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Republic blic of Indones esia ia Polic licy Syne nergy gy and nd Ma Macr croecono oeconomi mic St Stabil bility ity to Su Supp pport rt Re Reforms orms and nd Growt owth Mo Moment entum um October Oc ober 201

  1. Indo donesia esia Re Remains ains the he Investment stment Dest stin inatio tion of Cho C hoice ice The Econo nomi mist: : Indo done nesia a round nds out the top five of Asian an econo nomi mies that t Indo done nesia a Enjo joys Large Investm tments Relat lative to Peers within n the Region 2 can look forwar ard d to increas ased d investme ment nt spendi nding ng. . (January nuary 2019) 19) 1 40 China 58.3 35 India GDP (%) 48.7 Indonesia 48.1 30 t / GD Vietnam 39.8 25 Singapore 39.2 tment Thailand tal Investmen 38.5 20 Japan 36.4 Australia 36.4 15 Malaysia 34.2 10 Tota Hong Kong 32.1 31.31 31.27 31.78 34.47 34.52 34.55 23.61 22.48 23.14 26.94 27.21 29.56 24.99 24.95 25.31 26.57 26.34 26.26 Philippines 31.9 5 South Korea 26.3 0 Taiwan 25.2 India Indonesia Malaysia Philippines Thailand Vietnam Myanmar 22.5 2018 2019e 2020e 0 10 20 30 40 50 60 70 UNCTAD: AD: Indonesia a is listed d in the top 20 host econo nomi mies based d on FDI JBIC: C: Among ng ASEAN AN countr ntries, , Indonesia a is one of the most prefe ferred d plac ace inflo lows, , 2017 17 and d 2018 18 (June ne 2019) 19) 3 for busine ness investm tment nt (Nove vembe ber 2018) 18) 4 300 China 52.2 India 46.2 250 Thailand 37.1 2018 2017 200 Vietnam 33.9 Billion USD Indonesia 30.4 150 US 28.8 Mexico 13.7 100 Philippines 10.0 (x) = 2017 ranking Myanmar 50 8.6 Malaysia 8.4 0 Germany 5.8 Brazil 5.6 Korea 5.1 Taiwan 4.4 % of surveyed who consider each country has promising prospects Russia 3.7 0.0 10.0 20.0 30.0 40.0 50.0 60.0 1. Source: The Economist – Asia Business Outlook Survey 2018 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2019 2. Source: IMF World Economic Outlook, Database October 2019 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey) 8

  2. Natio ional nal Strategic tegic Dev evel elopme pment nt Plan an (Naw awa Cita ta) The 3 Dimensio ions on Econom omic ic Develop opment ment Priority Sector Human Development Equitable Development Development Food Securi rity ty Educ ucation ion Inter- Incom ome Group oup Energy & Electr tric ical Securi rity ty Healt alth Inte ter-Reg Region: ion: Mari ritime time & Mari rine ne (1) Rural al Area ea, Hous using ing (2) Perip ripher hery, y, Touris urism & Indus ustr try (3) Outs tside ide Java, Char aracte ter Water ter Security rity, Basic ic (4) Easte tern rn Area ea. . Infra rastru tructu ture re & Connect ectivity ivity Necessary sary Condit ition on Legal Certainty & Governance Politic & Democracy Security & Order Law Enforcement 9

  3. Economic ic Equal alit ity Policies cies to support sustainab nable le public ic welfar are.. ... Build a fair land distribution scheme • Build a priority scale of Tanah Objek Reforma Agraria (TORA) recipient based on land gini ratio, • Agra raria ian Reform rm Econom nomic ic poverty, & land demand Developing an agricultural industry by agglomeration or cluster method • Equali ality ty Define Lahan Pertanian Pangan Berkelanjutan LP2B to prevent land usage for non-agriculture • Polici cies purposes Agric icultu ture e (Landle dless Land consolidation for agriculture • Farm rmer er) Improve research on seeds and agriculture method, off-farm infrastructure, integrated logistic • system, build seeds market, tools and machinery Data collection & law enforcement on palm oil land area, including land bank data collection • Land Building a database and arranging policy on planting non-agriculture commodities • Planta tatio ion Improve cooperative performance by encouraging SOEs and private sectors involvement • Research support, market synergies, off-takers, and supply chain on downstream business • Social Housing • Urban Poor or & Afforda dable le House financing • Hou ousing Land banks and affordable land prices • Law enforcement on spatial policies • Integrating fishing and seaweeds sectors Fisher hermen en & Seaweed eed • Improve and support aquaculture industry and fishery sector value chain • Cult ltiv ivation tion Encourage Private sector investment on seaweed sector (process and off-taker) • Develop and improve progressive tax, capital gain tax and tax on unutilized asset • Fair ir Tax x System tem supporting fiscal spending • Developing natural resources industries and value chains • Manu nufact cture and d ICT Minimize interest gap between large companies and small companies • Protect market share from integrated businesses and strong capital • Oppor portuni tunity ty Regulate and build a database on traditional/modern market, traditional and modern shops • Regulate the distances, location, and zone of the market and modern stores • Retail l and Mark rket et Compulsory mandates to maximize the usage of Local products • Fair access to the logistic system • Financin ing g & Gov over ernmen ent Improving Kredit Usaha Rakyat (KUR) scheme to support non-bankable SME • Budget get Improving procurement scheme to support SME accessibility to finance • Identified and built priority scale on sectors, sub-sectors of leading industries and profession • Vocatio ional, , Improving link and match scheme between industries and vocation Human n Resour ource ce • Entre repr pren eneu eurs rship hip & & Labor r Early childhood education • Capaci city ty Marke rket Encourage education system to be more skill, collaborative, flexibility and impact oriented instead • of degree consideration Source: Coordinating Ministry for Economic Affairs Priority 10

  4. The he Economic ic Policy cy Pac ackag ages es “To improve national industry competitiveness, export and investment to generate significant economic growth” Harmo moni nizi zing ng Regulat ations ns Simp mpli lifyin ying Bureauc ucratic Proc ocess Ensuring Law Enfo forceabi bili lity Phase e I (9 Sept t ’15) Phase e IX (27 27 Jan ’16) Improving national industry competitiveness Accelerating electricity generation, stabilizing meat prices and improving rural – urban logistics sector Phase e II (29 Sept t ’15) Easing permit requirement and simplifying export proceeds Phase X (11 Feb ’16) requirement Revising the Negative investment List and improving Phase e III I (7 Oct t ’15) protection for SMEs Financial services facilitation, export financing and elimination Phase e XI (29 29 Mar r ’16) of business unnecessary burden Stimulating national economy through facilitation to SMEs Phase e IV (15 Oct t ’15) and industries Social safety net and betterment of people welfare Phase e V (22 Oct t ’15) Phase e XII II (28 28 Apr ’16) Improving industry and investment climate through tax Improving Indonesia’s rank on Ease of Doing Business (EODB) incentives and deregulation on sharia banking Phas ase e XIII I (24 Aug ’1 6) Phase e VI (5 Nov ’15) Low Cost Housing for Low-Income Communities Stimulating economic activities in border areas and facilitating strategic commodities availability Phase e XI XI V (10 Nov ’1 6) Roadmap for E-commerce Phase e VII (7 De Dec ’15) Stimulating business activities in labor-intensive industries Phase XV (15 Jun ’1 7) nation-wide through incentives in the form of accelerating Improving logistics land certification process for individuals Phase e XVI (1 (16 Nov Nov ’1 8) Phase e VIII I (21 De Dec ’15) Improving the competitiveness and domestic economy Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries In additio dition to the 16 Policy licy Packa kages ges, on Augu gust t 31, 2017 the Gov over ernmen ent has issued ed a Pres esiden identia tial l Regulatio tion No. o.91/2017 for or enha hancin ing g busin ines ess licen ense e serv rvic ice standa dard Source: Coordinating Ministry for Economic Affairs 11

  5. Improving ving the Compet petitivene itiveness ss an and Domestic stic Economy th Econo The 16 th nomic mic Policy cy Packag age has been launche nched TAX HOLIDAY EXPANSIO ION EXPORT PROCEEDS (DHE) SCHEME Backgr ground 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). Objectives tives and benefits fits 1) Increasing investment and strengthening the industrial sectors from the downstream to the upstream through the expansion of the business sector, KBLI’s pioneer industries, and Special Economic Zones (SEZ) that can receive tax holiday facilities 2) Increasing the process of convenience of filing process Tax Rate tes on Deposit it Tax Rate tes on Deposit it Interest Income Inte terest t Income and tax holiday facilities provision Source: Coordinating Ministry for Economic Affairs 12

  6. Progress ess of t the he Economic ic Policy cy Pac ackag ages* 236 36 I – XVI I – XII Initially, there are 236 regulations which need to be TOTAL INITIA TIAL REGULATIONS IONS deregulated 11 11 I – XVI I – XII Based on the further assessment, 11 regulations has been REVOK OKED ED revoked from deregulation process REGULATIONS TIONS 225 25 I – XVI I – XII Total regulation subject to be deregulated: 225 TOTAL REGULATIONS TIONS regulations 223 223 99% 99% SET As of October 1 st , 2019, deregulation of 223 regulations 99% 99% PRESIDENTIAL AL LEVE VEL 54 PRESI SIDE DENTI NTIAL are finished (99%), comprising 53 regulations at 53 FINI 53 47 47 42 42 TOTAL NISHED SHED Presidential level and 170 regulations at VEL 99% SELESAI Ministerial/Institutional level MINIST STERIAL IAL/I /INST NSTIT ITUTI UTIONAL ONAL LEVEL 99% 171 170 FINI NISHED SHED TOTAL 1% 2 ON GOIN ING Total regulation which are still discussed: 2 DISCU SCUSSION SION *as of October 1 st , 2019 Source: Coordinating Ministry for Economic Affairs 13

  7. Othe her Progres ess on Economic ic Policy cy Pac ackag ages es Develo lopmen ment of Fair, Simplif ifie ied & & Spesial al Economic mic Zone ne (SEZ) Project ctab able le Wage Sys System 29 Provinces have set 2016 Minimum Wage Investment commitments in SEZ up to System in accordance to the Government 2017 reach 41 T, with 3 hour licenses Regulation (GR) No. 78/2015 already applied in 4 SEZ’s Administrators in 2017 Indus ustrial rial Zone Deregula ulatio ion on Logis istics ics Sect ctor 52 Bonded Logistic Center has been • The Provinces of Central Java proposed 3 launched to support various industries IZ’s : Kendal, Demak, and Ungaran • Pharmaceutical IZ in Bitung (North Sulawesi) in 2017 14

  8. Invest vestmen ment Inc ncent entives ives to Bo Boost st Industry dustry Sector or BUSINE INESS SS EXPANSIO ANSION INDUST STRIAL RIAL ZONE Tax allowa wanc nce • VAT T exem xempt ptio ion n on import or delivery of capital goods, • Exe xemptio mption n or relie lief of import t duty ty on capita ital l goods, machine chinery or • Import t Duty exemption xemption on machineries/goods/materials, • equi uipme pment nt for production purposes that can not be produced Tax Allowa lowanc nce and Tax Holid iday • domestically; Exe xemptio mption n or relie lief of import t duty ty on raw mate teria ials or auxi xilia liary • mate teria ial l for production purposes for a certain period of time and certain conditions; FREE TRAD ADE ZONES AND PORTS Exe xemptio mption n or suspe pens nsio ion n of VAT on the import t of capita ital l goods • or machine chinery or equi uipme pment nt for production purposes that have not been produced domestically for a certain period of time; Exe xemptio mption n of: Accelerate depreciatio ciation n or amortizatio tization n (part of tax allowance); Import t Duty • • and VAT • Prope perty ty tax relie lief, especially for certain business sectors in Luxu xury Goods Sale les Tax x (PPnB PnBM) • • certain regions; Custom toms duty ty • Combine with Online Single Submission (OSS) • MICRO RO, SMAL ALL, MEDIUM IUM ENTERP RPRIS ISES (MSM SMES) S) PION ONEE EER INDUSTRIES USTRIES Decr creasin ing MSME MEs Tax from 1% to 0.5% % of gross revenue Tax holid liday of corporate income tax in a certain amount and time SPECIAL ECIAL ECONOMI ONOMIC ZONE E-COM OMMERC RCE No colle lectio ction n of VAT T and Luxu xury Goods Sale les Tax (PPnB PnBM), ), • Sales from customs areas for non-sma mall ll entrep treprene neur urs through • Custom toms tax exemption xemption, • the market place will be subject to 0.5% % income come tax and 1% Tax Allo lowa wance and Tax Holid iday, • VAT Suspe pens nsio ion n of Import t Duty, • Sales from customs areas for small ll entr trepr preneurs through the • 0% Import t Duty for goods produced using local components of • market place will be subject to 0.5% % inco come me tax a certain level Source: Coordinating Ministry for Economic Affairs 15

  9. New Tax Holiday liday Polic licy* y* to boost industry try sector BEFO FORE RE PROVIS VISION AFTE TER Pioneer Industry with minimum investment value of Pioneer Industry with minimum investment value of 500bn 1 trillion Rupiah (minimum investment value of Rupiah 500bn Rupiah for telecommunication sector) Applied to 17 industry groups: (i) upstream base metal; (ii) oil and gas refinery; (iii) Applied to 8 industry groups: petrochemical (oil, gas, or coal based); (iv) non-organic base (i) upstream basic metal industry; (ii) oil and gas chemical; (v) organic base chemical; (vi) pharmaceutical materials; refinery industry; (iii) organic basic chemicals industry; (vii) semiconductor and other components; (viii) communication (iv) machinery industry; (v) plantation, forest, and Taxpay payer devices components; (ix) medical devices components; (x) fishery products processing industry; (vi) machine manufacturing for industry; (xi) machine main telecommunication, information and communication components manufacturing; (xii) robotic components industry; (vii) marine transportation; and (viii) manufacturing; (xiii) ship components manufacturing; (xiv) airplane economic infrastructure components manufacturing; (xv) train components manufacturing; (xvi) power plants; and (xvii) economic infrastructure 10 – 100% 100% (single rate) Corporate te Income me Tax (CIT) T) reductio tion rate 5 – 20 years depends on the investment value (in IDR): 5 – 15 years; or • 1. 500Bn – 1Tn : 5 years 4. 15Tn – 30Tn : 15 years Can be extended to 20 years; subject to MoF • 2. 1Tn – 5Tn : 7 years 5. ≥ 5Tn : 20 years Conce cession n perio iod discretion 3. 5Tn – 15Tn : 10 years Not available 50% CIT reduction for the next 2 years Transit nsitio ion Tax allowance for business expansion can be Tax allowance not provided provided with terms and conditions applied After Tax Holiday *) MoF has issued a new Tax Holiday policy through Regulation No. 35/PMK.010/2018 (PMK-35) dated 4 April 2018. Source: Coordinating Ministry for Economic Affairs 16

  10. Enhan ancing cing Busines iness Li Licen ense se Serv rvice ice Stan andar dard Presiden identi tial al Regul ulati tion to Accelerate te Ease of Doing Busine ness ss has been launched ched Improve efficient, streamlined, Provide business licensing Overcome the barriers & integrated business license process assurance in terms to doing business in service standards of the costs and lead times Indonesia cy Goals 2 4 6 1 3 5 Policy Implement integrated Accelerate the Increase coordination & business licensing synergy between central & licensing process process regional government (single submission) nd Phase st Phase 2 nd 1 st Forming a Task Force to Business license identify & overcome the end- regulatory reforms cy Main Policy to-end licensing barriers Implementing a licensing checklist Implementation of the for Special Economic Zones (KEK), Single Submission Free Trade Zones (FTZ), Industrial system Zones & Tourist Zones Utilizing data sharing Note: 1 st and 2 nd Phase are implemented in parallel Source: Coordinating Ministry for Economic Affairs 17

  11. Impr proving ving Inv nvestment estment Clima imate Onlin ine Sing ngle le Submissi ission on (OSS SS) Has Been en Laun unched hed... ... OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Secto tors rs Lorem Ipsum Envir ironm nment ent Public lic Wor orks ks Electr tric icit ity y Indus ustr try y Health Sec ecto tor Suitable for all & Fores restr try y & Housin ing g Secto tor Secto tor category, Secto tor Secto tor Informatio ation n & Mari rine ne & Medic icine ine & Trans nsport rtat atio ion n Trade ade Secto tor Communic unicatio tion Fishery ery Secto tor Food Sector Secto tor Secto tor Other Secto tor The Advant antag age e of Using g OSS Business licenses Standardized Ellectronically can be secured in business licenses integrated under an hour are available The whole licensing Accessible at More practical process is monitored anytime and by the Task Force anywhere Source: Coordinating Ministry for Economic Affairs 18

  12. Improving ving Investment stment Clima imate te …Bonded Logistic Center to Improve Indonesia’s Competitiveness Bonded Logistic Center To To da date, e, 52 Bo Bond nded ed Logis gistic tic Cent nter ha has been en laun unched hed to to suppo pport variou rious indus dustries ries. (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the Small and Food & implementation of the medium ium bever erag ages es 1 st Economic Policy Package. indus ustr try indus ustr try Pers rsonal nal Oil il and PLB facility aims to improve care/ gas, ga s, and home care mining ng efficiency and reduce the cost of Synthetic tic indus ustr try indus ustr try transportation and logistics in textile ile Auto- (chemic ical al Indonesia; support the growth of motiv ive e substanc nces es) the domestic industry, including indus ustr try indus ustr try. y. Textile ile Heavy small and medium (cotto tton) n) Equipment nt industries; increase indus ustr try indust ustry ry investment; and to make Aircraft ft MRO Indonesia to become a logistics Defence indus ustr try indus ustr try hub in Asia Pacific. 19

  13. Impr proving ving Invest stment ment Clima imate te …revising the Negative Investment List Introduc uctio tion n of New w Foreig ign n Owne wnership ip Regula ulatio tion n for Strate tegic ic Secto ctors Sports Center, Pharmaceutical Raw Materials Cold storage ge Restaurants, , Bars Film Processing g Lab, Crumb Rubber Manufacturing After Before After Before After Before After Before 100% 100% 100% 100% 33% 85% 49% 51% Private Museum, Catering, g, apparel Toll Road Operator, Distribution, on, Wareho housing Key Reforms in Negative ive Foreig ign Manufacturing, g, Exhibitions ons & Telecom ommunication Testing Company Investment List Conve ventions ons Before After Before After Before After Revisio ion of "Partnership ip" category y to refer to partnership ip with Micro, Smal all and Mediu ium Enterpris ises 100% 67% 67% (MSME MEs) 95% 33% 51% Gran andf dfat ather Law: If a par artic icul ular ar sector is tightened in futur ure, existin ing Professiona onal Training, g, Golf Course Telecom ommunication Provide der foreig ign investor does not need to Management, , Air Transport ort Support ort Servi vices, , Consultancy for Construction on 1 with Integrated d Servi vices comply with tighter stak ake Trave vel Bureau Before After Before After Before After Strengthen implementatio ion of negative investment law throug ugh active ive roles from min inistrie ies, agencie ies 67% 67% 67% 49% 55% 65% and regio ional governments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) 20

  14. Investm estment nt Re Real aliza izatio tion (Q3-201 2019) 9) Direct ct Inve vestme tments nts Top 8 FDI Realiz lizatio tion n by Secto ctors (Q3-2019 vs Q3-2018) IDR tn Transp nsportatio tion, n, 220 Warehouse use, and FDI DDI TOTAL 200 205.7 Tele leco comm mmun unica catio tion 180 US$ US$1,842.6 .6 mn mn 160 140 Mini ning ng 75.5% Ele lectric icity ty 120 US$ US$285.6 .6 mn mn 100 US$1,554.0 US$ .0 mn mn 80 52.0% 27.4% 60 105.0 40 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Housin ing, Ind ndust ustria ial Estate tate, and Offic ice Food Indus ustry 2019 2013 2014 2015 2016 2018 2017 Invest stment nt Build ildin ing US$296.1 US$ .1 mn mn US$681.8 US$ .8 mn Reali liza zatio ion 23.2% IDR205.7tn tn 1.5 .5% Rp159.4 T IDR173.8tn tn 434,463 434 463 37 375,9 ,982 Rp145.4 5.4 T * Metal, tal, Exce cept pt Paper, per, Paper per 18.4% Mach chin inery, and Based Goods, and 9.6 9.6% 15.6 .6% Equi uipme pment nt Ind ndust ustry Printin nting Indus ustry US$ US$587.3 .3 mn mn US$ US$314.2 .2 mn Q3-201 018 Q3-201 019 Q1-201 016Q1-201 017 17.8% Q1-201 016 Q1-201 017 453.5% * * perso son Chemi mica cal l and IDR105.0tn tn Pharma mace ceutic utical l IDR100.7tn tn IDR89.1tn tn Indust ustry IDR84.7tn tn US$ US$315.6 .6 mn mn 30.3% 17.8% 18.9% Q3-201 019 Q3-201 018 Q3-201 019 Q3-201 018 Source: Investment Coordinating Board (BKPM), compared to Q3-2018 period 21

  15. Sec ection tion 2 Eco conomi mic Fact ctor: r: Strong and Stable Gr Growth Prospec ects Rema main In Intac act

  16. Conducive cive Environment ment Unde derpin rpinning ning Strong ng Growth th Funda damenta mentals ls 4th Most Tax base to be Budget reform as broad adened from Larges gest t Economy my Populous country y a a part of larger one reduc uce in South East in the World; ; economic ic reform dependency on Asia 64% in init itiat iative commodit ditie ies productiv tive e age Large rge and d Consi nsiste tent nt Fuel subsid idie ies Stab able le Risin ing g Middle e Budg dget t Reform orm signif ific ican antly y Econo nomy Manageable Class and reduc uced and Prud udent debt Inflatio tion Rate Affluen ent t spendin ing redir irected man anag agement to more produc uctive Custome mers allocat atio ion Reform rm-Or Orien iented ted Adminis inistr tratio ion Three main ain sources of finan ancin ing for From commodity-based to man anufa ufactur urin ing investment needs: Stat ate and regio ional al and servic vice sectors via infrast astruc ucture budget, Stat ate Owned Enterpris ises and PPP development New High h Contin inui uing from 2015 polic icy, infras astructur ure Econo nomic ic Infras rastructu ructure re From consum umptio ion-led to investment-led will be higher than fuel subsid idy growth via a stronger man anufac ufactur urin ing sector Structu ructure re Investmen ents and more investment init itia iative ives Infras astructur ure spendin ing focused on basic ic infras astructur ure projects Policie cies to main intain purchasin hasing power to stim imulate domestic ic economy in the mid idst Fiscal al and non-fis iscal al incentive ives to attrac act of weakenin ing macr croeconomic ic condit itio ions infras astructur ure investment and promote PPP 23

  17. Indonesia’s Strong GDP Strong ng GDP Growth th 1 % QoQ YoY 7.0 Economic growth momentum in Indonesia was maintained in the • 5.06 5.27 5.17 5.18 5.07 5.05 5.17 5.18 5.19 5.12 5.05 5.01 5.01 5.01 5.06 4.94 4.93 4.94 4.92 second quarter of 2019 despite a backdrop of global economic 4.82 4.74 4.77 5.0 moderation. The national economy expanded 5.05% (yoy) in the 4.21 4.20 4.01 4.01 3.83 3.74 second quarter of 2019, relatively unchanged compared with the 3.31 3.27 3.19 3.14 3.09 3.0 5.07% (yoy) recorded in the previous period. The latest economic developments were influenced by increasing • 1.0 0.04 domestic demand against a declining external sector. Domestic demand has increased on the back of rising consumption and stable (0.16) (0.30) -1.0 (0.36) (0.41) (0.52) investment, although inventories have decreased. (1.69) (1.73) (1.81) (1.70) (2.07) Meanwhile, the external sector was weighed down by decreasing -3.0 • Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 exports as a corollary of global economic moderation and fresh fears concerning a potential furtherance of the trade war. 2014 2015 2016 2017 2018 2019 Favo vour urable ble GDP Growth th Compar pared to Peers 2 Growth th Prospe pect ct % 9.0 Instit itutio ions 2019 GDP growth (%YoY) 8.0 7.0 7.0 6.1 2019 Budget 5.3 6.2 6.0 5.7 Bank Indonesia 5.0 – 5.4 5.0 5.1 5.0 3.7 4.0 3.6 IMF (WEO October 5.0 2019) 3.0 3.2 3.4 2.0 World Bank 5.2 1.0 ADB 5.2 0.0 2012 2013 2014 2015 2016 2017 2018 2019* 2020* Consensus Forecast 5.0 (October 2019) Bulgaria Colombia India Indonesia Philippines 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2019; * indicates estimated figure 24

  18. GDP Growth th Breakd akdown wn GDP Growth th Based on Expe xpend nditur itures (%, YoY YoY) 1 2014 14 2015 15 2016 16 2017 17 2018 18 2019 19 By expen pendit diture Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 4.9 5.0 4.9 5.0 4.9 4.9 5.2 5.0 5.1 5.0 5.0 5.2 HH. Consumption Non profit HH. 23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 5.3 6.9 8.1 8.8 8.6 10.8 9.1 16.9 15.3 consumption Government 6.1 (1.8) 1.2 0.9 1.2 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 5.2 6.3 4.6 4.8 5.2 8.2 consumption Gross Fixed Cap. 5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 7.9 5.9 7.0 6.0 6.7 5.0 5.0 Formation 3.1 1.5 4.9 (4.4) 1.1 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (1.7) 8.4 2.7 16.5 8.4 8.9 5.9 7.6 8.1 4.3 6.5 (1.9) (1.8) Exports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 (2.4) 4.8 0.2 15.4 11.9 8.1 12.6 15.2 14.0 7.1 12.0 (7.4) (6.7) Imports 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 GDP 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption GDP Growth th by Secto ctor (%, YoY YoY) 2014 14 2015 15 2016 16 2017 17 2018 18 2019 19 By sectors Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot. Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot Q1 Q1 Q2 Q2 Agriculture, forestry, 5.2 4.9 3.6 3.3 4.2 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3.3 4.7 3.7 3.9 3.9 1.8 5.3 and fishery Mining and Quarrying -1.2 0.7 0.7 1.5 0.4 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 (1.3) 2.1 1.8 0.0 0.7 1.1 2.6 2.7 2.2 2.2 2.3 (0.7) Manufacturing 4.5 4.9 5.0 4.2 4.6 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4.6 3.9 4.4 4.2 4.3 3.9 3.5 Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 6.0 7.0 7.0 7.2 6.8 7.4 5.7 5.8 5.6 6.1 5.9 5.7 Wholesale and Retail Trade, Repair of Car 6.1 5.1 5.2 4.4 5.2 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5.0 5.2 5.3 4.4 5.0 5.3 4.6 and Motorcycle Transportation and 7.0 7.6 7.7 7.2 7.4 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8.6 8.7 5.6 5.3 7.0 5.3 5.8 Storage Information and 9.9 10.7 9.8 10.1 10.1 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 10.5 11.1 8.8 8.3 9.6 7.8 5.1 8.1 7.2 7.0 9.1 9.6 communication 3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 8.9 6.0 5.9 6.1 3.8 5.5 4.2 3.1 3.1 6.3 4.2 7.3 4.5 Financial service Other Services * 5.4 4.7 5.9 6.5 5.7 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 6.0 4,6 5.4 6.2 6.7 6.4 6.2 6.8 7.3 GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.0 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 25

  19. Regio gional al Economic ic Growth th Econo nomic ic growt wth was driven by better growth th in the regio ions of Sumatra, a, Kalimant antan an as well as Bali and Nusa Tengg ggar ara, a, coupled led with stable le grow owth th in Java. Source: Central Bureau of Statistics of Indonesia (BPS) 26

  20. Sec ection tion 3 Ext xternal rnal Fact ctor: r: Im Improv oved Ext xternal ernal Resilie ience nce

  21. Exter ernal al Bal alan ance ce under r Contr trol l Support rted ed by A y Adequ quate ate Re Reser serves es Balance e of Payme ments Portrait it Curren ent t Account Defic icit it withi hin Safe Thres esho hold 2013: 2013: 2014: 2014: 2015 2015: 201 2016: 2017: 201 2018: 2018: CA Defic icit CA Defic icit CA Defic icit CA Defic icit CA Defic icit CA Defic icit US$bn US$bn Current Account Capital and Financial Account US$bn (US$29.1bn) n) (US$27.5bn) n) (US$17.5bn) n) (US$17.0bn) n) (US$16.2bn) n) (US$31.0bn) n) Overall Balance Reserve Asset (RHS) 8 0.0 20 160 0.19 6 -0.5 15 123.8 .82 4 2.06 -1.0 120 2 10 -1.5 7.05 0 -2.0 5 -2 (8.72) -2.5 80 -4 0 -3.0 -6 (3.04) 04) (1.98) -3.5 -8 -5 40 -4.0 -10 -10 (1.96) (8.44) -12 -4.5 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** -15 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3*Q4*Q1* Q2** 2013 2014 2015 2016 2017 2018* 2019** 2013 2014 2015 2016 2017 2018* 2019** Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs) Source: Bank Indonesia Source: Bank Indonesia Substantia tial FX Reser erves es to Mitiga igate te Exter ernal Challen enges ges Trade e Balance Portrait it 2017: 2018: 2013 2013: 2014: 2014 2015: 2016: 201 : FX Reserves s as of September 2019: US$124.3 4.3 bn n US$bn Surplus us Defic icit it Defic icit it Defic icit it Surplus us Surplus us (Equiv iv. to 7.0 month ths s of impo ports ts + servic icin ing of government t debt) t) US$11.83bn bn (US$8.57bn) n) (US$4.10bn) n) (US$2.37bn) n) US$7.59bn US$8.83b 3bn 3.00 US$bn Month FX Reserves (LHS) Month of Import & Debt Service (RHS) 130 15 14 2.00 120 13 12 1.00 110 11 10 100 9 0.00 8 90 7 -1.00 6 80 5 4 70 OG Non-OG Total -2.00 3 2 60 1 -3.00 50 - 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 11 11 11 11 11 11 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 * Preliminary Figure ** Very Preliminary Figure Source: Bank Indonesia Source: BPS 28

  22. Exc xchan ange Ra Rate In Li Line ne with Funda damentals mentals Move veme ment nt of Rupia iah IDR/US$ Th The Rup upiah iah has as strengthened ag again ain in in lin ine wit ith mai aintain ained BOP OP 15,500 performance. In October 2019, the Rupiah appreciated 1.18% (ptp) on the IDR/USD 15,176 level recorded at the end of September 2019. Cumulatively from January Quarterly Average until 23rd October 2019, therefore, the rupiah has appreciated 2.50% (ytd). 15,000 14,798 Monthly Average The stronger Rupiah is supported by a well-functioning foreign exchange 14,409 supply and demand mechanism from the business sector in addition to 14,220 14,381 14,500 maintained foreign capital inflows. In addition, slightly less global financial 14,120 14,232 14,601 14,207 market uncertainty has spurred positive sentiment concerning the Rupiah. Moving forward, Bank Indonesia predicts Rupiah exchange rate stability in 14,000 14,254 14029 line with the currency's fundamental value and maintained market 13,952 14,134 14,031 mechanisms based on the sustained inflow of foreign capital to Indonesia 14,100 congruent with the promising domestic economic outlook and attractive 13,500 13,576 returns, as well as the positive impact of looser monetary policy in *data as of October 23 rd , 2019 advanced economies. Bank Indonesia will continue to accelerate financial 13,000 market deepening in the money market and foreign exchange market in 16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct 16-Nov 16-Dec 16-Jan 16-Feb 16-Mar 16-Apr 16-May 16-Jun 16-Jul 16-Aug 16-Sep 16-Oct order to support exchange rate policy effectiveness and strengthen domestic financing. Rupia iah Exc xchang nge Rate Fared Relative latively ly Well ll Compar pared to Peers Rupia iah Exc xchang nge Rate Volatil tilty ty YTD 201 2019 vs 201 018 % 25 *data as of October 23 rd , 2019 point-to-point average 22.2 -8.49 TRY -14.02 Sep-19 19.37 -2.00 ZAR 20 -7.91 -4.96 BRL 17.18 -6.32 Oct-19 -5.25 KRW 15.4 -5.46 -2.97 15 EUR -5.21 -2.77 12.22 CNY -3.80 -1.61 10.4 INR 9.78 -2.50 9.1 10 -1.30 MYR -2.46 7.5 -0.07 SGD 6.4 6.49 6.33 -1.15 2.50 IDR 4.9 4.74 4.6 4.5 0.58 3.88 5 3.02 PHP 1.32 2.59 2.3 1.53 *data as of October 23 rd , 2019 JPY 1.26 1.34 6.76 THB % 3.51 - BRL ZAR TRY IDR KRW THB MYR INR SGD PHP -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 Source: Bank Indonesia 29

  23. Bank Indonesia’s Policy licy Direct ection ion To maintain ain Rupiah ah stabilit lity and support growth Measures es To To Stabi bilize lize Rupia piah Exchange nge Rate te Measures es To Supp ppor ort t Gro rowth th 1 1 To stabilise the rupiah A pre-emptive, front- Further easing of exchange rate, while To bolster the growth of the loading and ahead-of- macroprudential consistently controlling inflation property sector which has positive the-curve policy policy within the 2018-2019 target impact to the economy response range of 3.5±1% 2 2 Dual intervention in Coordination with the Coordinating the foreign exchange To stabilise the rupiah Policy Ministry of Economic Affairs, the market and exchange rate, adjust fair coordination to Ministry of Finance, and the government securities prices in the financial markets accelerate Financial Services Authority to (Surat Berharga Negara and maintain adequate liquidity financial market accelerate financial market – SBN) market in a in the money market deepening deepening, particularly in private measured way financing for infrastructure. 3 3 Strengthening the Electronification to support social Payment system To maintain adequate liquidity monetary operations in assistance disbursement and development to in the rupiah money market the foreign exchange and financial transcation of the central support digital and interbank swap market money markets and regional government economy 4 4 Sharia economy and finance Intensive communication, To form rational expectations, development to create halal value Sharia economy especially to market thus helping to mitigate the chain, sharia financal sector and finance players, banks, rupiah overshooting its development both for commercial development businesses, and fundamental level. and social purposes, including its economists education and communication Source: Bank Indonesia 30

  24. Ampl ple Li Lines of D Defen efense se Against ainst Ext xter ernal nal Shocks cks Ampl ple Reserve ves Ample level of FX reserves to buffer against external shock  FX Reserv rve FX Reserves as of September 2019: US$124.3 billion  Swa wap p Arrang ngeme ment nt Renewed a 3 year USD22.76 billion swap line with Japan on October 14 th , 2018  Japan The facility is available in USD and JPY  South th Korea Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2017  Bilateral teral Australia lia Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018  Singapo apore Established a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2018  Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in  China November 2018 Mala lays ysia ia Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019  Entitled to a maximum swap amount of USD600 million under ASA  ASEAN N Swap p The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million  Arra rangem gemen ent (ASA) nal Doubled to USD2 billion in 2005 iona  Regio Chia iang g Mai i Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool  created under the agreement Initia tiative tive Multila ltilatera terali liza zation tion Came into effect in 2010 with a pool of US$120 bn  (CMIM IM) ) Agreem eemen ent Doubled to US$240 bn effective July 2014  IMF Global al Global al Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem  Financ ncia ial Safety ty Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)  Net - GSFN Source: Bank Indonesia 31

  25. Solid id Policy cy Coordi dina natio tion In Managin aging Financial ancial Market kets Volati tili lity ty The enac actm tment nt of Law No. 9/201 016 6 regar arding ng Prevention ntion and Mitig tigat ation on of Financ nancial al Syste tem Crises Gov’t Securities Crisis is Mana nage gement ent Proto tocol (CMP) as a legal foundation for the government to serves Indicators: at the time of financial crisis in the form of Financi Financial al  - Yield of benchmark series; Syste tem Stabili ability ty Com ommitt ttee (KSSK) - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities KSSK membe bers: the Ministry of Finance, Bank Policies to address the crisis at every level : Indonesia, the Financial Services Authority, and the  Deposit Insurance Corporation - Repurchase the government securities at secondary market - Postpone or stop the issuance Bond nd Stabilizatio ilization n Framew ework rk Swap facility arrangements based on international cooperation First Line of Defense Buyback fund at DG of Budget Financing and Risk Management State’s Budget Investment fund at Public Service Enhancing coordination between government Agency (BLU) (min. level Aware) institutions and continuous dialogue with market Stat ate Owned Enterprises Related SOEs (min. level Aware) participants (BUMN)’s Budget Social al Secur urity y Organ anizing zing Agency y BPJS (min. level Aware) (BPJS)’s Budget CMP Implementing Crisis Management Protocol (CMP) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget Accumulated cash surplus (SAL) (min. Level Crisis) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 32

  26. Strengthe engthened ned Pri rivate te Ext xter ernal nal Debt ebt Ri Risk Man anag agement ement Enco cour uragin ing Corpor orate ates Compli liance ance on Hedgin ing Ratio io & Liqui uidity ty Ratio io Debt Burden en Indicator (Exter ernal Debt/G /GDP DP) ) Rema mains Comp mparable e to Peers Rating Hedging ging Ratio* Exter ernal Debt/ bt/GDP (%) 2020F 165, 55.00 255, Bulgaria 57.20 58.60 6% 2019F 10% 39.10 2018 Colombia 41.40 39.90 21.60 India 21.20 20.60 ≤ 3 mont m nths hs > 3 - 6 mont nths hs 37.10 Indonesia 36.90 36.20 2,295, 2,385, 19.60 Philippines 20.90 90% 94% 23.90 0 10 20 30 40 50 60 70 Source: Moody’s Statistical Handbook, May 2019 Liquid idity ity Ratio* Regulatio tion on Pruden entia tial Prin incipl iple in Managing g Exter ernal Debt 306, Phase 1 Phase 2 Phase 3 Regulat atio ion Key Points Jan 1,2015 – Jan 1,2016 – Jan 1, 2017 12% Dec 31,2015 Dec 31,2016 & & beyond Obj bjec ect of Regu gulatio ion Governs all Foreign Currency Debt Hedg dgin ing g Ratio io < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** 2,244, Liquid idit ity y Ratio io (< 3 months) 50% 70% 88% Credi edit Ratin ing Not applicable Minimum rating of BB- Must be done Hedg dgin ing g transaction ion to meet not necessarily be done with a with a bank in Comply Not Comply hedg dge ratio io bank in Indonesia Indonesia *Data as of Q2 2019, with total population 2.550 corporates Sanctio ion As of Q IV-2015 Applied Source: Bank Indonesia Source: Bank Indonesia 33

  27. Healthy althy Ext xter ernal nal Debt ebt Compo posit sitio ion Exte xterna nal l Debt Struc uctur ture The Struc uctur ture of Exte terna nal l Debt bt is Domin inate ted by Long ng-Te Term m Debt bt Private External Debt Public External Debt Short Term Ext Debt Long Term External Debt 100% 100% 90% 90% 80% 80% 57.4 58.6 52.6 50.0 46.4 44.2 45.9 49.5 51.2 49.4 49.6 50.0 49.0 48.6 48.8 49.8 49.7 49.9 70% 70% 60% 60% 78.8 79.3 78.3 78.8 79.8 81.7 82.1 82.9 83.5 84.4 84.2 84.2 85.1 84.6 84.1 84.5 85.5 85.9 50% 50% 40% 40% 30% 30% 42.6 41.4 47.4 50.0 53.6 55.8 54.1 50.5 48.8 50.6 50.4 50.0 51.0 51.4 51.2 50.2 50.3 50.1 20% 20% 21.7 10% 10% 21.2 20.7 21.2 20.2 18.3 17.9 17.1 15.6 15.8 15.8 16.5 15.9 14.9 15.4 15.5 14.5 14.1 0% 0% Exte xterna nal l Debt t Rema mains ns Manageabl ble Exte xterna nal l Debt t to GDP Ratio io & Debt bt to Expo xport t Ratio io External Debt / Export Ratio External Debt / GDP Ratio (rhs) % % Million USD % External Debt External Debt Growth (rhs) 450,000 20.0 36.9 36.8 200 40 36.1 36.2 17.1 34.7 34.3 18.0 32.9 400,000 31.8 35 180 16.0 29.1 350,000 27.4 30 26.5 14.0 25.0 176.1 175.8 12.0 300,000 11.5 11.3 160 171.5 168.4 168.0 25 12.0 10.2 10.1 163.9 9.9 250,000 10.0 8.1 140 20 200,000 7.0 8.0 5.9 139.5 15 5.4 150,000 120 6.0 123.1 3.0 121.8 10 100,000 4.0 114.9 113.8 100 50,000 5 2.0 101.0 0 0.0 80 0 *Provisional Figures Source: Bank Indonesia, External Debt Statistics of Indonesia, August 2019 34

  28. Man anag ageable eable External rnal Debt bt Profile le Short rt term non-ba bank nk corpo rporate debt (non affi filia liation) ion) repr pres esen ents ts only 8.4% of total priva vate externa rnal debt Public ic Long Term 1 Priv ivate te Bank Af Affil iliat iation US$196.3bn US$151.4bn US$19.7bn or or or 49.9% 76.8% 10.0% US$9.6 9.6bn of Total Ext. of Private Ext. of Private or or Debt Debt Ext. Debt 4.9% 9% Exter ernal Debt of Private ate Positio tion Ext. . Debt t US$1 $197.2bn bn US$45.8bn US$26.1bn or or or 50.1% 50 US$393 93.5bn bn 23.2% 13.2% of total of Private of Private Ext. Debt Ext. Debt Ext. Debt Priv ivate te Non-Bank US$16 16.5bn 5bn Short-Term Term 1 or or 8.4% 4% Priv ivate te of Private ate Ext. . Debt t External Debt Position as of August 2019 1 Based on remaining maturity Non Af Affil iliat iation Source: External Debt Statistics of Indonesia, October 2019 35

  29. Sec ection tion 4 Fisca cal Perf rforma rmanc nce and Flexib xibilit ility: Mor ore Fiscal cal Stimu mulus us with Pru rudent nt Fisca cal Pol olicy cy

  30. Integ tegrated ted Reform orm to Prov ovide ide Higher her Quality ity of Econo onomic mic Growth wth Struct ctur ural al reform rms to enhance ance potential ial growth wth and navig igate throug ugh chall lleng nges • Fair State Budget that declines poverty and income inequality Fiscal al Synergy Sy gy in reform rm to boos ost the more sustainab nable le and inclu lusiv ive • Monetary policy to support Mone netary ary & • Efficient, competitive, and Real al Secto tor growth wth macroeconomic stability Finan ancial ial innovative real sectors • Price stability and sustainable Sector tor • Job-creation current account deficit • Trade and investment • Efficient and credible policies that support growth, financial sector efficiency, and stability Source: Ministry of Finance 37

  31. Growth th Momentum ntum is Expected cted to Contin tinue ue Several al key drivers rs and strategie ies to accele lerate growt wth Strateg egies ies to Encour ourage Growth owth Key Driv iver ers Main intai tainin ning purchasing ing powe wer, r, boos osting ing domestic ic • Consumptio ion remains robust among others • demand and and support rting ing busines ess activity ity. supported by benign inflation Improve distribution channels  Increased shopping events, creative industries  Inves estment ent grows stably supported by • and festivals in tourism areas infrastructure acceleration, business climate improvement, rating upgrades, economic Incentives for manufacture  packages Developing e-commerce industry  Export and Import rt keeps improving driven by • Encourag uraging ing priv ivate te sector's r's role le in inves estment ent • increasing demand and improving prices Strengthening and deepening financial  markets Support from sever eral import rtan ant events ts such as • Making a stable investment climate through  Asian Games, Regional Elections, and IMF-WB political stability annual meeting Expand nd servic ices es sector, especially ially touris urism • Increasing foreign tourists arrival through  Risks & Challe halleng nges es cooperation with other countries by increasing the direct flight schedule Globa bal econo nomic ic uncert rtain ainties ties: China economic rebalancing Encouraging national creative industry growth  and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change 38

  32. 2019 State Bu Budget et (AP APBN BN 2019) 9) Healthie hier, r, More Equit itable able, Self-Suf Sufficie icient nt Macroecono economic ic Healt althier hier Assum umption ption Growth th Inflation tion Exchang nge Rate 3 months ths T-bill lls Deficit 1.84% of GDP, the • 5.3% 3.5% 15,000/US$ 5.3% lowest since 2013 Towards positive primary • balance ICP Oil Lifting ing Gas Lifting ing Debt to GDP ratio below • 70/barrel 775 thousands barrel/day 1,250 thousands barrel/day 30% of GDP More equitab uitable le Dev evelop lopmen ent Unempl ploy oyment nt Pov over erty ty Gini ni ratio tio HDI Strengthening • Target 4.8% – 5.2% 8.5 – 9.5 0.38 – 0.39 71.98 decentralization (increasing fiscal transfer to regions) EXPEND NDITURE ITURE REVENUE NUE Strengthening social • Rp2,461.1 T Rp2,165.1 T protection programs  Cen entr tral al Gov over ernmen ent  Tax Focusing on human capital • Rp1,634.3T Rp1,786.4 T quality improvement  Tran ansfer er to Region gion  Non Tax (inter-generational Rp756.8 T fairness) Rp378.3 T  Villag lage Fund nd  Gran ant Self lf suffic icie ient nt Rp70.0 T Rp0.4T Increasing tax revenue • Increasing the share of • local currency bond Deficit cit Prim imary ry Balance issuance Rp296.0 T (1.84% of GDP) (Rp20.1 T) Domestic financial • deepening Debt Financing ing Inves estment ent Rp359.3 T Driving export Rp75.9T • Source: Ministry of Finance 39

  33. Cred edible ible an and Health althier ier Budget et …providing more certainty to all stakeholders Macroeconomic Assum umptio ion for 2018 & 2019 Budget 2018 Budget realization showed healthy and credible • 2017 2017 17 2018 18 2019 19 performances: Indic icator R-Budge Budget Realiz ization Budget dget Budget dget - with tax revenues grew relatively high Economic ic growt wth (%, yoy ) 5.2 5.1 5.4 5.3 - improving tax ratio Inflatio ion (%, yoy ) 4.3 3.6 3.5 3.5 - optimal level of expenditure 3-Mo Month Treasury y Bill (SPN PN) (%) 5.2 5.0 5.2 5.3 2019 Budget is healthier, more equitable, and self-sufficient • Exchang nge Rate e (Aver erage ge, IDR IDR/US USD) - towards positive primary balance 13,400 13,384 13,400 15,000 ICP (USD/ba barrel) - strengthening decentralization 48 51.2 48 70 - increasing tax revenue Oil il Productio ction n (thousand nd barrel el/da day) 815 804 800 775 Gas Produ ductio ction n (mil illions ns barrel el/da day) 1.15 1.14 1.20 1.25 2019 2016 2017 2018 Descriptio ion (IDR Tril illio ion) Audit ited Audit ited Audit ited Proposed Realizat ization % Realizat izatio ion Budget Realizat ization Realizat ization Realizat ization Budget (a.o. Augus ust 31) to Budget A. A. Revenue ues and Gran ants 1,555.9 1,666.4 1,943.7 2,142.5 2,165.1 1,189.3 54.9 I. Domestic Revenue 1,546.9 2,142.1 2,164.7 1,188.3 54.9 1,654.8 1,928.1 1. Tax Revenue 1,285.0 1,343.5 1,518.8 1,781.0 1,786.4 920.1 51.5 2. Non Tax Revenue 262.0 311.2 409.3 361.1 378.3 268.2 70.9 II. Grants 9.0 11.6 15.6 0.4 0.4 1.0 220.6 B. Expendit iture 1,864.3 2,007.3 2,213.1 2,439.7 2,461.1 1,388.3 56.4 I. Central Government Expenditure 1,154.0 1,607.3 1,634.3 857.7 52.5 1,265.3 1,455.3 1. Ministerial Spending 684.2 765.1 846.5 840.3 855.4 481.7 56.3 2. Non Ministerial Spending 469.8 500.2 608.8 767.1 778.9 376.0 48.3 II. Transfer to Region and Village Fund 710.3 832.3 826.8 530.6 64.2 742.0 757.8 C. C. Prim imar ary y Balan ance -125.6 -124.4 -11.5 -21.7 -20.1 -26.6 132.4 D. Surplus us (Defic icit it) -308.3 -340.9 -269.4 -297.2 -296.0 -199.0 % of GDP -2.49 -2.51 -1.81 -1.84 -1.24 E. Finan ancin ing 334.5 366.6 305.7 297.2 296.0 280.3 94.7 Source: Ministry of Finance 40

  34. 2020 20 State te Budget et (APBN BN 2020 20) Indones nesia ia 2045: Becomin oming a Develo loped Country try Macroeconomic Assum umptio ion for 2020 Budget 2036-2045 2036 2019 19 2020 20 Indic icator ADVAN ANCED CED Sovereign, Advanced, Just, and Prosperous Country Outlook Budget dget INDO DONES ESIA IA Economic ic growt wth (%, yoy ) 5.2 5.3 2031-2035 Inflatio ion (%, yoy ) 3.1 3.1 Strengthening Competitiveness 3-Mo Month Treasury y Bill (SPN PN) (%) 5.6 5.4 TRAN ANSITIO SITION Exchang nge Rate e (Aver erage ge, IDR IDR/US USD) 14,250 14,400 ICP (USD/ba barrel) 63 63 2020 2020-2030 Oil il Productio ction n (thousand nd barrel el/da day) 754 755 STREN ENGTH GTHEN ENIN ING G THE Improving Competitiveness Gas Produ ductio ction n (mil illions ns barrel el/da day) FUNDAMENTA MENTAL 1.07 1.19 2020 Fiscal Competitiveness Theme 2020 2019 Growth Descriptio ion (IDR Tril illio ion) Proposed Growth Growth “ State Budget to Accelerate Outlook (%) Budget Budget (%) (%) Competitiveness through Innovation and A. A. Revenue ues and Gran ants 2,221.5 9.4 2,233.2 10.0 2,030.8 4.5 Strengthening Quality of Human I. Domestic Revenue Resources ” 1. Tax Revenue 1,861.8 13.3 1,865.7 13.5 1,643.1 8.2 FISCA SCAL POLICY ICY STRATEGY TEGY FOR 2020 2. Non Tax Revenue 386.3 (5.6) 359.3 (7.0) 367.0 (5.0) II. Grants 0.5 (61.5) 0.5 (61.5) 1.3 (91.7) B. Expendit iture 2,528.8 8.0 2,540.4 8.5 2,341.6 5.8 I. Central Government Expenditure 1,670.0 9.4 1,683.5 10.2 1,527.2 4.9 II. Transfer to Region and Village Fund 585.8 5.5 856.9 5.2 814.4 7.5 Revenu nue Mobiliza bilizatio tion C. C. Prim imar ary y Balan ance -34.7 201.7 -12.0 (65.4) -12.0 (65.4) D. Surplus us (Defic icit it) -307.2 (1.2) -307.2 (1.2) -310.8 15.4 % of GDP -1.76 (8.81) -1.76 (8.81) -1.93 6.04 Effect ective ive state te spendin ding E. Finan ancin ing 310.8 1.7 307.2 (1.2) 307.2 (1.2) Crea eative tive financin ing Source: Ministry of Finance 41

  35. New an and Strate tegic gic Program ams The policie ies and initia iativ ives in State Budget 2020 for f Improve vement nt in human an resour urce ce qualit ity and competit itiv ivene ness ss. Kuliah Tax Incentive centives for suppor porting ting huma man n Improve vement t In Human Resource Quali lity ty and Acce cele lerate ted compl pletio ion n of 4 supe per priority ity resources dev evelo lopm pment t & compe petitive titiveness Soci cial l Assis istan tance ce touris ism m destina tinatio tions ns Indone nesian n Smart Card Colle lege/KIP IP Kulia liah • Super deduction for vocational program and The development of Danau Toba, Supporting the poor people to achieve the higher R&D Borobudur, Labuan Bajo and Mandalika, education level • Mini tax holiday for investment commitment synergy among line ministries and local Pre Worke kers Card under 500 billion rupiah government • Investment allowance for human intensive Improving the job seekers’ productivity industry Food Aid id Card Protecting the food access for poors Streng ngth theni ning ng The Transfe nsfer to Regions ions and End ndowme ment nt Fund nd for Human n Resour urce ce and Streng ngth theni ning ng The Current t Acco coun unt Villag lage Fund nds Balan lance ce Cultur ture • Strengthening The Physical Specific Supporting the reducing current account The Utilization of endowment fund investment to Allocation Fund for social and marine deficit in the short and long term improve the the quality of higher education and transportation sectors; promotion of national culture, through: • Additional General Allocation Fund DAU for equalization village officials’ Culture Endowment Fund  fixed income and remuneration of Higher Education Endowment Fund  Government Employees with Work Significant additional endowment fund for  Agreements (PPPK) research and development Source: Ministry of Finance 42

  36. In 2020 20, Budget et Def eficit icit will be Mai ainta tained ined at leve l vel 1.76% GDP Direct cted to be healt lthie hier and adaptive ive to face the econo nomic ic risks 0.0 0.00 Deficit to GDP ratio in 2020 will be the • (11.5) (12.0) (50.0) (34.7) lower deficit in the past five years (0.50) (100.0) Primary balance deficit will be decreased • (1.00) gradually to positive direction (150.0) (124.4) (125.6) (142.5) Tax revenue for supporting the • (200.0) (1.50) (1.76) (1.82) competitiveness with the realistic and (1.93) (250.0) optimal target (2.00) (269.4) (300.0) Budget spending will be prioritized for • (298.5) (308.3) (341.0) (307.2) (2.50) (310.8) productive spending (350.0) (2.49) (2.51) (2.59) Budget financing will be decreased and • (400.0) (3.00) 2015 2016 2017 2018 2019 2020 Budget will be utilized for competitiveness Outlook improvements Budget Deficit (Trillion IDR) Primary Balance % Deficit to GDP 11.6 11.6 11.4 11.1 10.8 10.7 TAX AX RATIO IO 2015 2016 2017 2018 2019 Outlook 2020 Budget Source: Ministry of Finance 43

  37. State te Reven enue ue Optim imiza izati tion Followed wed by tax reform rms for supporting ing the econo nomy my and busine ness ss climate. Tax Revenue nue (Trilli illion on Rupiah) iah) Improv ovemen ent to Support ort Taxatio tion 2,000 1,861.8 1,865.7 Increasing the tax compliance • 1,643.1 1,518.8 Service quality improvement, counseling, and • 1,500 1,343.5 supervision through the strengthen IT system and 1,285.0 1,240.4 14.8 tax and administration 13.4 10.5 Equalizing the level playing field 1,000 • 12.6 13.0 13.5 8.2 8.2 Improving the business process especially for VAT • 5.8 refund 4.6 500 3.6 Implementing the AEoI • Extensification of excise goods • 2.9 - Adjusting the excise duty rates on tobacco • 2020 2015 2016 2017 2018 2019 2020 2020 2020 Budget Outlook RAPBN Budget APBN Plan Kepabeanan dan Cukai Pajak nonmigas Oil & Gas Non Oil & Gas Tax PPh Migas Pertumbuhan Penerimaan Perpajakan (%) Custom & Excises Tax Revenue Growth (%) Non Tax Revenue (Trillion illion IDR) R) Pertumbuhan Pajak nonmigas (%) Non Oil & Gas Tax Revenue Growth (%) 450.0 40.0 409,3 31.5 386,3 400.0 The role of the he non-oil and gas PNBP secto tor 30.0 370,0 359,3 311,2 350.0 contin tinue ues to be stren engt gthen ened ed accom ompan anied ied 20.0 18.8 300.0 by increa eased ed ser ervic ices es to the commun unity ity 262,0 10.0 255,6 250.0 - 200.0 2.5 Management and Utilization of Optimal, Effective • (5.6) (10.0) (5,0) (7,0) and Efficient Natural Resources 150.0 (20.0) Service Improvement and Tariff Adjustment 100.0 • Improvement of BUMN Efficiency and BLU (30.0) • 50.0 (35.9) Performance - (40.0) 2020 2020 Improving Governance • 2015 2016 2017 2018 Outlook RAPBN 2020 APBN 2020 Budget Budget 2019 Plan Non Oil & Gas(Trillion Oil & Gas (Trillion Rp) Growth (%) PNBP Migas (Triliun Rp) PNBP Nonmigas (Triliun Rp) Pertumbuhan (%) Rp) Source: Ministry of Finance 44

  38. Gover ernment ment expen endit iture in 2020 20 A better spending ing to supporting ing develo lopment nt to be efficie ient nt and effecti ctive ve. Source: Ministry of Finance 45

  39. Centr ntral al Gover ernme nment nt Expend nditur iture Direct cted to support rt Human an Capital improve vement nt and several al strategic ic program ams  Human an Resour ource Quality ality Improv ovem ement nt Smart rt Indones esian ian Card (KIP) for Higher er Ecuatio ion Supporting the poors to continue their education to higher education Pre-Em Emplo loyment ment Card To Improve the productivity of job seekers • Sustain inability ability of health th servic ice provis isio ion (increased premium aid by Government)  Social ial Prot otection ection Stren engt gthen hening ing • Food acces ess improvem ement nt (Food Card)  Infrastr tructu ture Dev evelop lopmen ent • Equalizing inter-region development • Accelerating development of 4 destination of super-priority tourism Source: Ministry of Finance 46

  40. Budget et for Improving ving the Human an Resou ource ce Qual alit ity Higher quali lity of human an resour urce ces for achi hievi ving ng the welfar are and just society. Nationa ional Educa ucation tion • Cultur Cu ture Endow dowmen ment Fund nd • Developm opmen ent (DPPN) Rp1,0 ,0 T Rp18,0 ,0 T • Ensure the continuity of culture scholarships for 5.000 new students  promotion for the next generation (higher degree level) scholarships for 12.333 students (higher  degree level) Financing 104 researches  Investme estment nt Fi Financing cing Rp29,0 Rp 29,0 T Highe her Educ ucation tion • Resear earch ch Endow owmen ent Fund • Endow owmen ent Fund Rp5,0 ,0 T Rp5,0 ,0 T • Increasing the human resource quality  and competitiveness Human resources and education Increasing the research which infrastructure for achieving the World  supported the university stakeholders Class University Incresing the research contribution to  economic growth Source: Ministry of Finance 47

  41. The he Natio ional al Budget et is to Prepar are the he Younger er Gener neratio tion to Improve ve the he Qual alit ity of Huma man Resources ces Educa cati tion on Budget et Rp508,1 ,1 T Source: Ministry of Finance 48

  42. The he Natio ional al Budget et is Preparing aring the Youth th through ugh Job Trai aining ing Definit nition on of Pre-Emplo mployment yment Car ard Tot otal al Budget “It is a card given to job seekers or workers to get vocational training Rp10 T (skill lling ing and re-skill killin ing) g) and / or job competency certification" Target Design of Implemen mentatio ion of Digital al and 2 Bi Billion on Regular ular Access ess part rtic icipan pants ts Regu gula lar Digit gital al Training + Certification + Training + Digital: 1.5 Mill Regular: 0.5 Mill Incentives Incentives Skill illin ing • Participants • Training and Targets : Fresh graduate job seekers choose the type Certification in Objectives : skill adjustment, vocational skill to work of training Government Job Outcome : reduce unemployment through a digital training Center (LPK) platform (GoJek, (including Vocational Re Re-Ski Skill llin ing Tokopedia, Center/BLK), Private Jobstreet etc.). LPK, and Industrial Targets : Workers who are laid off or potentially laid off • Private training * Taining Center Objective : to equip new/different vocational skills for new profession/entrepreneur Online ( e-learning ) Outcome : prevent unemployment from returning Offline training (class) and Offline (Class) Source: Ministry of Finance 49

  43. Infras astr tructur cture Budget et To build ld infras astruc ructur ure and remote te areas as Invest stment nt for accele lerating ing infras astruc ructur ure develo lopmen ment (SOE and PSA): PT HK Rp 3.5 T for building toll road Pekanbaru- Dumai and Terbanggi Besar- • Total Budget Pematang Panggang – Kayu Agung PT PLN Rp 5.0 T for fulfilling electrification target 100 % by 2020 • Rp423,3 ,3 T PT SMF Rp 2.5 T to support financing for building house for low income society • PSA LMAN Rp 10.5 T for land clearing to support national strategic project • PPPDP Rp 9.0 T for financing credit housing FLPP • Clean an Water &Sanit anitati tion ons 49 49 18,75 ,758 km Development of drinking water pipelines • Brid idges es Dams Development of domestic wastewater • treatment systems Provision of infrastructure for processing • waste 3 19,87 ,879 ha 6,34 346 km Airpo ports ts Irri riga gatio tions ns Roads ads Intern ernet et Housing ing for Low Incom ome 238.8 8.8 km Connec ectiv tivity ity Soci ciety ety Develo lopmen ent Railr lroads ads (Palap lapa Ring) Source: Ministry of Finance 50

  44. Subsidy sidy is Direct ected ed to Improve ove Effectiv ctivit ity an and Efficiency iency through ugh Attem tempts pts in Accuracy acy Impr provement vement Energy gy Budget 2020 Outlook 2019 Subs bsidy idy 125.3 T 142.6 T Polic licy :  Continuing fix subsidy for diesel of Rp1.000/litre  Price differential subsidy for kerosene and LPG 3 kg canister  Electricity subsidy is given to cert rtain ain tariff iff groups ups.  Electricity subsidy is given accurately for household customer of 450 VA and 900 VA  Improving electricity ratio and reducing inter- regions disparity Non Energy Budget 2020 Outlook 2019 Subs bsidy idy 69.8 T 62.3 T Polic licy : Expanding capital tal acces ess of Micro, Small, l, Medium ium • Data validation of beneficiaries and their needs of subsidized • Enterp erpri rises es through interest subsidy of KUR fertilizer  e-RDKK (Definitive Plan of Group Needs) Allocating down payment and interest differential • • Expanding the use of Farmer Card to buy subsidized fertilizer subsidy to encourage house ownership of low • Improving public service in transportation and public information income people Source: Ministry of Finance 51

  45. Tran ansfer fer to Re Regio gion an and Vill llag age Fund Rp8 p856.9 56.9 T Increased by Rp42.5 triliun from the Outlook 2019 that is directed to: Accele eleratin ting Prom omot oting ing productiv ductive Improv ovin ing basic sic public lic competit petitiv iven eness ess spen endin ding serv rvic ice deliv iver ery Accelerate the provision of public • infrastructure and strengthen the quality of human resources, especially through education, health, drinking water, social protection, and inter-regional connectivity. Increase competitiveness through • innovation, ease of doing business, governance, and incentive policies that support the investment climate. Increase productivity, especially • export-oriented through the development of regional economic potential. Source: Ministry of Finance 52

  46. Deb ebt Finan ancing cing Policy cy 2020 Debt financ ncing ng that is producti uctive ve, efficie cient, nt, fulfills lls prudent ntial ial aspect cts and support rted by good governance rnance and risk manag agem emen ent systems. Debt Financi ncing ng Strategy Debt Finan ancin cing Direction tion Prude udent nt • Optimizing community participation in the debt ratio control within the safe limit ranges domestic bond market (financial deepening) • from 29.4 - 30.1 percent of GDP to support fiscal • Active debt management through liability sustainability and asset management. Maint intainin ining macro balan lance by maint ntainin aining the he • composition of domestic and foreign debt in a controlled limit and deepening the financial markets Source: Ministry of Finance 53

  47. 2017 Achiev ievem ement ents of S State te Budget et Value ue creatio ion on various us project cts and count ntry ry developmen ment 15.5% 101.7% 118 18.5% 7.4% 23.0% 27.8% • Tax revenue growth vs. • Non-tax revenue over • Growth of realized • Growth of transfer • Revenue of customs • Capital expenditure 2017 revised Budget, a to village vs. 2016, 2016 (excluding Tax government spending and excise over 2017 growth vs. 2016, a growth of 17.7% vs 99.6% over 2017 Amnesty and Asset vs. 2016 revised Budget, a 92.8% over 2017 2016 revised Budget Revaluation) 7.4% increase vs. revised Budget. 2016 Local Gover ernment ment Achi hievements ements Centr tral Gover ernmen ent Milest stones es Infr frast structu ture: e: • 794 km road development Brid idges: 3,749 m bridge • 9,072 m bridge development in development, 291 m • 3 airports completed maintenance, and • 618.3 km railways 2,916m improvement Clas assroom: 1,351 new classrooms, 11,006 Roads: 1,033 km in rehabilitation, 11,758 development, 1,503 km rural library collection Educati tion: maintenance, 9,789 km • Distributed Indonesian Smart Card to 19.8 improvement million students Tuition: Reduced tuition Tu • School Operational Benefit for 8.0 million costs for 46.6 million • Scholarship for 364.4 students students and 5.6 million kindergarten- Welfare: Increased welfare aged children and work ethics of 1.7 Medic ical: Improved million civil teachers in rural Health thcare and Socia ial Sec ecurity: ty: facilities in 347 areas and compensated • Distribution of Indonesian Health Card to hospitals and 3,873 41,000 teachers in special 92.1 million people clinics regions Rural al: 107,9 village roads, 89,200 health clinics, 178,800 toilets, and 107,700 connected clean water and 25,903 Ha irrigated lands Source: Ministry of Finance 54

  48. Indonesia’s Tax Amnesty Program – A Succes ess Story ry With more than 965, 965,900 taxpayers rs particip cipating ing in the program Tax Amne nesty ty Resul ult (as of the end nd of March ch 31 st st , 2017) Repatriation Preliminary 3% Evidence Payment SMEs 1% 2% Tax Arrears Companies ​Offshore 147.1 .1 Payment 12% 1.7 Declaration 14% 85.59 21% 18.8 .8 594.9 .99 1,036 Individual SMEs 18% 861.8 .81 3,323.3 .36 ​Onshore 3,698 114.2 4.2 Declaration Individuals 76% Redemption 68% Money 85% Reven enue Compo posit ition n of Partic icipa ipants Asset Declared IDR 134. 4.8t 8tn n (~1. 1.1% 1% GDP) P) Based ed on Asset et Declared ed IDR 4,881tn (~39.4% of GDP) Redemp mption tion Mone ney Assets ts Decla clared 39.3 39.3 1.10 % of GDP % of GDP 0.62 0.58 8.3 0.20 5.2 0.17 0.15 3.9 3.6 0.12 2.1 0.04 0.04 0.3 Germany Belgium Italy Chile Indonesia India South Spain Australia India Spain Chile Indonesia Italy South Australia (2004) (2004) (2009) (2015) (2016) (1997) Africa (2012) (2014) (1997) (2012) (2015) (2016) (2009) Africa (2014) (2003) (2003) Source: Ministry of Finance 55

  49. 2019 Finan ancing cing Nee eeds Fulfill lled from Governm rnment nt Securit uritie ies IDR 791.8 tn tn (90.86%) %) and Loan IDR79.68 .68 tn tn (9.14%) Source: Ministry of Finance 56

  50. Gover ernment ment Securit urities ies Indica icative ive Financi ncing ng Plan for 2019 Auction: • Conventional Securities – 24x • Islamic Securities – 24x • Non-auction: • Retail GDS (tradable/ORI & non-tradable), Retail • Sovereign Sukuk (tradable/Sukri & non-tradable); Private Placement – based on request. • Auction GS Net GS Rupia iah [74% – 76%] Domestic [381.83] [83% - 86%] GS Issuance Non-auction Need [9% - 10%] Issuance Composition [841.78] Foreign eign Denom nomin inated ted GS GS GS Matured International [459.95] [14% - 17%] *in triliun IDR Foreign denominated GS as co comple mplementa ntary •  The issuance target for Semester I - 2019 • Avoid id crowd wdin ing out out in domestic market. = 50% -60% of the gross target of GS; Th The tar target amo moun unt ca can be be adjust usted to the • Especially for financing in IDR, issuance in • potential of other financing sources and financing Semester I = 52% of the IDR GS gross needs. target. Source: Ministry of Finance 57

  51. Governm ernment ent Securit urities ies Reali liza zation ion As of End of Septembe mber 30, 2019 – in Trillio lion IDR Government Securities realization as of September 30, 2019 IDR728.3 8.31 T T or 86.52% .52% from the target From IDR7 R728 28.3 .31 T T cons nsist ist of: 728.31 29.52 Isuance Is e Need eed 4% for 2019 fo 841.78 189.81 26% 419.57 58% 89.41 12% 328.73 Governme Go ment Se Securit ities ies Net et 381.83 IDR Government Debt Securities FX Government Debt Securities IDR Sovereign Sharia Securities FX Sovereign Sharia Securities Realization as of Sept 30, 2019 Budget 2019 Source: Ministry of Finance 58

  52. 2018 Finan ancing cing Need eds Fulfill lled from Governm rnment nt Securit uritie ies IDR 730.2 tn tn (92%) and Loan IDR6 R63.1 tn tn (8%) Domestic GS IDR591.0 tn Deficit it Domestic Debt Rp325,9 T IDR595.5 tn Debt t matu ture res (75%) Rp394,1 T (include clude Domestic Loan Rp10,1 T of IDR4.5 tn Priva ivate te Placem acemen ent) Inves estme tment t Financing Lendin ding g Financin ing g Rp6,7T Needs Rp65,7T IDR793.3 tn Foreign Other er Denominated financin ing g Bonds (Rp0,2T) T) (JPY, EUR, USD) IDR139.3 tn Gov over ernmen ent t Foreign Debt Guarant ntee IDR197.8 tn Obliga igati tion (25%) Rp1,1T Foreign Loan (Program & Project) IDR58.5 tn Source: Ministry of Finance 59

  53. Discipl sciplined ined an and Soph phist istica icated ted Debt ebt Port rtfolio lio Man anag ageme ement nt Stable ble Debt bt to GDP Ratio Ove ver the Years Prude udent nt Fisca cal l Defic icit it IDR Tn Government Debt / GDP (%) 600 0.0% 28.3% 29.4% 29.8% 29.7% 27.4% 442 2 30.0% 407 7 24.9% 362 2 24.7% 358 8 -0.5% 5,000.0 400 265 5 25.0% 784.7 -1.0% 4,000.0 810.7 200 20.0% 746.2 19 19 14 14 -1.5% 734.8 3,000.0 - 755.1 15.0% (7) (7) -2.0% (9) (9) (4) (4) (20) 0) (69) 9) (66) 6) 677.6 (58) 8) (56) 6) -1.8% 8% 2,000.0 714.4 3,915.5 (200) 10.0% 3,612.7 -2.2% 2% -2.5% 3,248.6 (227) 27) 2,780.6 2,410.0 (298) 98) -2.5% 5% (308) 08) (269) 69) -2.5% 5% 1,000.0 (400) -2.6% 6% (341) 41) -3.0% 1,931.2 5.0% 1,661.1 2014 2015 2016 2017 2018 - 0.0% SBN (neto) Bonds (Net) Pinjaman DN & LN (neto) Loans (Net) 2013 2014 2015 2016 2017 2018 *) 2019**) Non Debt (Net) Budget Surplus/Deficit Non Utang (neto) Surplus (Defisit) APBN Bond Loan Debt/GDP Ratio [RHS] Fiscal Deficit (%GDP, RHS) Rasio Defisit APBN thd. PDB (RHS) Source: MoF Source: Ministry of Finance Weig ighte ted Ave verage Debt bt Matur urity ity of ~8. 8.5 Years Well ll Dive versif ifie ied Across Different nt Currenc ncie ies % of Yearly y Issuance ce ATM (in years) 9.8 3% 2% 2% 1% 1% 1% 1% 100% 4% 4% 4% 4% 3% 3% 3% 6% 8% 7% 6% 6% 9% 9.4 12% 80% 9.1 28% 30% 30% 31% 32% 29% 29% 8.7 60% 8.5 8.4 40% 61% 57% 59% 58% 57% 55% 53% 20% 0% 2014 2015 2016 2017 2018 Sep 2019 2013 2014 2015 2016 2017 2018 Sep-19 IDR USD JPY EUR OTHER Source: Ministry of Finance Source: Ministry of Finance Note: *LKPP Data exc. Prefunding 2019, **as of end of August by using GDP assumption (interpolation) 60

  54. Well ll Bal alan anced ced Maturi rity ty Profile le With th Strong ng Resilie silience nce Again ainst st Exter ernal al Shocks cks Declin clinin ing Exch change Rate te Risks ks Declin clinin ing Inte terest t Rate te Risks ks Variable rate ratio [%] Refixing [%] FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 21.0 20.7 44.5 43.4 19.7 42.6 19.2 41.3 41.0 38.7 17.5 16.5 14.8 13.7 12.1 10.6 10.6 10.2 12.2 12.1 12.3 12.1 11.5 10.7 2014 2015 2016 2017 2018 Sep 2019 2014 2015 2016 2017 2018 Sep 2019 Debt bt Maturity ity Profile ile Upcomin ing Maturitie ities (Nex Next 5 Years) IDR tn tn in 1 year (%) in 3 year (%) in 5 year (%) 450 IDR Denominated (Triliun Rp) 42.1 400 40.4 39.3 350 36.0 Other Currencies (Triliun Rp) 34.7 155 33.9 152 300 131 162 25.5 250 168 25.0 24.9 81 22.7 21.4 118 20.1 120 200 260 258 104 150 28 16 10.6 237 151 208 9.9 26 100 208 22 32 8.4 8 8.2 7.7 139 6.5 31 149 27 143 141 3 2 36 26 21 50 183 99 96 94 89 30 27 74 34 2 34 70 23 59 58 132 27 13 28 - 30 19 22 23 20 22 21 - - 11 - 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049-2058 2014 2015 2016 2017 2018 Sep 2019 Note: using GDP assumption Source: Ministry of Finance 61

  55. Holders ers of Trad adab able le Centr ntral al Gover ernme nment nt Secu curi rities ies More Balance nce Ownership rship In Terms of Holders rs and Tenors rs Hold lders of of Tradable Gov’t Domestic Debt Securities Foreig eign Own wnership p of Gov’t Domestic Debt Secu ecuritie ities by Tenor 100% 37.5% 33.8% 36.0% 38.1% 37.0% 37.7% 38.2% 38.6% 38.6% 80% 39.8% 42.8% 44.7% 60% 30.8% 39.8% 38.64% 38.1% 38.2% 37.8% 37.7% 39.9% 37.5% 37.5% 36.8% 42.0% 40% 34.6% 35.6% 37.4% 36.8% 33.6% 20% 22.7% 39.0% 17.3% 17.8% 15.2% 31.0% 18.4% 23.9% 23.4% 23.9% 22.5% 11.8% 20.3% 5.1% 3.7% 5.3% 1.9% 7.2% 1.3% 5.0% 4.3% 3.5% 3.2% 4.6% 1.6% 0% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 30-Sep-19 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Sep-19 0-1 ≥ 1-2 ≥ 2-5 ≥ 5-10 Domestic Banks Domestic Non-Banks Foreign Holders ≥ 10 %Foreign Ownership of Total Source: Ministry of Finance 62

  56. Owner ersh ship ip of IDR R Tra rada dable ble Cen entr tral al Governm rnment t Securities urities (IDR DR tn) Descr criptio iption Dec-15 15 Dec-16 16 Dec-17 17 Dec-18 18 Sep-19 19 Banks* nks* 350. 0.07 07 23.9 .95% 5% 399. 9.46 46 22.5 .53% 3% 491.6 .61 23.4 .41% 1% 481. 1.33 33 20.3 .32% 637. 7.12 12 23.9 .91% 1% Govt Institutio titutions ns (Bank nk Indone nesia ia**) 148. 8.91 91 10.1 .19% 9% 134. 4.25 25 7.57 57% 141.8 .83 6.75% 75% 253.47 3.47 10.70 .70% 167.99 7.99 6.30% 30% Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 244.34 9.17% GS used for Monetary Operation 23.63 1.33% 38.01 1.81% (36.15) (1.52%) 76.36 2.87% Non-Banks nks 962. 2.86 86 65.8 .87% 7% 1,239 39.5 .57 69.9 .90% 0% 1,466 66.33 .33 69.83% .83% 1,633 33.65 .65 68.98 .98 % 1,859 59.22 .22 69.78% .78% Mutual Funds 61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01 % 125.44 4.71% Insurance Company and Pension 221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50 % 462.98 17.49% Fund Foreig eign Hold lders 558. 8.52 52 38.2 .21% 1% 665. 5.81 81 37.5 .55% 5% 836.1 .15 39.8 .82% 2% 893. 3.25 25 37.7 .71 % 1,029 29.3 .39 38.6 .64% 4% Foreign Govt's & Central Banks 110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91 % 184.27 6.92% Individual 42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09 % 77.70 2.92% Others 78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67 % 160.71 6.03% Total 1,461.85 100.00% 1,773.28 100.00% 2,099.77 100.00% 2,368.45 100.00% 100 2,664.33 100.00% 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance 63

  57. Sec ection tion 5 Monetar ary and Finan anci cial al Fact ctor: r: Credible Cr Monetary ary Policy cy Track ck Reco cord and an Fav avour ourab able le Financ ancial ial Sect ctor or

  58. Bank Indonesia’s Policy Mi Mix To Maint ntain in Macroe oeco cono nomi mic and Fina nanc ncial ial Sy Syste tem Stabili lity ty Pre-emptive, front loading and  Implementing Macro prudential  ahead-of-the-curve policy rate Intermediation Ratio (RIM) response Implementing Macro prudential Liquidity  Stabilize exchange rate  Buffer (MLB) 2 consistent with fundamentals 1 Accelerate implementation of  Macro- reserve requirement averaging prude udentia ntial Moneta etary ry Electronification: Social Maintaining a monetary   Polic licy Polic licy program, e-payment for operations strategy oriented Government towards increasing available liquidity (FX swap) Financial technology  3 National Payment Gateway  (NPG) QRIS (QR Indonesia Standard) Paymen ent  Coordina inatio ion System Sy Expanding National Clearing with other er  Polic licy System (SKNBI) services Controlling inflation: TPIP, TPID  Authorit ities ies 4 5 Structural reforms: Government  Developing market instruments for financing  Financial deepening & stability:  infrastructure Financ ncia ial Marke rket KSSK (Financial System Stability Committee), OJK (Financial Developing financial market infrastructures Deepening ning  Services Authority) Rupiah Interest Rate Swaps (IRS) and Overnight  Index Swap (OIS) Coordinating efforts in reducing  Current Account Deficit Domestic non-Deliverable Forward (DNDF)  Developing the Commercial Papers (Surat  Berharga Komersial) Source: Bank Indonesia 65

  59. Ban ank Indo donesia esia Policy cy Mix: x: Octo tobe ber 2019 rd and 24 th th October The BI Board of Governors ernors agreed eed on 23 23 rd ober 2019 9 to lower er the BI 7-Day Revers erse e Repo o Rate by 25 bps to 5.00%, 0%, Depos osit it Facilit ity (DF) rates lowere red 25 bps to 4.25% 5% and Lending nding Facilit lity (LF) rates lowered ered 25 bps to 5.75%. 5%. Maintains an Monitors domestic Consistents with Continues to strengthen accommodative controlled inflation Supported by a and global economic coordination with the Lowers monetary macroprudential development in using and attractive Government and other policy stance in order the BI returns on domestic operations strategy its room to relevant authorities in order optimised to to stimulate bank 7-Day financial investment implement an to maintain economic Reverse maintain adequate lending and expand accommodative assets, and as a stability and catalyse economic financing. Repo pre-emptive measure liquidity and policy mix in order domestic demand, while Rate by facilitate the Payment system to maintain to stimulate boosting exports and policy and financial 25 bps domestic economic effective controlled inflation tourism and attracting to transmission of an market deepening will growth momentum and external stability foreign capital flows, 5.00%. accommodative also be strengthened as well as to against a backdrop including Foreign Direct to foster economic of global economic policy mix. support economic Investment (FDI). growth. growth momentum. moderation *The amendment will become effective on December 2 nd , 2019. Source: Bank Indonesia 66

  60. Princi ciple les of Average ge Re Reserve erve Re Requi uireme rement nt Ra Ratios os Improve vement ent Consid ider eratio tions for r the Average rage Reserv rve Requir irem ement ent Effect ective ive Substa tance Old Old New Dat ate Ratio ios Impro rovem emen ent t a. Additional rupiah 16 th July Improvement in average reserve requirement is a • average reserve Fixed RR: 5% Fixed RR: 4.5% follow up to the monetary policy operational requirement for Average RR: 1.5% Average RR: 2% 2018 framework reform implemented by Bank Indonesia conventional RR: 6.5% RR: 6.5% since 2016. commercial banks Monetary policy operational framework reform • 16 th July b. Annulment of started in August 2016 as BI7DRR replaced BI Rate 2.5% (from 1.5% demand deposit 0% 2018 as policy rate. This was then strengthened in 1st RR) renumeration July 2017, by the implementation of the average reserve requirement in rupiah for conventional c. Implementation of commercial banks at 1.5% out of the total 6.5% of foreign exchange Fixed RR: 8% Fixed RR: 6% 1 st GDP reserve requirement in Rupiah. The average reserve Average RR: 0% Average RR: 2% October reformulation is also backed by various efforts in requirement for RR: 8% RR: 8%* 2018 financial market deepening. conventional commercial banks The current improvement aims to elevate flexibility in • banking liquidity management, enhance banking d. Implementation of 1 st intermediation function, and support efforts in Fixed RR: 5% Fixed RR: 3% average reserve October financial market deepening. This multiple targets will Average RR: 0% Average RR: 2% requirement for 2018 in turn improve the effectiveness of monetary policy RR: 5% RR: 5%* Islamic banks transmission in maintaining economic stability. * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 67

  61. Pri rincipl iples of Mac acropr prudential dential Inter termedia mediatio tion Ra Ratio (MIR) R) an and Mac acropru rudentia dential Li Liqu quidity idity Buffer er (MLB LB) Consider sideratio ions for Macr croprudential ial Instr trument ments Macr cropr prudenti tial Intermedia mediatio ion Ratio io (MIR) IR) and Macr cropr prudenti tial Liquid idit ity Buff ffer (MLB) B) 1 2 3 4 Striving to stimulate the bank The policy is expected to This The regulation is intermediation function and stimulate the bank macroprudential effective for liquidity management, Bank intermediation function to the policy instrument is conventional Indonesia issued Bank Indonesia real sector congruent with countercyclical and commercial banks from 16 th July Regulation (PBI) No. sectoral capacity and the can be adjusted in 2018 and for 20/4/PBI/2018 and Board of economic growth target in line with prevailing sharia banks from 1 st Governors Regulation (PADG) No. compliance with prudential economic and October 2018. 20/11/PADG/2018 concerning principles, while also financial dynamics. the Macroprudential overcoming the issue of Intermediation Ratio (MIR) and liquidity procyclicality. Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. Source: Bank Indonesia 68

  62. Pri rincipl iples of Mac acropr prudential dential Inter termedia mediatio tion Ra Ratio (MIR)* )* MIR Shar aria ia (Shar Sharia ia Banks nks and Sharia aria Regu gula lation ion MIR (Con onven entio tional al Com ommer ercial ial Bank) nk) Busine iness Units) ts) 1 MIR Accounting Formula Credit + Owned Bond Financing + Owned Sharia Bond Deposit + Issued Bond Deposit + Issued Sharia Bond 2 Rate and Parameters Ceiling 94% Ceiling 94%   Floor 84% Floor 84%   Minimum Capital Adequacy Requirement Minimum Capital Adequacy Requirement 14%   14% For Sharia business units, the Minimum Capital  Upper disincentive parameter 0.2 Adequacy Requirement is the same as that of the  parent conventional commercial bank Lower disincentive parameter 0.1  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1  3 Scope of credit/financing Credit: rupiah and foreign currency Financing: rupiah and foreign currency   and deposits to calculate Deposits in rupiah and a foreign currency: Deposits in rupiah and a foreign currency: (i)   MIR / MIR Sharia (i) demand deposits, (ii) savings deposits; wadiah savings; and (ii) unrestricted investment and (iii) term deposits, excluding interbank funds, excluding interbank funds funds 4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports 5 Criteria for securities held Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk  Issued by a nonbank corporation and by a resident   Offered to the public through a public offering Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution  *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019 69

  63. Pri rincipl iples of Mac acropr prudential dential Inter termedia mediatio tion Ra Ratio (MIR)* )* Regu gula lation ion MIR (Con onven entio tional al Com ommer ercial ial Bank) nk) MIR Shar aria ia (Shar Sharia ia Banks ks and Shar aria ia Busine iness Units) ts) 6 Percentage of the 100% securities held 7 Criteria for securities medium-term notes (MTN), floating rate notes sharia-compliant medium-term notes (MTN)   issued (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution  8 Securities Reporting Offline delivery mechanism (email) 9 Scope of deposits to Average daily total deposits in rupiah at all Average daily total deposits in rupiah at all   meet DD MIR /DD MIR branch offices in Indonesia branch offices and sharia business units in Sharia Indonesia Including rupiah liabilities to a resident and  non-resident third-party nonbank, consisting Including rupiah liabilities to a resident and non-  of: (i) demand deposits, (ii) savings deposits; resident third-party nonbank, consisting of: (i) (iii) term deposits, and (iv) other liabilities wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 10 Relaxation of DD Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing  MIR/Sharia DD MIR disbursement and fund accumulation The provisions may be relaxed based on a request from a conventional commercial bank, Sharia  bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK) Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed  policy are exempt from sanctions *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019 70

  64. Adju justment ent of Macropr pruden udential tial Inter ermedia ediatio tion Ratio io (MIR)/ )/Sharia haria Macrop oprud rudentia ential Interm rmedia diation tion Ratio (Sharia ia MIR)* )* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Polic licy y Backgr grounds unds Main in Regulato latory y Point ints Including loan received by conventional commercial banks and financing received by Islamic banks • In response to global and domestic • and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. economic developments, BI is maintaining an accommodative policy The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia • mix to maintain the economic growth MIR calculation are as follows: while also maintaining macroeconomic a. Loans/financing received in Rupiah and foreign currency; and financial system stability. b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; BI relaxed MIR/sharia MIR policy in • c. Loans/financing excludes interbank loans/financing. March 2019, which stimulated bank d. Loans/financing received with a maturity of no less than 1 year; and lending. Nevertheless, the e. Loans/financing received based on a loan agreement. macroprudential intermediation ratio (MIR) is again approaching the upper Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: • bound, thus necessitating efforts to Credit it + Owned Bond increase bank lending capacity. Deposit sit + Issued Bond + Loan/Fin inancin ing g Receiv eived ed Considering the potential of bank • Lower disin incentiv tive e parame meter er Upper er disin incent entiv ive e parame meter er funding sources that are not included in the MIR ratio, for example the expanding MIR/shar aria MIR MIR RR RR= MIR/shar aria MIR RR RR= share of loans/financing received by Lower Disincentives Parameter x (Lower Bound of 0.2 x (Bank’s MIR/sharia MIR - Upper Bound of banks, BI decides to adjust MIR/sharia MIR/Sharia MIR Target – Bank’s MIR/Sharia MIR) x Deposit MIR/Sharia MIR Target – ) x Deposit MIR policy in order to optimize loans/financing received for bank lending. *This disincentive applies for banks with CAR below 14%. This policy to stimulate credit growth • will comply with prudential principles. Therefore, BI is only encouraging banks with low non-performing loans and The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy • adequate capital resilience to expand will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index credit/financing. Average (IndONIA). *This adjustment will be effective from December 2 nd , 2019 71 Source: Bank Indonesia

  65. Pri rincipl iples of Mac acropr prudential dential Li Liqu quidi idity ty Buffer er (MLB) LB) Regu gula lation ion MLB (Con onven entiona ional Commercial ial Bank nk) MLB Sharia aria (Sha haria ria Bank nks) 1 Rate 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) 2 Components Securities denominated in rupiah held by a Sharia-complaint securities denominated in   conventional commercial bank that may be used rupiah held by an Sharia bank that may be for monetary operations (including SBI/SDBI/SBN); used for sharia-compliant monetary operations and (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah  held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet Under certain conditions, the securities used to the MLB may be used for repo transactions to Bank meet the sharia MLB may be used for repo Indonesia for open market operations, totalling no transactions to Bank Indonesia for open market more than 2% of rupiah deposits operations, totalling no more than 2% of rupiah deposits 5 Sources of Data on Monthly Commercial Bank Reports Monthly Sharia Bank Reports   Deposits Rupiah deposits to calculate MLB are the average Rupiah deposits to calculate sharia MLB are   daily total deposits at all branches in Indonesia the average daily total deposits at all branches in Indonesia Rupiah deposits include: (i) demand deposits, (ii)  savings deposits; (iii) term deposits, and (iv) other Rupiah deposits include: (i) wadiah savings; (ii)  liabilities unrestricted investment funds, and (iii) other liabilities 72

  66. Relaxing ing the Loan-to to-Value lue (LTV) and Financi ncing-to to-Val alue ue (FTV) Ratios* os* The LTV/FTV TV relaxa axati tion on is conducte ducted while taking into to accoun count aspect pects of pruden dential al and consumer mer protect otection* on* 2. Relaxing the amount of loan/financing facility through indent 1. Increasing opportunities of first time buyers to fulfill their housing mechanism to a maximum of 5 facilities without taking needs through housing loan, specifically by adjusting the LTV ratio account of the orders for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for 3. Adjusting the arrangement of stages and amount of property property credit and FTV ratio for property financing as shown in the loan/financing disbursement of indent property: table below. “ - “= The LTV rate depends on each bank’s risk management *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2 nd , 2019 Source: Bank Indonesia 73

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

  68. Adju justment ent of LTV Ratio for Proper erty ty Loans, ns, FTV Ratio for Proper erty ty Financ ncing ing, and Do Down Payments ents on Au Automotive ve Loans/Fina ns/Financ ncing* ng* 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 licy y Backgrounds ounds Main in Regulato latory y Point ints 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property In response to global and domestic economic • developments, BI is maintaining an accommodative Financing. policy mix to maintain the economic growth while a. BI decides to relax the LTV ratio for property loans and FTV ratio for also maintaining macroeconomic and financial property financing by 5% from current ratio as follows: system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the • property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support • sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be • given to borrower with strong repayment capacity and low credit/financing risk. BI will regularly evaluate this policy at least once a • year. *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 75

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

  70. Adju justment ent of LTV Ratio for Proper erty ty Loans, ns, FTV Ratio for Proper erty ty Financ ncing ing, and Do Down Payments ents on Au Automotive ve Loans/Fina ns/Financ ncing* ng* Main in Regulato latory y Point ints 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2 nd , 2019 *This adjustment will be effective from December 2 nd , 2019 Source: Bank Indonesia 77

  71. Pri rincip iples les of Dome mestic stic Non Del eliv iver erable able Forw rwar ard (DND NDF) F) Tran ansac actio tion Purpo poses Ge General Provision visions  Domestic ic Non-Deliv liverable le Forwar ard Tran ansaction action (DND NDF Tran ansaction) action) 1. To support the effort of Plain vanilla derivatif transaction of foreign exchange against rupiah in the form stabilizing the Rupiah exchange of forward transaction with fixing mechanism in the domestic market rate through the additional of  Forwar ard Tran ansactio tions ns alternative hedging instruments Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the delivery of funds shall be performed in more than 2 days after the 2. To support the development and transaction date deepening of the domestic  Fixing ing Mecha hanis nism financial market Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference 3. To increase the confidence of rate in JISDOR on a specified future time agreed in the contract (fixing date) exporters, importers, and investors in conducting  Other her Def efin initions itions economic and investment The definition of derivative transaction of foreign exchange againts rupiah, activities through the flexibility of Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to hedging transactions against Bank Indonesia regulations regarding foreign exchange transaction againts Rupiah currency risk rupiah Source: Bank Indonesia 78

  72. Pri rincip iples les of Dome mestic stic Non Del eliv iver erable able Forw rwar ard (DND NDF) F) Tran ansac actio tion Bank can perform rm DNDF Trans nsact actio ions ns as follows: 1. Must have Under erly lyin ing Tran ansa sact ctio ions: Tran ansaction action betwe tween en: Inclu ludin ing all l fol ollo lowin ing g activit tivities ies : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Can only be performed to Bank – Customer Exclu cludin ing foll llowin ing activit tivities ies: hedge rupiah a. Bank Indonesia certificates; b. Placement of funds with bank; exchange rate c. Unwithdrawn credit facilities; risk. d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities. Bank – Foreign Party 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank – Bank Source: Bank Indonesia 79

  73. Pri rincip iples les of Dome mestic stic Non Del eliv iver erable able Forw rwar ard (DND NDF) F) Tran ansac actio tion Trans nsacti action Settlement nt 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 • termina nation for Roll over er and early rly DNDF NDF is prohib hibite ited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging ing Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign • Purpose: Hedging • Overseas seas Cus usto tomer er / / Cover Bank Hedging Foreig eign Part rty 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. Source: Bank Indonesia 80

  74. Amen endment dment on DND NDF Regula ulatio tion *to provi ovide more flexibi ibili lity ty in DNDF tran ansac saction tion *to increa ease se liquidity idity and effic iciency iency in dome mestic stic forei eign gn excha hang nge ma market et BI Regula ulatio ion No. 21/7/PBI/20 /2019 BI Regula ulation ion No. 20 20/10 10/PBI/201 /2018 AMENDMENT Artic icle le 3 Artic icle le 3 1. Sell FX/IDR through DNDF up to $ 5 mio can be done 1. DNDF transactions must have Underlying without underlying documents Artic icle le 6 Artic icle le 6 2. Not Regulated; 2. DNDF can be terminated (unwind); Artic icle le 11 Artic icle le 11 3. Underlying documents for buy FX/IDR for DNDF is : 3. Underlying documents must be final (firm) with additional Final (firm commitment) + Supporting documents supporting documents • 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: Final (firm commitment) + Supporting documents • Projection (anticipatory basis) + Supporting documents • Artic icle le 11 Article icle 11 5. In using estimate underlying transaction documents in the 4. Not Regulated; form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. *Effective on May 17 th , 2019; English version of the regulation is available in BI website. Source: Bank Indonesia 81

  75. Overnight rnight Inde dex Swap aps (OIS) IS) & Inter I erest est Ra Rate Swap aps (IRS RS) As hedg dging ing instrum rument nts against ainst Rupiah iah inte tere rest t rate te chang nges es IR IRS is a contract between two parties to periodically exchange rupiah interest rate 4 flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based OI 3 on a daily overnight reference rate (IndoNIA) Improvement of IRS transaction 2 liquidity Alignment between JIBOR Encourage price transparency in the  and OIS interest rupiah money market rate OIS transaction 1 Strengthen monetary policy  with IndoNIA as transmission benchmark rate Provide alternative hedging instruments  against rupiah interest rate changes IndoNIA & JIBOR Support securities market deepening in  Indonesia Strengthening reference rate based on real transactions Source: Bank Indonesia 82

  76. OIS an and IRS RS Tran ansac actio tions: ns: Gener neral al Provisio ions ns Market Pl Players yers. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions Transa sact ctio ion Ne Needs An Analys lysis is. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or Calcu cula lati tion OIS Quota tati tion rates es Inte terest Payment foreign party is required to have an analysis on the Base based on 2 based on Nettin ing need of rupiah interest rate derivative transactions. ACT/36 360 decimal als IndONI NIA Notio ional al of Net Market Co Conventi tions. When performing IRS and OIS Quotatio ion : 1W, inter erest st payment in in Index ex 2W, 1M, 2M, 3M, transactions, the respective bank is bound by IDR with 0 0 with 5 5 4M, 5M, 6M market conventions agreed upon by market players decimal als decimal als through industry association including the Indonesian Foreign Exchange Market Committee. At the 1st phase, Compound Settle lemen ent Date = OIS settle lemen ment will Floatin ing Rates Sett ttlement ment. Settlement can be performed as a 1 busin iness ess days only be done at the (CFR) based netting payment and every transaction has to be after er Maturit ity Date end of the OIS on 5 settled in Rupiah. Clos Close-out netting can be applied (MD) tenor (MD+1bd). ). decimal als under predetermined conditions. Source: Bank Indonesia 83

  77. Ban ank Ind ndonesia onesia Policy icy Mix: 201 015 – 201 017 2015 2015 2017 2017 2016 2016 BI 7-day RR Rate cut of BI Rate cut of 25bps (Feb) Policy Rate cuts of 150bps • 1. 1. Monetary y Polic icy •  25bps to 4.50% (Aug) Moving from BI Rate (12  Further BI 7-day RR Rate month) to BI 7-day Reverse • Polic icy Rate cut of 25 bps to 4.25% Repo Rate (Aug) (Sept) Reser erve e Lowering RR by 50bps to Further lowering RR by • Implementation of RR • • Requir ireme ement 100bps to 6.5% (Feb) 7.5% (Nov) Averaging (Aug): RR fixed 5%; RR Averaging 1.5% Market-based exchange rate stability consistent with fundamental  2. 2. Excha hange ge Rate Dual intervention in the FX market and purchases of government bonds from secondary market in  Polic icy time of distress (capital reversal) or large mis-alignment Relaxation of LTV for Further relaxation of LTV for •  Initiative to issue  property and automotive property loans (Sept) macroprudential regulation 3. 3. Macropr pruden entia tial loans (June) Strengthening systemic  on Financing to Funding Polic icy surveillance & Crisis Ratio (FFR) Management Protocol (April) Obligation to use IDR in E-money for social transfer   National Payment Gateway  4. 4. Payme ment domestic transaction (Nov) (June) System em Polic icy (March) Financial Technology  Modernized cash  Non-cash movement (FinTech) Office (Nov)  management underway (GNNT) New Rupiah issuance (Dec)  Source: Bank Indonesia 84

  78. Stabl able Monetary tary Environment ment Despite spite Chal alleng lenges es Well ll Mainta ntain ined Inflatio lation Ensur ured Price ce Stability bility Streng ngth thene ned Monet netary Polic icy Frame mewo work (%) (%) 20 9.00 8.00 19 August 2016 16 8.38 8.36 36 The New 18 CPI (%, yoy) - rhs 8.00 Monetary LF Rate: 7.00 Operatio ion 16 Volatile Food (%, yoy) - lhs 7.00 7.00 Framewo work 14 Administered (%, yoy) - lhs 6.00 BI Rate: 6.50 12 Core (%, yoy) - lhs 6.00 5.00 10 LF Rate: 5.75 75 3.61 8 4.00 3.35 3.39 3.28 5.00 3.13 3.02 BI 7Day RR Rate: 5.00 6 2.48 3.00 4 4.00 2.00 DF Rate: 4.25 2 1.00 0 3.00 -2 0.00 2013 2014 2015 2016 2017 2018 Q1 2019 Q2 2019 Q3 2019 Rupia iah Exc xchang nge Rate Rema main ins Compar parable ble to Peers Credit Growth th Profile ile YTD 201 2019 vs 201 018 %,yoy point-to-point average 20 Total Growth -8.49 TRY Working Capital Loans 18 -14.02 -2.00 ZAR Investment Loans -7.91 16 Consumption Loans -4.96 BRL -6.32 -5.25 KRW 14 -5.46 -2.97 12.7 EUR -5.21 12 -2.77 CNY -3.80 10 -1.61 INR 8.6 -2.50 -1.30 MYR 8 -2.46 7.4 -0.07 SGD -1.15 6 6.9 2.50 IDR 0.58 3.02 4 PHP 1.32 1.53 JPY 2 1.34 *data as of October 23 rd , 2019 6.76 THB 3.51 0 % -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 2015 2016 2017 2018 2019 Source: Bank Indonesia 85

  79. Re Regio gional al Inflatio tion unde der Control In September ber 2019, CPI Inflatio ation n in most regio ions ns are within in national nal inflatio ation n targe get t range ge. Nevert rtheles less, some provinc inces es record rded ed higher er infla latio tion than others ers due to impact of variet iety y of chili li inflat atio ion n duri ring g the year r and fresh fish price e increas rease, e, for example le Central ral Sulawe wesi i (5.71%, yoy) and Maluku uku (5.52%, yoy). ). Source: Central Bureau of Statistics of Indonesia (BPS), calculated 86

  80. 4 Strategies gies to Ac Achi hieve ve the Infl flation tion Target 2018-20 2019 Target et 2020 20 20-20 2021 Target et Achieving inflation at 3,5%±1% Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining core inflation • • Maintaining volatile food stability at 4-5% Maintaining volatile food inflation less than 4% • • Controlling administered price inflation Controlling administered price inflation • • 4 Strateg egies ies 1. Price Afford rdabilit bility 2. Supply Availa lability bility 3. Well Managed Distr tribu ibution ion 4. Effectiv tive Communi nication ion Strengthening production, Encouraging Government trade Improving Strengthening Stabilizing Managing Strengthening Improving data food reserves cooperation trade central-regional the price demand side institution quality and food between infrastructure coordination export-import regions management Source: Bank Indonesia 87

  81. Impr proving ving the Effectiveness ectiveness of Moneta tary ry Polic icy Tran ansmissio smission Bank nk Indones nesia ia has instit tituted ted a Reformulat latio ion n of Moneta netary ry Policy licy Operat ratio ions ns Fra ramework k which ich cons nsis ists ts of 3 pill llars; ; (1 (1) implem plemen entatio tation of BI 7da day Rever erse e Repo po Rate; e; (2 (2) implem plemen entatio tation of reser erve e requir irem emen ent t aver eragin ging; g; and (3) ) contin inue e to implem plemen ent t money ey marke rket t deepen penin ing g prog ogram. Refor ormula ulatio ion of Moneta etary ry Polic licy Operatio iona nal Framew ework rk Implem emen enta tatio tion of Money ney Implem emen enta tatio tion of Reserve Implemen ementa tatio tion of BI 7 Mark rket et Deepen ening ing Requir iremen ent (RR) Day Revers erse Repo Rate Progr gram am Averag aging ing Enhancement of monetary policy Enhancement of banking liquidity Enhancement of instruments signal management and transactions Source: Bank Indonesia 88

  82. Enhan anceme cement nt of Monetary tary Oper eratio tions ns Fram amew ework ork PREVIOUS IOUS JIBOR BOR Can be traded among contributor banks for 10 • minutes. Up to the amount of Rp10 billion. • Up to 1-month tenor. • CURR RREN ENT JIBOR BOR (as per June 1 st , 2016) Can be traded among contributor banks for 20 • minutes. Up to a total of Rp20 billion. • Up to 3-month tenor. • Source: Bank Indonesia 89

  83. Finan ancia cial Inter ermedia mediatio tion is Exp xpecte cted to Exp xpan and Ba Bankin king and multi lti-fin inance in inter termedi ediation tion are re in in mod oder erati tion on in inlin line with ith gl glob obal slo lowdown. Do Domes estic tic capit pital mark rkets ts and in insurance pre remium is is risin ing. Meanw nwih ihil ile, Financ ncin ing distrib tribute uted by multi ti-fin inanc nce compan panie ies was Banki nking ng inte termediatio tion n growth wth was reco corded at 8.59% % (yoy) as of continu tinued to grow at leve vel of 4.10% % (yoy) whic ich high igher than n growth th Aug ug 2019, with th inve vestme tment nt loans ns growth wth of 12,72% % (yoy) as the in the previo vious us month th. main n driv iver. yoy IDR Tn yoy IDR Tn 5465 Financing Growth (rhs) 450 5,500 16% 8.59% 450 10% Bank Loans YoY Growth (rhs) 14% 8% 5,000 12% 425 10% 6% 4.10% 4,500 8% 400 4% 6% 4,000 4% 375 2% 2% 3,500 0% 350 0% Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 Mar-19 May-19 Jul-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Capita ital l raisin ing throug ugh corpor porate te issua uanc nce continu tinues to increase sinc nce The gross premi mium um reve venu nue in the dome mestic tic insur uranc nce ind ndust ustry was early ly 2019 and it has reach ched IDR 129.6 .61 Tn Tn as of Oct-19. 19. increasing ng from IDR 263 Tn Tn in July ly to IDR 303 Tn Tn in Aug ug 2019. IDR Tn IPO Rights Issue Corporate Bond & Sukuk IDR Tn 180 500 433.3 160 450 405 400 140 341 350 303 120 296 94 263 300 247 100 221 250 193 80 185 176 200 148 60 110 150 26 40 71 100 36 11.23 20 50 0 0 2012 2013 2014 2015 2016 2017 2018 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 2012 2013 2014 2015 2016 2017 2018 15 Okt 2019 Source: Financial Service Authority (OJK) 90

  84. Finan ancia cial Institutio titutions ns Re Remain ain Ro Robust The capit pital l is stea eadily dily well ll abov ove e the minim imum req equire iremen ents ts, able le to withs hstand tand futu ture re shock ock; ; while le prof ofita itability ility and d lever erage ge ar are e still ill consta tantly ly at a suffic icien ient level el. . CAR of the e banking g secto tor rema mained ed high gh and stable e at 23.93% with h Tier Risk-based ed capita tal (RBC) C) of the insurance e industr try rema mained ed high gh and 1 Capit ital at 22.15% as of Aug-19. 19. well above the mi minimu mum m thres esho hold (120%). . 22.15 CAR Tier 1 Life Insurance (Lhs) General Insurance (rhs) 26.0 323 800 350 23.93 24.0 700 300 22.0 600 684 250 20.0 500 200 18.0 400 150 16.0 300 100 14.0 200 50 12.0 100 0 0 10.0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Profita itabil ility ty of the e banking g secto tor has been relativ tivel ely stable e during g the Gearin ing g ratio of mu multi-fi finance e comp mpanies es was steadil ily ma maintained ed with h past three ee years with h the high ghes est t net interest est ma margin in the regio ion. 2.75 time mes in Aug-19. This is provid ides es amp mple room m for future e growth. th. % Net Interest Margin Return on Assets 4.0 6.0 3.5 2.75 4.9 5.0 3.0 2.5 4.0 2.0 3.0 2.5 1.5 1.0 2.0 0.5 1.0 0.0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Source: Financial Service Authority (OJK) 91

  85. Man anag ageable eable Credit dit Ri Risks ks with Ade dequ quate te Li Liqu quidity idity Ban Banks ks ar are equip ipped ed wit ith suffic icien ient li liquid id as assets ets. In Insuran ance in industr try al also de demo monstr trates ates a suffic icien ient level level of of in inves vestmen tment adeq adequacy acy rat atio io. Credit edit risk is is also managed ged at at a low ow level el as as non-per perfor ormin ing loan and non-per perfor ormin ing financin ing rem emain ins belo low the thre resho hold ld. The ratio of liquid id assets to deposit it and LA/NCD CD in the banking g Inves estmen tment t adequacy ratio in the insurance e industr try y was kept t above 100 100%. %. secto tor was ma maintained ed at a suffic icient ient level el. % % Life Insurance General Insurance Liquid Assets to Non-Core Deposits (lhs) 210 140 30 Liquid Assets to Deposit (rhs) 130 181.9 190 25 120 19.5 110 170 20 100 150 90 15 80 92.9 120.1 threshold LA to Deposit = 10% 10 130 70 60 5 110 50 threshold LA/ NCD= 50% 40 0 90 Aug-15 Oct-15 Dec-15 Feb-16 Apr-16 Jun-16 Aug-16 Oct-16 Dec-16 Feb-17 Apr-17 Jun-17 Aug-17 Oct-17 Dec-17 Feb-18 Apr-18 Jun-18 Aug-18 Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 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 As of Aug-19, the e gross & net NPL L ratios of the banking g secto tor were e NPF ratio of the mu multi-fi finance industr try y rema mained ed low at 2.78% as of 2.6% & 1.17% respec pectiv tivel ely, well ma maintained ed steadil ily y below the thr hreshold eshold Aug-19. 19. % 4.00 3.5 NPL Net NPL Gross 3.50 3.0 2.6 2.78 3.00 2.5 2.50 2.0 1.17 2.00 1.5 1.50 1.0 1.00 0.5 0.50 0.0 0.00 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Source: Financial Service Authority (OJK) 92

  86. Man anag ageable eable Mar arket et Ri Risks Amids midst the the in incre reas asin ing market rket vol volatilit atility, y, the the risk profile ile of of fin inan ancial al in insti tituti tution ons re remain ains man anage ageable able. Net Net open open pos osit ition on of of the the ban ankin king secto tor was was main inta tain ined ed at at a low low level vel, while ile the inves estm tmen ent valu lue of of domes estic tic instit titutio tional inves estor tors was still ll rela latively tively stable le. Net ope pen po positio ition in in the ba bank nkin ing secto ctor ma mainta ntain ined signi nific icantly ntly far far Mu Mutua tual funds’ net asset va valu lue (NAV AV) wa was steadily ly in incr creasin ing wit with low low below low the maxi ximu mum limi mit (20 20%). volatili tility ty. % IDR Tn NAV Mutual Funds IDX (rhs) 5 6,800 530 6,600 4 500 6,400 470 6,200 3 440 6,000 2.11 410 5,800 2 380 5,600 350 5,400 1 320 5,200 290 0 260 5,000 Jan-17 Feb-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Mar-17 Mar-18 Mar-19 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 Multi ti-fin inanc nce companies’ exposures to foreign debt has generally been The inve vestme tment nt value lue of insur uranc nce & pens nsio ion n fund nds were in an mitig igate ted through compa pany hed edgin ing measures es. increasing ng trend nd. IDR Tn IDR tn IDR Tn Insurance Pension Funds (rhs) 400 180 1,103 1,150 160 350 175.74 1,050 140 Domestic Debt Foreign Debt 300 120 950 100 250 274 850 106.12 80 750 200 60 Jan-17 Feb-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Mar-17 Mar-18 Mar-19 Apr-17 May-17 Aug-17 Sep-17 Dec-17 May-18 Aug-18 Sep-18 Apr-19 May-19 Aug-19 Jan-17 Feb-17 Mar-17 Jun-17 Jul-17 Oct-17 Nov-17 Jan-18 Feb-18 Mar-18 Apr-18 Jun-18 Jul-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Jun-19 Jul-19 Source: Financial Service Authority (OJK) 93

  87. Domes mestic tic Cap apital ital Mar arkets ets Mai aintained tained Positive tive Growth th The domes estic ic financia ial marke rket perf rform rmance is is expect ected ed to to impr prove ve and has roo oom to to stre rengt gthen hen. The IDX Stock Composit ite e Index dex was expect ected ed to grow posit sitiv ivel ely y in the e mediu ium term. Domes mestic tic capit pital marke ket t shows shif ifting ting portfoli lio from stock ck to bond nd. Stock ck Index ex Perfo formance ce 15 Oct 2019 (compared to 31 Dec’18) 280 Comp Bond Index Comp Stock Index (rhs) 7,000 269 270 6,500 15.27% 4.04% THAI 260 6,000 1.33% INDO -0.59% 250 5,500 6,158 2.55% SIN 240 5,000 1.54% 2.88% 19.93% 230 4,500 CHIN -7.36% 220 4,000 JPN 10.95% 210 3,500 17.29% AS 15.85% 200 3,000 18.89% TURK 4.37% Oct-18 Oct-18 Nov-18 Dec-18 Dec-18 Jan-19 Feb-19 Feb-19 Mar-19 Apr-19 Apr-19 May-19 Jun-19 Jul-19 Jul-19 Aug-19 Sep-19 Sep-19 Oct-19 -9% 0% 9% 18% Despite pite sell ll-of off in stock ck market ket in rece cent nt months ths, the stock ck market Indonesia’s bond prices extended its upside movement due to more still ll expe perie ienc nce net t inflow low sinc nce Janua uary 2019. attractiv ctive relative lative retur urn n and stabl ble-to to-stro tronger rupiah. Yield (%) IDR Tn Gov't Debt Securities Equity 15500 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs) 60 10 15000 40 9 14500 20 -0.67 8 14000 0 7 13500 -20 -0.64 6 13000 -40 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 15 Oct '19 5 12500 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance 94

  88. Strate tegic gic Policies cies in Finan ancial cial Secto ctor Supporting rting inno nova vation tions in digital ital Supporting rting infrast struc ructur ture financi ncing ng and deepeni ning ng the capital ital mark market financ nance Enhan hancin ing variab riabil ilit ity of finan inancing ing instr trum umen ents ts  Perpetual bonds, green bonds, municipal bonds Issuing the guiding principles for the  Investment products for mortgage providers of digital financial services, including for registering, licensing, and the Simpl plif ific ication ion of issuan uance proces ocess in crowdfunding scheme the capita tal mark rket et  Simplifying issuance process of debt securities and sukuk for professional investors Directing financial institutions to synergize with the fintech sector or to establish a fintech business line Expand nding ing the investo estor base Expanding the access of domestic retail  investors to the capital market Promoting the participation of local financial  Promoting the role of fintech lending in institutions through the establishment of local supporting government programs, including securities companies in online retail sales of government debt securities Stren engt gthen enin ing the role of NBFIs Is in infrastructu ructure develop lopment nt  The provision of credit guarantee products by credit guarantee companies & insurers Source: Financial Service Authority (OJK) 95

  89. Strate tegic gic Policies cies in Finan ancial cial Secto ctor Enhancing Enhan financ nancial ial liter terac acy & inc inclus lusio ion OJ OJK has as als lso built uilt a str trong foun oundation for or fina inancial inclu inclusio ion pr prog ograms, to to en ensure access ess to to fin financial produ oducts & & serv ervic ices es by In Indo donesia ians of all social al clas asses. . Suc uch init initia iatives also lso in include the the en enhancement of fina inancial lite teracy and nd fin inanci cial con consumer pr prot otection. Promoting the Developing Developing Strengthening establishment financial Enhancing the micro-credit the role of of Islamic education products with role of the Financial Access microfinance models utilizing additional “Investment Acceleration institutions various delivery business support Alert Taskforce ” Taskforce (TPAKD) (“ Bank Wakaf channels (“ KUR Klaster ”) in local areas Mikro ”) The he res esult lt of of OJK’s 201 016 nationa tional surv urvey ey dem emonstrated an improveme ment in fina nancia ial lite teracy & & inclusion ion amon ong Ind ndon onesia ians compa pared to tha hat of of 201 013, but ther here is sti till ll room om for furth ther er impr provement. 21.8% 29.7% 59.7% 67.8% Financ ncial l Financ ncial l 2013 2016 2013 2016 Lite teracy Inclu lusion Source: Financial Service Authority (OJK), June 2017 96

  90. A A Compr preh ehens ensive ive Finan ancial cial Dee eepen pening ing Program am … strateg tegy to tackle challenges in deepening Indonesia’s financial markets In Apr-2016 2016, the Minis ister ter of Finance, e, the Gov over ernor r of Bank k Indo dones esia ia, and d the Chair irman of the Board d of Com ommis issio ioner ers of of the Fina nanc ncia ial l Serv rvic ices es Author thority ity launched hed a Coo oordin dinatio ion For orum for or Devel velopm pmen ent t Financin ing g thro rough gh Financia ial l Marke rket t (FK-PP PPPK). PK). The he thre ree autho thoriti ities es have ve agr greed eed to for ormula late e “The Natio tional l Stra rategy tegy of Financia ial l Marke rket t Devel velopm pmen ent ” Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN 1 2 3 POLICY COORDINATION, ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars HARMONIZATION & RISK MANAGEMENT DEVELOPMENT EDUCATION Structure Product Money Bond Stock Syariah FX Market 6 Markets Market Market Market Market Market Fund Market Regulatory 7 Elements Infrastructure Framework of Financial Instrument Market Coordination & Benchmark Rate & Ecosystem Education Standardization Intermediaries Source: Bank Indonesia 97

  91. Contin tinuou ous Program am on Cap apital ital Mar arket et Dee eepen pening ing …continuously strengthened, including through capital market deepening initiative ives Enhan hancin ing the supply ly-side ide Stren engt gthen enin ing mark rket infras astructu ructure  Simplification of public-offering requirements and  Expansion of Single Investor Identification (SID) coverage procedures  Development of electronic trading platform (ETP) in the  Development of debt market debt market  Development of mutual fund industry  Development of Integrated Investment Management  Development of other products, including those to System (S-INVEST) support infrastructure development (private equity  Enhancing the clearing and settlement process funds, REITs, ABS)  Enhancement of capital market data warehouse  Development of Islamic capital market  Development of Extensible Business Reporting Language  Development of municipal bonds (XBRL) for issuers Enhan hancin ing the deman and-side ide Stren engt gthen enin ing govern rnance nce Enhancing the role of the domestic institutional  Development of market players’ capacity  investors (insurers & pension funds) in capital  Enhancement of GCG for publicly-listed companies markets  Development of repo regulations and infrastructure Development of the domestic investor base  (conducting investor education programs) Expansion of distribution channels of market  products Source: Financial Service Authority (OJK) 98

  92. BI’s Roles in Supporting Distribution of Non -Cas Cash Socia ial As Assist istance ance (NCSA) A) BI supports ports govern rnment nt ’s progr gram am of shif iftin ting social ial assist istan ance to tar arget eted ed non cash social ial assis ista tance nce disb sburs rsem emen ent throug ough the electr tronic nic payme ment nt syst stem em. In the futur ure, electr ectron onic ic mechan hanism ism disb sburs rsem ement nt will be also applied ied to LPG subsidy. idy. NCSA SA Prog ograms Pilot ot Project oject Family ly Hope Progr gram am Smart rt Indones esia ia (Progr gram am Keluar arga ga Progr gram am (Progr gram am Harapan an -PKH KH) Indones nesia ia Pintar tar-PIP IP) Gradu adual Implem lemen entatio tion 2016-2020 9876543210 XXYYZZ 12345678 Full Non Cash Imple lementation ion Food Assistanc nce (Bantua uan Panga gan Non Tunai – BPNT) LPG Subsid idy Inter erconnecte cted & inter eroper erable le payment syste tem Source: Bank Indonesia 99

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