[PPT] - Re Reform rms on The Mo Move, e, Stability bility Int PowerPoint Presentation

SLIDE 1

Febr bruary ary 2018 Republ blic ic

f

Indones esia ia

Re Reform rms

n

The Mo Move, e, Stability bility Int ntact ct

SLIDE 2

1

About ut Inves esto tor Relatio tions ns Unit

f

the Republic ublic

f

I Indones esia

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

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2

Overvie rview

1 2 3 4 5 6

Instit itutio utional nal and Governan ernance Effectiv ivene eness: Acceler lerated ted Reforms rms Agenda with Instit itutio utional nal Improvem ement ent Econo nomic ic Factor: Strong ng and Stable le Growth wth Prospec ects Remain in Intact Externa ernal l Facto tor: : Impro roved ed Externa ernal l Resilien lience Fiscal al Perfo rformanc ance and Flexibilit ibility: y: More re Fiscal al Stimulus lus with Prud udent nt Fiscal l Mana nage gement nt Moneta etary ry and Financ ncial ial Factor: : Credible ible Monet netar ary y Polic licy y Track k Record rd and Favour urable ble Financ ncial ial Sector Pro rogres gressiv ive e Infras rastr truc uctur ure Develo lopment ent: Strong ng Commitm itment ent on Acceleratio leration n

f Infras

rastr truc uctur ture e Pro rovis isio ion

SLIDE 4

In Institutio utiona nal and Go Govern rnme ment nt Eff ffect ctiv ivenes eness: s: Ac Acce celerated ted Reform rms Ag Agenda with In Institutio utiona nal Im Improveme ment nt

Sec ection tion 1

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4

123 129 122 121 129 128 120 114 109 91 72

20 40 60 80 100 120 140 160 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Rank nk Indonesia India Morocco Romania Hungary

41 41 36 36 40 40 71 71 68 68 60 60 20 30 40 50 60 70 80 90 Rank Indonesia India Morocco Romania Hungary

Improving ving Global bal Percep ception tion

…with recent improve vement nts

n

global al competit itive ivene ness and governan rnance ce indica cator

1. Source: World Economic Forum –The Global Competitiveness Report 2017 – 2018; 2. Source: World Bank – Doing Business Report; 3. Source: World Bank; 4. Source: Transparency International – Corruption Perceptions Index 2017 Report

World ld Governa nanc nce Indic icator tors3 Ease of Doing ng Busin iness2 Global l Compe petitive titivene ness Index1 Corruptio uption n Perce cept ptio ion n Index4

Higher rank is better Higher score is better Higher rank is better (rankings at the time of annual report publication) 50 33 53 50 39 43 15 35 55 2010 2011 2012 2013 2014 2015 2016 Voice and Accountability Political Stability/Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption Higher rank is better 45 37 40 48 30 35 40 45 50 55 60 2012 2013 2014 2015 2016 2017 Morroco Hungary Indonesia India Romania

SLIDE 6

5 Rank Countries ies GCI Rank Change e in Rank 2017 2017-2018 2018 2016 2016-2017 2017

Singapo apore 3 2 1 Mala lays ysia ia 23 23 25 25 2 Thailand land 32 32 34 34 2 Indones nesia ia 36 36 41 41 5 Brune nei Darussalam alam 46 46 58 58 12 12 Vietna nam 55 55 60 60 5 Philip ilippines ines 56 56 57 57 1 Cambodia ia 94 94 89 89 5 Lao PDR 98 98 93 93 5

Improving ving Global bal Percep ception tion

Indone nesia sia has improved its competi titi tive vene ness among ng ASEAN AN members rs.. .... ..

Source: World Economic Forum –The Global Competitiveness Report 2017 – 2018

1 2 3 4 5 6 7 8 9

Rank Countries ies Transpo port t Infastr tructu ture e Index ex Change e in Rank 2017 2017-2018 2018 2016 2016-2017 2017

Singapo apore 1 2 1 Mala lays ysia ia 14 14 11 11 3 Indones nesia ia 30 30 36 36 6 Thailand land 34 34 37 37 3 Brune nei Darussalam lam 63 63 70 70 7 Vietna nam 64 64 63 63 1 Philip ilippines ines 90 90 90 90 Cambodia ia 108 108 102 102 6 Lao PDR 109 109 110 1 1 2 3 4 5 6 7 8 9

Indo dones esia ia is inchin hing g its way up the com

mpeti

petitiven tivenes ess ladder der, , mov

vin

ing g ahea ead d 5 places es Indonesia’s transport infrastructure continues to improve supp pported rted by massive ive infrastru tructu ture project

jects

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6

BBB / Stab able Baa3 a3 / Positiv ive BBB BBB- / Stabl ble

Feb b 201 017, Baa3, Outlook Revis ised ed to Posit itive “We changed the outlook on Indonesia's sovereign rating to positive from stable to reflect emerging signs of a reduction in structural constraints, including its level of external vulnerability and the strength of its institutions.“ May 2017 17, BBB-, Ratin ing g Upgr graded ded “We raised the long-term sovereign credit to BBB- as the Indonesian authorities have taken effective expenditure and revenue measures to stabilize the public finances despite the terms of trade shock.” Dec 201 2017, BBB, Ratin ing g Upgra grade ded “Indonesia's resilience to external shocks has steadily strengthened in the past few years, as macroeconomic policies have consistently been geared towards maintaining stability.

BBB BBB / Stab able

Febr bruary 201 2018, , Ratin ing g Upgr graded ded to BBB BB, Outlook Revis ised d to Stabl ble “....the government led by President Joko Widodo has been pressing ahead with structural reforms aimed to promote sustainable growth.. First, the investment climate has significantly improved.... Second, infrastructure development has been gaining momentum... Third, the external debt owed by the private sector has been curbed since 2016... Taking those into consideration, JCR has upgraded its ratings by one notch and changed the outlook to Stable.

BBB BBB- / Positive ive

April il 2017, 017, BBB-, Outlook Revis ised ed to Posit itiv ive e “Indonesia's macroeconomics stability has been maintained for several

years. Its external position is also improving,. fiscal deficits have been

reined in and government debt is low. In light of such factors, coupled with improved policy management, R&I has changed the rating outlook to Positive.’

BBB BBB- BB BB+ BB B+ BB-

Indones esia ia is Now Fully ly Rated as as Inves estm tment ent Grad ade Countr try

Below low Inve vestme tment nt Grade

S&P R&I R&I Moody’s

BBB BBB Fitch

Investment Grade

JCRA

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

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2,7 3,8 4,3 5,9 6,3 6,3 9 10,6 18,2 26,1 33,1 34,5 38,1 43,9 45,7

10 20 30 40 50

Turkey Singapore Russia Malaysia Korea Brazil Myanmar Philippines Mexico USA Indonesia Thailand Vietnam India China 32,90 34,17 25,11 21,21 22,25 27,58 30,38 34,29 25,87 24,28 22,00 26,58 29,94 34,28 25,54 25,85 22,72 26,75

5 10 15 20 25 30 35 40 India Indonesia Malaysia Philippines Thailand Vietnam

2015 2016 2017e

Indones esia ia Remain ains the he Investment stment Desti stinatio tion

f

C Cho hoice ice

1. Source: The Economist – Asia Business Outlook Survey 2018 2. Source: IMF World Economic Outlook, Database October 2017 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2017 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (29th Annual Survey)

Tota tal Investm tment t / GD GDP (%)

Indo done nesia a Enjo joys Large Investm tments Relat lative to Peers within n the Region2 JBIC: C: Among ng ASEAN AN countr ntries, , Indonesia a is one of the most prefe ferred d plac ace for busine ness investm tment nt (Nove vembe ber 2017) 17)4 The Econo nomi mist: : Indo done nesia a round nds out the top five of Asian an econo nomi mies that t can look forwar ard d to increas ased d investme ment nt spendi nding ng. . (January nuary 2018) 18)1

% of surveyed who consider each country has promising prospects

UNCTAD: AD: Indonesia a is listed d as the top 5 prospecti tive ve investme tment nt desti tinati nation in the world ld (June ne 2017) 17)3

3 4 4 4 5 6 7 7 7 9 11 11 20 36 40

10 20 30 40 50 Australia (13) Canada (18) Singapura (18) Vietnam (14) Spain (25) Philippines (9) Mexico (7) Germany (5) United Kingdom (4) Brazil (7) Thailand (14) Indonesia (8) India (3) China (2) United States (1)

% of executives responding (x) = 2016 ranking

18,2 20,2 24,3 24,7 26,6 28 28,7 28,8 30,1 30,6 36,9 44,1 47,1 69,4 10 20 30 40 50 60 70 80 Taiwan Myanmar Malaysia Philippines Japan South Korea Thailand Hong Kong Australia Singapore Vietnam Indonesia India China

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Natio iona nal Strategic tegic Dev evel elopmen pment Plan an (Naw awa Cita ta)

Human Development

Educ ucation ion Healt alth Hous using ing Char aracte ter

Priority Sector Development

Food Securi rity ty Energy & Electr tric ical Securi rity ty Mari ritime time & Mari rine ne Touris urism & Indus ustry try

Water ter Security rity, Basic ic Infra rastru tructu ture re & Connect ectivity ivity

Equitable Development

Inte ter- Incom

me

Group

up

Inte ter-Reg Region: ion: (1) Rural al Area ea, (2) Perip ripher hery, y, (3) Outs tside ide Java, (4) Easte tern rn Area ea. .

Security & Order Politic & Democracy Governance

The 3 Dimensio ions

n

Econom

mic

ic Develop

pment

ment Necessary sary Condit ition

n

Legal Certainty & Law Enforcement

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9

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

purposes

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

system, build seeds market, tools and machinery

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

poverty, & land demand

Developing an agricultural industry by agglomeration or cluster method

Economic ic Equal alit ity Policies cies

to support sustainab nable le public ic welfar are.. ...

Source: Coordinating Ministry for Economic Affairs

Econo nomic ic Equali ality ty Polici cies

Human n Resour urce ce Capaci city ty

Land

Oppor portuni tunity ty Agra raria ian Reform rm Agric icultu ture e (Landle dless Farm rmer er) Planta tatio ion Urban Poor

r & Afforda

dable le Hou

using

Fisher hermen en & Seaweed eed Cult ltiv ivation tion Fair ir Tax x System tem Manufactu ture e and d ICT Retail l and Mark rket et Financin ing g & Gov

ver

ernmen ent Budget get Vocatio ional, , Entre repr pren eneu eurs rship hip & & Labor r Marke rket

Priority

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The he Economic ic Policy cy Pac ackag ages es

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

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

ns

Simp mpli lifyin ying Bureauc ucratic Proc

cess

Ensuring Law Enfo forceabi bili lity Phase e VI (5 Nov ’15) Stimulating economic activities in border areas and facilitating strategic commodities availability Phase e I (9 Sept ’15) Improving national industry competitiveness Phase e II (29 Sept ’15) Easing permit requirement and simplifying export proceeds requirement Phase e VII (7 De Dec ’15) Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals Phase e VIII I (21 De Dec ’15) Resolving land acquisition disputes, intensifying domestic

il production, stimulating domestic parts and aviation

industries Phase IX (27 Jan ’16) Accelerating electricity generation, stabilizing meat prices and improving rural–urban logistics sector Phase e X (11 Feb ’16) Revising the Negative investment List and improving protection for SMEs Phase e XI (29 29 Mar r ’16) Stimulating national economy through facilitation to SMEs and industries Phase e XII II (28 28 Apr’16) Improving Indonesia’s rank on Ease of Doing Business (EODB) Phase e XIII I (24 Aug ’16) Low Cost Housing for Low-Income Communities Phase e XI XIV (10 Nov ’16) Roadmap for E-commerce

Source: Coordinating Ministry for Economic Affairs

Phase e XV (15 Jun ’17) Improving logistics Phase e XVI (31 Aug’17) Enhancing Business License Service Standard

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11

Boosting ting the he Competitive petitivenes ness through ugh Lo Logisti stical al Efficienc ciency

The 15th

th Econo

nomic ic Policy Packag age has been launche nched

Source: Coordinating Ministry for Economic Affairs

Policy cy Goals

Strengthen the Institution

f the Indonesia National

Single Window (INSW) Provide Market Opportunities for Shipping Companies, Marine Insurance, and National Ship Maintenance Businesses Increase Competitiveness

f Logistic Service

Providers

Policy cy Target ets

1 2 3 4 5

Import duty for 115 types

f

ship’s spare parts and components 0%

0%

Opportunities for national shipping to serve export and import transportation

f

around

USD 600 millio lion/ n/year ar

70-100 units

f

new ships worth USD

700 00 millio lion

New employment

pportunity
f

2,00 000 sai ailors rs

Improve the Regional Government’s role in development

f

Regional Logistics System to control inflation and reduce post-harvest product damage up to 30%

30%

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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

f

Doing Busine ness ss has been launched ched

Source: Coordinating Ministry for Economic Affairs

Policy cy Goals

1 2 3 4 5 6

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

f the costs and lead times

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

Main Policy cy

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

Business license regulatory reforms Implementation

f

the Single Submission system

1st

st Phase

2nd

nd Phase

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13

Progres ess

f

t the he Economic ic Policy cy Pac ackag ages es*

Initially, there are 234 regulations which need to be deregulated As of January 18th, 2018, deregulation of 219 regulations are finished (97%), comprising 50 regulations at Presidential level and 169 regulations at Ministerial/Institutional level Unfinishe ished reg egula latio ions: Proposed Policy on Development

f Business and competitiveness of National Logistics

Service Providers

I–XII

21 219

SET

97% 97% 11 11

REVOK OKED ED REGULATIONS TIONS

4

ON GOIN ING DISCU SCUSSION SION

3% 3%

171 TOTAL

169

MINIST STERIAL IAL/I /INST NSTIT ITUTI UTIONAL ONAL LEVEL VEL 97%

97%

47 47 42 42

SELESAI

PRESI SIDE DENTI NTIAL

52 TOTAL

50 50 FINI

NISHED SHED

PRESIDENTIAL AL LEVE VEL

96% 96% I–XV

FINI NISHED SHED

I–XII

234 34

TOTAL INITIA TIAL REGULATIONS TIONS

I–XV

I–XII

223 23

TOTAL REGULATIONS TIONS

I–XV

Based

n

the further assessment, 11 regulations has been revoked from deregulation process Total regulation subject to be deregulated: 223 regulations

Source: Coordinating Ministry for Economic Affairs *as of January 18th, 2018

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14

Other her Progress ess

n

Economic ic Policy cy Pac ackag ages es

14 Provinces have set 2016 Minimum Wage System in accordance to the Government Regulation (GR) No. 78/2015 (Kepulauan Riau, Kalimantan Barat, Nusa Tenggara Barat, Sumatera Barat, Jambi, Aceh, Kalimantan Selatan, Banten, Gorontalo, Nusa Tenggara Timur, Jawa Barat, Bali, Sumatera Utara, and Bangka Belitung)

Fair, Simplif ifie ied & & Project ctable able Wage Sys System

State-owned train manufacturer PT Industri Kereta Api (INKA) in Madiun, East Java, has begun its first passenger train exports by shipping 15 train wagon to Bangladesh.

Export-Orie rient nted Busine ness Credit it (KURBE) RBE) Develo lopmen ment

f

Spesial al Economic mic Zone ne (SEZ)

Total value of facilities and incentives for

SEZs amounted IDR 33.8 trillion (as of September 2016)

18

companies benefitted from the simplification of fiscal incentive process with average processing time of 13.4 days (previously 2 years)

50 Bonded Logistic Center has been

launched to support various industries

North Sulawesi has sucessfully exported

coconut product through SOEs’ joint program

Deregula ulatio ion

n

Logis istics ics Sect ctor

r

SLIDE 16

15

Improving ving Investment stment Clima imate te

…implement 3-hour ur investmen ment licensing sing service ice to complemen ment the One Stop Service vice (OSS) S)

BKPM

Arriv

rive at OSS at BKPM directly from the airport

Consult with Director of Investment Service
Submit

it the required documents & data Require iremen ent t for

r utili

lizi zing g 3-ho hour Inves estme tment t Licen ensin ing g Service vice:

No requir ireme ement nts for investme estment nt in infrastr struc uctu ture sector

r

9 document ments

btaine

ined

Wait it at the lounge while documents are processed by BKPM, in-house notary, ministries, & other government institutions Obtain tain eight documents & letter of land availability within three hours to start the business

RPTKA/Employment plan
IMTA/Working permit
Investment license
Certificate of incorporation
NPWP/Tax Registration Number
TDP/Company Registration
APIP/Import identification
NIK/Customs registration
Letter of land availability

Certaint ainty to start a busines ess Certaint ainty to Import capital tal goods Certaint ainty to work rk Accurate land informa matio ion

1. Minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers. 2. Application must be submitted directly by at least one candidate of the proposed company stakeholder

2 documen ments needed

ID Card
And/or Deed of Establishment (Indonesian company) or

Article of Association (Foreign company)

Containing workflow from raw material production to the

finished products

Inves esto tor iden entity tity as the prospec ectiv ive shareh ehold lders ers Flowc wchart art

f

busines ess activities ities work rkflo low

Source: Investment Coordinating Board (BKPM)

From Jan – December er 2017, 191 projec jects ts have ve utilized the “3 hou

urs

rs services ices”

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16

Improving ving Investment stment Clima imate te

…implement 3-hour ur investmen ment licensing sing service ice for Energy and Mineral al Resour urce ces Secto tor

Director arrives at central OSS, then submit required documents* Waiting in priority lounge, while the documents processed

1 2 3

Applicant receive the requested licensing products Note *: ESDM3J service is given if the company has fulfilled

the checklist of administrative & technical requirements as regulated on MEMR Ministrial Decree No.15 of 2016

9 Types es

f

licen ensing ing issue ued by ESDM3J M3J serv rvic ice

No. Type

f

Licen ensing ing Duratio ion for reguler uler servic ice (work rk days) 1 Temporary Business License for Electricity 20 2 Temporary Business License for Oil/Fuel/LPG storage 32 3 Temporary Business License for Storage

f

Processed Products/Compressed Natural Gass (CNG) 32/40 4 Temporary Business License for Liquefied Natural Gas (LNG) Storage 32 5 Temporary Business License for Oil Refinery 32 6 Temporary Business License for Processing Oil Residue Industry 32 7 Temporary Business License for Natural Gas Processing 32 8 Temporary Business License for General Trade

f

Oil/Fuel 40 9 Temporary Business License for General Trade

f Processed

Product 40

Source: Investment Coordinating Board (BKPM)

From Jan – Decembe mber 2017, 48 project cts have utilize zed the 3 3 hours rs service ices for EMR Sector

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17

Improving ving Investment stment Clima imate te

…implement nt Direct ct Construc ructio ion Permit it to attract ct invest stment nt in Indust ustrial rial Estates

Direc ect Construct uction ion (KLIK IK)

No Requir uirements ements

No

minimum investments

r

workers is required.

Available for 32

32 sele lecte ted indus dustrial rial esta tate tes.

Construction

permits can be

btained

in parallel with construction process.

Investors can directly start their project construction before

btaining construction permits. This service is supported by

both Cent Central al and and Regional gional Gov Gover ernme nment nts wh which ich become become the first step to to syner ergize gize betwe ween en central and local al licensi ensing ng

Obtain in investment licence at

OSS at national or regional level.

Survey a land within selected

industrial estates.

Acquir

ire the land for your

industry.

Start

rt the constru tructio tion of your

project. No other permits are

required.

Apply

ly for building construction permit & environmental permit, in parallel with construction process.

Priority Investment Service Until il December er 2017, 11 115 5 projects have utilized the “KLIK servi vices es”

Source: Investment Coordinating Board (BKPM)

SLIDE 19

18

Improving ving Investment stment Clima imate te

…Direct Construc ructio ion Permit it is expanded nded to 32 Indust ustrial rial Estates (IE) E) throug ughou hout Indone nesia ia

1

Banten (3 3 IE IE; ; 3,150 3,150 ha)

1. Modern Cikande Industrial

Estate/MCIE (1,800 ha)

2. Wilmar Integrated

Industrial Park/WIIP (800 ha)

3. Krakatau Industrial Estate

Cilegon/KIEC (570 ha) West Java (5 5 IE IE; ; 1.151 ha)

1. Bekasi Fajar Industrial

Estate/BFIE (300 ha)

2. Delta Silicon 8 (158 ha)
3. Karawang Internasional

Industrial City/KIIC (293 ha)

4. Suryacipta City of

Industry/SCI (300 ha)

5. GT Tech Park @

Karawang (100 ha) Central Java (3 3 IE IE; ; 840 840 ha)

1. Kendal Industrial Park/KIP

(700 ha)

2. Bukit Semarang Baru/BSB

(40 ha)

3. Wijayakusuma Industrial

Estate/KIW (100 ha)

East Java (1 1 IE; 1,761 ha)

KI Java Integrated Industrial and Port Estate/JIIPE (1,761 ha)

North h Suma matera (1 1 IE; 100 ha)

Medan Industrial Estate/KIM (100 ha)

South Sulawes esi i (1 1 IE IE; ; 3,000 000 ha ha)

Bantaeng Industrial Park/BIP (3,000 ha)

KLIK 1st

st Stag

age (14 IE) KLIK 2nd

nd Stag

age (18 IE)

1 2 3 4 5 6 3 5 6 7

1 2 3 4 5 6

East Java (2 IE; 341 341 ha) 1. IE Maspion (151 ha) 2. IE Tuban (190 ha) East Kalima manta tan (1 1 KI KI;133 133.8 8 ha ha) IE Kariangau (133.8 ha) Riau Island (5 IE; 556 ha)

1. Batamindo Industrial

Park (61.4 ha)

2. Bintang Industrial

Park II (20 ha)

3. Kabil Integrated

Industrial Estate (142.5 ha)

4. Bintan Inti Industrial

Estate (229.6 ha)

5. West Point Maritim

Industrial Park (102.5 ha) West Java (6 IE; 1,814 814.1 1 ha)

1. Artha Industrial Hill

(315.1 ha)

2. Greenland International

Industrial Center (GIIC)/Deltamas (400 ha)

3. Jababeka Tahap III

(45 ha)

4. Kota Bukit Indah Ind.

City (510 ha)

5. Indotaisei Kota Bukit

Indah (300 ha)

6. Marunda Center (300

ha) Central Java (1 1 IE IE; ; 285 285.7 7 ha ha) IE Demak (285.7 ha)

2

1

Riau (1 IE IE; ; 198 198.9 9 ha) IE Dumai (198.9 ha)

2

4

DKI Jakarta ta (2 IE; 129 129 ha)

1. Kawasan Berikat

Nusantara/KBN (118.6 ha)

2. Jakarta Industrial

Estate Pulagadung/JIEP (10.4 ha)

3 6 4 7 5

Source: Investment Coordinating Board (BKPM)

SLIDE 20

19

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

f

Finance as part

f

the implementation

f

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

To To da date, e, 50 50 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.

Improving ving Investment stment Clima imate te

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil il and ga gas, s, and mining ng indus ustr try Food & bever erag ages es indus ustr try Auto- motiv ive e indus ustr try y Pers rsonal nal care/ home care indus ustr try Textile ile (cotto tton) n) indus ustr try Small and medium ium indus ustr try Synthetic tic textile ile (chemic ical al substanc nces es) indust ustry ry.

Bonded Logistic Center

Heavy Equipment nt indus ustr try Defence indus ustr try Aircraft ft MRO indus ustr try

SLIDE 21

20

Impr proving ving Invest stment ment Clima imate te

…revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

Cold storage ge Restaurants, , Bars Pharmaceutical Raw Materials Manufacturing Sports Center, Film P Processing Lab, Crumb Rubber

Revisio ion of "Partnership ip" category y to refer to partnership ip with Micro, Smal all and Mediu ium Enterpris ises (MSME MEs) Gran andfat ather Law: If a par artic icul ular ar sector is tightened in futur ure, existin ing foreig ign n investor does not need to comply with tighter stak ake Key Reforms in Negative ive Foreig ign Investment List Strengthen implementatio ion of negative investment law throug ugh active ive roles from min inistrie ies, agencie ies and regio ional al governments

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

Distribution,

n, Wareho

housing Private Museum, Catering, g, apparel Manufacturing, g, Exhibitions

ns &

Conve ventions

ns

Toll Road Operator, Telecom

mmunication Testing Company

Consultancy for Construction

n1

Telecom

mmunication Provide

der with Integrated d Servi vices Profession

nal Training,

, Golf Course Management, , Air Transport

rt Support
rt Servi

vices, , Trave vel Bureau

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

Introduc uctio tion n of New w Foreig ign n Owne wnership ip Regula ulatio tion n for Strate tegic ic Secto ctors Source: Investment Coordinating Board (BKPM)

SLIDE 22

21

Contin tinuou

us

Improv

vement

ement

f

Investme stment Clima imate te

…anothe her leap

n Indonesia’s

Rank nk

n

Ease

f

Doing Busine ness ss (EODB)*

EODB 201 2018 Rank nk EODB 201 2017 Rank nk Chan hange in Rank nk EODB 201 2018 Point ints EODB 201 2017 Point ints Chan hange in Point ints

Overall all 72 72 91 91 19 66.47 61.52 4.95 Start rting ing a busines ess 144 151 7 77.93 76.43 1.5 Dealing ing with Constr truc uctio ion Permit rmit 108 108 116 8 66.08 65.73 0.35 Getting ng Electr tric icity ity 38 38 49 49 11 83.87 80.92 2.95 Registering tering Property erty 106 106 118 12 59.01 55.72 3.29 Getting ng Credit it 55 55 62 62 7 65.00 60.00 5.00 Prote tecting ting Mino nority ity Inves esto tors 43 43 70 70 33 63.33 56.67 6.66 Paying ing Taxes 114 104 104 10 68.04 69.25 1.21 Trading Across Border ers 112 108 108 4 66.59 65.87 0.72 Enforcing ing Contrac acts ts 145 166 21 47.23 38.15 9.08 Resolv lving ing Insolv lven ency 38 38 76 76 38 67.61 46.46 21.15

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

Source: World Bank * Higher rank is better, EoDB 2018 was published in October 2017

SLIDE 23

22

Improving ving Investment stment Real aliza izatio tion (Q4-201 2017) 7)

IDR tn

2013 2014 2015

Risin ing Direct ct Inve vestme tments nts

2016

Mini ning ng Leath ther Goods and Footw twear Ind ndust ustry Rubbe ber and Plastic tic Indust ustry Metal, tal, Machine chinery & & Ele lectroni nic c Ind ndust ustry US$110 mn US$165 mn US$112.5 .5 mn US$1,169.6 .6 mn US$645.6 .6 mn US$1,208.3 .3 mn mn Transp nsportatio tion, n, Warehouse use, and Tele leco comm mmun unica catio tion

432.0%

US$265.4 .4 mn

45.8% 40 40.0% 0% 8,9% 56,6% 824.4% 17. 7.8% 8% Invest stment nt Reali liza zatio ion

Textil xtile Indust ustry US$128.6 .6 mn

189 89.6% 6%

FDI Reali lizatio tion n by Secto ctors

Source: Investment Coordinating Board (BKPM), compared to Q4-2016 period

2017

Rp145.4 5.4 T Rp159.4 9.4 T IDR101.3tn tn IDR112.0tn tn IDR58.1tn tn 434 434,463 463

9.6 9.6% 15.6 .6%

10.6% 16.4%

Q1-201 016 Q1-201 017 Q4-201 016 Q4-201 017 Q1-201 016Q1-201 017 Q4-201 016 Q4-201 017

*

* * person son 37 375,9 ,982 IDR15 159.4tn tn IDR17 179.6tn tn

12.7% 7%

Q4-201 016 Q4-201 017

IDR67.6tn tn Trade & Repar paratio tion Non Metallic tallic Mine neral l Indust ustry 112,0 179,6

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

SLIDE 24

Eco conomi mic Fact ctor: r: Strong and Stable Gr Growth Prospec ects Rema main In Intact ct

Sec ection tion 2

SLIDE 25

24

Conducive cive Environment ment Underpin rpinning ning Strong ng Growth th Fundam ament ental als

Larges gest t Economy my in South East Asia 4th Most Populous country y in the World; ; 64% in productiv tive e age Manageable Inflatio tion Rate Growin ing g Middle e Income me Class

From commodity-based to man anufa ufactur urin ing and servic vice sectors via infrast astruc ucture development From consum umptio ion-led d to investment nt-led d growth via a stronger man anufac ufactur urin ing sector and more investment init itia iative ives Policie ies to main aintai ain pur urchasing asing power to stim imulat ate domestic ic economy in the mid idst

f weakenin

ing mac acroeconomic ic condit itio ions Budget reform as a a part of larger economic ic reform init itiat iative Tax base to be broad adened from

ne reduc

uce dependency on commodit itie ies Fuel subsid idie ies signif ific ican antly y reduc uced and spendin ing redir irected to more produc uctive allocat atio ion Prud udent debt man anag agement

Reform rm-Or Orien iented ted Adminis inistr tratio ion

Three main ain sources of finan ancin ing for investment needs: Stat ate and regio ional al budget, Stat ate Owned Enterpris ises and PPP Contin inui uing from 2015 polic icy, infras astructur ure will be higher than fuel subsid idy Fiscal al and non-fis iscal al incentive ives to attrac act infras astructur ure investment and promote PPP Infras astructur ure spend nding ing focused d on basic ic infras astructur ure projects

Larg rge e and d Stable able Econo nomy Consi nsiste tent nt Budg dget t Reform

rm

New Econo nomic ic Structu ructure re High h Infras rastructu ructure re Investmen ents

SLIDE 26

25

Indonesia’s Strong GDP

Growth th Prospe pect ct GDP Growth th Based on Expe xpend nditur itures (%, YoY YoY)1 Strong ng GDP Growth th1

By expen pendit diture 2014 14 2015 15 2016 16 2017 17 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 HH. consumption 5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 4.9 4.9 4.9 5.0 4.9 Non profit HH. consumption 23.2 22.4 5.8 (0.5)12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 5.2 6.9 Government consumption 6.1 (1.8) 1.2 0.9 1.2 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 Gross Fixed Cap. Formation 5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 Exports 3.1 1.5 4.9 (4.4) 1.1 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.8) 4.1 (1.6) 8.4 2.8 17.0 8.5 9.1 Imports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.5) (4.1) 2.7 (2.4) 4.8 0.2 15.5 11.8 8.1 GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 %

Instit itutio ions 201 2018 GDP growth (%YoY) 2018 Budget 5.4 Bank Indonesia 5.1 – 5.5 IMF 5.3 World Bank 5.3 ADB 5.3 Consensus Forecast (February 2018) 5.3

Favo vour urable ble GDP Growth th Compar pared to Peers2

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2017; * indicates estimated figure %

3
1

1 3 5 7 9 2012 2013 2014 2015 2016 2017* 2018* Indonesia India Morocco Romania Hungary

0,04 3,83 3,27 (2,07) (0,16) 3,74 3,31 (1,73) (0,36) 4,01 3,14 (1,81) (0,30) 4,01 3,19 (1,70) 5,12 4,94 4,93 5,05 4,82 4,74 4,77 5,17 4,92 5,18 5,01 4,94 5,01 5,01 5,06 5,19

3,0
1,0

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

SLIDE 27

26

Strong ng an and Stable able GDP Perf rform rman ance ce

GDP Growth th by Secto ctor (%, YoY YoY) Spatia tial l GDP Growth th (YoY)

By sectors 2014 14 2015 15 2016 16 2017 17 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. Agriculture, forestry, and fishery 5.2 4.9 3.6 3.3 4.2 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.2 2.8 2.2 3.8 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 (1.2) 2.1 1.8 0.1 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 4.2 3.5 4.8 4.5 4.3 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 6.9 7.0 7.2 6.8 Wholesale and Retail Trade, Repair of Car and Motorcycle 6.1 5.1 5.2 4.4 5.2 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.4 Transportation and Storage 7.0 7.6 7.7 7.2 7.4 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 Information and communication 9.9 10.7 9.8 10.1 10.1 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 10.5 11.1 8.8 9.0 9.8 Financial service 3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 8.9 6.0 5.9 6.2 3.8 5.5 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 4.1 3.5 4.8 6.1 4,7 GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1

Java: 58.49% Sumater era: 21.66% Maluku ku & Papua: 2.43% Sulawesi: esi: 6,11% Kalim imant ntan: n: 8. 8.2% Bali & Nusa Tenggara: 3.11%

Spatia tial l GDP Growth th Contribu ibutio tion

Sumatera GDP Grow

wth

Q4 2017: 2017: 4.43% Java GDP Grow

wth

Q4 2017: 2017: 5.62% Kalimantan GDP Grow

wth

Q4 2017: 2017: 3.37% Sulaw awesi si GP Grow

wth

Q4 2017: 2017: 7.53% Maluku ku & Papua GDP Grow

wth

Q4 2017: 2017: 5.42% Bali & Nusa sa Tenggara GDP Grow

wth

Q4 2017: 2017: 3.2% Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008)

SLIDE 28

Ext xternal rnal Fact ctor: r: Im Improved Ext xtern ernal al Resilie ienc nce

Sec ection tion 3

SLIDE 29

28

1,20 (7,82) (2,30) 3,16

5,76
12
10
8
6
4
2

2 4 6 8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3* Q4** 2012 2013 2014 2015 2016 2017** Goods Services Income Secondary Income Current Account US$bn

1

2 3 4 5 6 7 8 9 10 11 12 13 14 15 50 60 70 80 90 100 110 120 130

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 2013 2014 2015 2016 2017 2018

FX Reserves (LHS) Month of Import & Debt Service (RHS) Month US$bn

Stru ructur ctural ally ly-Stro Stronge nger r Curr rrent ent Account nt Deficit icit

Imp mprovin ing g Current t Account Defic icit it Strong g Balance e of Payme ments Supported ted by Substantia tial FX Reser erves es to Mitiga igate te Exter ernal Challen enges ges Annual Trade e Balance e Surplus Continues es

Source: Bank Indonesia Source: Bank Indonesia

2015 2015: CA Defic icit (US$17.5bn) n) 2012: 2012: CA Defic icit (US$24.4bn) n) 2013: 2013: CA Defic icit (US$29.1bn) n) 2014: 2014: CA Defic icit (US$27.5bn) n) 201 2016: CA Defic icit (US$16.9b 9bn) n)

Source: BPS * Preliminary Figure ** Very Preliminary Figure

2015: 2015: Surplus US$7.59bn 2013 2013: Defic icit (US$4.1 .10bn) n) 2014 2014: Defic icit (US$2.3 .37bn) n) 201 2016: : Surplus US$8.83b 3bn 2017: 2017: Surplus US$ US$11.8 .83bn bn*

Source: Bank Indonesia FX Reserves s as of January 201 2018: US$13 131.98 1.98 bn n (Equiv

iv. to 8.2 month

ths s of impo ports ts + servic icin ing of government t debt) t) US$bn

3,00
2,00
1,00

0,00 1,00 2,00 3,00 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2013 2014 2015 2016 2017 OG Non-OG Total

5,8

6,5 1,0 130,2

40 80 120 160

15
10
5

5 10 15 20 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3* Q4** 2012 2013 2014 2015 2016 2017** Current Account Capital and Financial Account Overall Balance Reserve Asset (RHS)

US$bn US$bn 201 2017: CA Defic icit (US$17.3b 3bn) n)

SLIDE 30

29

9,33 8,76 7,32 6,37 6,06 2,33 0,05

0,30
0,48
3,29

4,48 3,80 3,29 3,92

0,03

0,45 1,34

2,89

3,92 1,14

6,00
4,00
2,00

0,00 2,00 4,00 6,00 8,00 10,00 12,00 ZAR MYR EUR THB KRW INR IDR PHP BRL TRY Point to Point Average 7,69 3,11 2,99 2,78 2,62 2,33 1,90 1,90 1,76 1,73 1,36 0,95

0,42

4,52 3,80 3,53 3,92 3,47 3,92 2,09 3,56

0,03

1,08 1,34 0,45

2,89
4,0
2,0

0,0 2,0 4,0 6,0 8,0 10,0 ZAR MYR EUR BRL CNY THB SGD JPY KRW TRY IDR INR PHP Point to Point Average

Exchang ange Rate In Li Line ne with Fundam ament entals als

Move veme ment nt of Rupia iah Rupia iah Exc xchang nge Rate Fared Relative latively ly Well ll Compar pared to Peers

IDR/US$ % %

*data as of January 31st, 2018

Th The rupia upiah tended to to apprecia ppreciate in in Janu January 2018 2018 afte ter defyin ing pr pressur ures in in th the four urth qua uarte ter of

f

2017

2017. In the fourth quarter of 2017, the rupiah

depreciated by an average of 1.51% to Rp13,537 per USD, before rebounding 1.36% to Rp13,378 per USD in January 2018 as non-resident capital inflows returned in line with the promising national economic

utlook

and appreciation

f

regional currencies.

YTD 2018 vs 201 2017

*data as of January 31st, 2018

Source: Bank Indonesia

Jan 2018 vs Dec 2017

*data as of January 31st, 2018 13433 13.338 13.321 13.343 13.561 13.378 13.348 13.309 13.333 13.537 13.395 13.000 13.100 13.200 13.300 13.400 13.500 13.600 13.700 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

IDR/USD Monthly Average

SLIDE 31

30

Ampl ple Li Lines of D Defen efense se Against ainst Ext xter ernal nal Shocks cks



Ample level of FX reserves to buffer against external shock



FX Reserves as of January 2018: US$131.98 billion

South th Korea



Renewed a 3 year KRW/IDR swap arrangement with the size of up to 10.7 tn KRW/IDR115 tn in March 2017

Australia alia



Established a 3 year A$/IDR swap arrangement with the size of up to A$10 bn or IDR100 tn in Dec. 2015

Chia iang g Mai i Initia tiative tive Multila ltilatera terali lizati tion

n

(CMIM IM) ) Agreem eemen ent



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



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



Doubled to US$240 bn effective July 2014

Japan



US$22.76 billion swap line with Japan currently in place



The size of the swap line was increased from US$12 bn in December 2013

IMF Global al Financ ncial ial Safety ty Net

GSFN



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



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

Bilateral teral Regio iona nal Globa bal FX Reserv rve

Ampl ple Reserve ves Swa wap p Arrang ngeme ment nt

Source: Bank Indonesia

SLIDE 32

31

Solid id Policy cy Coordi dina natio tion

In Managin aging Financial ancial Market kets Volati tili lity ty

Source: Ministry of Finance First Line of Defense State’s Budget Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Stat ate Owned Enterprises (BUMN)’s Budget Related SOEs (min. level Aware) Social al Secur urity y Organ anizing zing Agency y (BPJS)’s Budget BPJS (min. level Aware) Second Line of Defense State’s Budget

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

Stat ate Owned Enterprises (BUMN)’s Budget Related BUMNs (min. level Alert) Social al Secur urity y Organi anizing zing Agency y (BPJS)’s Budget BPJS (min. level Alert)

Gov’t Securities Crisis is Mana nage gement ent Proto tocol (CMP)

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

The enac actm tment nt of Law No. 9/201 016 6 regar arding ng Prevention ntion and Mitig tigat ation

n of Financ

nancial al Syste tem Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financi Financial al Syste tem Stabili ability ty Com

mmitt

ttee (KSSK) KSSK membe bers: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Most impor porta tant nt provis

visions
ns stipu

pulat ated in the Law:

Financ

nancial al syste tem stabi bility ty moni nito toring ng and mainte ntenanc nance by KSSK members based on crisis management protocol of each member;

Prevention

ntion of financ ancial al syste tem crisis, including the mitigation of systemically important bank’s liquidity and solvency problems;

Reco

covery Plan an for Syste temical ally Impor portant ant Banks ks;

Bank

k Restr truct uctur uring ng Prog

gram

am

Gov’t Securities CMP Level

NORM RMAL AWARE RE ALERT RT

CRISIS SIS

Bond nd Stabilizatio ilization n Framew ework rk

SLIDE 33

32

2297; (87,6%) 324; (12,4%) 2454; (93,6%) 167; (6,4%)

Comply Not Comply

2.353 ; (89,8%) 268; (10,2%) 50 100 150 200 250 300 350 400 50 100 150 200 250 300 US$bn US$bn Public (Govt. & BI) Private Total (RHS) 23,2 36,1 42,5 55,4 105,4 20,4 34,0 44,7 51,9 92,1 22,6 34,2 42,2 52,9 95,2

0,0 20,0 40,0 60,0 80,0 100,0 120,0 India Indonesia Morocco Romania Hungary 2017F 2016 2015

Streng engthened hened Pri rivate te Exter erna nal Deb ebt Risk Man anag agem ement ent

Source: External Debt Statistics of Indonesia, February 2018 Source: Moody’s Statistical Handbook, November 2017

Regulat atio ion Key Points Phase 1 Jan 1,2015 – Dec 31,2015 Phase 2 Jan 1,2016 – Dec 31,2016 Phase 3 Jan 1, 2017 & & 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%** Liquid idit ity y Ratio io (< 3 months) 50% 70% Cred edit Ratin ing Not applicable Minimum rating of BB- Hedg dgin ing g transactio ction n to meet hedg dge ratio io not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanctio ion As of Q IV-2015 Applied Exter ernal Debt/ bt/GDP (%)

Debt Burden en Indicator (Exter ernal Debt/G /GDP DP) ) Rema mains Comp mparable e to Peers Rating

Priva vate te Exte xterna nal l Debt bt Rema main ins Mana nageable ble Enco cour uragin ing Corpor porate tes Compli lianc nce on Hedgin ing Ratio io & Liqui uidity ty Ratio io > 3 – 6 month ths < 3 month ths

Source: Bank Indonesia

Total Ext. . Debt: US$352.2 .2bn n Private Sector

Ext. Debt:

US$171.6bn

* Provisional Figures ** Very Provisional Figures

Liquid idity ity Ratio* Hedging ging Ratio*

*Data as of Q3 2017, with total population 2.621 corporates

SLIDE 34

33

Man anag ageable eable External rnal Debt bt Profile le

short

rt

term non-bank bank corpor porate te debt bt (non affili iliation) ion) repr presen ents

nly

8.7% %

f

total priv ivate te external ernal debt bt

Priv ivate te Short-Term Term1 Priv ivate te Non-Bank Exter ernal Debt Positio tion

Af Affil iliat iation Non Af Affil iliat iation

US$125.6bn

r

73.2%

f Private Ext.

Debt US$19.2bn

r

11,2%

f Private
Ext. Debt

US$11.9b 11.9bn

r
r

6.9 6.9%

f Private

ate Ext. . Debt t US$14.9 4.9bn bn

r
r

8.7 8.7%

f Private

ate Ext. . Debt t

Public ic Long Term 1 Priv ivate te Bank

US$26.8bn

r

15.6%

f Private
Ext. Debt

US$171.6 .6bn bn

r

48.7 8.7%

f total
Ext. Debt

US$46.1bn bn

r

26.8%

f Private
Ext. Debt

External Debt Position as of December 2017

1 Based on remaining maturity

Source: External Debt Statistics of Indonesia, February 2018

US$352.2bn bn

US$180.6bn

r

51.3%

f Total Ext.

Debt

SLIDE 35

Fisca cal Perf rforma rmanc nce and Flexib xibilit ility: More Fiscal cal Stimu mulus us with Pru rudent nt Fisca cal Policy cy

Sec ection tion 4

SLIDE 36

35

Integ tegrated ted Reform

rm

to Prov

vide

ide Higher her Quality ity

f

Econo

nomic

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

Efficient,

competitive, and innovative real sectors

Job-creation
Trade

and investment policies that support growth, efficiency, and stability

Price

stability, inflation, and exchange rate

Efficient

and credible financial sector

Monetary

policy that support growths and decreases poverty Fiscal al Real al Secto tor Mone netary ary & Finan ancial ial Secto tor

Sy Synergy gy in reform rm to boost the more sustainab nable le and inclu lusiv ive growth wth

Source: Ministry of Finance

SLIDE 37

36

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

urage

Grow

wth

th Key Driv iver ers

Consumptio

ion remains robust among

thers

supported by benign inflation

Inves

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

Export

and Import rt keeps improving driven by increasing demand and improving prices

Support

from sever eral import rtan ant events ts such as Asian Games, Regional Elections, and IMF-WB annual meeting

Main

intainin taining g purchasing ing powe wer, r, boosting ing domes estic ic demand and and support rting ing busines ess activity ity.  Improve distribution channels  Increased shopping events, creative industries and festivals in tourism areas  Incentives for manufacture  Developing e-commerce industry

Encourag

uraging ing priv ivate te sector's r's role le in inves estment ent  Strengthening and deepening financial markets  Making a stable investment climate through political stability

Expand

nd servic ices es sector, especially ially touris urism  Increasing foreign tourists arrival through cooperation with other countries by increasing the direct flight schedule  Encouraging national creative industry growth

Risks & Challe halleng nges es

Globa bal econo nomic ic uncert rtain ainties ties: China economic rebalancing and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change

SLIDE 38

37

More Credible dible an and Real alis istic tic Budget et

…providing more certainty to all stakeholders

Indic icator 2016 16

2017

2018 18 Realiz ization¹ n¹ Realiz ization2 Budget dget Economic ic growt wth (%, yoy) 5.02 5.07 5.4 Inflatio ion (%, yoy) 3.02 3.61 3.5 3-Mo Month Treasury y Bill (SPN PN) (%) 5.7 4.98 5.2 Exchang nge Rate e (Aver erage ge, IDR IDR/US USD) 13,307 13,384 13,400 ICP (USD/ba barrel) 40.2 51.2 48 Oil il Productio ction n (thousand nd barrel el/da day) 829 803.9 800 Gas Produ ductio ction n (mil illions ns of barrels/da day) 1.18 1.14 1.2

Macroeconomic Assum umptio ion for 2018 Budget

Source: Ministry of Finance 1. Audited 2. Unaudited

2018 budget will focus on efficiency and quality of

priority expenditure, optimization and reforms on government revenue, and maintaining economic momentum as well as public confidence.

2018 fiscal deficit is set lower than 2017 R-budget

at 2.19% of GDP. However, government spending is targeted towards infrastructure development as well as poverty and unemployment reduction for an equitable development and improved connectivity.

Descriptio ion (IDR Tril illio ion) 2016 Audit ited Realiza ization 2017 2018 R-Bud udget Realizat ization2 % Realizat izatio ion to to R-Budget Budget % difference with R-Bud udget A. A. Revenue ues and d Grant ants 1,555 55.9 1,736 36.1 1,655.8 95. 95.4 1,894 94.7 7 9.1%

I. Domestic Revenue

1,546.9 1,733.0 1,648.1 95.1 1,893.5 9.3%

1. Tax Revenue

1,285.0 1,472.7 1,339.8 91.0 1,618.1 9.9%

2. Non Tax Revenue

262.0 260.2 308.4 118.5 275.4 5.8%

II. Grants

9.0 3.1 7.6 244.9 1.2

61.3%

B. Expendit iture 1,864.3 2,133.30 2,001.6 93.8 2,220.7 4.1%

I. Central Government Expenditure

1,154.0 1,367.00 1,259.6 92.1 1,454.5 6.4%

1. Ministerial Spending

684.2 798.6 759.6 95.1 847.4 9.6%

2. Non Ministerial Spending

469.8 568.4 500.0 88.0 607.1 2.2%

II. Transfer to Region and Village Fund

710.3 766.3 741.9 96.8 766.2 0.0% C. C. Prim imar ary y Balan ance

125.6
178
129

29.3 72.6

87.3
51.0%

D. Surplus us (Defic icit it)

308.3
397.2
345

45.8 87.1

325.9
18.0%

% of GDP

2.49
2.92
2.57
2.19

E. Finan ancin ing 334.5 397.2 364 64.5 91.8 325.9

18.0%

SLIDE 39

38

Increasing easing Tax ax Revenue ue Over er The Yea ears rs

Future policie ies will be direct cted at expand nding ing the tax base and incr creas asing ing compli liance ance

Source: Ministry of Finance 981 1077 1147 1240 1285 1344 1618 11,9 11,9 11,4 10,7 10,3 10,0 11,6 2 4 6 8 10 12 14 200 400 600 800 1000 1200 1400 1600 1800 2012 2013 2014 2015 2016 2017* 2018 APBN Tax Revenue % GDP - RHS

Taxa xation tion Reven venue ue

*preliminary realization IDR Trilion

Autom tomatic tic Excha hange ge of Informatio tion (AEoI

I)
Expanding tax base
Preventing Base Erosion Profit

Shifting . Data ta and d Informatio tion System tem More up to date integrated system e-filing, e-form and e-faktur. Taxp xpayer yer Com

mplia

liance Building sustainable compliance e.g. through e-service, mobile tax unit, KPP Mikro, and outbond call. Tax x incen entive tive

Tax holiday and tax allowance
Reviewing VAT exemption policy

for several items. Human Resou

urce

e and d Regu gula lati tion

n

Improving service and institution framework

Tax Improve vement nt Effort rts

Custom & Excise 194.1 Oil & Gas Non O&G

38.1 1,385 85.9 1,424 24.0 .0

Tax Revenue

SLIDE 40

39

Commitm tment nt to Contin tinue ue Streng ngth thenin ening Productive ductive Spending ing

Alloca cating ing budget to a more product uctive ive spending ing

Source: Ministry of Finance

2015 Rp1,183.3 T 2016 Rp1,154.0 T 2017 Rp1,259.6 T

2018 Rp Rp1,454 454.5 5 T

Central Govern ernmen ent Spendin ing

3,35 3,35 1,03 0,86 0,67 0,64 0,49 0,49 0,58 0,54 0,59 0,42

0,50

1,00 1,50 2,00 2,50 3,00 3,50 4,00 2013 2014 2015 2016 2017 2018 % Spendi nding ng Energy Non-Energy

Line ne Mini nistries Non Line ne Mini nistries

Rp. Rp.847,4 7,4 T Rp. Rp.607,1 7,1 T

Better ter targetin eting

Subsidy for the

poorest family and there is no plan to eliminate the subsidy, rather making it well- targeted.

Targeted for the poor.

Electricity subsidy is targeted to the subscribers of 450 VA and 900 VA

Database improvement
Inflation management

Energ nergy Subs bsid idy Non Ener ergy gy Subsidy idy Inter eres est paymen ent

Cost effic ficien iency

Controlling

cost of financing

Deepening

government bond market

Controlling

debt burden

Improving planning with performance

based, and integrated with development priority

Operational spending efficiency
Monitoring and evaluation
Early procurement process

Integr egrati tion with h energy gy subsidy

Synergy with

social assistance programs and transfer to regions

Staple good price

management

Improving

agriculture productivity

Subsid idy as %

f

Total Spending ing

SLIDE 41

40

Increasing easing Qual alit ity of Spending ding

Reinf nforcing ng Alloca catio ion, n, Distrib ibut utio ion, and Stabili iliza zatio ion funct ctio ions ns

Source: Ministry of Finance

Social protec ectio tion program (PKH)

2018: 10,0 mio families Rp17,3 T 2017: 6,0 mio families Rp12,7 T

Expansio sion of Non-Ca Cash h Food Assista tance (BPNT)

2018: 10,0 mio families Rp13,5 T 2017: 1,4 mio families Rp1,6 T

Health th servic ices es PBI I

2018: 92,4 mio people Rp25,5T 2017: 92,4 mio people Rp25,5T

Pover erty y and Inequa ualit lity

Agric iculture

Increased food

production and construction of facilities and infrastructure

horticulture

cultivation

Main in Secto tor

Tourism m

developing 10

tourist destinations

Increased tourists
Tourism promotion

Road Constructio tion 865 km

Infras rastr truc uctur ure

Irriga igatio tion Constructio tion 781 km Welfare e apparatus and pensioners

Civil il Servant nt and Commun unit ity y Servic ice

Increa ease e in food allowance e for TNI I / / Polri  Rp5 mio from Rp55.000 tp Rp60.000/person/ day Educatio tion Sma mart Indonesia esia Program m

2018: 19,7 thousand students Rp10,8 T 2017: 19,7 thousand students Rp10,7 T Bidik Misi: 401,5 thousand students Rp4,1 T 2017: 339,4 thousand students Rp3,5 T

Constructio tion of Affordable e Housing 13.405 unit Fishe hery

Increased

competitiveness of processed fishery products

Fishing boats

support 1048 units

Environmental

sustainability

System em imp mproveme ements ts and retirement benefits of the state apparatus Elec ectr trif ific icatio tion Ratio 95,15 % Imp mproved ed bureaucrati tic reform m to improve the quality of public services

297.8 410 10.7 34 34.8 36 365.8

Defen ense se The achievement of MEF phase 2 and the development of defense industry

Defense e of Securit urity y & & Democracy acy 220

20.8

Securit ity y Maintenance of security, order, and criminal investigation Demo mocracy The 2018 election

rganizer and

preparations for the 2019 election

(Rp Trilllion)

SLIDE 42

41

Investm estments ts in human an cap apital ital has as been een ram ampe ped up

20%

f

national nal budget is alloca cated for educa catio ion and anothe her 5% for healt lth

Bidik ikmi misi si Scholarship ship

353,4 390,1 370,4 419,8 444,1

50 100 150 200 250 300 350 400 450 500

2014 Real 2015 Real 2016 Real 2017 Outlook 2018 Budget

IDR IDR tn

59,7 65,9 92,3 104,9 111,0

25 50 75 100 125

2014 Real 2015 Real 2016 Real 2017 Outlook 2018 Budget

IDR tn

Basic & complete immunization for 92.5% of 0-11 months old infants

Immu mmunizatio ion

92.4 million people

Indones esia ia Healthy thy Program

49 hospitals/health centers

Provis isio ion of Health th Facil ilities ities

74 thousand certifications

Drug and Food Certific tificatio tion

1.8 million people

Fami mily Plan Program m (KB)

Budg udget t for Educ ucatio tion n Program Budg udget t for Healt lth Program

Indones esia ia Sma mart Program

19.7 million students

Targets ts

f

Educatio tion Progr gram in 2018

School Rehabil bilita itatio tion School Operatio tional Assista tance e (BOS OS) Teache her Allowance

56 million students 401.5 thousand college students 61.2 thousand rooms

Non Civil Servants

: 435.9 thousand teachers

Civil Servants

: 257.2 thousand teachers

Local Civil Servants : 1.2 million teachers

Targets ts

f

Health Progr gram in 2018

SLIDE 43

42

Impr proved ved Budget Allo loca cation tion Towar wards ds Local al Governm ernment ent

…promoting better alloca cation

f

budget spending ing to local al governm rnment nt

64% 64% 24% 24% 1% 1% 3% 3% 8% 8%

Reformulated to (1) Give more weight on the poor population. (2) Improving inequality between villages Villag age Fun und (IDR60.0 tn tn) Special Autonomy & Fund for DIY keeps increasing from year to year Special ial Autonomy y & D.I Yogyak akar arta - DIY (IDR21.1 tn tn) Regional al Incentive Fund (IDR8.5 tn tn) Minimum of 25% (IDR122.7 tn) earmarked for public service facility development acceleration. It provides revenue sharing fund to promote equal opportunity for natural resource producers & high tax earners General al Tran ansfer Fund (IDR490.7 tn tn) Special ial Tran ansfer Fund allocation is based on each regions’ proposal and national priorities Special ial Tran ansfer Fund (IDR185.9 tn tn) Incentive ive Fund allocation has been increased to enhance local government performance and public service delivery

Indonesia

continues its improvement

f

regional transfer, esp. village fund, to spur growth throughout regions

Allocation

for both Transfer to Region and Village Fund has been increasing substantially

The

increased allocation indicates the Government’s commitment to support development in regions

A

minimum 25%

f

general transfer fund must be earmarked for public service infrastructure 2018 2018 Transfe fer r to Regions ns and Villag lage e Funds (Budge get) t) Trans nsfer er to Regio ions/Villa Village ge Funds

IDRtn 2013 Audit ited 2014 14 Audit ited 2015 15 Audit ited 2016 16 Audit ited 2017 Realizat ization 2018 Budget Transfer to Region 513.3 573.7 602.4 663.6 682.2 706.2 Village Fund

20.8

46.7 59.8 60.0 Total al Regional al Tran ansfer 513.3 573.7 623.2 710.3 766.3 766.2 Source: Ministry of Finance

SLIDE 44

43

2017 Achiev ievem ement ents

f

S State te Budget et

Value ue creatio ion

n

various us project cts and count ntry ry developmen ment

Source: Ministry of Finance

Health thcare and Socia ial Sec ecurity: ty:

Distribution of Indonesian Health Card to

92.1 million people

Educati tion:

Distributed Indonesian Smart Card to 19.8

million students

School Operational Benefit for 8.0 million
Scholarship for 364.4 students

Infr frast structu ture: e:

794 km road development
9,072 m bridge development
3 airports completed
618.3 km railways

Local Gover ernment ment Achi hievements ements Centr tral Gover ernmen ent Milest stones es

15.5% 101.7% 118 18.5% 7.4% 23.0% 27.8%

Tax revenue growth vs.

2016 (excluding Tax Amnesty and Asset Revaluation)

Revenue of customs

and excise over 2017 revised Budget, a 7.4% increase vs. 2016

Non-tax revenue over

2017 revised Budget, a growth of 17.7% vs 2016

Growth of realized

government spending

vs. 2016
Capital expenditure

growth vs. 2016, a 92.8% over 2017 revised Budget.

Growth of transfer

to village vs. 2016, 99.6% over 2017 revised Budget Roads: 1,033 km in development, 1,503 km maintenance, 9,789 km improvement Brid idges: 3,749 m bridge in development, 291 m maintenance, and 2,916m improvement Clas assroom: 1,351 new classrooms, 11,006 rehabilitation, 11,758 rural library collection Medic ical: Improved facilities in 347 hospitals and 3,873 clinics Tu Tuition: Reduced tuition costs for 46.6 million students and 5.6 million kindergarten- aged children Welfare: Increased welfare and work ethics of 1.7 million civil teachers in rural areas and compensated 41,000 teachers in special 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

SLIDE 45

44

Indonesia’s Tax Amnesty Program – A Success ess Story ry

With more than 965, 965,900 taxpayers rs particip cipating ing in the program

Source: Ministry of Finance

Tax Amne nesty ty Resul ult (as of the end nd of March ch 31st

st, 2017)

Redemptio mption n Money ney Assets ts Decla clared

114,2 18,8

1,7 Preliminary Evidence Payment 1% Redemption Money 85% Tax Arrears Payment 14%

Reven enue IDR 134. 4.8t 8tn n (~1. 1.1% 1% GDP) P)

3.323,36 861,81 594,99 85,59 Individuals 68% Individual SMEs 18% Companies 12% SMEs 2%

Compo posit ition n of Partic icipa ipants Based ed on Asset et Declared ed

0,04 0,15 0,20 0,62 1,10 0,58 0,17 0,12 0,04 Germany (2004) Belgium (2004) Italy (2009) Chile (2015) Indonesia (2016) India (1997) South Africa (2003) Spain (2012) Australia (2014) % of GDP 2,1 3,9 8,3 39,3 5,2 3,6 0,3

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

% of GDP 3,698 1,036 147,1

Onshore Declaration 76% Offshore Declaration 21%

Repatriation 3%

Asset Declared IDR 4,881tn (~39.4% of GDP)

SLIDE 46

45

Finan ancing cing Policy cy 2018: 8: Gene neral Object jective ive & P Policy cy

To support the development

f

deep, active, and liquid market To enhance public accountability as part

f

transparent Government debt management To meet financing needs at efficient cost and tolerable risk

Source: Ministry of Finance

General al Policy cy

Cost control and debt risk

SLIDE 47

46

Domestic Debt IDR596.7 tn (75%) Foreign Debt IDR196.6 tn (25%)

Domestic GS IDR592.2 tn Domestic Loan IDR4.5 tn Foreign Denominated Bonds (JPY, EUR, USD) IDR145.3 tn Foreign Loan (Program & Project) IDR51.3 tn

Financing Needs IDR793.3 tn

2018 Finan ancing cing Need ed

Fulfill lled from Governm rnment nt Securit uritie ies IDR 737.5 tn tn (93%) and Loan IDR5 R55.8 tn tn (7%)

Source: Ministry of Finance

Deficit it Rp32 325, 5,9 T Debt t matu ture res Rp394,1 T (inclu lude de Rp10,1 T of Priva ivate te Placem emen ent) Inves estme tment t Financin ing g Rp65,7T Gov

ver

ernmen ent t Guarantee tee Obliga igatio tion Rp1,1T Other er financin ing g (Rp0,2T) T) Lendin ding g Rp6,7T

SLIDE 48

47

Government Debt Securities Government Sukuk

Indica cative tive Finan ancing cing Plan an for 2018

Creating ing prudent nt and sustainab inable le fiscal al manag agement nt

Source: Ministry of Finance

Gove vernm nment t Se Secur uriti ties to Meet t Stat tate Bud udget Fin inanci cing

Dome mest stic ic Bonds

Weekly auct uction: Conventional securities 24 24-25x Islamic securities 24 24-25x Non-Auct uction Retail bonds (Indonesian Retail Government Bond, Retail Sukuk, Online Retail Bonds) Private Placement Based on request Tar arget avg. tenor mat aturity for Government Secur uritie ies (SB SBN) N) Issua uance 7-8 ye year ars

Instrum uments nts Indic icativ tive Budg udget Target*

IDR tn tn USD bn bn Budget et Defic icit it (2.19% 325.9 24.3 Gover ernment ment Sec ecuritie ties (Net) et) 414.5 30.6 .6 Gover ernment ment Sec ecuritie ties (Gross ss) 856.5 63.9 .9

Compo mpositi tion

Domestic Bond 80 - 83% International Bond 17 - 20% Issuance Targets gets for Gover ernmen ent t Debt bt Sec ecurit itie ies s and Sukuk Inter ternatio tional Bonds (USD, SD, Sukuk USD D EUR, JPY-deno enomina minated ted)  Avoid crowding out in domestic market  Provide benchmarks for corporate bonds  Investor base diversification Front t Loading ing Issu suance e for 2018 Budge get Financing  Faster access to liquidity  Anticipate developments in global environment

70.0% - 75.0% 25.0% - 30.0%

*exchange rate assumption in 2018 budget: IDR13,400/USD

SLIDE 49

48

6,8 (0,4) 1,2 2,1 2,1 1,6 5,1 2,7 (0,6) 5,3 5,5 3,4 (7,1) (6,1) (5,8) (5,3) (4,8) (3,7) (3,3) (2,9) (2,8) (2,2) (1,6) (0,1) I NDI A B R A ZI L JA P A N U K U S A S A F R I CA M A LA Y S I A A U S TR A LI A I TA LY I NDONE S I A TU R K E Y THA I LA ND

GDP Growh Fiscal Deficit (% GDP)

Sound Governm rnment ent Deb ebt Port rtfolio lio Man anag agem ement ent

Portfolio io managemen ment charact acteriz rized by stable le debt/G /GDP DP ratio and well-div iversi rsified fied debt

Weig ighte ted Ave verage Debt bt Matur urity ity of ~8. 8.6 Years (As As of Dec.

c. 2017)

Defic icit it Produc uctivity tivity**

Source: MOF, World Economic Outlook

Well ll Dive versif ifie ied Across Different nt Currenc ncie ies

% of Yearly y Issuance ce Source: Ministry of Finance Source: Ministry of Finance Source: Ministry of Finance Years 9,7 9,6 9,7 9,4 9,0 8,6 8,0 8,3 8,5 8,8 9,0 9,3 9,5 9,8 10,0 2012 2013 2014 2015 2016 Dec-17

Stable ble Debt bt to GDP Ratio Ove ver the Years

Gover ernment Debt bt / GDP P (%) *As of end of 2017, **GDP growth and fiscal deficit numbers are average of 2012-2016 (5 years), ***SDR, AUD, and other. 31,2% 30,0% 25,9% 23,8% 20,9% 18,9% 68,8% 70,0% 74,1% 76,2% 79,1% 81,1% 23.0% 24.9% 24.7% 27.4% 28.3% 29.2% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 0% 20% 40% 60% 80% 100% 2012 2013 2014 2015 2016 2017* Loans (LHS) Securities (LHS) Govt Debt / GDP (%) (RHS)

56% 53% 57% 55% 58% 60% 24% 29% 29% 32% 31% 29% 14% 12% 9% 8% 7% 6% 3% 3% 3% 3% 4% 4% 3% 3% 2% 2% 1% 1%

2012 2013 2014 2015 2016 2017 IDR USD JPY EUR Other

SLIDE 50

49

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 Inte terest t Rate te Risks ks Debt bt Matur urity ity Profile ile Declin clinin ing Exch change Rate te Risks ks Upco comi ming ng Matur uritie ities (Ne Next 5 Years)

IDR tn tn

1 Variable Rate Ratio is defined as ratio between debt instruments with variable rate divided by total debt instruments (variable + fixed rates) 2 Refixing Rate ratio is defined as ratio between debt instruments with variable rate + debt instruments with fixed rate maturing in 1 year divided by total debt instruments (variable + fixed rates)

* Preliminary figure

Source: Ministry of Finance % % %

16,0 14,8 13,7 12,1 10,7 10,6 23,2 21,0 20,7 17,5 19,5 17,4 5 10 15 20 25 2013 2014 2015 2016 2017 *) Jan 18 Variable rate ratio [%] Refixing rate [%]

210 226 133 154 147 108 168 48 126 134 67 100 29 130 90 56 97 5 98 26 57 7 15 26 23 21 32 84 140 123 133 140 126 110 123 92 89 70 24 23 20 19 17 12 30 6 24 29 2 2 2 32 21 134

50 100 150 200 250 300 350 400

2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044- 2055

Other Currencies IDR Denominated 11,7 10,7 12,2 12,1 11,7 10,9 46,7 43,4 44,5 42,6 40,4 41,1 10 20 30 40 50 2013 2014 2015 2016 2017 *) Jan 18 FX Debt to GDP ratio (%) FX Debt to total debt ratio (%)

1 2

8,6 7,7 8,4 6,5 10,1 7,9 21,8 20,1 21,4 22,7 25,3 23,2 33,4 33,9 34,7 36,0 39,8 38,1

0,0 10,0 20,0 30,0 40,0 50,0 2013 2014 2015 2016 2017 *) Jan 18 in < 1 year (%) in < 3 year (%) in < 5 year (%)

SLIDE 51

50

33,7% 31,0% 23,9% 22,5% 27,3% 23,4% 25,8% 33,8% 30,8% 37,8% 39,9% 34,9% 36,8% 32,9% 32,5% 38,1% 38,2% 37,5% 37,8% 39,8% 41,3%

Dec-13 Dec-14 Dec-15 Dec-16 Jan-17 Dec-17 Jan-18

Foreign Holders Domestic Non-Banks Domestic Banks

Profile le

f

Total al Centr ntral al Gover ernment ment Deb ebt

More Balance nce Ownership rship In Terms

f

Holders rs and Tenors rs

Foreig ign n Owne wnership p of Governm nment nt Secu curitie ities at Long nger Teno nors Hold lders of

f Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

5,2% 4,6% 3,2% 3,5% 5,0% 6,7% 5,4% 3,7% 1,3% 5,3% 5,1% 5,5% 12,9% 15,2% 11,8% 17,8% 17,3% 17,0% 32,0% 33,6% 39,0% 37,4% 35,6% 34,3% 44,5% 42,8% 44,7% 36,0% 37,0% 36,5% 32,5% 38,1% 38,2% 37,5% 39,8% 41,3% 0% 20% 40% 60% 80% 100% Dec 13 Dec 14 Dec-15 Dec-16 Dec-17 Jan-18 0-1 ≥1-2 ≥2-5 ≥5-10 ≥10 %Foreign Ownership of Total

SLIDE 52

51

Owner ersh ship ip of IDR Tra radab able le Cen entr tral al Governm rnment ent Securit urities ies

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

(IDR DR tn)

Source: Ministry of Finance

Descr criptio iption Dec-14 14 Dec-15 15 Dec-16 16 Jan-17 17 Jun-17 17 Dec-17 17 31 31-Jan Jan-18 18 Banks* nks*

375. 5.55 55 31.0 .04% 4% 350. 0.07 07 23.9 .95% 5% 399. 9.46 46 22.5 .53% 3% 493. 3.82 82 27.2 .27% 7% 399. 9.19 19 20.4 .45% 5% 491. 1.61 61 23.4 .41% 1% 544. 4.59 59 28.8 .85% 5%

Govt Institutio titutions ns (Bank nk Indone nesia**)

41.6 .63 3 3.44 44% 148. 8.91 91 10.1 .19% 9% 134. 4.25 25 7.57 57% 53.3 .31 2.94 94% 175. 5.89 89 9.01 01% 141. 1.83 83 6.75 75% 58.1 .16 2.76 76%

Bank Indonesia (gross)

157.88 8.90% 163.63 9.03% 180.28 9.23% 179.84 8.56% 180.18 8.55%

GS used for Monetary Operation

23.63 1.33% 110.32 6.09% 4.39 0.22% 38.01 1.81% 122.02 5.79%

Non-Banks nks

792. 2.78 78 65.5 .52% 2% 962. 2.86 86 65.8 .87% 7% 1,239 39.5 .57 69.9 .90% 0% 1,264 64.0 .02 69.7 .79% 9% 1,377 77.1 .15 70.5 .54% 4% 1,466 66.3 .33 69.8 .83% 3% 1503. 3.99 99 71.3 .39%

Mutual Funds

45.79 3.78% 61.60 4.21% 85.66 4.83% 87.84 4.85% 91.56 4.69% 104.00 4.95% 104.31 4.95%

Insurance Company

150.60 12.45% 171.62 11.74% 238.24 13.43% 241.25 13.32% 254.21 13.02% 150.80 7.18% 154.89 7.35%

Foreig ign n Hold lders

461. 1.35 35 38.1 .13% 3% 558. 8.52 52 38.2 .21% 1% 665. 5.81 81 37.5 .55% 5% 685. 5.51 51 37.8 .85% 5% 770. 0.55 55 39.4 .47% 7% 836. 6.15 15 39.8 .82% 2% 869. 9.77 77 41.2 .29% Foreign Govt's & Central Banks 103.42 8.55% 110.32 7.55% 120.84 6.81% 118.91 6.57% 131.94 6.76% 146.88 6.99% 145.74 6.92%

Pension Fund

43.30 3.58% 49.83 3.41% 87.28 4.92% 86.95 4.80% 89.11 4.56% 198.06 9.43% 202.81 9.63%

Individual

30.41 2.51% 42.53 2.91% 57.75 3.26% 57.69 3.19% 60.49 3.10% 59.84 2.85% 56.42 2.68%

Others

60.51 5.00% 78.50 5.37% 104.84 5.91% 104.78 5.79% 111.23 5.70% 117.48 5.60% 115.79 5.50%

Total

1,209.96 100% 100% 1,461.85 100% 100% 1,773.28 100% 100% 1,811.14 100% 100% 1,952.23 100% 100% 2,099.77 100% 100% 2,106.74 100% 100%

SLIDE 53

52

Positi tive ve Response nse

f

Gover ernme nment nt Secu curi riti ties es Issu suan ance ce in 201 017

The average incoming bids in 2017 is IDR27.99

tn/auction, higher than 2016 (IDR19.05 tn/auction)

The average awarded bids in 2017 is IDR11.74 tn/

auction, higher than 2016 (IDR9.37 tn/auction)

IDR bn bn Increasing Incoming Bids in 2016’s Government Securities Issuance

Source: Ministry of Finance

Pricing g Date March h 22, 2017 May 31, 2017 July 11, 2017 2017 Decemb ember er 4, 2017 Instrumen ment Global Sukuk Samu murai Bonds Global Conventio tional Bonds Euro-Den Denomi minated ted Bonds Global Conventio tional Bonds (Pref efundin ing g for 2018) Tenure 5 yr 10yr 3 yr 5 yr 7 yr 10 yr 30 yr 7 yr 5 yr 10 yr 30 yr Nomi minal US$1 bn US$2 bn JPY40 bn JP50 bn JPY10 bn US$1 bn US$1 bn EUR1 bn US$1 bn US$1.25 bn US$1.75 bn Coupon Rate 3.40% 4.15% 0.65% 0.89% 1.04% 3.85% 4.75% 2.15% 2.95% 3.50% 4.35% Yield 3.40% 4.15% 0.65% 0.89% 1.04% 3.90% 4.80% 2.178% 3.00% 3.55% 4.40% Incomi ming Bid US$10.8 bn bn JPY100 bn bn US$7.3 bn bn EUR4.3 bn bn US$9.9 bn bn

2,67 2,00 2,07 2,81 2,37 2,04 1,98 2,83 3,36 1,84 2,12 0,00 1,00 2,00 3,00 4,00

20

40 60 80 100 120 140 160 180 200 Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS)

SLIDE 54

Monetar ary and Finan anci cial al Fact ctor: r: Cr Credible Monetary ary Policy cy Track ck Reco cord and Favour urab able le Financ ncial ial Sect ctor

Sec ection tion 5

SLIDE 55

Bank Indonesia’s Policy Mi Mix 2018

To Mainta tain in Macroe

eco

conomic and Finan ancial cial Sy Syste tem Stabi bili lity ty

53

1.

1. Mone

netary ary Poli licy: y:

a. Accelerate

interest rate reduction, especially

n

bank lending

b. Stabilize

exchange rate consistent with fundamental

c. Accelerate

implementation

f

reserve requirement averaging 4.

4. Payment

yment Sy Syste tem Polic licy: y:

a. National

Payment Gateway (NPG)

b. Electronification:

Social program, e-payment for government

c. Financial

technology 3.

3. Finan

ancial ial Mark rket Dee eepen ening ing:

a. Developing

market instruments for financing infrastructure

b. Developing

financial market infrastructures,

eg. market
perators

& centralized counterparty (CCP). 2.

2. Macroprud

ruden ential ial Polic icy:

a. Introducing

Macroprudential Intermediation Ratio (MIR)

b. Introducing

Macroprudential Liquidity Buffer (MLB) 5.

5. Coor
rdina

inatio tion with th

ther

her Autho thoritie ities:

a. Controlling

inflation: TPIP, TPID

b. Structural

reforms: Government

c. Financial

deepening & stability: KSSK, OJK

3 2 4 1 5

Bank Indone

nesia

sia 2018 Strateg tegic ic Polici cies es

Coordination with

ther Authorities

SLIDE 56

55

Ban ank Indones esia ia Policy cy Mix: Febr bruary ary 2018

The e BI Board ard of Gov

ver

ernors

rs agr

gree eed on 14th th and d 15th th Februar ruary 2018 18 to hold ld the e BI 7-days days Rev ever erse e Repo

Rate

te at 4.25 25%, , while ile maint intainin ining the he Dep epos

sit

it Facility lity and d Lend nding ing Facility lity rate tes at 3.50 50% and d 5.00 00% res espec pective tively, y, effective tive 19th th Februa ruary ry 2018 18

Continues to strengthen policy coordination between Bank Indonesia and the Government in anticipation of a potential build-up

f inflationary

pressures, specifically from volatile foods. Remains vigilant of emerging global financial market uncertainty, while continuing exchange rate stabilisation measures to safeguard the currency’s fundamental value and maintain market mechanisms. Projects the domestic economy to expand in the 5.1-5.5% (yoy) range in 2018 Continues to monitor the risks, including global risks such as growing uncertainty in the global financial markets owing to anticipation of a higher- than-expected FFR hike, coupled with the rising oil price, as well as the domestic risks linked to

ngoing corporate

consolidation, a sluggish bank intermediation function and inflation risk. Holds the BI 7-day Repo Rate at 4.25% Predicts stronger credit and deposit growth in 2018, improving respectively to 10-12% (yoy) and 9-11% (yoy) in line with the expected economic recovery and progress in terms of corporate and banking sector consolidation

SLIDE 57

56

Princi ciple les

f

Average ge Re Reserve erve Re Requi uireme rement nt Ra Ratios

s Improve

vement ent

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

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

Improvement

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

perational

framework reform implemented by Bank Indonesia since 2016.

Monetary

policy

perational

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

f

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

The current improvement aims to elevate flexibility in

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

Consid ider eratio tions for r the Average rage Reserv rve Requir irem ement ent Ratios ios Impro rovement t

SLIDE 58

57

Pri rincip iples les

f

Mac acropru rudentia dential Inte term rmedia ediatio tion Ratio (MIR) R) an and Mac acropru rudentia dential Li Liqu quidity idity Buffer er (MLB LB)

Financial sector behavior, especially in the banking sector, tends to be procyclical with the rise and fall of the economy. When the economy is doing well, banks will expand and increase risk taking behavior. On the contrary, when the economy is slowing, banks tend to hold back from expanding by witholding credit

disbursement. On the other hand,

banking liquidity ratio tends to decrease during economic expansion and is at the lowest just prior to a crisis. Bank Indonesia enhances its macroprudential policy by implementing the Macroprudential Intermediation Ratio and the Macroprudential Liquidity Buffer to prevent and reduce risk and procyclical behavior of banks. The policy is expected to promote banking intermediation function to the real sector in line with the economic capacity and growth target while also maintaining prudential principles, and addressing liquidity procyclicality issues. Banks procyclical behavior can potentially disrupt the balanced, good quality intermediation function in the financial system. Moreover, liquidity risk can amplify other risks into becoming systemic risks.

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 5

The policy is also applied to shari’a banks to strengthen intermediation and improve banking resilience. This macroprudential instrument is procyclical in nature and can be adjusted in line with the economic and financial cycle.

SLIDE 59

58

Pri rincip iples les

f

Mac acropru rudentia dential Inte term rmedia ediatio tion Ratio (MIR) R) an and Mac acropru rudentia dential Li Liqu quidity idity Buffer er (MLB LB)

a. a. Macropru prudent dentia ial l Inter ermedia ediatio tion Ratio io (MIR)

Secondary y RR MLB Conventio tional Comme mmercia ial Banks Shari’a Banks Formula Calculation

Percentage of rupiah

securities held by conventional commercial banks to rupiah deposits

No existing Secondary

RR for shari’a banks and business units

Percentage of rupiah securities held by conventional

commercial banks to rupiah deposits that can be used in

pen market operations, among others include BI

Certificate, BI Deposit Certificate, and Tradeable Government Securities

For conventional commercial banks with a shari’a

business unit, securities of and deposits held by the shari’a business units will be calculated in the MLB Percentage of rupiah securities held by shari’a banks to its rupiah deposits that can be used in

pen market operations, among
thers include BI Certificate, BI

Deposit Certificate, and Tradeable Government Securities Magnitude 4% of rupiah deposits Flexibilty No flexibility Under certain conditions, max. 2% of rupiah deposits may be repoed to BI through the open market operations to meet liquidity needs Effective Date 16th July 2018 1st October 2018

b. b. Macropru prudent dentia ial Liquidity idity Buffer er (MLB) B)

RR RR-loan to funding g ratio (RR-LFR)/ LFR)/additio tional RR linked ed to financin ing g to deposits its ratio MIR Conventio tional Comme mmercia ial Banks Shari’a Conventional Banks and Busines ess s Units Formula Calculation For Conven entio tional Banks (RR-LF LFR): R): Credit Deposits + Securities issued For Shari’a Banks and Business Units: (Additional RR linked to the financing to deposits ratio): Financing Deposits Credit + Securities held Deposits + Securities issued Credit + Shari′a Securities held Deposits + Shari′a Securities issued Magnitude Lower bound 80% and upper bound 92% Effective Date 16th July 2018 1st October 2018

SLIDE 60

59

Ban ank Ind ndonesia

nesia

Policy icy Mix: : Maint intaining aining Stability, bility, Supp pporting rting Growth th

Further relaxation of

LTV for property loans (Sept)

Strengthening

systemic surveillance & Crisis Management Protocol (April)

E-money for social

transfer (Nov)

Financial Technology

(FinTech) Office (Nov)

New Rupiah issuance

(Dec)

Obligation to use

IDR in domestic transaction (March)

Non-cash

movement (GNNT)

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

from secondary market in time of distress (capital reversal) or large mis-alignment

BI 7-day RR Rate

cut of 25bps to 4.50% (Aug)

Further BI 7-day

RR Rate cut of 25 bps to 4.25% (Sept)

Further lowering RR

by 100bps to 6.5% (Feb)

Lowering RR by

50bps to 7.5% (Nov)

Policy Rate cuts of

150bps

Moving from BI Rate

(12 month) to BI 7- day Reverse Repo Rate (Aug) 1. 1. Monetary y Polic icy Polic icy Rate Reser erve ve Requir ireme ement 2. 2. Excha hange ge Rate Polic icy 3. 3. Macropr pruden entia tial Polic icy

Relaxation of LTV

for property and automotive loans (June)

BI Rate cut of

25bps (Feb)

Implementation of

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

Initiative to issue

macroprudential regulation on Financing to Funding Ratio (FFR) 4. 4. Payme ment System em Polic icy

National Payment

Gateway (June)

Modernized cash

management underway 2015 2015 2016 2016 2017 2017

Impacts of LTV Relaxation Monetary Transmission

Polic icy Rate ↓ 200 bps

(Jan‘16 – Sept’17)

RR RR ↓ 150 bps

(Dec’15 –Mar’16)

Deposit it Rate

(Jan’16 – Jan’18) 8)

↓ 196 bps (5.98%)

Lendin ing g Rate

(Jan’16 – Jan’18)

↓151 bps (11.32%)

Deposit sit

(Jan’17 – Jan Jan’18 (LBU) Total ↑ Rp403 T (8.36% yoy)

Lendin ing

(Jan Jan’17 – Jan Jan’18 (LBU) Total ↑ Rp319 T (7.40% yoy)

Des-16 Des-17 Construction 20.33 15.48 Real Estate 22.22 5.67 Housing 7.67 10.53 Total 7.86 8.24 Loan Growth % (yoy)

SLIDE 61

60

9,33 8,76 7,32 6,37 6,06 2,33 0,05

0,30
0,48
3,29

4,48 3,80 3,29 3,92

0,03

0,45 1,34

2,89

3,92 1,14

6,00
4,00
2,00

0,00 2,00 4,00 6,00 8,00 10,00 12,00 ZAR MYR EUR THB KRW INR IDR PHP BRL TRY Point to Point Average 3,00 4,00 5,00 6,00 7,00 8,00

Stab able le Monetary tary Environment ment Despite spite Chal alleng lenges es

Rupia iah Exc xchang nge Rate Rema main ins Compar parable ble to Peers Well ll Mainta ntain ined Inflatio lation Ensur ured Price ce Stability bility Streng ngth thene ned Monet netary Polic icy Frame mewo work Credit Growth th is Expe xpecte cted to Pick ck Up

(%, YoY)

YTD 201 2017* vs 201 2016

BI 7Day RR Rate: 4.25 25

(%)

LF Rate: 7.00 LF Rate: 5.00 00 BI Rate: 6.50 DF Rate: 3.50 50

19 August 2016 16

The New Monetary Operation ion Framewo work

%

*data as of January 31st, 2018

Source: Bank Indonesia

3,25 2,69 2,62 5,82

2

3 8 13 18 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 2013 2014 2015 2016 2017 2018 (%)

CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)

8,15 8,46 4,64 10,89 89 5 10 15 20 25 30 35 40 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2013 2014 2015 2016 2017 Total Growth Working Capital Loans Investment Loans Consumption Loans

SLIDE 62

61

5 Meas asur ures es to Control

l

Inflatio tion

On January ary 22nd

nd,

2018 the National nal Infla latio tion Contr trol Coordin inatio tion Center has agreed ed

n

five strateg egic ic measures es to contr ntrol infla latio ion in 201 2018 within in the target et corr rrid idor

f

3.5±1%, while le also setting ng the infla latio tion targets ets at 3.5±1% 1% for 2019 and 3±1% % for 2020 and 2021.

Source: Bank Indonesia

1 2 3 4 5

Dampening ning the second nd-round und effect

f

aminis ister tered ed pric ice adjus usmen ents ts Main intainin taining volatile tile food (VF) infla latio tion at 4-5% Stren ength gthening ing quality ity contr trol

f

governm ernmen ent polic icies ies. Stren ength gthening ning coordin inatio tion betwee een centr tral and regio ional al governm ernments nts as well as Bank Indones nesia ia Stren ength gthening ning the Bank Indones nesia ia polic icy mix to mainta tain in macroec econo nomic ic stabilit lity

1. Ensuring food production 2. Strengthening the government’s food stock 3. Improving production management through corporate/cooperative farming 4. Improving rice miling yield & rice quality 5. Distributing subsidised rice for low- income households & non cash food assistance in time 6. Developing an accurate database on rice production 7. Synergizing between farmers & downstream industries

SLIDE 63

62

Improving ving the Effect ectivene iveness ss

f

Moneta tary ry Polic icy Tran ansm smissio ission

Bank k Indo dones esia ia has instit tituted ted a Refor

rmula

latio ion of Moneta etary ry Policy licy Opera ratio tions Fra ramew ework k whic ich h consis 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

gram.

Source: Bank Indonesia

Enhancement

f

monetary policy signal Enhancement

f

banking liquidity management Implem emen enta tatio tion

f

BI 7 Day Revers erse Repo Rate Implem emen enta tatio tion

f

Reserve Requir iremen ent (RR) Averag aging ing Reformula rmulatio ion

f

Mon

netary

tary Pol

lic

icy Operatio iona nal Framewo work rk Enhancement

f

instruments and transactions Implem emen enta tatio tion

f

Money ney Mark rket et Deepen ening ing Progr

gram

SLIDE 64

63

Enhan anceme cement nt

f

Monetary tary Oper eratio tions ns Fram amew ework

rk

...posit sitive ve resul ults ts thus far

Can be traded among contributor banks for 10

minutes.

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

minutes.

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

CURR RREN ENT JIBOR BOR (as per June 1st, 2016) PREVIOUS IOUS JIBOR BOR

IBMM: Interbank Money Market MO: Monetary Operation

Domes mestic tic Mone ney Marke ket t Yiel ield Curve ve (2nd

nd week

k of Febr brua uary 201 2018)

Source: Bank Indonesia

Domestic ic mone ney mark rket yield ld curv rve tend nd to conv nver erge Mone netary ary

peration

ion term rm stru ructu ture is being ing refer erred ed by mone ney mark rket rate tes

O/N 1W 1W 1M 1M 3M 12M 12M 6M IBMM MO MO

SLIDE 65

64

Interme ermedia diatio tion Expected cted to Furt rthe her Expan and in 2018

The he in inter erme mediatio ion gr growth is is stil still at at a moder erate le level el in in lin line wit ith conso consolid idatio ions in in the he rea eal sect sector as as wel ell in in ban ank loan loans. In Inter erme mediatio ion is is projec jected ed to to im impr prove next year year (10 10-12 12%). In In the he domest estic ic ca capita pital mar market ets, s, capit apital al raisin aising by by corp corporatio ions (partic icula larly ly right ht issues es and corporate bond issuan ance ce) remain ins strong.

Source: Financial Service Authority (OJK)

The he growth th of financ ncin ing dis istrib tributed uted by multif tifin inanc nce compan panie ies was 7,05% % (yoy) in Dec-17 17 Gross premi mium um reve venu nue in the domes mestic tic insur uranc nce indust ustry is also continu tinuousl usly growing wing Capita ital l raisin ing throug ugh rights ts issue ues and corpor porate te bond nd issua uanc nce in Jan-Dec c 2017 increased by 30.77% % (yoy) The growth th of bank k lend nding ng was 8.24% % (yoy) as of Dec-17 17

IDR tn IDR mn IDR tn IDR tn 4.605 4.738 7,47% 8,24% 0% 2% 4% 6% 8% 10% 1.000 2.000 3.000 4.000 5.000 Bank Loans YoY Growth (rhs) 413 415 7,58% 7,05%

5%

5% 15% 25% 35% (50) 50 150 250 350 450 Financing YoY Growth (rhs) 12,1 9,6 67,1 88,2 116,2 156,7 20 40 60 80 100 120 140 160 180 2012 2013 2014 2015 2016 2017 IPO Equity Rights Issue Corporate Bonds & Sukuk 406 50 100 150 200 250 300 350 400 450 2012 2013 2014 2015 2016 2017

SLIDE 66

65

Finan ancial cial Institutio titutions ns Remain ain Robust

CAR of the e banking g secto tor rema mains at a high h level as s of Dec-17, CAR & Tier Tier-1 Capit ital was 23.36% & 21.54%, respec pectiv tively Risk-based ed capita tal (RBC) C) of the insurance e industr try also rema mained ed high gh, well above the mi minimu mum m thres esho hold (120%) %) Gearin ing g ratio of mu multifin finance comp mpanies es was at 2.99 time mes (well below the ma maximu mum m requir ireme ement t of 10 time mes), ), provid idin ing g amp mple room m for future e growth th Profita itabil ility ty of the e banking g secto tor is relativ tivel ely stable

Do Domes estic tic fin inancial in insti titu tution tions exhib xhibit it genera generall lly ro robust condit

ndition
ion. Capit

pital ade dequacy is is main intain tained ed wel ell above ve the the min inimum re require remen ents ts. Pro Profit itability ility and le leve verage ge are re main intain tained ed at at a suffic icien ient level

level. Furth

rther er, ge gearin ring (debt (debt-to to-eq equity) ity) rati tio of

f multi

ltifin inance com

mpanie

ies prov

vides

ides ample ple roo

om for
r futu

ture grow

wth

th.

Source: Financial Service Authority (OJK)

23,37 23,36 21,69 21,54

19,5 20,0 20,5 21,0 21,5 22,0 22,5 23,0 23,5 24,0 %

492% 521% 310% 321%

180% 210% 240% 270% 300% 330% 350% 400% 450% 500% 550% 600% 650% 700% Life Insurance General Insurance (rhs)

5,31 5,32 2,48 2,45

0,0 1,0 2,0 3,0 4,0 5,0 6,0 % Net Interest Margin Return on Assets 2,99 1,0 1,5 2,0 2,5 3,0 3,5 4,0

SLIDE 67

66

134 203 90 140 190 240 Life Insurance General Insurance % threshold 100%

104,79 21,95

5 10 15 20 25 40 50 60 70 80 90 100 110 120 % %

threshold Liquid Assets/Non-Core Deposits=50% threshold Liquid Assets/Deposit=10%

Adequa quate te Li Liquidit uidity, y, Man anag ageable eable Cred edit it Risks ks

Ba Banks ks are re eq equipp ipped ed with th suffic icien ient li liquid id assets

ets. In

Insurance in industry try als lso de demon

nstr

trates tes an an en enha hanced ed level level of

f in

inves estme tment ade dequacy rati tio. The non-per perfor

rmin

ing loa

an/financing (NPL/NPF)

NPF) ratio tio is is main inta tain ined ed below

w the thres

esho hold ld.

The ratio of liquid id assets s to deposits sits in the banking g secto tor was well ma maintained ed at a high gh level el... .. As of Dec-17, the e gross & net NPL L ratios of the banking g secto tor were e 2.59% & 1.11% respectiv pectivel ely, ma maintained ed below the e thres esho hold NPF ratio of the mu multifi finance industr try was 2.96% as of Dec-17, ma maintained ed well below the 5% thresho eshold Inves estmen tment t adequacy ratio in the insurance e industr try y is ma maintained ed above 100%

Source: Financial Service Authority (OJK) *

*The spike in this ratio was due a change in calculation methods.

1,11 2,59 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 % NPL Net NPL Gross 2,96% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0%

SLIDE 68

67

Relativel tively low mar arket ket ri risks

Market rket ris risks are re gen general ally ly man anage ageable able in in lin line with with the the stren trengthen gthening tren trend of

f the

the do dome mesti tic fin inan ancial al market

rket. Net

et open

pen pos
sit

ition ion of

f th

the bankin king sect ector re remain ins lo low, while hile the the in inves vestme tment va valu lue of

f do

domes esti tic in instit titution tional in inves vestors rs (m (mutual funds ds, in insure rers, and pen pension ion funds ds) contin tinues es to to grow

w.

Net open n positio ition n in the bankin king secto ctor was kept pt far below low the maxi ximu mum m limit it (20%) %) The inve vestme tment nt value lue of insur urers & pens nsio ion n fund nds continu tinued an increasing ng trend nd Multif tifin inanc nce companies’ exposures to foreign debt have generally been mitig igate ted throug ugh hedgin ing measur ures Mutual funds’ net asset value (NAV) continued to grow in line with the streng ngth theni ning ng domes mestic tic financ ncial l marke ket

Source: Financial Service Authority (OJK) 1,67 2,04 1 2 3 4 %

1.007,38 254,48

100 150 200 250 300 550 650 750 850 950 1.050 IDR Tn IDR Tn Investment of Insurers Investment of Pension Funds (rhs) 177 83 60 80 100 120 140 160 180 IDR tn Domestic Debt Foreign Debt

4.800 5.000 5.200 5.400 5.600 5.800 6.000 6.200 6.400 6.600 6.800 7.000 260,0 280,0 300,0 320,0 340,0 360,0 380,0 400,0 420,0 440,0 460,0 480,0 500,0 Oct-16 Nov-16 Dec-16 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 IDR tn NAV of Mutual Funds (lhs) IDX Stock Composite Index (rhs)

SLIDE 69

68

Cap apital ital Mark rkets ts Contin tinue ue to Streng ength then en

In In lin line with ith the the improv

vin

ing gl glob

bal

and domes estic tic ec econ

nomic

ic pros

spec

pect, t, the the do domes estic tic capit pital marke rkets ts cont

ntin

inue to to de demon

nstr

trate te a stre rengthen thenin ing tren

end. The vola

latil ility ity of

f the markets

kets is is rela latively tively low low.

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

Both th the stock ck & bond nd marke kets ts continu tinued a streng ngth theni ning ng trend nd, with th a low w leve evel l of vola latility tility Nonresid ident nt inflow lows in the dome mestic tic capit pital l marke ket t rema main in signif ignific icant, nt, particu ticular larly ly to the gove vernm nment nt debt bt marke ket In 2017, the IDX Stock ck Composite posite Index grew w by 4.16% % (ytd td as of 23 Feb b 2018), , one of the best-pe performi ming equi uity ty indice ces in the regio ion In line ne with th the stable ble IDR and improvin ving domes mestic tic prospe pects cts, the gove vernm nment nt bond nd yiel ields tend nd to decl clin ine

26,86

5,51

25,08 5,55 19,10 9,45 6,56 25,11 18,12 35,99 19,99 21,76 13,66 20,12

12
5

2 9 16 23 30 37 TURK BRAZ RUS AS EURO JPN MAL CHIN PHIL SIN HKN INDO KOREA THAI WORLD

%

*: as of 23 February 2018 4.200 4.700 5.200 5.700 6.200 6.700 7.200 180 190 200 210 220 230 240 250 260 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 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 Comp Bond Index Comp Stock Index (rhs)

50

50 100 150 200 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 2016 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 2017 Jan-18 Feb-18 IDR tn Gov't Debt Securities Equity 12400 12600 12800 13000 13200 13400 13600 13800 5 6 7 8 9 10 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 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 Yield (%) 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs)

SLIDE 70

69

Mai aintain taining ing Finan ancial cial Sys yste tem Stability ability

…maintaining resili ilienc nce in confr front nting ing possible le shocks and enhancin ancing financi ncial al system stabilit ity

Stren engt gthen enin ing finan ancial ial sector ector superv ervis ision ion

Assessment
n

the soundness

f

financial institutions

Liquidity

coverage ratio for banks

Regulations
n

risk management for financial institutions

Minimum

capital requirement for banks

Enhancement
f

GCG for financial institutions and publicly-listed companies

Stren engt gthen enin ing & stru ructu turin ring financ ancial ial sector tor base sed

n

inte tern rnatio tional al sta tand ndar ards ds

Risk-based

supervision for all financial sectors

Regulations
n

domestic systemically-important banks and capital surcharge

Enhancement
f

crisis management protocol and interagency coordination Financ ncia ial cong nglo lomerate tes account

unt

for 66.77% %

f

the total assets

f

financial sector…

Improv

vin

ing the inte tegr grate ted regu gula latio tion & supervision framework…

Such

improvement has become even more important due to the dominance

f

financial conglomerates in the domestic financial sector.

OJK

has issued regulations

n

GCG, risk management, and minimum capital requirements for financial

conglomerates. These

will be followed by regulations

n

liquidity management, capital management, and intragroup transaction exposures.

Source: Financial Service Authority (OJK), June 2017

66,77% 33,23%

Financial Conglomerates Others

SLIDE 71

70

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

Source: Bank Indonesia

In Apr-2016 2016, the Minis ister ter of Finance, e, the Gov

ver

ernor r of Bank k Indo dones esia ia, and d the Chair irman of the Board d of Com

mmis

issio ioner ers of

f the Financia

ial l Serv rvic ices es Author thority ity launched hed a Coo

ordin

dinatio ion For

rum for
r 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

rmula

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

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

Mission: Financial Market as Sources of National Development Financing

1 2 3

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

3 Pilars 6 Markets 7 Elements

f

Financial Market Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

SLIDE 72

71

Contin tinuou

us

Program am

n

Cap apital ital Mar arket et Dee eepen pening ing

…continuously strengthened, including through capital market deepening initiative ives

The utiliza ilizatio tion of capit pital l marke rkets ts by domes estic tic cor

rpo

pora ratio tions (inclu ludin ding g financia ial l instit titution tions) demons

nstr

trates es an incre reasing trend

Stren engt gthen enin ing mark rket infras astructu ructure

Expansion
f

Single Investor Identification (SID) coverage

Development
f

electronic trading platform (ETP) in the debt market

Development
f

integrated investment management system

Enhancement
f

the clearing and settlement process

Enhancement
f

capital market data warehouse

Enhan hancin ing the supply ly-side ide

Simplification
f

public-offering requirements & procedures

Development
f

financial market products (mutual funds, private equity funds, REITs, ABS)

Development
f

municipal bonds

Cross-border
ffering

(harmonizing regulations with ASEAN Disclosure Standards established by ACMF)

Enhan hancin ing the deman and-side ide

Expansion
f

the domestic investor base (conducting investor education programs)

Expansion
f

mutual fund distribution channels, including the marketing methods

f

securities companies

Stren engt gthen enin ing govern rnance nce

Development
f

market players’ capacity

Enhancement
f

GCG for publicly-listed companies

Development
f

repo regulations and infrastructure

Source: Financial Service Authority (OJK), July 2017

12.1 4.1 67.1 53.8 116.2 84.7 20 40 60 80 100 120 140 2012 2013 2014 2015 2016 Jan-Jun 2017 IDR tn IPO Equity Rights Issue Corporate Bonds & Sukuk

SLIDE 73

72

Finan ancial cial Secto ctor: r: Foste teri ring ng Dome mestic stic Growth th

…boosting domestic econo nomic ic activit itie ies and supporting ing the national nal economic mic develo lopmen ment

Fundin ding

f

infras astr tructu ture & priorit

rity

econo nomic ic sec ecto tors rs

Enhancement
f

NBFI

wnership

in government bonds

Private

equity funds for infrastructure financing

Asset-backed

securities specifically designed for secondary mortgage financing

Insurance

for farmers and fishermen

Capacit pacity building ilding

f

finan ancia ial instit titut ution ions

Strengthening

the capital

f

financial institutions to increase their financing capacity

Expansion
f

the business lines

f

multifinance companies

Capital

requirements for rural banks based

n

their

perational

zones

Dev evelop lopmen ent

f

finan ancial ial products ducts & serv rvic ices es

Expansion
f

the distribution channels for financial products & services

Development
f

sustainable finance regulations

Utilization
f

KYC information from third parties

Facilitating

access to capital market as a source

f

funding (e.g. simplification

f

public

ffering

procedures)

Capital

market deepening initiatives

Dev evelop lopmen ent

f

Islam lamic ic finan ancial ial secto tor

Strengthening

the capital

f

Islamic financial institutions

Spin-off
f

the Islamic business units

f

commercial banks

Development
f

Islamic financial product regulations (sukuk, mutual funds, asset-backed securities)

Continuous

education & socialization

n

Islamic financial products & services

Source: Financial Service Authority (OJK)

SLIDE 74

73

BI’s Roles in Supporting Distribution

f

Non-Cash Cash Socia ial As Assis istan tance ce (NC NCSA) A)

BI supports ports govern rnment nt’s progr gram am

f 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

ugh

the electr tronic nic payme ment nt syst stem

em. In

the futur ure, electr ectron

nic

ic mechan hanism ism disb sburs rsem ement nt will be also applied ied to LPG subsidy. idy. NCSA SA Prog

grams

Family ly Hope Progr gram am (Progr gram am Keluar arga ga Harapan an

PKH

KH) Smart rt Indones esia ia Progr gram am (Progr gram am Indones nesia ia Pintar tar-PIP IP) Non Cash Food

d

Assistanc nce (Bantua uan Panga gan Non Tunai – BPNT)

2016-2020

Pilot

t

Project

ject

Gradu adual Implem lemen entatio tion

Inter erconnecte cted & inter eroper erable le payment system em

LPG Subsid idy

Full Implem lemen entatio tion

XXYYZZ 12345678

9876543210

SLIDE 75

74

Progr

gress

ss

f

NCSA Progr

grams

ams

Famil ily Hope Program am (Program am Keluar uarga ga Harapa apan

PKH)

H) Non Cash Food Assis ista tanc nce (Bantu ntuan an Pangan gan Non Tunai nai - BPNT)

The

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

household. PKH

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

As of December 2017,

PKH is distributed to 6,0 million households on non-cash basis.

PKH

will be expanded to 10 million households in 514 regencies/cities in 2018.

BPNT

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

As of December 2017, BPNT was distributed to

1,2 million households in 44 cities.

BPNT will be expanded

to 10 million households in 217 regencies/cities on the 25th of each month in 2018.

SLIDE 76

75

Strong nger er Fundam amen entals tals Fac acing ng the he Headw adwind inds

82,4 12,1 6,8 1998 2008 Sep-15 30 30 3.8 2,8 1998 2008 Agu-15 17,4 50,2 1998 2008 Sep-15

Inflatio lation n Rate te (%) %) IDR Move veme ment nt (%) Non-Pe Performi ming ng Loan/NPL PL (% (%) Govern ernment t Debt bt/G /GDP Foreig ign n Reserve ves (USD bn)

100.0% 1998 98 27.4% 2008 08 29.2% 2017 2017 8.6x 1998 98 3.1x 2008 08 2.7x 201 2017 116.8% 1998 98 33.2% 2008 08 34.82% 201 017

More Liqui uid Marke ket (%) %) Exte xterna nal l Debt t (Pub ubli lic c & Priva vate te) to FX Reserve ve Ratio io Exte xterna nal l Debt/GD t/GDP

Inflation controll lled ed within the target et range IDR sligh ghtly ly depr prec eciated ed in January 201 2018 NPL lev evel el (gross) s) is below the maximum thres eshold ld of 5% Consisten ently ly well-maintained ned below 30% Significa cantly ly higher er than 1998 98 & 2008, 08, ample to cover er 8. 8.2 months of import and external al debt repay payment Significa cantly ly lower er than 1998 98 crisi sis Sligh ghtly ly high gher er than 2008, 08, but significa cantly ly lower er than 1998 98 January ‘18 131.9 1.98

January ‘18

3.25 (yoy)

December ‘17 2..6 .6 62 62 10,5 5,7 1998 2008 Jul-15

Over ernigh ght interbank nk money market rate is rela latively ly lower er

Dec’ 17

3.87 87 (ytd)

1,34

35
197

Jan-18 2008 1998

SLIDE 77

76

Outlo look

k
f

Dome mesti stic Economy Remain ains Robust st

...d ...domes mestic ic econo nomic ic growt wth is predict icted to be highe her in 201 2018

201 2018 Econo nomic ic Outlo tlook

k

 Economic growth in 2018 is projected in the 5.1-5.5% range, buoyed by investment in ongoing infrastructure projects

coupled with increasing non-building investment, including private investment, specifically machinery and equipment as well as solid export growth as the global economy continues to recover and international commodity prices remain high.

 Inflation is predicted to remain within the target range for 2018, namely 3.5±1%, with the current account deficit is expected

to remain under control and within a safe threshold at 2.0-2.5% of GDP in line with domestic economic improvements.

 Credit growth is predicted to grow in the 10.0-12.0% range, in line with the expected economic recovery and progress in

terms of corporate and banking sector consolidation. Econom nomic ic Growth Infl flation ion CAD AD (% (% of

f GDP)

Credit it Growth

2017 17 Realization alization 5. 5.07 07% 3.61% 1.7% 8.2 .2% %

Source : Bank Indonesia

2018 18 5.1–5.5 5.5 % 3.5±1% 2.0-2.5 2.5% 10 10-12 12% %

SLIDE 78

Progress ssiv ive In Infr frastruc ructu ture Developmen ent: Strong Co Comm mmitme ment

n

Ac Acce celeratio tion

f

In Infr frastruc ructur ture Provisio ion

Sec ection tion 6

SLIDE 79

78

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

The he Governm rnment ent has as Enac acte ted Var arious us Reform rms to Accel eler erate te Infrast astru ructur cture Provisio ion

Fiscal al Reform

rms

Instit titut utio iona nal Reform

rms

Regu gula latory

ry

Reform

rms

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

Viabilit ility Gap Fundin ing (VGF) KPPIP IP Direc ect Lending ing Issuance

f

MoF Reg. No. 223/2012. To increase project financial feasibility by contributing up to 49%

f

the construction cost Availabilit lability Paymen ent Land Revol

lving

ing Fund Issuance

f

regulatory framework for annuity payment scheme by the Government (MoF Reg. No. 190/2015 for Central Gov’r and MoHA Reg. No. 96/2016 for Regional Gov’t.) during the concession period after the project

perational

by private sector in

rder

to make the project bankable Issuance

f

MoF Reg. No. 220/2010 A revolving-fund sourced from State Budget, to accelerate land acquisition KPPIP is actively involved in accelerating delivery

f

priority infrastructure projects

PT. Sarana

na Mult lti Infras astr trukt uktur ur Merging between

PT. SMI

and Gov’t Investment Center (PIP) to become an infrastructure funding company Indones nesia ia Infras as. . Guaran antee tee Fund (IIGF) PPP Unit Provide facilities to help GCA

n

preparing PPP project (PDF/TA) BLU LMAN BLU LMAN is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Issuance

f

Presidential

Reg. No.

82/2015. Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects Land Acquisit itio ion Issuance

f

Presidential

Reg. No.

148/2015. To stipulate land acquisition acceleration based

n

Law

No. 2/2012

Econo nomy Packag kages es Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness

f

economic packages implementation Risk-sharing aring Guideline elines IIGF has issues risk allocation and mitigation guidelines for PPP project

SLIDE 80

79

Reforms Along the Project’s Life Cycle

...to enco cour urag age and accele lerate te infras astruc ructur ure project ct using ng PPP scheme me Governm rnment nt

f

Indone nesia sia

Project

ject

Dev evelop lopme ment Facility lity (PDF) PDF) Viab abil ilit ity Fundin ding Gap (VGF) F) Guar uarant ntee Fund Tax Facilitie lities Availab ailabil ilit ity Payment yment Land nd Acquis uisition ition Preparation Bidding Process Construction

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

n GCA

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

Guaranteeing Govt. contractual

bligations

under infrastructure concession agreements and Mof Regulation No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt’s comitment: US$ 450 mn

MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment

industries. Sector

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

SLIDE 81

80

Effort rts to Accel eler erate te Infras astru tructu cture Provisio sion

Regu gula latio ion improveme ement to to accel elerate land procu curemen ment proce cess ss

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

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

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

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

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

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

Land Procurem rement t Proces ess s as Stipula lated ted in Law No. 2 of 2012

Law No

No. 2/2012 was

was succes essfull lly applied plied in in: 1. 1. Pa Pale lembang – In Indr dralaya sect ection ion of

f the

the Tr Trans Sumater era Toll ll Roa

ad Project
ject

2. 2. Java va Nor

rth

th Line Dou

uble

le Track Rail il Project

ject

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

SLIDE 82

81

Effort rts to Accel eler erate te Infras astru tructu cture Provisio sion

…the establishment

f

Indone nesia ia Asset Manag agemen ment Agency ncy (LMAN) AN)

Source: Ministry of Finance

Governm rnment nt has establi blished shed State Asset Manag agemen ment Unit (LMA MAN) N) as a solution to accele lerate te the land acquisi uisitio ion throug ugh the provisi sion

f

land acquis uisit itio ion fund

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

allocation. Unused

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

ne

agency

1. LMAN

was established in December 2015 through the issuance

f

MoF Reg. 219/2015 concerning State Assets Management

2. In

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

f

Public Works due to US$ 1,081 Mio shortage

f

fund to acquire land for priority toll roads

3. The

scope

f

support is broaden for all National Strategic Projects through the issuance

f

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

4. In

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

f

direct payment scheme

Land Acqui uisi siti tion Budgeting ng Scheme me LMAN at a Glance ce This LMAN initiative ive provid ides es better er flexibi bili lity ty, coordina inatio ion and manag agement nt

f

land acquis uisit itio ion fund provisi sion for National nal Strategic ic Project cts (PSN)

SLIDE 83

82

New ew Fundam ament ental al Regu gula latio tions ns Hav ave Been een Initia tiate ted in 2017

to accele lerate te infras astruc ructur ture project cts delivery ry

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

1

Governm ernmen ent

Reg. No. 13/2017
n

Natio ional al Spatia ial Plan (RTRWN) WN) The issuance

f

RTRWN can resolve spatial planning mismatch in the implementation

f

infrastructure projects listed in the annex

f

Government

Reg. No. 13/2017. A

number

f

breakthroughs were developed, and

ne
f

them is that the Minister

f Agrarian

and Spatial can issue a recommendation

f

spatial utilization; so that the process

f
btaining

project permission can be done.

2

MoF No. 60/2017

n

Procedur edures es for the Provis isio ion

f

Central al Governm ernment ent Guarant antee ee for the Acceler leratio tion

f

the National

nal

Strate tegic ic Proje

jects

Implementa tation tion The supporting regulation for Presidential

Reg. No. 3/2016
n

the Acceleration

f

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

bligation
n

government guarantees to all

PSN. The

guarantee provision is expected to increase the feasibility and trust

f

investors to participate in the implementation

f

PSN.

3

Pres esid iden ential tial

Reg. No. 56/2017
n

Socia ial Impact Handlin ling in Land Acquis isit itio ion Proces ess for PSN This Presidential

Reg. allows

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

fficial

rights

ver

the land required for

PSN. This

regulation helps to solve the land acquisition problem due to community

bjection
ver

the land use.

4

MoF No. 21/2017

n

Procedur edures es for Land Acquis isitio ition for Natio iona nal Strateg egic ic Projects ts and Asset Manag agem ement nt

f

Land Acquis isitio ition by State Asset Manag agem ement ent Agency The implementing regulation

f

Presidential

Reg. No.102/2016
n

Financing

f

Land Acquisition for the Development

f

Public Interest in the Framework

f

the National Strategic

Implementation. This

regulation becomes the legal basis for the financing

f the

procurement

f

National Strategic and Priority Projects by BLU LMAN

SLIDE 84

83

Und nder President sidentia ial Reg. . No.3/2 3/2016 j.o j.o. . the Presid sidential ential Reg. . No.

.58

58/20 /2017, 245 45 proj

jects

cts and nd 2 prog

gram

ams are listed ted as PSN

PSN includes udes 15 s sectors rs at project ct level and 2 sectors rs at program am level

7

IRIGASI

Proje ject

Electricity 1 PROGRAM Small- Medium Airplane 1 PROGRAM

74 74 12 12 6 4 7 54 54 9 3 3 30 30 8 10 10 23 23

61 24 27 13 15

Projects Proyek

93 93 10 10 1 12 12 2

Projects Programs

US$47.3 Bn US$41.7 Bn US$24.3 Bn US$33.2 Bn US$98.8 Bn US$0.8 Bn US$81.1 Bn

Projects Projects Projects Project s Projects Projects Projects Projects Projects Projects Projects Projects Projects ROAD RAILWAY SEAPORT AIRPORT INDUSTRI-AL ZONE HOUSING NATIONAL BORDERS WATER & SANITA- TION IRRIGA- TION DAM TECH- NOLOGY OIL & GAS SMELTER

Projects Projects Projects Projects Projects Projects

1

Project FISHERY

Exchange rate: US$ 1 = IDR 13,500

1

Project SEA DIKE

Progr gram am

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

Kalimantan Sumatra Sulawesi Maluku & Papua Java National

Note: The investment value is based on the updates per October 2017. The data on investment value is under verification process with The Executive Office of President (KSP) and Indonesia’s National Government Internal Auditor (BPKP)

SLIDE 85

84

PSN may ay receiv ive pri rivileg ileges es as stipula pulated ted in the President sidentia ial Reg. . No.

. 3/20

2016 j.o j.o. . the Presid sidential ential Reg. . No.

. 58/2

/2017

01 01 02 03

Determination of National Strategic Projects

04 05 06 07 08 09 10 10 11 12

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

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

SLIDE 86

85

Progres ess

n

245 45 Natio ional al Strate tegic gic Projects ts

8 projects are completed 157 projects & 1 program are in construction1 7 projects are in transaction 73 projects & 1 program are in preparation

Progres ess of Natio tional nal Strateg ategic ic Projec ects + 2 Programs ams (per Janua nuary 2018) The Estimated timated Inves estme tment nt Cost of Natio tional nal Strateg ategic ic Projec ects1

1Exclude 12 projects which investment value are still unknown 2Exchange rate : US$ 1 = IDR 13,500

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

11 Electricity Program in construction category

State Budget 13% SOEs/ RSOEs 28% Private 59%

Tota tal Investm estment nt Value lue2

US$ 327.2 7.2 Billio lion

State Budget US$ 40.6 Bn Bn SOEs/RSOEs US$ 92.9 Bn Bn Private US$ 193.7 Bn Bn

5 S 5 Secto tors rs with Highes est Invest stment nt Value

Energy 12 Projects US$ 93 Bn Electr tric icit ity 1 Program US$ 76.7 Bn Road ad 74 Projects US$ 52.2 Bn Train in 23 Projects US$ 46.2 Bn SEZs and IEs 30 Projects US$ 28.7 Bn

Note: This data will be verified with The Executive Office of President (KSP) and Indonesia’s National Government Internal Auditor (BPKP)

64% 30% 3% 3%

SLIDE 87

86

Progres ess

n

3 37 Pri riori rity ty Projects cts

From the revise ised Nationa ional Str trate tegic gic Projects

jects,

the he Gov

vern

rnment nt has as sele lecte ted a list

f

37 Priorit iority Project

ject

to be the he focus us

f
f

infrastr tructu ture provis ision. ion.

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

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

Note: New Priority Projects are highlighted in the red color

SLIDE 88

87

Progres ess

n

37 Pri riori rity ty Projects cts

Recen ent t Miles esto tones es Prog

gres

ess of 37 Prio iori rity Project

jects (per

er January ry 2018) Fundin ding g Schem eme e of 37 Prio iority ity Project

jects

20 projects are in construction 5 projects are in transaction 12 projects are in preparation

Loan Agreement has been signed on 15 November 2017. Outline Business Case has been completed by the end

f December 2017.

Allocation of repayment liability on additional-loan for Phase I and Phase II has been decided in the KPPIP Ministerial meeting – 49% will be borne by Central Government and 51% will be borne Provincial Government of DKI Jakarta. Environmental Permit has been issued by LHK Ministry – letters of recommendation for spatial aspects and rerouting of road have also been issued.

Patimb mban an Port Bitung Inter ernatio ional al Hub Port Mass Rapid Tran ansit it (MRT) Jakart rta Sout uth-No Nort rth Refin iner ery Developmen ment Master er Plan Cilaca cap

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

51% 51% 39% 39% 10% 10%

US$92.4 billion from Private/ PPP US$71.8 billion from SOE/ Regional SOE US$17.5 billion State/ Regional Budget (including G-to-G loan)

54% 54% 14% 14% 32% 32%

Exchange rate : US$ 1 = IDR 13,500

Total Investment Value US$ 181.6 Billion

Outline Business Case has been completed by the end

f December 2017.

Yogyakar arta – Bawen en Toll Road

SLIDE 89

88

Energy gy Secto ctor: r: the he Progres ess

f

35.000 000 MW Program am

No No Phase MW MW % 1 Operating 1,041 3 2 Construction 16,642 46 3 Signed Power-purchase Agreement 12,776 36 4 Procurement 3,160 9 5 Planning 2,228 6 17 Dec ‘14

Cabinet t Meeting ing “There’s electricity crisis in Indonesia, requires construction

f large capacity plant "

Jan ‘15

Aver erage ge economi mic growth th of 6.7% % requir ires es 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)

Jan ‘15

Debottl tlen enec eckin ing g through gh regulatio tion:

1. Regulation No.1/2015 concerning electricity

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

2. Regulation

No.3/2015, concerning Procedures

f

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

16 Mar ‘15 4 May ‘15 June‘17

Cabinet t Meeting ing Progress of 35,000 MW Launchi hing g 35.000 MW by the President in Goa Beach Sanden DIY The progres ess so far:

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

35,000 MW Prog

gram Distrib

tributio tion

Source: PLN

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

Note : Progress of 35,000 MW Electricity Program per December 2017 Note: This data is still going to be verified by The Executive Office of President (KSP) and Indonesia’s National Government Internal Auditor (BPKP)

SLIDE 90

89

Accel eler eratio tion

f

35.00 000 MW Program am

Gov

ver

ernm nmen ent PT PLN

EPC C Power erpla plant t and d Transmis issio ion PLN Subsidia idiary (Joint

int Ventu

ture) e) Indepen ependen ent Power er Prod

ducer

er

Stren ength gthen Equity ty 2B 2B 1

Gov

ver

ernmen ent t Supp ppor

rt

t (outs tside ide Guara rantee) tee)

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

Local l Con

nten

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

2A 2A

Assign ignmen ent SJKU* U* Minis istry try of Finance

Strength then PLN‘s Balanc nce Sheet

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

ver

ernmen ent t has issued ed Pres esiden identia tial l Regu gula latio ion No.

. 4/2016 on Electr

tric icity ity Infrastru tructu ture e Accel eler eratio tion to accel eler erate te power er proj roject ects Prov

vis

isio ion of Electri tricity ity Refin inancin ing Hedgin ging Financia ial l Asset et Optim imiz izatio ion Direct Lending Direct Lending Bond issuance by PT PLN Company Tax Holiday PT PLN’s divident allocation Loan from independent lenders Asset Revaluation Other types

f funding

Equity Injection by the Government

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

SLIDE 91

90

Sign gnificant ificant Progres ess

n

I Infras astr tructu ucture Projects cts

Databas ase Project information such as map, track, existing study and latest project status. An integr grated ted IT system with monitoring capacity for stakeholders, so that they can have real time data ta. Platform rm data

utlook

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

KPPIP developed an integrated IT System for monitoring

f

national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision-making purposes. Impr prov

vin

ing g Monitor itorin ing g System tem on Infrastru tructu ture e Project

jects1

Roads

Trans-Sumatr tra Toll Road Merah h Putih ih Bridge idge, Ambon

Dams

Jatige igede de Dam (Operatio tional)

Transp nsportatio tion

Jakarta ta MRT Project2

Drinki nking ng Wate ter Proce cessin ing

Umbulan Drinkin king Water Provi visio sion System, East t Java

1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2 Not funded from National Budget

Terminal 3 Ultima imate te Soeka karno-Hatta tta2 New Tanjung Priok k Port t Project2 Nop Go Golia iat t Dekai, i, Papua

SLIDE 92

91

Infras astr tructur cture Projects ts an and Finan ancing cing Sche hemes mes

Public ic Private te Partnership rships (PPP), SOE, E, and Private te Sector serve as alterna rnative ive to direct ct budget etary ary spending ng

Financing ing Brea eakdown (2015 – 2019) 2019) Esta tabli blishment shment of PPP PPP Unit

Broad ad Objective  Champion project preparation and acceleration of the PPP agenda in Indonesia Core Mandates  Improve quality of project selection under KPPIP – OBC criteria  Support project preparation through PDF support and highly qualified transaction advisors  Act on behalf the Minister of Finance in providing government support and approvals for projects Addit itio ional al Man andates  Coordinate all public finance instruments  Provide input for PPP Policy program Development and Regulations  Implement capacity building for Govt. Contracting Agency (GCAs)  One stop shop for PPP promotion & Information Total financing needs: ~ USD345.1bn Government & local budget (40.0%) Financing gap (60.0%) ~ USD164.8bn SOE PPP PPP ~ USD180.3bn Alternative Fin inancing Scheme

Budget get Public Priv ivate te Partn tner ershi ship SOE E & Priv ivate te Sec ecto tor

 Central & regio ional budget (special allocatio ion fun und & rur ural tran ansfer)  Primarily to to support bas asic ic infrastruct ucture projects: – Food secur urity: Irrigation, dams etc. – Mar aritime: Seaports, shipyards etc. – Connectivi vity: y: Village roads, public transportation etc.  Certain in infrastruct ucture projects to to be funded and operat ated throug ugh a par artnership ip between the Indonesian an government and the priva vate sector – Projects ready for auction under the PPP Scheme: – Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung – Railway projects such as an express line into Soekarno-Hatta International Airport – Water supply projects such as the West Semarang Project  Var ario ious government sup upport for PPP: PPP: – Project Development Facilit ity y (PDF): Helps Government Contracting Agencies (GCAs) in project preparation and transaction – Viab iabil ility y Gap ap Fund: improves financial viability of PPP projects – Government Gua uaran antees: Supports PPP projects’ bankability by providing sovereign guarantees – Infrastruct ucture Fin inan ancing Fund: Provided through PT SMI and IIGF  Government to to inject capital al into SOEs: Intended multiplier effect to develop more infrastructure projects  Key focus us ar areas: as: – Infrastructure and maritime development – Transportation and connectivity – Food security  Mediu ium term infrastruct ucture deve velopments to focus us on: – Water Supply – Airports – Seaports – Electricity and power plants – Housing – Mining

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

SLIDE 93

92

Gover ernment ment Guar aran antee tee For Bas asic ic Infras astr tructu ucture Devel velopment pment

Reflect cts strong ng commit itment nt to national nal developmen ment plannin ning

Source: Ministry of Finance No. Central al Government Guar aran antee for Infrast astruc ucture Programs Exposur ure/ Outstand nding ng (USD bn bn) 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 2.94 2 Clean Water Supply Program 0.01 3 Direct Lending from International Financial Institution to SOEs 0.35 4 Sumatra Toll Road Development (PT Hutama Karya’s) 0.48 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 1.58 6 Obligation of government-related entities under PPP 1.06 7 Local infrastructure financing through PT SMI 0.07 Total al 6. 6.49 49

Conting tingent nt Liabili bilitie ties from m Governm nment nt Guarante ntees Governm nment nt Guarantee tee Program

Credit it Guarantee ee PPP PPP Guarantee ee

Busin iness Viab abil ilit ity y Guar aran antee (BVG) VG)  Power (Electric icit ity) – Full credit guarantee for PLN’s debt payment obligation under FTP 1 10,000 MW and 35GW  Celan an Water – Guarantee for 70% of PDAM’s debt principal payment obligations  Infras astructur ure - Full credit guarantee on SOE’s borrowing from international financial institution & guarantee for PT SMI’s local infrastructure financing  Toll road ad – Full credit guarantee for PT Hutama Karya’s debt payment obligation (Sumatra Toll Road Development)  Public ic Tran ansportat ation (Light Rail Tran ansit it) – Full credit guarantee for PT Kereta Api Indonesia’s debt payment obligations for the development of LRT Jabodebek  Power (Electric icit ity) – Guarantee for PT PLN’s

bligations under Power Purchase Agreements

with IPPs (off-take and political risk) under FTP-2 10.000MW and 35GW programs*  Infras astructur ure – Guarantee on the obligation of Government related entities in accordance to the Agreement  The Maximum Guarantee Limit for the period 2018 – 2021 is set at 6% of GDP GDP in anticipation of the project pipeline increase to IDR1,178.1 Trillion *) MOF provides both credit guarantees and BVGs for 35GW program

SLIDE 94

93

Gover ernment ment Finan ancia cial Fac acilities ilities for PPP Proje jects cts

Financ ncial ial Facilit ilities ies to Attrac act More Priv ivate te Part rtic icip ipatio tion

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

f the following PPP projects:

Viabilit ility Gap Fund (VGF) Proje ject Develo lopment ent Facilit ility (PDF) Governm ernmen ent Guarante ntees es (dir irec ectly ly by MoF or through gh IIGF) Financ ncing ing from PT

PT. SMI

and

PT. IIF

Availabilit lability Paymen ent Schemes es More Fundin ing Schemes es are

n

the Pipelines lines

Project Financing funded by the priv ivate te secto tor through the granting of concessions for an

perating asset owned by the

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

perated & managed.

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

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

several years

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

Sche heme me Character teristic istics Sche heme me Character teristic istics

LCS (Limited ited Concessio ion Scheme) e) PINA (Non-Gov Governm ernment nt Budget et Infras astr truc uctur ure Financ ncing) ing)

Source: Ministry of Finance

SLIDE 95

94

Progress ess

f

P PPP Infrast astru ructur cture Proje jects ts

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

Succes essful ful Proje jects ts Reaching ing Finan ancial ial Close in 2016 and 2017

No No Projec ect Name me Projec ect Cost (IDR R tn tn) Financia ial Facil ilities ities Status 1 Batang–Semarang Toll Road 11 IIGF Guarantee PPP & guarantee contracts signed on April 27th, 2016 2 Manado–Bitung Toll Road 5.1 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 3 Samarinda–Balikpapan Toll Road 9.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 4 Pandaan–Malang Toll Road 5.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 5 Serpong–Balaraja Toll Road 6.0

PPP contracts signed on June 8th, 2016

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

Signed PPP PP Proje

jects

in 2016 and 2017

Source: Ministry of Finance, as of July 2017

SLIDE 96

95

New Guar aran antee tee Sche hemes mes for Non-PPP PP Projects cts

The Government had issued Pres esid identi ential al Re Regula ulatio tion No No 82 82/2015 and Minis inistr try of

f Fina

inanc nce Re Regu gula latio tion No No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. Guarant antee ee

n

SOE Direc ect Lending ing from Interna rnatio tional nal Financ ancial ial Institut tutio ions ns (IFIs Is) Guarant antee ee for Regio ional al Infrastr tructur ture Financ ncin ing Provis isio ion State finan ance soundnes ness Fiscal al sustainabiliy nabiliy Best practic tice

f

fiscal al risk managem ement ent The

bjective
f

this guarantee is to provid ide credit edit enhanc ncem emen ent in terms

f

low inter erest rate and long tenor finan ancing ing, with 3 main prin incip iples les:

The Government had issued Min inis istry try

f
f

Fin inance Regu egulati tion

n

No No 174 174 of

f 2016

2016 to provide guarantee to PT SMI

n

the assignment

f

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

n

Gov Govern rnmen ent Regu egulation tion No No. 95 95/2015 2015 and Min inis istry try

f
f

Fin inance Reg egulation tion No No. 232 232/2015 2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry

ut functions in providing loan to

local government, as previously carried

ut

by PIP (Government Investment Center). The objective is to give give sti timulus to to the the accel eleration ion

f
f

lo local in infrastr tructure re dev devel elop

pmen

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

rder

to meet local infrastructure development needs and to reduce reliance

n

state/local budget.