
  • 30
  • 10

10 30 50 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 Life Insurance Premium Growth General & Reinsurance Premium Growth

slide-118
SLIDE 118

117

Resili silien ent t Finan ancial cial Insti titu tuti tions

  • ns

Domestic financial institutions show a relatively stable condition amidst the COVID-19 pandemic. Capital is maintained at a healthy level with sufficient profitability, while leverage remains manageable.

Source: Financial Service Authority (OJK)

The banking sector’s capital remains strong, reflected in CAR of 22.13% with Tier-1 1 Capit ital al at 20.34% % as of April l 2020 *) Profit itab abili ility of the bank nking ng sector is maint intained ained at a relat ativ ivel ely high gh and stable level l *) RBC of the insur uranc nce indus ustry remains ains high gh and well l above e the minim nimum um thresh eshol

  • ld (120%)

%) *) Gearing ing ratio io of mult lti-finan finance companies anies is stead adil ily maint intained ined at a level of below three e times es

*) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19

slide-119
SLIDE 119

118

Managea geable ble Cred edit it Risks sks with h Adequat ate e Liquid uidity ity

Financial Institutions are equipped with sufficient liquidity. Credit risks are also maintained at a low level and remain below the threshold…

The ratio io of liquid uid assets to deposit it and non-core deposit its in the bank nking ing sector is maint intain ained well l above the thresh eshol

  • ld *)

NPL ratios ios are well l maint intain ained below w the thresh eshold ld with h 2.89% % gross and 1.00% net as of April l 2020 *) NPF ratio io of the mult lti-fi financ nance indus ustry is still ill manag nageab able at 3.3% as of April l 2020 *) Inves estment nt adequa uacy ratio io in the insuran urance indus ustry is steadily ly maint intained ined above 100% (thres eshold ld) *)

Source: Financial Service Authority (OJK) % *) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19

slide-120
SLIDE 120

119

Managea geable ble Mark rket t Risks sks

Amidst the increasing market volatility, the risk profile of financial institutions remains manageable

Net et open en pos

  • sit

ition ion in in the he bank ankin ing sect ector

  • r is

is maint intai ained ned signif nificant ntly ly bel elow the he maxim imum um limit it of

  • f 20

20% *) *) Insur uranc ance & pensio ion fund nd inves estment nt value ue is is growing wing stead adily ly *) The exposures ures of mult lti-fi financ nance companies anies to foreign ign debt have e large gely ly been mitig igat ated ed by compan any hedging ng meas asur ures es Mutual ual funds’ net asset value ue (NAV) is is stead ady with low low volatilit ility

Source: Financial Service Authority (OJK) IDR Tn *) provisional figures due to the relaxation on financial institutions’ report to OJK because of Covid-19 As of 10 June, 2020

slide-121
SLIDE 121

120

Domest estic ic Capital ital Mark rket t Perfor

  • rma

manc nce e Amid d Global al Challenges llenges

Source: Bloomberg and Ministry of Finance

Dom

  • mes

estic tic bond and stock

  • ck index

ex perform

  • rmances

es are e showi

  • wing recov
  • very

ery after ter a deep ep contra traction ction at t the e end of March rch 2020

Foreign gn portfol

  • lio

io contin inue ue to re-enter er the market as it records total l inflo flows ws of IDR 25.39 39 Trill llio ion n sinc nce May 2020 COVID-19 pandemic emic continues inues to weigh gh on JCI's 's performan ance as the global al stock market plummets ets

Amid id uncerta ertain market rket conditi itions, s, Gov

  • vern

ernmen ent t bond yield elds s remain in attra tractive tive to support pport the e sta tabi bili lity ty of rupiah exch change ge rate te

Stock

  • ck Index

ex Perf rfor

  • rmance as of 10 June

e '20 (Com

  • mpare

red to 31 Dec '19)

Fears of the second wave of COVID-19 infection remains as a negative sentiment on global and domestic financial markets amidst the number of countries reopening.

slide-122
SLIDE 122

121

Stim imuli uli to Support Indonesia’s Financial Industry

OJK and d ot

  • ther

er gover ernmen ment instit itutio ions s have e wo worked ed intensiv ively ly to minimize imize the impa mpact of COVID VID-19 on the econom

  • nomy

Source: Financial Service Authority (OJK) *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities.

Mainta aintainin ining busin siness ss funda damenta tal l of the e rea eal sec ector

OJK Regula latio ion No

  • No. 11

11/PO /POJK.03 03/2020: “National Economic

  • mic Stimulu

imulus as as A Coun Counter ercyclic lical Policy of

  • f The Impacts of
  • f COVID-19

19 Outbreak” Bank ank

  • Relaxation of credit assessment and credit restructuring to debtors

who are affected by COVID-19.

  • Credit assessment (up to IDR10 billion) is based only on the

punctuality of debtors to pay their debts and interests.

  • This applies to Commercial and Sharia Banks
  • With maximum 1 year period of credit restructuring

*) *) OJK Regul ulation No

  • No. 14

14/PO /POJK.05 05/2020: “Cou

  • unter

ercy cycl clic ical Polic licy as as an an Impact of

  • f CO

COVI VID-19 19 for Non-Bank Financial Institut utio ion (NBFI)”

  • Extended deadline of report submission
  • Relaxation of financing assessment
  • Financing Restructuring
  • Regulating loan restructuring, deadline of periodic reports,
  • Conducting fit and proper tests,
  • Determination of asset quality of financing,
  • Calculation of solvency level of insurance companies,
  • Calculation of pension fund quality, and
  • Implementation of asset management provisions.

NBFI FI

2 1

  • Stabilizing financial sector particularly in banking sector amid

COVID-19 outbreak by allowing merger, consolidation, acquisition, and/or integration to banks permitted by OJK. *) OJK Regula ulatio ion No.18/P /POJK.03/2 /2020: “Written Orders rs to Handle Bank Problems ems” OJK Circula ular r Letter No. 3/SEOJK. K.04 04/20 2020 20: “Other Conditions as Significantly Fluctuating Market Condition

  • n Stock Buyback issued by Issuers or Public Companies”
  • Prohibition of short-selling
  • Asymmetric Auto Rejection (current auto rejection limits under 7%)
  • 30-minute Trading Halt for 5% decrease in IHSG
  • Negation of trade in the pre-opening session
  • Stock buyback without prior general shareholders meeting

Aimed to enhance the participation of shareholders in General Shareholders Meeting (RUPS) by allowing electronic authorization to third parties. *) OJK Regula ulatio ion No.15/P /POJK.04/2 /2020: “Plan and and Organiz izatio ion of

  • f the General Meeting of
  • f Shareholde

lders rs of

  • f

Public Companies” Regulating the implementation of electronic corporate decision making by requiring a member of the board of director/commissioner in charge of GSM, while other electronic attendances are counted as fulfillment of attendance quorum. *) OJK Regula ulatio ion No.16/P /POJK.04/2 /2020: “The Implementation of Electronic General Shareholders Meeting (GSM)” Improving the definition and procedure of Material Transaction, as well as the effectiveness of regulation to enhance the protection of public shareholders and the quality of information disclosure in Material Transaction and Business Activities Changes. *) OJK Regula ulatio ion No.17/P /POJK.04/2 /2020: “Mater erial ial Trans nsac action ion and Chang anges es in Busin iness Activ ivit itie ies”

Maintaining financial market stability

slide-123
SLIDE 123

122

Furth ther er Stimuli imuli to Provide vide Liquidity uidity and Capital ital in Banking ing Industr stry

Source: Financial Service Authority (OJK)

  • i. The deferment reforms include Risk-Weighted Assets (RWA) for operational risk, credit

risk, market risk, and Credit Valuation Adjustment (CVA)

  • ii. Until then, the Capital Adequacy Requirement still refers to the current RWA standard.

Adjus justme ment nt of Bankin nking g Provis ision ions Implemen plementation ion during ing Relaxation ion Period iod i. Eliminating the obligation to fulfill Capital Conservation Buffer by 2.5 percent of Risk Weighted Assets (ATMR) for BUKU 3 and BUKU 4 banks (until 31 March 2021) ii. Maintaining the obligation of fulfilling Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for BUKU 3, BUKU 4, and foreign banks at a minimum level of 85 percent (until 31 March 2021)

  • iii. Dismissing the quality assessment of Foreclosed Collateral (AYDA) based on the

period of ownership (until 31 March 2021)

  • iv. Reducing the obligation of education funds provision to less than 5 percent

Relaxation ation for Conven ention ional al and Sharia ia Banks (Reporting/Treatment/Governance of Restructured Credit/Financing)

Restructured credit/financing is excluded from the Loan at Risk (LAR) in the assessment

  • f banks performance. Banks are also allowed to approve credit restructuring with several

alternative governance by considering the necessary principle.

Defer erral ral of Basel III Reform rms Implem emen enta tati tion

  • n

(valid until 31 December 2022) Relaxati ation

  • n for Rural and Rural

l Sharia ia Banks

  • i. Relaxing the General Loan Loss Provision (PPAP) to less than 0.5%
  • ii. Exemption of Interbank Placement for Legal Lending Limit (BPMK) and Maximum Limit
  • f Fund Channeling (BPMD) to a maximum 30% of capital
  • iii. Temporary Halt on Foreclosed Collateral (AYDA) calculation based on period of
  • wnership
  • iv. Providing 5% less on Education, Training, and Human Resource Fund from the

previous year

slide-124
SLIDE 124

123

OJK’s Role in the National Economic Recovery Program (PEN)

Source: Financial Service Authority (OJK)

OJK carry y out effor

  • rts to

to suppor

  • rt the economic recovery,

through:

Placement of funds by the Government to provide liquidity support to banks conducting loan restructuring and to provide additional credit / working capital financing

Fund nd Place ceme ment nt

OJK supports the program through Liquidity Buffer and Credit Restructuring to Banks and Multi- Finance Companies

Providing Interest Subsidies for MSMEs

  • MSMEs debtors with credits up to

IDR10 billion

  • Debtors of housing loans (KPR) up to

type 70

  • Debtors of motorcycle loans for

productive activities, including online transportation and informal business

Targe geted ed Beneficiar iaries ies

  • Obedient taxpayer
  • Excluded from National

Blacklist (DHN)

Other r Requir uirem emen ents

Providing necessary information in the implementation of interest subsidies based on the procedure which will be arranged through Joint Decision Letter (SKB)

OJK’s Role

The provision regarding the budgeting, implementation, and responsibility mechanism of interest subsidies and debtor requirements are regulated in the Minister of Finance Regulation (PMK)

Mechan hanism ism Artic icle le 20 Paragrap graph 2 Gover ernm nmen ent t Regulat lations ions No.

  • . 23 of 2020

All debtors with credits up to IDR500 million will be given interest subsidies while debtors with credits up to IDR10 billion will go through the same mechanism with credit restructuring program. The program is eligible for debtors of banks/multi-finance companies with Performing Loan (Kol 1 and Kol 2) before COVID-19, valid from 29 February 2020.

National Economic Recovery Program (PEN) PP PP No. 23/2020

slide-125
SLIDE 125

124

Strat rategic egic Polic licies ies in Finan ancial cial Sector

  • r

Source: Financial Service Authority (OJK)

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

slide-126
SLIDE 126

125

Continuou tinuous s Progr gram am on Capital ital Mark rket t Deepen ening ing

…continuously strengthened, including through capital market deepening ini niti tiativ atives es

Stren engthen thening ing market t infras astr tructure

  • Development of Integrated Licensing (SPRINT).
  • Enhancement of electronic reporting system.
  • Development of electronic public offering.
  • Integrated data warehouse and supervisory system.

Enhanci ancing the supply-side side

  • Product: QIB offering and private placements, private

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

  • Issuer: Financial conglomerates, big bank debtors, local

government, IDX incubators, SMEs, SOEs & big tax payers.

Enhanci ancing the deman mand-side side Stren engthen thening ing governance ance & c cust stom

  • mer

er protec ectio ion

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

Source: Financial Service Authority (OJK)

  • Enhancing the role of the domestic institutional investors

(insurers & pension funds) in capital markets .

  • 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
slide-127
SLIDE 127

126

Enhan ancing cing Financi ncial al Literac eracy y & Inclusion usion

Source: Financial Service Authority (OJK)

OJ OJK striv strives s to

  • buil

build a a str strong foun

  • unda

dation for

  • r fina

inancial l incl inclusi sion prog

  • grams,

, to

  • en

ensu sure ac access to

  • finan

inancial products ts & & ser ervices by In Indo donesians of

  • f all

all soc

  • cial

l cla

  • lasses. Such

Such in initia itiati tives als also in include th the e en enha hancement t of

  • f fin

inan ancial lit liter eracy an and d finan inancial cons

  • nsumer protecti

tion. Developing financial education models utilizing various delivery channels Enhancing the role of the “Investment Alert Taskforce” The result of OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among Indo donesian ans com

  • mpared

ed to that t of 2016.

Fina inanc ncial Lit iter eracy cy Fina inanc ncial Inclu clusio ion

21.8%

2013

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

  • f Islamic

microfinance institutions (“Bank Wakaf Mikro”) Strengthening the role of Financial Access Acceleration Taskforce (TPAKD) in local areas 29.7%

2016

38.03 .03%

2019

2019 Targ rget: 35%

59 59.7%

2013

67 67.8%

2016

76.19%

2019

2019 Targ rget: 75%

slide-128
SLIDE 128

127

A A Comprehen prehensiv sive e Financ ncia ial l Deepe pening ning Program

  • gram

…strat

trategy gy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

In Apr-2016 2016, the Minis nister er of Fina nance nce, , the Gover erno nor of Bank nk Indon

  • nes

esia, ia, and the Chair irma man n of the Board of Commi missione ioners of the Financi ncial l Service ices Authorit

  • rity

launc nched ed a Coordina ination ion Forum um for Developme elopment nt Financin ncing throug ugh Financia ncial Market ket (FK-PPPK). K). The e three ee authorit

  • rities

ies have e agreed eed to formula mulate e “The Natio ional l Strategy egy of Fina nancia ncial l Market ket Development elopment”

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

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

Mission: Financial Market as Sources of National Development Financing

1 2 3

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

3 Pilars 6 Markets 7 Elements

  • f Financial

Market Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

slide-129
SLIDE 129

128

BI’s Roles in Supporting Distribution of Non-Cash Cash Soc

  • cial

ial Assistance stance (NCS CSA) A)

BI suppor

  • rts

ts gover ernme ment’s progra

  • gram

m of shiftin ing socia ial l assista istanc nce to targeted ed non cash sh soc

  • cial

ial assistan istance disbu sburse seme ment t throu

  • ugh

h the elec ectr tronic ic paymen ent system

  • em. In the future,

re, elec ectr tronic ic mechan hanism ism disbu bursem rsement t will l be also

  • applie

ied d to LPG subsidy sidy. . NCSA A Programs ams

Family ily Hope Program ram (Program gram Keluarga uarga Harapan an -PKH KH) Smart Indone

  • nesia

ia Program ram (Program gram Indon

  • nes

esia ia Pintar tar-PIP PIP) Non Cash Food d Assistan tance e (Bantuan tuan Pangan gan Non Tunai ai – BPNT)

2016-20 2020 20

Pilot Proj

  • jec

ect Gradu adual al Impl mpleme ementatio tation

Inter erconne

  • nnected

ed & inter eroperable

  • perable

paymen ent t syst stem em

LPG Subsidy idy

Full Imp mpleme lementati tation

XXYYZZ 1234567 678

9876543210

Source: Bank Indonesia

slide-130
SLIDE 130

129

Prog

  • gres

ress of

  • f NCSA

A Prog

  • grams

ms

Family ly Hope e Program

  • gram

(Program ram Kelu luarga rga Harap rapan an - PKH) Non

  • n Cash Food
  • d Assistance

istance (Ban antuan Pangan gan Non

  • n Tunai -

BPNT)

  • The Family Hope Program (PKH) is a program that

provides cash to very poor households. IDR1.89 million /year will be granted for each

  • household. PKH will be granted every February,

May, August, and November.

  • As of December 2017, PKH has been distributed

to 6.0 million households on non-cash basis.

  • In 2018, PKH has been distributed to 10 million

households on non-cash basis.

  • BPNT is a poverty alleviation and social protection

program that is managed by the central

  • government. It provides subsidized rice and eggs

to low - income households. IDR110 thousand/ month will be granted for each household as BPNT that can be used in certain stores which called e-warong.

  • As of December 2017, BPNT was distributed to

1.2 million households in 44 cities.

  • In 2018, BPNT has been distributed to 10.1 million

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

Source: Bank Indonesia

  • In 2019, PKH has been distributed to 9.84

million house hold on noncash basis with total realization of IDR32.75T.

  • In 2019, BPNT has been distributed to

15 million household on non cash basis with total realization of IDR15.44T

slide-131
SLIDE 131

130

Strong

  • nger

er Fundamentals amentals Facing ng the Headwi dwind nds

82,4 12,1 6,8 1998 2008 Sep-15 17,4 50,2 1998 2008 Sep-15

Inflation tion Rate te (%) IDR R Movem emen ent t (%) Non Non-Perf Perform

  • rmin

ing g Loa

  • an/NPL

PL (% (%) Government ent Debt/G t/GDP Forei eign gn Reserv rves (USD D bn)

100.0% 1998 98 27.4% 2008 08 32.12% Q1 - 20 2020 20 8.6x 1998 98 3.1x 2008 08 3.2x Q1 - 20 2020 20 116.8% 1998 98 33.2% 2008 08 34.5% Q1 - 2020

More e Liquid quid Market rket (%) Extern ernal l Debt bt (Publ blic ic & Priva ivate) te) to FX Reserv erve e Ratio tio Extern ernal l Debt bt/G /GDP

Inflat ation contro trolled d withi thin the target t range IDR depreciate ted d year-to to-date date in June 2020 NPL NPL level (gross) is below w the maximum um thresho hold of 5% Consiste tentl tly y well-mai ainta tained Significan antl tly y highe her than n 1998 & 2008, ample to cover 8.0 months ths of import t and exte ternal al debt t repaym yment Significan antl tly y lower than n 1998 crisis Slightl tly higher than n 2008, but significan antl tly y lower than 1998 May ’20 130,5

May ’20

2.19 19 (yoy)

62 62 10,5 5,7 1998 2008 Jul-15

Overnight ht interbank k money y market t rate is relati tively y lower

Tw I ‘20

4.3

(ytd) d)

  • 1,42
  • 35
  • 197

17-Jun-20 2008 1998 2,89 3,8 30 Apr 2020 2008 1998

slide-132
SLIDE 132

131

Outlook look of Domest mestic ic Econom

  • my

y Remai mains ns Robust st

...d ...dome mestic stic economic mic growth th is predi dict cted ed to be moderat ated d in 2020 0 and rebound nd in 2021

2019 and 2020 Economic

  • nomic Outloo
  • ok

 Bank Indonesia projects economic growth in 2020 at the range 0.9%-1.9%, revised down from around 2.3%.  Bank Indonesia projects inflation in 2020 within the target range, namely 3.0%±1%.  Bank Indonesia projects current account around level 1.5% of GDP in 2020, revised down from 2.5%-3.0% of GDP.  Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in 2020 in the 6-8% range, revised down from

9-11% previously, in line with the revised economic growth projection in 2020. Econom

  • nomic

ic Grow rowth Inflat lation ion CAD D (% (% of

  • f GDP)

DP) Cred redit it Growt

  • wth

Source : Bank Indonesia

2018 Real aliza izatio ion 5.17% 3.13% 2.98% 11.75 .75% 201 2019 9 Real aliza izatio ion 5.02% 2.72% 2.72% 6.08% 20 2020 20 0.9%-1.9% .9% 3. 3.0±1% arou

  • und

d 1.5% 6.0-8.0 .0%

slide-133
SLIDE 133

Progr gressi essive e Infrastructure tructure Developme pment: Strong

  • ng Commi

mmitme tment t on Accel celer eration ation of Infrastructure structure Provi vision ion

Se Sect ction ion 7

slide-134
SLIDE 134

133

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

The Governmen rnment t has Enact cted ed Various ious Reform rms s to Accelerat erate e Inf nfrastructur rastructure e Provis ision ion

Fiscal l Refor

  • rms

ms Instit itutio ional al Refor

  • rms

Regulat lator

  • ry Refor
  • rms

ms

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

Viabil ilit ity Gap p Fund nding ing (VGF) F) KPPIP IP Direct ect Lend nding ing Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Avail ilab abil ilit ity y Payment ent Land nd Revolv

  • lving

ing Fund nd Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF

  • Reg. No. 190/2015 for Central Gov’r and MoHA
  • Reg. No. 96/2016 for Regional Gov’t.)

A revolving-fund sourced from State Budget, to accelerate land acquisition (MoF Reg. No. 220/2010) KPPIP is actively involved in accelerating delivery

  • f priority infrastructure projects
  • PT. Sarana

na Mult lti Infrastruk uktur ur Merging between PT. SMI and Gov’t Investment Center (PIP) to become an infrastructure funding company Indon

  • nes

esia ia Infras. . Guarantee ntee Fund nd (IIG IGF) F) PPP Unit it Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land nd Acquis uisit itio ion Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg. No. 148/2015) and land acquisition fee payment for impacted community (Presidential Reg. No.56/2017) Econo nomy my Packa kages ges Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation Risk-sha haring ing Guid ideli elines nes IIGF has issued risk allocation and mitigation guidelines for PPP project Tax x Incent entiv ives es (Tax ax Holid iday ay) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 – 20 years depending on the investment value Indon

  • nes

esia ia Infrastructur ucture e Guarantee ntee Fund nd (IIGF) F) IIGF has the potential to provide project guarantee for non-PPP projects

slide-135
SLIDE 135

134

Some me of Most t Recen ent t Reforms

  • rms

Policy y reforms rms are aiming ming to create a more conduci ducive e invest stment ent climat mate e for infrast frastructure ructure deliver ery

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

Presid ident entia ial l Reg. No. 20/2 /2018 on Use of Foreig eign Labor

  • r – released on March 2018

This regulation aims at t simp mplif ifying ng the e perm rmit it appl plic icati tion

  • n proce

cess ss for foreig eign n workers kers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia

Presid ident entia ial l Reg. No. 56/2 /2017 on Socia ial l Imp mpact t Handling ling in Land Acquis uisit itio ion n Proces ess for PSN – released on June 2017

This Presidential Reg. allows the Execu cuting ting Agency cy to pay land d acqu cquisi isition tion compe pensation tion to the impac pacted ted community ity who does not have officia icial l righ ghts ts

  • ver

r the land d required ired for PSN. . This regulation helps to solve the land acquisition problem due to community objection over the land use.

MoF MoF No. 60/20 2017 on Proced edures res for the Provis isio ion of Central ral Govern rnmen ent t Guaran rantee ee for the Ac Accele elerat ration ion of the Nation ional al Strateg egic ic Projec ects ts Imp mplem lement entati tion

  • n – released on May 2017

The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This is regula gulation tion regulates tes the scope pe and d genera ral l requirem irements ts and d proce cedu dure res to propo pose and d gra rant t guara rante tees, , as well l as all llocate cate state te budget dgetob

  • bli

liga gatio tion on govern rnment t guara rantee tees to all ll PSN. . The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

Gover ernment nment Reg. . No. 13/2 /2017 on Natio iona nal l Spatia ial l Plan n (RT RTRW RWN) – released on April 2017

The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg.

  • No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister

ister of Agra raria rian and Spatia tial can issu sue e a recom commen endation tion of spa patia tial l util iliz ization tion; ; so that t the proce cess of obta tain inin ing g projec ject t perm rmiss issio ion can be done.

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset t Managem agemen ent t of Land d Acquis uisit ition ion by State e Asset t Management gement Agenc ncy – released on February 2017

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

slide-136
SLIDE 136

135

Reforms Along the Project’s Life Cycle

...to

  • encoura

urage and accelerat rate infrastructur nfrastructure project ect usi sing ng PPP sche heme me Government nment of Indonesi nesia

Proj

  • jec

ect Develop lopment t Facili ility ty (PDF) Viabi ability lity Fundin ing Gap (VGF) Guarantee e Fund Tax x Facili ilitie ies Avail ailab abili ility Paymen ment Land d Ac Acquisition ition Preparation Bidding Process Construction

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

  • n GCA proposal

Gov’t. commitment: 49% max. Per project cost

Guaranteeing

  • Govt. contractual
  • bligations under

infrastructure concession agreements and Mof Regulation No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt’s comitment: US$ 450 mn

MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment industries. Sector will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion

  • f an asset.

MoF Regulation, and MoHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov’t. commitment: US$ 12 mn (2016) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

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SLIDE 137

136

Effor

  • rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

  • n

Regulat ation ion imp mprovem emen ent to to accele elerat ate land procurem emen ent proces ess

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

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

  • For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation
  • No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which

has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement.

Land nd Procurem

  • curement

t Process as Stipul ulate ated d in Law No. 2 of 2012

Law No

  • No. 2/201

012 was succe ccessfully ully applied lied in in: 1.

  • 1. Palemb

lembang ng – Ind Indralaya laya section ection of

  • f the Trans

ns Sumater era Toll Road Project ject 2.

  • 2. Java North Line Doub

uble le Track ck Rail Projec ject

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

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SLIDE 138

137

Effor

  • rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

  • n

…the establishment of Indone

  • nesia

sia Asset et Management ent Agency (LMAN)

Source: Ministry of Finance

Government nment has establish shed ed Stat ate Asset set Management nt Unit t (LMAN) as a s soluti ution n to accelera rate e the land acqu quisiti tion n through ugh the provisi vision n of land d acqu quisiti tion n fund

1. Unutilized fund can be allocated for the following year 2. Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the

  • ther project

3. Land acquisition fund for PSN projects is managed under one agency

  • 1. LMAN was established in December 2015

through the issuance of MoF Reg. 219/2015 concerning State Assets Management

  • 2. In 2016, BLU LMAN was mandated to provide

land acquisition fund as a support to Ministry

  • f Public Works due to US$ 1,081 Mio

shortage of fund to acquire land for priority toll roads

  • 3. The scope of support is broaden for all

National Strategic Projects through the issuance of MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN

  • 4. In January 2018, LMAN has disbursed up to

US$ 881.48 Million (IDR 11.9 Trillion) through bridging finance scheme for 27 toll road projects, and planned to start the implementation of direct payment scheme

Land Ac Acqui quisitio tion n Budgeting ting Scheme LMAN at a Glance This LMAN initiativ nitiative provi vides des bet etter r flexibil xibility ty, coordi dina nati tion n and management ent of land acqu quisit sition

  • n fund

nd provisi vision n for National

  • nal Strat

rategic gic Projects cts (PSN)

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SLIDE 139

138

New ew Fundame ament ntal al Regulations ulations Have Been een Initiat tiated ed in 2017

to accelerat rate infrastru frastructu ture re projects cts deliver ery

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

1

Gover ernm nmen ent Reg. . No. 13/2017 on National ional Spatial ial Plan n (RT RTRWN RWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of

  • btaining project

permission can be done.

2

MoF MoF No. 60/2017 on Proced edure ures for the Provisio ision n of Central ral Governm rnmen ent t Guarant rantee ee for the Ac Accele elera ration tion of the Nation ional al Strateg egic Projects ects Implem emen enta tation tion The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects

  • Implementation. This regulation regulates the scope and general requirements and procedures to propose and

grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

3

Presid iden enti tial al Reg. No. 56/2017 on Social ial Impact t Handling ling in Land d Acquis uisit ition ion Proces ess for PSN PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use.

4

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset Managem gemen ent t of Land d Acquisit isition ion by State e Asset t Managem gemen ent Agen ency The implementing regulation of Presidential Reg. No.102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN

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SLIDE 140

139

Und Under er Preside esident ntial ial Reg. . No.56/2 6/2018 18, , PSN N list st has been revised ised int nto

  • 223 Proje
  • jects

cts and nd 3 P Progr grams ams

projects

27

Projects

53 53

Projects

17

Projects

12 12

Projects

Sulawe awesi

US$23.4 B

Kalim limant ntan

US$35 35.7 B

Sumat atra

US$43.6 B

Maluk luku & Papua ua

US$34. 34.5 B

89 89 3

Programs

Projects

National ional

Projects

1 2

Projects

Java

US$72.7 B US$100 100.7 7 B

13 13

Bali & Nusa sa Tengga ggara ra US$0. 0.7 7 B

Exchange rate: US$ 1 = IDR 13,500

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

Projec ect Program ram

PSN incl clud udes s 15 sector

  • rs

s at project ct level and 3 sector

  • rs at progra

gram m level

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

Projects
slide-141
SLIDE 141

140

PSN may y rece ceiv ive e privil vileges eges as s stipulat ipulated ed in the e Presidential sidential Reg.

  • g. No.

. 3/20 2016 j.o j.o. . the e Pr Presid sidential ential Reg.

  • g. No. 58/20

/2017

01 01 02 03

Determination of National Strategic Projects

04 05 06 07 08 09 10 10 11 12

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

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

slide-142
SLIDE 142

141

Progr gress ess on 223 Projects jects and 3 P Program

  • grams

s PSN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019

From 2016 – December 2019, there were 92 projects1 completed with an estimated investment value of US$ 34.6 Billion

1In cumulative, including projects that are already taken out in 2016 and 2017

Exchange rate: US$ 1 = IDR 13,500

slide-143
SLIDE 143

142

Progr gress ess on 223 Projects jects and 3 P Program

  • grams

s PSN

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019

slide-144
SLIDE 144

143

Energy ergy Sector

  • r:

: the Progres gress s of 35.000 MW Progr gram am

No No Phase MW MW % 1 Operating 3,792 11 2 Construction 22,739 62 3 Signed Power-purchase Agreement 6,923 21 4 Procurement 1,279 4 5 Planning 734 2

17 Dec ‘14

Cabine inet Meeting ing “There’s electricity crisis in Indonesia, requires construction of large capacity plant "

Jan ‘15

Average econom

  • mic

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

Jan ‘15

Debottle leneck neckin ing g through

  • ugh regula

latio ion: n:

  • 1. Regulation

No.1/2015 concerning electricity supply cooperation & joint utilization

  • f

the electrical network among license holders.

  • 2. Regulation No.3/2015, concerning Procedures of

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

16 Mar ‘15 4 May ‘15 June‘17

Cabine inet Meeting ing Progress of 35,000 MW Launc unching hing 35.00 000 0 MW by the President in Goa Beach Sanden DIY The progress so far:

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

35,00 000 0 MW Progr

  • gram

m Dist istrib ibution ution

Source: PLN

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

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

slide-145
SLIDE 145

144

Energy ergy Sector

  • r:

: the Progres gress s of 35.000 MW Progr gram am

Decemb mber er 2016

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

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

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

5,824 MW in planning phase

3% 3% 44% 44% 38% 38% 9% 9% 6% 6% 8% 8% 52% 52% 32% 32% 5% 5% 3% 3% 19% 19% 57% 57% 19% 19% 3% 3% 2% 2%

998 MW in operating phase 15,676 MW in construction phase 13,782 MW signed Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase 2,899 MW in operating phase 18,207 MW in construction phase 11,467 MW signed Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 6,811 MW in operating phase 20,168 MW in construction phase 6,678 MW signed Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase

Nove vemb mber er 2017 Decemb mber er 2018 Decemb mber er 2019

slide-146
SLIDE 146

145

Acceleratio eration n of 35.000 MW Progr gram am

Governme ment PT PLN

EPC Power werpl plant nt and Trans nsmis missio ion PLN Subsid idia iary (Joint int Ventur ure) e) Independ ependent ent Power wer Produc ucer er

Streng ngthe then n Equity uity 2B 2B 1

Gover ernme nment nt Suppor port (outsid ide e Guarantee) ntee)

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

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

2A 2A

Assign ignmen ent SJKU KU* * Minis nistry y

  • f Financ

nce

Strengthe gthen PLN‘s Balance e Sheet et

*)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter The Gover ernme nment nt has issued ued Presid idential ential Regul ulation ion No. 4/201 016 6 on Electr ectricit icity y Infrastructur ucture e Accel eler eratio ion n to accel eler erate e power er projec ects

Provis ision ion of Elect ectric icit ity Refina inancin ncing Hedging ging Financ ncial ial Asset et Optimiza imization ion Direct Lending Direct Lending Bond issuance by PT PLN Company Tax Holiday PT PLN’s divident allocation Loan from independent lenders Asset Revaluation Other types of funding Equity Injection by the Government

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

slide-147
SLIDE 147

146

Sign gnif ific icant ant Progress

  • gress on Infrast

rastructure cture Proje

  • jects

cts

Datab abas ase Project information such as map, track, existing study and latest project status. An integrat grated ed IT system with monitoring capacity for stakeholders, so that they can have real l time data. Platf tform rm data outlook that is efficient and functional using a user- friendly framework. Record decisions related to projects and synchr hroniz nize e the implementation schedule that can be utilized by stakeholders.

KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision- making purposes. Improvi

  • ving

ng Monitor nitoring ing System em on Infrastructur ucture e Projects jects1 Roads

Trans-Sumatr tra Toll Road Merah Puti tih Bridge, Ambon

Dams

Jati tigede Dam (Operati ational)

Transporta portation tion

Jakar karta ta MRT Project ct2

Drinking inking Water ter Proce

  • cess

ssing ing

Umbulan Drinking Wate ter Provision System, East t Java va

1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2 Not funded from National Budget

Terminal 3 Ultimate Soekarno-Hatta ta2 New Tanjung Priok k Port t Project ct2 Nop Goliat t Dekai, kai, Papu pua

slide-148
SLIDE 148

147

Infrast rastructure cture Projects jects and Financ ancing ing Schemes mes

Promoti

  • tion

n of Infra frast structure ructure Developme pment nt to Ac Accelerat ate Economi mic Growth th

Establis ishment ent of PPP PPP Unit it

Broa

  • ad

Objecti tive  Champion project preparation and acceleration of the PPP agenda in Indonesia Core e Mandates tes  Improve quality of project selection under KPPIP – OBC criteria  Support project preparation through PDF support and highlyqualified transaction advisors  Act on behalf the Minister of Finance in providing government support and approvals for projects Additiona ional Mandates es  Coordinate all public financeinstruments  Provide input for PPP Policy program Development and Regulations  Implement capacity building forGovt. Contracting Agency(GCAs)  One stop shop for PPP promotion & Information

Bud udget get Publi lic Private Partner nership ip SOE & Private Sector

  • r

 Cen entr tral & regio gional budge get (speci special alloc

  • cati

tion fund & rural transfer) er)  Pr Prim imaril ily to to supp pport basic sic infrastruct cture project ects: – Food secu security ty: Irrigation, dams etc. – Marit itim ime: e: Seaports, shipyards etc. – Connecti ectivit ity: Village roads, public transportation etc.  Certa tain in infrastr truct cture e proj

  • ject

ects to be funded ed and opera perated ted throu

  • ugh

gh a pa partner ership ip between en the Indon

  • nes

esian ian gov

  • vern

ernment ment and the e priv ivate secto ctor – Projects ready for auction under the PPP Scheme: – Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung – Railway projects such as an express line into Soekarno-Hatta International Airport – Water supply projects such as the West SemarangProject  Vario ious gov

  • vern

ernmen ment t suppo port t for PPP: P: – Proje

  • ject

ct Devel elopmen pment t Facil cilit ity (PDF): ): Helps Government Contracting Agencies (GCAs) in project preparation and transaction – Viabil ilit ity y Gap p Fund: improves financial viability of PPP projects – Gov

  • ver

ernmen ment Guarantees ees: Supports PPP projects’ bankability by providing sovereign guarantees – Infrastructu cture e Financin cing Fund: Provided through PT SMI and IIGF – Availabilit ity Payme yment t (AP): P): GCA pays private partner based of availability of infrastructure services  Gov

  • ver

ernme ment to inject ect capi pita tal into to SOEs Es: Intended multiplier effect to develop more infrastructure projects  Key y focu cus area eas: – Infrastructure and maritime development – Transportation and connectivity – Food security  Medi dium m term infrastruct cture e develop elopme ments ts to focu cus on: – Water Supply – Airports – Seaports – Electricity and power plants – Housing – Mining

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

 Infrastru tructu cture e Develop

  • pmen

ent t in order to:

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

 Infrastru tructu cture e fundraisin sing needs: s: $357. 57.9 9 bn bn (or equivalent to IDR4,796.2 tn)  245 5 Nati tion

  • nal Strategy

gy Proje

  • jects

cts under National Medium Term Plan for 2015 – 2019 with an estimated total cost of IDR4,197 tn (USD313 bn)  37 prior

  • rity

ty infrastru tructu ture proj

  • jects

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

Infrastruc uctur ure Development nt is a Key Priorit ity

slide-149
SLIDE 149

148

Govern ernment ment Guara rant ntee ee For Basic sic Infrast rastructure cture Development lopment

Reflec ects ts strong

  • ng commitm

tment ent to nati tiona nal developme pment nt planning nning

Source: Ministry of Finance No. Central Govern ernme ment t Guarantee tee for Infrastru tructu cture Prog

  • grams

ms Guarante tee e Documents ments Expos posure/ Outsta tstanding ing (USD bn bn) 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 16 1.49 2 Clean Water Supply Program 6 0.01 3 Direct Lending from International Financial Institution to SOEs 6 1.63 4 Sumatra Toll Road 9 2.07 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 7 3.83 6 Public-Private Partnerships (PPP) 7 3.80 7 Regional Infrastructure Financing 1 0.17 8 Public Transportation (Light Rail Transit) 1 0.19 9 Electricity Infrastructure Fast Track Program (35GW) 4 3.96 Tota tal 57 57 17.15

Conting tingen ent t Lia iabi bili liti ties es from

  • m Gov
  • vern

ernmen ent t Guara rantee tees Governmen ent t Guarantee ntee Progra gram

Credit it Guaran antee PPP Guarant antee

Busines iness Viability ty Guarante tee (BVG)  Power (Elec ectric tricit ity) – Full credit guarantee for PT PLN’s debt payment obligation under FTP 1 10,000MW and 35GW programs*.  Cl Clean Water – Guarantee for 70% of PDAM’s debt principal payment obligations.  Toll road – Full credit guarantee for PT Hutama Karya’s debt payment obligations for the development of Sumatra Toll Roads.  Infrastru tructu cture - Full credit guarantee on SOE’s borrowing from international financial institution & guarantee for PT SMI’s local infrastructure financing.  Public ic Transp spor

  • rta

tati tion

  • n (Ligh

ight t Rail Transit) t) – Full credit guarantee for PT Kereta Api Indonesia’s debt payment

  • bligations for the development of LRT Jabodebek.

 Powe wer (Elec ectric tricit ity) ) – Guarantee for PT PLN’s obligations under Power Purchase Agreements with IPPs (off-take and political risk) under FTP-2 10.000MW and 35GW programs*  Infrastru tructu cture – Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements  From 2008 to Q1-2020 **, the government has issued 85 guarantee documents with total value of USD36.17 billion, there were 28 guarantee documents worth USD3.54 billion have been expired.  The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. P.  Beginning in 2008 the Government has allocated a contingent budget with respect to these

  • guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund.

This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees.

**) As of end March 2020; currency conversion of IDR16,367.01/USD1 and IDR18,044.64/EUR1

Politic ical l Risk Guarantee

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

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

slide-150
SLIDE 150

149

Go Govern ernmen ment t Fina nancial ncial Facilit ilities es for PPP PP Projects jects

Financ ancial ial Facilit ilities ies to to Attrac tract More e Privat vate Parti ticip ipati ation

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

  • f the following PPP projects:

Viabilit ility Gap Fund d (VGF) Projec ect t Develop elopmen ent t Facilit ility (PDF) Gover ernm nmen ent Guar arant antees ees (direc rectly tly by MoF MoF or throug ugh h IIGF) F) Finan ancing ing from PT

  • PT. SMI and PT. IIF

Availa vailabil ilit ity Paymen ent t Schem emes es More Funding ing Schem emes es are on the Pipelines elines

Project Financing fund nded by the privat ate sector

  • r through

the granting of concessions for an operating asset

  • wned by the Government/SOE (based on the policy
  • f the Government) to the private sector to be
  • perated & managed.

Project Financing fund nded by any source of funds

  • ther than Government’s budget, e.g. long term

management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas.

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

years

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

Scheme e Charac acteris istic ics Scheme e Charac acteris istic ics

LCS (Limit ited ed Concession ion Schem eme) e) PINA (Non-Gover ernm nmen ent Budget get Infras astruc tructure ure Financ ancing) ing)

Source: Ministry of Finance

slide-151
SLIDE 151

150

Progr gress ess of PPP P Inf nfrastru rastructure ture Project

  • jects

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

Succes essful ful Projec ects ts Reaching hing Financi ncial l Close e in 2016 and 2017

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

  • PPP contracts signed on June 8th, 2016

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

Signed ed PPP Projects ects in 2016 and 2017

Source: Ministry of Finance, as of July 2017

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New Guarant antee e Schemes emes for Non-PP PPP P Proj

  • ject

ects

The Government had issued Presidential idential Regu egulati lation No No 82 82/2015 and Mini Ministry of

  • f Fi

Finan nance Regu egulati lation No No 189 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. Guarant rantee ee on SOE Direc ect Lending ding from Internat rnational ional Financ ancial ial Instit itutions utions (IFIs Is) Guarant rantee ee for Regiona ional l Infras rastruct ructur ure e Financ ancing ing Provis ision ion State e financ ance e soundne ness Fiscal al sustainab inabilit ility Best practi tice e of fiscal al risk managem gemen ent The objective of this guarantee is to to provid vide e credit dit enhancem ncemen ent in terms of low

  • w intere

rest rate and long g tenor fina nanci ncing ng, with 3 main princi nciples les:

The Government had issued Minis inistry of

  • f

Fin Finance nce Regulation egulation No No 174 174 of

  • f 2016

2016 to provide guarantee to PT SMI on the assignment

  • f

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

  • n

Gover

  • vernme

nment nt Regulation egulation No

  • No. 95

95/2015 2015 and Min inis istry of

  • f Fin

Finance ce Regulation egulation No

  • No. 232

232/2015 2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried

  • ut

by PIP (Government Investment Center). The objective is to giv give stimulus imulus to to the acc accele elerat ation ion

  • f
  • f

lo local cal infrastr infrastruct uctur ure dev evelopment elopment through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in

  • rder

to meet local infrastructure development needs and to reduce reliance on state/local budget.

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