REFORMS IN THE MAKING APRIL 2016 1 Overview Fiscal Performance - - PowerPoint PPT Presentation
REPUBLIC OF INDONESIA REFORMS IN THE MAKING APRIL 2016 1 Overview Fiscal Performance and Flexibility: 4 Institutional And Governance 1 More Fiscal Stimulus with Prudent Effectiveness: Unwavering Commitment on Reforms Agenda Fiscal
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Institutional And Governance Effectiveness: Unwavering Commitment on Reforms Agenda Wide Range of Policy Reforms to Boost Economic Growth Fiscal Performance and Flexibility: More Fiscal Stimulus with Prudent Fiscal Management Monetary Factor: Monetary Policy Anchors Price Stability Economic Factor: Healthy Growth Prospects Remain Intact External Factor: Improved External Resiliency
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Source: World Economic Forum; World Bank; Transparency International
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World Governance Indicators Ease of Doing Business WEF Global Competitiveness
129 109 132 130 127 116 100 110 120 130 140 150 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia India Brazil
53 31 55 49 42 34 20 30 40 50 2010 2011 2012 2013 2014
Voice and Accountability Political Stability/Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption
Corruption Perception Index
28 36 35 38 44 50 20 30 40 50 60 2010 2011 2012 2013 2014 2015
Indonesia Thailand Malaysia
54 37 49 55 56 75 87 47 75 56 30 45 60 75 90 2009 2010 2011 2012 2013 2014 2015
Indonesia India Brazil Phillipines Vietnam
Higher score is better Higher rank is better Higher rank is better Higher rank is better
IDR tn
2015E Total Investment / GDP (%)
Indonesia enjoys large investments relative to peers within the region2 Investments have continued to grow in 20151
1. Source: IMF World Economic Outlook, Database October 2015 2. Source: The Economist – Asia Business Outlook Survey 2015;
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50 100 150 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FDI DDI Total 145.4 46.2 99.2 2011 2012 2013 2014 2015
18,0 30,7 34,0 26,5 20,7 24,7 5 10 15 20 25 30 35 Brazil India Indonesia Malaysia Philippines Thailand
3,9 3,9 4,6 5,5 6,2 7,9 11,1 11,5 16,6 23,6 27,5 30,7 38,8 38,8 40,4 5 10 15 20 25 30 35 40 45 Turkey Korea Singapore Russia Malaysia Myanmar Brazil Philippines USA Mexico Vietnam Thailand China Indonesia India % of surveyed who consider each country has promising prospects
JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for business investment (December 2015)4 The Economist: Indonesia among the top 3 destination for attracting investors in Asia (January 2016)3
18,9 22,9 23,6 24,8 27,1 28,3 29,0 30,1 32,2 32,7 37,2 48,0 58,2 69,3 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 Taiwan Hong Kong South Korea Singapore Australia Japan Thailand Vietnam Myanmar Malaysia Philippines Indonesia China India % of surveyed who plan to increase investment in each country
1. Source: Indonesia Investment Coordinating Board (BKPM); 2. Source: IMF World Economic Outlook, Database October 2015; 3. The Economist – Asia Business Outlook Survey 2016; 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (27th Annual Survey);
Education Health Housing Character
Food Security Energy & Electrical Security Maritime & Marine Tourism & Industry Water Security, Basic Infrastructure & Connectivity
Inter- Income Group Inter-Region: (1) Rural Area, (2) Periphery, (3) Outside Java, (4) Eastern Area.
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7 Requirements: Minimum investment of IDR 100 billion (US$ 8 million) and/or employing 1.000 local workers. 4 Documents Obtained:
Investment Service
documents & data Documents are processed by BKPM, notary, Tax Office, and Agrarian Ministry Obtain four documents within three hours to start business
Investment Service 3-hour Investment Licensing Service
Obtaining IP (3 Hours License) Note:
issues and the Environmental Permit (EIA), as well as the support governors / regents / mayors).
commercial production. Investors can start constructing without first having another construction permit This special permission is provided for investors who have investment license with project located in an industrial park or a specific bonded zone Investment License as a Construction Permit
Source: Investment Coordinating Board (BKPM)
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Rp4 Rp463, 3,1 T Rp5 Rp545,4 T 1.43 1.435.7 .716 Rp30 Rp307 7 T Rp3 Rp366 6 T Rp1 Rp156, 6,1 T Rp1 Rp179, 9,4 T 1.42 1.420.8 .846
Source: Investment Coordinating Board (BKPM), compared to Jan-Dec 2014 period
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US$8.815 Mn
Mining
Food Industry
US$3.633 Mn
Paper & Printing Industry
US$1.876 Mn
Chemical and Pharmaceutical Industry
US$5.098 Mn
Metal, Machinery and Electronic Industry
US$6.392 Mn
Transport Equip and Other Transport Industry
US$5.326 Mn
Transportation, Warehouse and Telecommunication Electricity, Gas and Water Supply
US$4.740 Mn US$5.251 Mn
Largest Economy in South East Asia 4th Most Populous country in the World; 64% in productive age Manageable Inflation Rate Growing Middle Income Class From commodity-based to industrialized- natural resources-based economy via infrastructure development From consumption-led to investment-led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Tax base to be broadened from
dependency on commodities Fuel subsidies significantly reduced and spending redirected to more productive allocation Prudent debt management
New Reform- Oriented Administration
Three main sources of financing for IDR 5 tn investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure will be higher than fuel subsidy Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP Infrastructure spending focused on basic infrastructure projects
Large and Stable Economy Consistent Budget Reform New Economic Structure High Infrastructure Investments 11
Indonesia’s strong GDP growth remains favorable compared to peers, supported by demographic bonus and strong domestic demand
Strong GDP Growth Domestic Growth Remains Favorably Compared to Peers GDP Growth Global Growth
Source: Bloomberg
GDP Breakdown GDP Growth based on Expenditures
second semester of 2015 Source: BPS, Bank Indonesia
Outlook Growth Prospect
Ins nsti titu tutio ion 2015 2015 (in %) %) 2016 2016 (in %) %)
Indonesian Government 5.1 5.4 World Bank 4.7 5.5 IMF 4.7 5.1 Asian Development Bank 5.0 5.6 S&P 5.5 5.7 Moody’s 4.7 4.7
(%)
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5,7 5,5 6,4 6,0 4,6 6,4 6,5 6,0 5,6 5,0 4,7 4,7 4,7 5,0 1 2 3 4 5 6 7
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015
Sector 2013 2013 2014 2014 2015 2015 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Household Consumption 5.5 5.2 5.4 5.4 5.4 5.1 5.1 5.0 5,01 4,97 4,96 4,9 NPI Serving Household Consumption Expenditure 6.5 6.4 6.7 12.8 23.7 22.8 5.6 (-0.2) -8,25
6,39 8,3 Gross Fixed Capital Formation 7.9 5.5 6.0 2.1 4.7 3.7 3.9 4.3 4,37 3,69 4,62 7,3 Government Consumption 3.0 3.2 12.4 7.9 6.1 (-1.5) 1.3 2.8 2,65 2,13 6,56 6,9 Exports 3.5 2.1 1.3 9.4 3.2 1.4 4.9 (-4.5) -1,04
Imports 2.9 0.9 4.9 (-0.9) 5.0 0.4 0.3 3.2
GDP 5.6 5.6 5.5 5.6 5.1 5.0 4.9 5.0 4,72 4,67 4,73 5,0
6,2 6,2 6 5,6 5 4,8
2 4 6 8 10 12
2010 2011 2012 2013 2014 2015 India Brazil Turki Rusia Indonesia
Spatial GDP Growth
Sumatera GDP Growth 2014: 4.7% 2015Q1: 3.5% 2015Q2: 2.9% 2015Q3: 3.0% 2015Q4: 4.6% Java GDP Growth 2014: 5.6% 2015Q1: 5.2% 2015Q2: 5.1% 2015Q3: 5.4% 2015Q4: 5.9% Kalimantan GDP Growth 2014: 3.2% 2015Q1: 1.1% 2015Q2: 1.5% 2015Q3: -0.4% 2015Q4: 1.5% Sulawesi GDP Growth 2014: 6.9% 2015Q1: 7.3% 2015Q2: 8.6% 2015Q3: 8.2% 2015Q4: 8.3% Maluku & Papua GDP Growth 2014: 4.3% 2015Q1: 3.7% 2015Q2: 10.2% 2015Q3: 2.3% 2015Q4: 10.4% Bali & Nusa Tenggara GDP Growth 2014: 5.9% 2015Q1: 8.9% 2015Q2: 8.9% 2015Q3: 11.8% 2015Q4: 7.6%
Spatial GDP Growth Contribution
Java: 58.3%
Main Contributors to GDP Growth Shifting from Commodity-based economy
increase from 4.73% in 3rd Quarter 2015.
Kalimantan, given its high industrialization and larger consumption base
to shift from commodity-based economy 2015Q4 GDP Growth: 5.04%
Source: BPS
Sumatera: 22.4%
Source: BPS
Maluku & Papua: 2.2% Sulawesi: 6.1% Kalimantan: 8.0% Bali & Nusa Tenggara: 3.1% (%) (%)
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5,0 4,9 7,3 6,9
5 10 15 0,0 1,0 2,0 3,0 4,0 5,0 6,0 I II III IV I II III IV I II III IV 2013 2014 2015 GDP (LHS) Household Consumption (RHS) Investment Government Consumption (RHS) Exports (RHS) Imports (RHS)
5.1 (20) (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
Current Account (LHS) Capital & Financial Account (LHS) Overall Balance (LHS)
Improving Current Account Deficit Strong Balance of Payments Rising Foreign Reserves Amid Global Uncertainties Trade Balance Surplus Continues
Source: Bank Indonesia Source: Bank Indonesia Source: Bank Indonesia (US$bn) (US$bn)
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2010 2011 2012 2013 2014 2015 9.5
(15) (10) (5) 5 10 15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Goods Services Income Secondary Income Current Account
(US$bn)
2011: CA Surplus US$1.7bn 2012: CA Deficit US$24.4bn 2013: CA Deficit US$29.1bn 2014: CA Deficit US$27.5bn 2015: CA Deficit US$17.8bn 2011 2012 2013 2014 2015 (US$bn) Source: BPS Source: Bank Indonesia
2015: Surplus US$5.98 Bn 2014: Deficit US$2.52 Bn
(US$bn) (Months)
2 4 6 8 35 70 105 140 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan FX Reserves (LHS) Months of Imports + Debt Service (RHS) 2011 FX Reserves as of March 2016: US$107.5 Bn (Equiv to 7.8 months of imports + servicing of government debt)
0,00 1,00 2,00 3,00
Jan Feb Mar Apr Mei Jun Jul Ags Sep Okt Nov Des Jan Feb Mar Apr Mei Jun Jul Ags Sep Okt Nov Des Jan Feb Mar 2014 2015 2016
Non-OG OG Total
2012 2013 2014 2015
107,5 7,8
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(0,14) 2,03 2,45 2,77 3,61 3,96 4,11 5,77 10,12 10,26
(2,00) 0,00 2,00 4,00 6,00 8,00 10,00 12,00 INR PHP THB KRW TRY IDR EUR ZAR MYR BRL
4,17 1,52 1,28 3,28 4,94 3,35 0,84 8,73 7,78 8,15 11,8 0,29 0,58 1,14 1,92 2,02 2,15 2,35 2,41 2,83 2,96 7,58 0,00 2,00 4,00 6,00 8,00 10,00 12,00 14,00 EUR THB TRY IDR MYR BRL
Average Point to Point
Mar 2016 vs Feb 2016
%
13260 13873 13769 13525
13000 13200 13400 13600 13800 14000 14200 14400 14600 14800
IDR/USD Monthly Average Quarterly Average
Data as of 31 March 2016
Stable Movement of Rupiah
Source: Bank Indonesia Source: Bank Indonesia
YTD 2016 vs 2015
%
Data as of 31 March 2016 Data as of 31 March 2016
Source: Bank Indonesia
Rupiah Exchange Rate Relatively Well Compared to Peers
IDR/US$
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FX Reserve
Ample of level of FX reserves to buffer against external shock
FX Reserves as of March 2016: US$107.5billion China
Agreed to renew currency swap agreement with PBOC and increase volume of funds to RMB130 billion up from RMB100 billion
Agreement was signed in 2009 and was previously extended for a period of 3 years in 2013 South Korea
Established a 3 year KRW/IDR swap arrangement with the size of up to 10.7 trillion KRW / IDR 115 trillion in March 2014 Australia
Exchange of local currencies between the two central banks of up to A$10 billion or IDR 100 trillion
Effective as of December 15, 2015. The effective period will be three years, and could be extended by mutual consent of both sides
First Line of Defence Second Line of Defence BI’s Existing Bilateral Currency Swap Arrangement (BCSA)
* In addition to the above facilities, Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem as part of IMF’s Global Financial Safety Net (GSFN) initiative. Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) Japan
US$ 22.76 billion swap line with the Bank of Japan currently in place
The quantum of the swap line was increased from US$12 billion in December 2013 Chiang Mai Initiative Multilateralization (CMIM) Agreement
Entitled to a maximum swap amount of US$ 22.76 billion 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$120 billion
Doubled to US$ 240 billion effective July 2014
Source: Bank Indonesia
Deferred drawdown option facilities up to US$5bn Implementing Crisis Management Protocol Implementing Bond Stabilization Framework Enhancing coordination between government institutions and continuous dialogue with market participants Specific policies in place in the 2014 budget law to address crisis Swap facility arrangements based on international cooperation Chiang Mai Initiative Multilateralization Specific articles in the 2014 State Budget Law that provide flexibility for Government to take quick mitigation action if necessary, with Parliament approval that has to be given within 24 hours The FKSSK, Consists of Minister of Finance, BI Governor, Head of Indonesian FSA and Head of Indonesian Deposit Insurance Corporation, manages the Nationwide Crisis Management Protocol (CMP) Framework as guidance and procedures for national crisis prevention and mitigation measures. The nationwide CMP incorporates the Exchange Rate, Banking, Non-Bank Financial Institution, Capital Market, Government Bonds Market (SBN), and Fiscal CMPs. Coordination Meeting is conducted regularly to discuss and assess the current level of Financial System Stability and current issues related to the financial system In 2013, FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre-emptive instrument (CMIM) at technical In March 2016, the Parliament has approved Financial System Crisis Prevention and Mitigation Law (UU PPKSK) which contains some key features, ie: Clear division of tasks and responsibilities between the Ministry of Finance, BI, OJK and LPS; Clarity of Systemically Important Banks (SIBs) definition based on international criteria; Application of the bail-in principle according to international best practices; and Resolution mechanism in which Lender of Last Resort (LoLR) still provided by central banks to address short-term liquidity difficulties. Crisis Management Protocol Potential purchase of government bonds by State Owned Enterprises in primary market (min. Aware Level) and in secondary market (min. Alert Level) Buyback Funds DMO Budget SOE Budget Other Gov’t Budget Buyback of government bonds by the DMO from the state budget Related SOEs (min. Alert level) KUN (State’s General Cash) (min. Alert level) Potential purchase of government bonds by the Treasury Office using the State’s General Cash (KUN) Potential purchase of government bonds by the Indonesia Investment Agency PIP Investment Funds (min. Alert Level) SAL (min. Crisis Level) Purchase of government bonds using the accumulated cash surplus (SAL). Parliament approval is required Bond Stabilization Framework 1 2 3 4 5 1 6 2
Fiscal buffers to prevent crises and mitigate risks 18
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external debt for the nonbank corporation to mitigate risk emerging from external debt activity. Corporations holding external debt required to fulfil: (i) minimum hedging ratio in order to mitigate currency risk, (ii) minimum forex liquidity ratio to mitigate liquidity risk, (iii) and minimum credit rating to mitigate overleverage risk
coverage of components of Foreign Exchange Assets and Liabilities, the provision for fulfilment of Hedging and Credit Rating liability
Total FCY Debt: US$311 bn Private Sector FCY Debt: US$164 bn
(US$bn)
Source: External Debt Statistics of Indonesia, April 2016
(%)
Source: Moody’s Statistical Handbook, November 2015 23,2 27,0 27,3 33,1 34,6 50,4
0,0 10,0 20,0 30,0 40,0 50,0
India Brazil Philippines Indonesia Thailand Turkey
2014 2013
Despite increasing trend of external debt… Debt burden indicator (External Debt / GDP) remains comparable to peers
Regulation Key Points Phase 1 Jan 1,2015 – Dec 31,2015 Phase 2 Jan 1,2016 – Dec 31,2016 Phase 3 Jan 1, 2017 and beyond Object of Regulation Governs all Foreign Currency Debt Hedging Ratio < 3 months 20% * 25%** > 3 – 6 months 20%* 25%** Liquidity Ratio ( < 3 months) 50% 70% Credit Rating Not applicable Minimum rating of BB- Hedging transaction to meet hedge ratio not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia Sanction As of Q IV-2015 Applied
Prudent External Debt Management
50 100 150 200 250 300 350 50 100 150 200 250 300
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* 2015* Jan 2016* Feb 2016**
Public (Govt. & BI) Private Total (RHS)
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... short term non-bank corporate debt represents only 16.3% of total private external debt
External Debt Position as of February 2016
1 Based on remaining maturity
Source: External Debt Statistics of Indonesia, April 2016
Private
Long Term (1)
Short-Term (1)
Private Bank
Private Non-Bank
External Debt Position Public Affiliation Non Affiliation
USD311.5 bn
USD164.6 bn
52.8%
USD46.2 bn
28.0%
USD146.9 bn
47.2%
Debt USD118.5 bn
72.0%
Debt USD19.4 bn
11.8%
USD10.0 bn
6.1%
USD16.8 bn
10.2%
USD26.8 bn
16.3%
Debt
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Structural Challenges Global Volatility Investment to contribute larger part in achieving sustainable and equitable economic growth
5,3 7,6 6,8 4,0 4,5 5,0 5,5 6,0 6,5 7,0 7,5 8,0 2013 2014 2015 2016 2017 2018 2019 2020
Revenue Optimization Quality Spending Sustainable Financing
Budget Reforms Long Term Strategy to Create Sustainable and Equitable Economic Growth
Improve People Purchasing Power Improve Quality of Investment Climate
Structural Reforms Short Term Strategy to Navigate Global Uncertainties and Financial Turmoil
…to support sustainable and equitable economic growth Objective: Creating a sustainable and equitable economic growth for Indonesia
I.
Shift from commodity-based revenues
II.
Broaden tax coverage
and prevent leakages
institution
payers
I.
Higher spending productivity
II.
Enhanced subsidy scheme
governments
I.
Secure budget financing
II.
Effective utilization of domestic and international funding sources
support infrastructure development program Initiatives:
Management
income threshold
Autonomous Tax Office Initiatives:
procurement regulation.
Reform (re-allocate energy subsidy to productive spending) and maintain targeted subsidy scheme.
Initiatives:
deficit;
multilateral financing sources, including BSA and DDOs
instruments.
SOEs to include SOEs in infrastructure development 23
Slow and low disbursement performance Revenue Shortfall (tax, low oil and commodity prices) Dependency on foreign financing Narrow tax base Miss targeted subsidy
…key focus to strengthen Indonesia’s economic development fundamentals
Conditional cash transfer
financing scheme
direct investment
trust fund, and infrastructure bond
and mining sector)
export quality, determine competitive price and develop international standard services
enhance export performance
1. Maintain economic stability to promote strong business and investment climate 2. Simplify licensing and investment procedures
regulations between central government and local governments
involvement of state owned enterprise (SOE) in infrastructure development 5. Increase the role of banking institutions in lending rate development, especially for working capital and investment credits 6. Expand the role of non-bank financial institutions in the development of infrastructure financing alternative Maintain Purchasing Power State Owned Enterprise & Private Sector Accelerate Infrastructure Development Strategies & Policy Formulations to Boost Investments 24
Items (IDR tn) 2014 2015 2016 Revised Budget 1st Semester Realization % of Revised Budget Revised Budget 1st Semester Projection % of Revised Budget 2nd Semester Prognosis % of Revised Budget Outlook Budget
1635.4 712.7 43.6% 1,761.6 697.4 39.6% 952.3 54.1% 1649.8
1,822.5
1633.1 711.7 43.6% 1,758.3 697.2 39.7% 949.2 54.0% 1646.4
1,820.5
1.Tax revenue 1246.1 537.5 43.3% 1,489.3 555.2 37.3% 811.8 54.5% 1367.0
1,546.7
2.Non tax revenue 386.9 172.2 44.5% 269.1 142.0 52.8% 137.4 51.1% 279.4
273.8
2.3 1.0 42.8% 3.3 0.2 5.8% 3.1 94.2% 3.3
2.0
1876.9 759.9 40.5% 1,984.1 773.9 39.0% 1135.9 57.3% 1909.8
2,095.7
1280.4 468.7 36.6% 1,319.5 436.1 33.1% 809.4 61.3% 1245.5
1,325.6
602.3 178.9 29.7% 795.5 208.5 26.2% 521.6 65.6% 730.1
784.1
678.1 289.8 42.7% 524.1 227.6 43.4% 287.9 54.9% 515.5
541.4
596.5 291.2 48.8% 664.6 337.7 50.8% 326.5 49.1% 664.2
770.2
17.9
3.3%
150.4%
19.6%
34.4%
82.5%
% deficit to GDP
241.5 138.8 57.5% 222.5 194.0 87.2% 66.0 29.7% 260.0
273.2
254.9 162.2 63.6% 242.5 215.6 88.9% 28.1 11.6% 243.7
272.8
174.0%
10.8% 37.9
163.0
0.4
Excess/Shortage Financing 0.0 91.6 0.0% 0.0 117.6
Strengthen Fiscal Buffer, esp. to Support Government Priority Program Stimulate Business Capacity and Product Competitiveness Create a Sustainable Fiscal Cycle by Managing Risk 25
Period
2015
2016 Proposed Budget Revised Budget Latest Realization Growth (%) 5.7 4.71 5.3 Inflation (%) 5.0 YoY 6.832 4.7 YTD 2.242 Exchange Rate (US$/IDR, Average) 12,500 EOP 13,5343 13,900 YTD 13,3033 3-month-SPN (Treasury Bills) 6.2 5.92 5.5 Indonesia Crude Price (ICP) (US$ / bbl) 60.0 52.22 50.0 Oil Lifting (thousand bbl / day) 825 756.64 830 Gas Lifting (thousand bbl / day oil equivalent) 1,221 1,1754 1,155
2016 Budget Strategy and Features 2016 Budget Key Macroeconomic Assumptions Revenue
2015 revenue outlook.
improving tax administration.
purposes.
government institution rather than commodity-based revenue.
Expenditure
projects as committed.
Financing
threshold (3% of GDP)
currencies
competitive term and condition (Bilateral loan, DDO, etc.)
Source: Ministry of Finance
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Controlled expansion at 2.15% GDP Deficit 1 Bureaucracy efficiency 2 5% Healthcare Budget 3 Continuously increasing infrastructure projects 4 Better subsidy scheme (objects, subjects & delivery methods) 6 Sustainable national social security system 7 Fasten efforts to reduce income gap (expansion of PKH) 8 Strengthen fiscal decentralization (higher Village Fund & Reallocation of DK/TP) 9 1 million home program 10 20% Education Budget 5
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General policies to achieve taxation target includes:
investment climate;
purchasing power;
add;
Breakdown (IDR bn) 2015 2016 Budget-R Budget
1,489,255.5 1,546,664.6
1,439,998.6 1,506,577.5 1) Income Tax 679,370.1 757,230.1
629,835.3 715,788.6
49,534.8 41,441.5 2) VAT 576,469.2 571,732.7 3) Land and Building Tax 26,689.9 19,408.0 4) Duties 145,739.9 146,439.9 5) Other Tax 11,729.5 11,766.8
49,256.9 40,087.1 1) Import Duty 37,203.9 37,203.9 2) Export Duty 12,053.0 2,883.2
72,3% 73,3% 74,9% 74,0% 84,5% 84,9% 37,8% 35,9% 32,9% 34,8% 18,1% 17,7% 1,5% 1,6% 1,9% 1,3% 1,2% 0,7% 2011 2012 2013 2014 2015 2016 Perpajakan PNBP Hibah
i.e. focus on primary sectors in each regional office, transfer pricing and fraud
Tax Payers i.e. data matching,
regulation reform
Enforcement i.e. through active tax billing, examination and investigation
Revise target of audit
investigation efforts
monitor distribution of excisable goods
TAX CUSTOM AND EXCISE
Revenue Composition(%)
Non Tax Revenue Tax Revenue
Grant
Extra Effort to Reach Revenue Target 2016 28
…as part of a larger structural reform
High economic integration Contributes high value addition and externalities Introduces new technology Has strategic role on the national economy
Tax Allowance Facility
Up to 30% of invested capital is deductible for tax purposes
to 10%
max of 10 years
sector industries in specified region
Tax Holiday Facility
Income Tax Relief or Reduction
Tax Allowance Tax Holiday
Support economic diversification Strengthen national industry structure Competitive in the international market High absorptions of workers and supporting technology transfer Located outside Java, Bali, and Batam Islands (Remote Areas & KTI)
Pioneer Industry/Projects High Priority Industry/Projects Incentives
fisheries
information and communication
Special Economic Zone
projects Incentives
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…supportive fiscal (tax allowance and tax holiday) to further improve business climate
30 Improve regulation; Tax amnesty, Amendment of Income tax law (UU PPh), VAT law (UU PPN), General tax provisions and procedures (UU KUP), and non tax revenue (PNBP). Reinventing policy, E-Invoice, Compliance risk management. Adjustment of non-taxable income threshold . Broaden tax base, improve compliance, improve tax administration and improve the Tax Office Information and Communication Technology (ICT). Improve fiscal incentives for strategic purposes. Optimize non-tax revenue from government institution. Develop priority infrastructure projects as committed. More efficient spending. Better targeted subsidy scheme. Fulfill mandatory spending. Improve Government procurement regulation. Continue targeted subsidy reform (Electricity, seed, Fertilizer, Interest (KUR)). Stimulate regional economies to reach optimum growth by introducing transfer to rural regions (dana desa). Larger Budgetary allocations for: Infrastructure projects Social welfare Cashless smart cards Rural transfers Keep budget deficit under constitutional threshold (3% of GDP). Mix budget financing instruments and currencies. Combine financing sources with competitive terms and conditions (Bilateral loan, DDO, etc). Increase capital injection to SOEs to include SOEs in infrastructure development. Revenue Expenditure Financing
…the focus of government to broaden tax base, increase compliance, and improve the quality
31 Optimization of tax revenue to maintain investment climate Maintain national economic stability and people's purchasing power Improve competitiveness and added value to the national industry Control the consumption of goods subject to customs
Grand Strategy to Achieve Taxation Target Policy Direction
Reinventing policy; e-INVOICE Extensification and Intensification of Taxpayers
Data matching, optimization of IT, e-tax invoice, improved regulation
Improvement of tax administration Shifting the sources of income derived from commodities Widening the scope of revenue base Increasing the level of tax compliance Prevent tax leakage, especially VAT refunds Control the consumption of goods subject to customs
Tax Policies
Optimization of inspection
The focus of the leading sectors of each regional office, transfer pricing, and fraud;
Implementation of 2016 as the year of Law Enforcement
Tax Amnesty
Adjustments to Non-Taxable Income Threshold
Revision on Taxation Regulation
(Amendments Tax Procedures Law, Income Tax Law, and VAT Law)
Compliance Risk Management
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Providing tax relief for taxpayers who revise their unreported assets
Assets and Properties of Indonesian Citizen Deposited Overseas Accelerating Economic Growth through Asset Repatriation
Paying for certain amount of compensation Lowering tax rate for repatriation than declaration Lowering tax rate for early reporting
Increase domestic liquidity Improve the stability of IDR currency Create lower interest rate Support investment growth
Expanding Tax Base through Reliable, Integrated and Comprehensive Database Increasing More Sustainable Tax Collection
Rp Rp Rp
By the implementation of Automatic Exchange of Information (AEOI) globally in 2018, taxpayers could not hide the information of their asset to avoid taxation
Objectives
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The Virtuous Cycle of Purchasing Power Stimuli Consumption is still the largest contributor to Indonesia’s GDP Private consumption has been a key factor driving Indonesia’s economic growth in recent years The Government has designed stimulus program to maintain and enhance purchasing power of the people Funds are targeted at not only to improve basic village infrastructure but also to create jobs through labor intensive projects as well as other job creation programs
u Fuel Price And Electricity Adjustment Predictable Labour Wages Boosting Housing Development Ensure the Availability of Medicine and Medical Tools to Optimize the Quality of Public Health Insurance 2 Months Addition of Rice Subsidy Program Rural Transfer for Productive Spending Ease of Land Certification and Licensing for Street Vendors
Maintaining Purchasing Power
Increase Non-taxable Income Limit Stabilized Price for Meat Products Elimination of Luxury Goods Tax for Consumer Goods
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Licensing Incentives Tax Incentives Other Incentives Business and Infrastructure Incentives
Tax Incentives on Property Relaxation of Negative Foreign Investment List Integrated Logistics Zones CPO Fund Support for Export-Oriented Industries Village-City Logistics Improvement Acceleration
Infrastructure Income Tax Relief for Labor Intensive Industries One Map Policy Incentives for Footwear and Apparel Industries Simplification of Import Licensing for Drugs and Raw Food Accelerating Infrastructure Development Water Management and Regulation Eliminate Double Taxation for REITS and Tax Incentive for REITS Issuance SME Loan Improvement: Expansion of Coverage, Interest Subsidy, Special Rate for Export Oriented SME Dwelling Time Optimization Oil Refinery Development Aviation Sector Incentives Downstream Industries Debt To Equity Ratio Special Economic Zones Permit & Licensing Simplfication Relaxation of Entry Visa Policies Accelerate export import process, esp. in Harbor
35
line ministries
General Allocation Fund (DAU) as an equalization grant
instrument to improve the quality of public infrastructure as well as a tool to support national priority
through reform on Regional Incentive Fund (DID) policy
Policy Reform for 2016 Transfer to Region
IDR tn 697 884 1.011 1.137 1.204 1.320 1.326 345 411 481 513 574 665 770 500 1.000 1.500 2.000 2.500 2010 2011 2012 2013 2014 Revised Budget 2015 Budget 2016 Central Government Spending Regional & Rural Transfer
from BI rate)
36
% of GDP
56,2 56,1 56,3 54,9 2,2 1,2 1,1 1,0 32,1 32,6 32,8 39,0 20 40 60 80 100 2013 2014 2015 2019 Target Household Consumption Non Profit Private Consumption Investment
Increased share of investments in GDP
Policy to Accelerate Infrastructure Development Incentive for Business Sector expected to create stable trade sector Policy to Maintain Purchasing Power
Strategies & Policies to Boost Investments
Indonesia will continue to have young and vibrant population as evidenced by stable dependency ratio outlook
Share of Growth Geared Towards Investment Stable Dependency Ratio Showing Sustainable Support for Investment Activities
Source: BPS Source: Euromonitor
The Government will encourage the development of infrastructure projects to boost investment opportunities and create greater competitiveness for Indonesian economy
30 40 50 60 70 80 90 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 China India Russia
267 311 345 376 409 419 41 47 53 68 77 105 255 306 310 350 138 102 114 146 156 178 290 312 150 300 450 2011 2012 2013 2014 Revised Budget 2015 Budget 2016 Education Healthcare Energy Subsidy Infrastructure (IDR tn)
EDUCATION 28.3% INFRASTRUCTURE 103.5% ENERGY SUBSIDY 60.7% HEALTH 75.4% Comparison between average allocation in 2015 - 2016 and 2011 - 2014
37
697 884 1.011 1.137 1.204 1.320 1.326 345 411 481 513 574 665 770 500 1.000 1.500 2.000 2.500 2010 2011 2012 2013 2014 Revised Budget 2015 Budget 2016 (IDR tn) Central Government Spending Regional & Rural Transfer
10 Ministries with Highest Budget Allocation Budget (IDR tn)
104.1
99.5 National Police 73.0
63.5
57.1
49.2
48.5
40.6
39.3
31.5
20 40 60 80 100 120 140 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2014 2015
30 60 90 120 150 180 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2014 2015 (IDR tn) (IDR tn)
2015 Revised Budget Capital Spending Profile 2015 Revised Budget Goods Spending Profile
The Result of Online Procurement: Acceleration of Capital and Goods Spending in 2015 Government Spending grew 11% CAGR from 2010 – 2016 with Regional and Rural Transfer Allocation Outgrowing Central Government Budget Reallocation of Energy Subsidies to Productive Areas: Education, Healthcare and Infrastructure
38
Early auction for 2016 projects
Agriculture Infrastructures, O&G Infrastructures, Energy Conversion Infrastructures, LPF and Fuel Storage Tanks, with total value IDR 107,5 tn) Pre-funding to optimize cost ahead of possible Federal Funds rate hikes and anticipate developments in global environment. (USD 3.5 bn Front Loading Issuance for 2016 Budget Financing) Moderate spending on Q1-2015 due to some re-organization of Line Ministries that affected spending profile
(IDR tn)
194 1.566 7.848 100 1.318 3.935 1.459 5.356 10.752 2.000 4.000 6.000 8.000 10.000 12.000
Januari Februari Maret
2016 2015 2014
0,11% 0,85% 4,26% 0,04% 0,48% 1,43% 0,72% 2,66% 5,33% 0,00% 1,00% 2,00% 3,00% 4,00% 5,00% 6,00%
2016 2015 2014
% to Target
Jan Feb Mar Jan Feb Mar
2015 Revised Budget Capital Spending Profile (Nominal) 2015 Revised Budget Goods Spending Profile (percentage to target)
...2015 spending as evidence, 2016 will be further improved
Adoption of online procurement system Task force team for disbursement acceleration and evaluation (TEPRA) establishment Regular meeting of assets and liability management Revision on Government Procurement Regulation
Acceleration of capital and goods spending in 2015 results from:
39
Central & Regional Budget (Special Allocation Fund & Rural Transfer)
Mainly to support basic infrastructure projects:
►
Food Security: Irrigation, dams etc.
►
Maritime: Seaports, shipyards etc.
►
Connectivity: Village roads, public transportation etc.
Budget
Government to inject capital to SOEs – with leveraging process a multiplier effect, more infrastructure projects can be developed
Key focus areas:
►
For commercial and/or complex projects
Medium term infrastructure developments focus: electricity and power plants, toll road
State Owned Enterprises 2015 – 2019 Infrastructure Plan
SOEs and PPP Become Alternative Source of Funding as Government Budget Could Only Support ~20% of Our Infrastructure Needs
New Sea Ports – 24 Sea Port Development – 59 Pioneer Cargo Ships New Airports – 15 Airport Infrastructure Development Airplanes – 20 Rail lines – 2,159 km Intra City Rail Lines – 1,099 km New Roads – 2,650 km Highway – 1,000 km Road Maintainance – 46,770 km Bus Corridors – 2
Infrastructure Financing Needs 2015 - 2019 Scenario 1 (Full Scenario) Scenario 2 (Partial Scenario) Baseline (Baseline)
Roads 1,274 851 637 Rail System 278 222 140 Urban Transportation 155 115 75 Sea Transportation 563 424 282 Ferry and Other Waster Transportation 91 80 60 Air Transportation 182 165 100 Electricity 1,080 762 714 Other Energy dan Gas 535 420 268 Waer Resources 1,091 845 645 Water and Sanitation 666 450 330 Public Housing 384 247 180 Information and Communication Technology 242 200 130 Total 6,541 4,781 3,561
Government support for PPP :
►
Land Fund: Modification and simplification of land acquisition process
►
Project Development Facility (PDF) through PT Sarana Multi Infrastructure
►
Indonesia Infrastructure Guarantee Fund (IIGF)
►
Viability Gap Fund (VGF)
►
Infrastructure Fund & Availability Payment (AP) Public Private Partnership And Private Sector
Projects Ready for Auction under PPP Scheme:
►
Toll roads projects such as Balikpapan-Samarinda, Manado-Bitung
►
Railway projects such as Halim-Soetta Airport Express Railway
►
Water supply such as West Semarang water supply project
40
Source: Ministry of Finance. USD/IDR: 13,200
Debt (Gross) IDR625.4tn
Redemption IDR294.5tn Budget Financing IDR273.2tn Non-Debt Financing IDR57.7tn
Breakdown of Budget Financing IDR tn US$ bn Government Debt (net) 330.88 25.07 Government Securities (net) 327.22 24.79 Issuance 546.62 41.41 Redemption & Cash Management (216.39) (16.39) Debt Portfolio Management (3.00) (0.23) Domestic Loans (net) 3.26 0.25 Withdrawal 3.71 0.28 Redemption (0.45) (0.03) Foreign Loans (net) 0.40 0.03 Withdrawal 69.18 5.24 Redemption (68.78) (5.21)
41
Instruments Preliminary Budget Indicative Target (IDR bn) Indicative Target (US$ mm) Government Securities (Net) 327,224 24,790 Redemption 197,339 14,950 Cash Management 19,054 1,443 Buyback 3,000 227 Government Securities (Gross) 546,618 41,410 Composition Domestic 76% Auction 66% Non-Auction 10% International Bond 24%
Government Issuance Targets International Bonds
complement to avoid crowding out in domestic market and provide benchmark for corporate issuance, consists of USD, YEN or EURO global bonds
bond 30% from target gross
Source: Ministry of Finance, USD/IDR: 13,200
Domestic Bonds
Weekly Auction: Conventional securities 23 x Islamic securities 23 x ATM for Government Securities (SBN) by auction 9-11 years Non-Auction: Retail bonds Sukuk Retail (Q1), SBR1 (Q2), Sukuk Tabungan2 (Q3), and ORI3 (Q4) Private Placement Based on request
Front Loading Issuance For Budget Financing
Government Debt Outstanding (as of Dec 2015)
IDR tn US$ bn Total Govt. Debt Outstanding 3,098 235
26.8%
Debt Securities 76% Sukuk 24%
1 SBR: “Saving Bond Ritel” or Retail Savings Bond 2 Sukuk Tabungan means Sukuk Savings Bond 3 ORI: “Obligasi Ritel Indonesia” or Indonesian Retail Bond
42
1 Preliminary figures in 2015
Stable Debt to GDP Ratio Over the Years Weighted Average Debt Maturity of ~9.28 Years (2015)
US$ bn
Remarkable Debt Reduction Initiative Over the Past 10 Years
Change in Debt to GDP Ratio (2005 – 2015) (%) Source: IMF World Economic Outlook Database, October 2015
Well Diversified Across Different Currencies
% of Yearly Issuance
Government Debt / GDP (%) 118 131 141 136 155 169 69 69 64 58 54 54 24.5% 23.1% 23.0% 24.9% 24.7% 26.8% 5 10 15 20 25 30 50 100 150 200 250 2010 2011 2012 2013 2014 2015 Securities (LHS) Loans (LHS) Source: Ministry of Finance
(1)
(43,3) (39,4) (39,0) (19,3) (1,0) 2,0 5,3 8,7 30,6 31,9 33,0 34,3 52,1 61,6 113,7 159,3 230,3 (80,0) (30,0) 20,0 70,0 120,0 170,0 220,0 270,0 Indonesia Philippines Turkey India Thailand Brazil Germany Poland Italy Japan Colombia Malaysia South Africa United States United Kingdom Chile Australia Source: Ministry of Finance Source: Ministry of Finance
9,46 9,32 9,70 9,60 9.73 9,28 9,00 9,25 9,50 9,75 10,00 2010 2011 2012 2013 2014 2015 ATM (in years)
54% 55% 56% 53% 57% 56% 21% 22% 24% 29% 29% 31% 18% 17% 14% 12% 9% 8% 4% 3% 3% 3% 3% 3% 3% 3% 3% 3% 2% 2% 0% 20% 40% 60% 80% 100% 2010 2011 2012 2013 2014 2015 IDR USD JPY EUR Others
(1)
(1)
43
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) 3 Preliminary figures for 2015
Declining Interest Rate Risks Debt Maturity Profile % Declining Exchange Rate Risks % Upcoming Maturities (Next 5 Years)
% IDR tn 20,3 18,8 16,2 16,0 14,8 14,0 26,1 25,9 22,5 23,2 21,0 21,1 0,0 5,0 10,0 15,0 20,0 25,0 30,0 2010 2011 2012 2013 2014 2015 11,3 10,4 10,2 11,7 10,7 11,8 46,2 45,1 44,4 46,7 43,4 43,9 0,0 10,0 20,0 30,0 40,0 50,0 2010 2011 2012 2013 2014 2015
185 88 122 109 76 93 76 71 160 45 60 48 53 99 29 42 47 53 98 6 23 23 23 8 17 24 23 22 16 80 92 109 126 108 109 101 79 85 112 28 24 20 17 16 14 14 14 9 28 4 23 29 1 1 1 32 22 28 28
50 100 150 200 250 300
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046- 2060
7,1 8,2 7,2 8,6 7,7 8,5 20,8 22,7 21,5 21,8 20,1 21,8 34,2 34,6 32,4 33,4 33,9 35,3 0,0 10,0 20,0 30,0 40,0 2010 2011 2012 2013 2014 2015
Variable Rate Ratio (1) Refixing Rate (2) FX Debt to GDP Ratio FX Debt to Total Debt Ratio In < 1 year In < 3 year In < 5 year
IDR-Denominated Other Currencies
(3) (3) (3)
Source: Ministry of Finance
Description (IDR tn) 2015 2016 R-Budget Budget I. Domestic Financing 242,5 272,8 1. Domestic Banking 4,8 5,5 2. Domestic Non-Banking 237,7 267,3 II. Foreign Banking
0,4 1. Foreign Outstanding Loan (Gross) 48,6 75,1
7,5 36,8
41,1 38,3 2. Standby Loan Agreement (SLA) 4,5
3. Foreign Debt Principal Repayment 64,2
TOTAL 222,5 273,2
(0,73) (1,14) (1,86) (2,33) (2,25) (1,90) (2,15) (3,0) (2,0) (1,0) 0,0 (300,0) (250,0) (200,0) (150,0) (100,0) (50,0) 0,0 2010 2011 2012 2013 2014 2015 R-Budget 2016 Budget % IDR tn Defisit % to PDB
mutualism partnership. (If needed)
source of fund
Liabilities Management (ALM) regular meeting
infrastructure project
for low income class Debt Financing Non Debt Financing
44
Government Debt Outstanding Increasing Foreign Ownership of Government Securities at Longer Tenors
76.14
45
Source: Ministry of Finance (%)
Foreign Holders of Government IDR Bonds – Composition Maret 2016
30,8 32,98 32,54 38,13 38,12 38,94 38,98 38,48 32,58 30,49 33,76 30,83 37,85 31,25 30,48 32,89 36,63 36,53 33,7 31,04 23,95 29,81 30,53 38,48 20 40 60 80 100 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-16 Feb-16 Mar-16 Foreign Holder Domestic Non Banks Domestic Banks
10,18 11,87 7,84 5,2 4,65 3,23 3,04 3,04 3,28 22,78 24,97 19,32 18,29 18,96 13,1 13,44 13,10 12,45 67,04 63,16 72,84 76,5 76,39 83,66 83,52 83,87 84,27 30,53 30,8 32,98 32,54 38,13 38,21 38,94 38,98 38,59 20 40 60 80 100 Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-16 Feb-16 Mar-16 0-1 >1-5 >5 Foreign Ownership to Total (RHS)
2011 2012 2013 2014 Jun-15 Des-15 Jan-16 Mar-16 Loan Government Securities
209.41 199.48 204.51 194.55 214.88 224.60 229.70 USD bn 243,80
74.13 65.66 68.82 70.04 75.81 75.73 76.14 25.87 34.34 31.18 29.96 24.27 23.86 24.19
%
76.95 23.05
IDR tn
Maturity Profile Central Government by Currencies
46
Source: Ministry of Finance
Maturity Profile Central Government by Instruments
IDR tn
47
Source: Ministry of Finance
(in trillion Rp)
1) Non Resident are consisted of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the gov't securities used in monetary operation with Bank Indonesia. **) net, excluding gov't securities used in monetary operation with Banks. Description Banks* 299,66 36,73% 335,43 33,70% 375,55 31,04% 350,07 23,95% 442,76 29,81% 451,00 28,63% Govt Institutions (Bank Indonesia**)
44,44 4,47% 41,63 3,44% 148,91 10,19% 56,41 3,80% 52,70 3,35% Bank Indonesia (gross) 150,18 10,11% 149,98 9,52% GS use for Monetary Operation 93,77 6,31% 97,28 6,18% Non-Banks 517,53 63,21% 615,38 61,83% 792,78 65,52% 962,86 65,87% 985,99 66,39% 1071,42 68,02% Mutual Funds 43,19 5,28% 42,50 4,27% 45,79 3,78% 61,60 4,21% 61,48 4,14% 67,57 4,29% Insurance Company 83,42 10,21% 129,55 13,02% 150,60 12,45% 171,62 11,74% 173,26 11,67% 192,29 12,21% Foreign Holders 270,52 32,98% 323,83 32,54% 461,35 38,13% 558,52 38,21% 578,32 38,94% 606,08 38,48% Foreign Govt's&Central Banks 50,06 6,13% 78,39 7,88% 103,42 8,55% 110,32 7,55% 110,98 7,47% 112,31 7,13% Pension Fund 56,46 6,91% 39,47 3,97% 43,30 3,58% 49,83 3,41% 52,24 3,52% 56,15 3,57% Individual 32,48 3,26% 30,41 2,51% 42,53 2,91% 41,42 2,79% 65,85 4,18% Others 63,64 7,79% 46,68 4,69% 60,51 5,00% 78,50 5,37% 78,99 5,32% 83,47 5,30% Total 817,19 100% 995,25 100% 1.209,96 100% 1.461,85 100% 1.485,16 100% 1.575,12 100% Dec-13 Dec-12 Dec-14 Dec-15 Jan-16 Mar-16
* Adjusted by changes in Cash Management & Debt Switch * Based on projection of deficit 2,15%
48
Source: Ministry of Finance Budget 2016
Realization (a.o. March 29, 2016) % Realization to Revised Budget 2016
Government Securities Net 327.224.357 171.716.143 52,48% Government Securities Maturing in 2016 and Buyback 228.839.399 90.698.489 39,63% Issuance Need for 2016 556.063.756 262.414.632 47,19% Government Debt Securities (GDS) 164.497.132 Domestic GDS 115.854.132
81.700.000
17.400.000
16.754.132
48.643.000
48.643.000
97.917.500 Domestic Government Islamic Debt Securities 64.510.000
Sukuk) 30.510.000
31.500.000
2.500.000 Global Sukuk 33.407.500
50
in 2016 as well as less uncertain global financial markets
18 June 2015 Loosens Macroprudential Policy
Value (LTV) ratio
for automotive loans 26 June 2015 Reserve Requirement Policy:
calculation 14 January 2016
resp.
even further, ranging from 25bps to 45bps (O/N to 1Y) 17 November 2015 Lowering IDR Primary RR by 50bps from 8.0% to 7.5%. Effective since 1 Dec 2015 18 February 2016
7.5% resp.
denominated primary reserve requirement by 1%, from 7.5% to 6.5%, effective from 16th March 2016 18 March 2016
resp. 21 April 2016
DF & LF Rate at 4.75% & 7.25% respectively.
into the 7 day (Reverse) Repo Rate to improve the effectiveness of monetary policy transmission. The change will be effective on August 19th 2016
51
The BI Board of Governors agreed on 20th and 21st April 2016 to hold the BI Rate at 6.75%, while maintaining the Deposit Facility and Lending Facility rates at 4.75% and 7.25%, respectively
Hold the BI Rate to 6.75% Reformulate policy rate from BI Rate into the 7 day (Reverse) Repo Rate to improve the effectiveness
will be effective on August 19th 2016 Remain vigilant towards global developments, specifically China’s economy, central banks’ policy convergence, and international commodity prices Strengthen coordination with the Government to support sustainable economic growth while maintaining macroeconomic stability Maintain exchange rate stability in line with the currency’s fundamental value Maintain accommodative macro-prudential policy, while continuing financial market deepening Tenor Term Structure of Monetary Operations 7-day 5.50% 2 Weeks 5.50% 1 Month 5.80% 3 Months 6.20% 6 Months 5.50% 9 Months 6.60% 12 Months 6.75%
52
Bank Indonesia will enhance the monetary operations framework that is supported by the deepening of the financial markets in order to strengthen the transmission of monetary policy.
BI RATE
agent’ inflation expectations
financial markets and eventually to influence general interest rate
Transmission of monetary policy is less effective:
financial crisis draw down overnight interbank rates around DF Rate. Meanwhile, the BI rate is currently around 9-12 months OM instrument.
monetary policy.
CHALLENGES ENHANCEMENT
Background:
53
OMO Term Structure
Character
Transmission
Financial Deepening
The New Policy Rate:
54
6,50 6,75 6,50 6,00 5,75 6,00 6,50 7,00 7,25 7,50 7,75 7,50 7,25 7,00 6,75
5,00 6,00 7,00 8,00 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr
Data as of 31 March 2016
Pre-emptive and Bold Monetary Policy Supported by Substantial FX Reserves to Mitigate External Challenges)
%
Managed Core Inflation Over The Past Few Months Rupiah Exchange Rate Remains Comparable to Peers
2015 2011 2010 2012 2013 2014
US$ bn
Source: Bank Indonesia
2 4 6 8 70 140 Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan FX Reserves (LHS) Months of Imports + Debt Service (RHS)
FX Reserves as of March 2016: US$107.5 Bn (Equiv to 7.8 months of imports + servicing of government debt)
4.45 3.50 9.59 2.76 5 10 15 20
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov Jan Mar 2011 2012 2013 2014 2015 2016 CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)
%
(0,14) 2,03 2,45 2,77 3,61 3,96 4,11 5,77 10,12 10,26 (1,00) 1,00 3,00 5,00 7,00 9,00 11,00 INR PHP THB KRW TRY IDR EUR ZAR MYR BRL
YTD 2016 (2) vs 2015
(%)
%
2016 107,5 7,8
2011 2012 2013 2014 2015
Capital Adequacy Ratio (CAR) & Non Performing Loan (NPL) Credit Growth Act of Financial System Crisis Prevention and Resolution (PPKSK) Loan-to-Deposit Ratio Well Maintained Within the Target Range
Source: Bank Indonesia Source: Bank Indonesia Source: Bank Indonesia
55
LDR (%)
5 10 15 20 25 1 2 3 4 5 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 2013 2014 2015 2016 Capital Adequacy Ratio (CAR) (RHS) Gross Non-Performing Loan (NPL)
(%) (%) 0% 5% 10% 15% 20% 25% 30% 35% 40%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 2013 2014 2015 2016
Total Growth Working Capital loans Investment Loans Consumption Loans
2,9 21,7 12,8 9,2 8,2 5,3
89,42
83 84 85 86 87 88 89 90 91 92 93
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 2013 2014 2015 2016
authorities in the crisis prevention and resolution.
functions of banking especially against SIBs.
principle.
and has sufficient collateral.
intervention by LPS in the event of a systemic bank experiencing solvency issues.
crisis handling.
Education & Socialization
Instrument and Investor Based Regulation and Standardization Institutional Support Market Infrastructure
Priority on clarity, harmonization
regulation to support financial market development, and standardization of transactions agreements and accounting treatments (Repo) Priority on developing investor base, instruments (investment, financing, liquidity and risk management instruments), and encourage reference rate credibility Priority on promoting efficiency and transparency on transaction and settlement system (ETP and CCP) Priority on strengthening institutional support, including cross authority coordination forum and other supporting institution
56
82,4 12,1 6,8 1998 2008 Sep-15 197,0 35,0 15,5 1998 2008 Sep-15 60,0 9,5 7,5 1998 2008 Okt-15 30,0 3,8 2,8 1998 2008 Agu-15 17,4 50,2 1998 2008 Sep-15
Inflation Rate IDR Depreciation BI Rate Non-Performing Loan (NPL) Government Debt/GDP Foreign Reserves
100.0% 1998 27.4% 2008 15.9% Dec 2015
8.6x
1998
3.1x
2008
3.0x
Dec-2015
116.8%
1998
33.2%
2008
36.1%
Q4-2015
More Liquid Market External Debt (Public & Private) to FX Reserve Ratio External Debt/GDP
Inflation controlled under the revised Budget target Depreciation rate lower than 1998 & 2009 BI Rate is lower than 2008 NPL level is below the maximum threshold of 5% Continue to decline and allocated to productive sectors Significantly higher than 1998 & 2008, ample to cover 7.3 months of import and external debt repayment Significantly lower than 1998 crisis Slightly higher than 2008, but significantly lower than 1998
Mar 16
3.96 (ytd)
Mar 16
107,5
Apr 16 Mar 16
4,45 (yoy)
Feb 16
2.9 6.75
62 10,5 5,7 1998 2008 Jul-15
Overnight interbank money market rate is relatively lower
Mar 16
5,0
57
2016 Economic Outlook
58
Economic Growth Inflation CAD (% GDP) Credit Growth
increase as a result of government policy packages and measurable monetary easing.
below 3% of GDP.
OJK has clearly set out three directions to develop the domestic financial sector in the medium term. From each direction, key priorities and programs are derived. A comprehensive “Indonesia’s Financial Sector Masterplan” is scheduled to be launched in Q4-2015.
Enhancing financial sector’s role in boosting economic activities
In ongoing efforts to achieve a robust and sustainable economic growth, the domestic financial sector is directed to play a more vital role in terms of catalyzing national economic activities.
Strengthening financial sector’s resilience to maintain financial system stability
To support the sustainability of economic development, financial stability plays an important role. To that end, financial sector must maintain its resilience to confront possible shocks that could emerge from the domestic or external environments.
Enhancing financial sector’s role in improving financial inclusion and promoting equality
Financial sector has the opportunity to play an increasingly significant role in overcoming inequality that may arise. Initiatives undertaken by OJK include promoting financial inclusion and catalyzing local economy. 59
sectors initiated by the Government
(regional credit guarantee, rural banks, microfinance, and cooperatives) to foster rural credit growth
and competitiveness of the national banking industry
activities
integration
province
reinsurance industry
issuers, collaborating with the stock exchange and relevant agencies
rationalization of disclosure requirements
sectors (e.g. mortgage-backed securities – Certificate of Participation for housing sector)
source for SMEs & startups
financing source
In ongoing efforts to achieve a robust and sustainable economic growth, the domestic financial sector is directed to play a more vital role in terms of catalyzing national economic activities. Hence, OJK undertakes a series of initiatives for each financial sector. Enhancing the role of financial sector in the development financing Enhancing the role of financial sector in improving competitiveness and fostering growth OJK also undertakes a number of initiatives in the implementation of green financing and the development of the Islamic financial sector.
60
market infrastructure. In 2015, focus of development will be put on enhancing the clearing and settlement system, developing a capital market data warehouse, and developing e- registration, e-licensing, and e- monitoring systems
secondary debt market. Measures include the implementation of electronic trading platform for the debt market and the issuance of regulations
Agreement (GMRA)
industrial players in financial sector, thereby simplifying analysis and promoting understanding of financial performance of financial institutions
corporate governance in the allocation of profits to corporate owners and management, with high regards to future potential risks
protection (market conduct) using the self- assessment and thematic surveillance approaches, in order to maintain consumer loyalty on financial service providers
requirements for financial
complements another directives issued in 2014 concerning the implementation of integrated corporate governance and risk management
To support the sustainability of economic development, financial stability plays an important role. To that end, financial sector must maintain its resilience to confront possible shocks that could emerge from the domestic or external environments. Hence, extending the contribution of financial services sector must be held simultaneously with maintaining the resilience. Strengthening the implementation of integrated supervision Strengthening regulations on financial reporting, GCG, and market conduct Continuing measures to deepen the capital market
61
programs and coordinating with the industry to develop appropriate products and services aimed at particular target groups
include students, professionals, and low-income families
banks through coordination with relevant agencies (including local government and regional bank association) and the integration of IT, HR, products, and risk management platform of all regional banks
distinguishing capital requirements for the establishment of rural banks based on the
microfinance institutions and building cooperation with local governments in supervising the microfinance institutions
bond issuance to finance feasible local projects
framework
programs, which include the insurance for fishermen and farmers, as well as health insurance for low-income families
public to invest in the capital market, including through various socialization programs and expanding the channeling of mutual fund products
Financial sector has the opportunity to play an increasingly significant role in overcoming inequality that may arise. Initiatives undertaken by OJK include promoting financial inclusion and catalyzing local economy. Expanding financial services to the public of all social classes Increasing the role of financial sector in catalyzing local economy Improving financial education and financial inclusion
62
…to navigate through uncertain global environment and to stimulate domestic economic growth, Indonesia has launched a series of economic policy package
64
Stimulus Package I: 9 Sep 2015 Cut Red Tapes Accelerate Strategic National Projects Boost Low Income Housing
requirements, gas price adjustment for certain industries and enhancing cooperative function
and implementation of e-services
accommodation
for the government
accelerate national strategic project completion
income citizens
property sector
Tax Incentives Integrated Logistics Facilities Stimulus Package II: 29 Sep 2015 Simpler Permit Requirements
permit issuance program
holiday for qualified investments to 25 days and 45 days, respectively
forestry sector from 14 to 9
(train, shipping and air transport inc. spare parts)
month 7.5%, 6-month 2.5% and more than 6- month 0%
center
(Fuels)
Lower Fuel and Electricity Prices Stimulus Package III: 7 Oct 2015
fuel)
industries
use right and land permits
Land Permit Simplification for Investment Activities Broadening of Small Business Credit Recipients
include salaried workers
…to navigate through uncertain global environment and to stimulate domestic economic growth, Indonesia has launched a series of economic policy package
65
Stimulus Package VI: 5 Nov 2015
Propel Rural Economies through Development in Special Economic Zones (SEZs)
(reduce net income and accelerate depreciation.
areas
agencies
times
permits
resources utilization
SPAM subsystem
Sustainable and Equitable Water Supply to the Community Simplifying Import Licensing for Pharmaceutical Raw Materials
00
Stimulus Package V: 23 Oct 2015
Lower Asset Revaluation Tax
according to periods, detailed below:
rate at 3%
rate at 4%
rate at 6%
Real Estate Investment Trusts (REITs)
infrastructure companies to issue REITs in Indonesia
Eliminating Double Taxation for REITs Stimulus Package IV: 15 Oct 2015 Fair, Simplified and Projectable Wage System
simplified, stable and projectable yearly wage adjustments
business credit to stimulate credit growth in banking sector and affordability to applicants
to include:
productive sectors (farming, fishery, manufacturing, creative business, trading and services)
terminated contract
Ease and Affordability of Small Business Credit
…to navigate through uncertain global environment and to stimulate domestic economic growth, Indonesia has launched a series of economic policy package
66
Stimulus Package VII: 4 Dec 2015
Acceleration of Land Certification Process
especially from non-civil servant.
registration announcement, from 60-30 days to 14 days
system
peoples and people who lives in plantation/forest area
which facilitate income tax (PPh) for the labor works in labor intensive industry for 2 years
industries throughout provinces in Indonesia Tax Incentive for Labor Intensive Industry
Stimulus Package VIII: 21 Dec 2015
One Map Policy
thematic map in 1:50.000 in order to accelerate the settlement of land using problem and to solve the country’s borderline problem
and Bontang, to support the existing refinery in Cilacap, Balikpapan, Balongan and Dumai. Refinery Construction Incentive for Aircraft Maintenance Companies
tariff post regarding aircraft sparepart and maintenance components
Stimulus Package IX: 27 Jan 2016
Accelerated Construction
Company (PLN) in its various actions by guaranteeing the supply of primary energy;
energy sources;
stop-shop;
provision of land and resolution of legal issues
regulated trading schemes;
Smallholder Livestock Centres (SPRs).
Stabilisation of Meat Prices Deregulation on Logistics Sector
aggregators for SME’s products, geographical indications and the creative economy
…to navigate through uncertain global environment and to stimulate domestic economic growth, Indonesia has launched a series of economic policy package
67 Stimulus Package XI: 29 Mar 2016
facilities for the working capital and investment needs of micro, small and medium enterprises.
Export-Oriented People’s Business Credit (KURBE) Real Estate Investment Trust (REITs) Risk Management for Expediting Flows of Goods in Ports (Indonesia Single Risk Management/ISRM) Further Development of the Pharmaceutical and Medical Equipment Industries
categories to those reserved for micro, small and medium enterprises and cooperative (MSMECs) in a revision to Presidential Decree Number 39 of 2014 concerning the List of Business Closed and Conditionally Open to Investment, more commonly known as the Negative Investment List (NIL).
production; cold storage; tourism (restaurants, bars, cafés, recreational, art and entertainment businesses, sports facilities); the film-making industry; operation of marketplace electronic transactions above Rp 100 billion; establishment of telecommunication devices testing institutions; toll road concessions; non- hazardous waste management and disposal; and the pharmaceutical raw material industry have been taken off the NIL.
business categories to foreigners permitted to hold shares up to particular levels, compared to the previously required 100% domestic investment, including health support services (max. 67% foreign capital), land passenger transportation (max. 49%), the film-making industry including film distribution (up to 100%) and high/extra high voltage power utility installations.
Stimulus Package X: 11 Feb 2016
Easing of Investment Restrictions
bolster efficiency in provision of long-term investment funds in support of accelerated construction of infrastructure and housing under the National Medium-Term Plan for 2015-2019.
can offer business certainty, efficiency in times and costs of licensing, and savings in dwelling time through more effective supervision through integration of risk management among the relevant line ministries/government agencies.
preparations (i.e. drugs, drug raw materials, traditional medicines and cosmetics) and medical equipment in an effort to improve health services under the National Health Insurance (JKN) and promote affordable prices for drugs in Indonesia.
Stimulus Package XII: 28 April 2016
Simplification of Licensing, Procedures, Duration, and Cost of Starting Business in Indonesia
Cutting procedures and minimum requirements in the establishment of Limited Company (Ltd.)
Simplification of 17 procedures / 210 days to 14 procedures / 52 days
Simplification of 5 procedures / 25 days to 3 procedures / 7 days
Introduce online taxation system to simplify procedure from 54-time to 10-time payments.
Access to credit will be conducted through PT PEFINDO and PT Indonesia Jaya Credit Bureau.
Contract enforcement by regulating simple lawsuit settlement
Simplification of electricity connection process from 5 procedures / 80 days to 4 procedures / 25 days
Cut export time from 4.5 days to 3 days and export fees from USD424 to USD83.
Compensation to curator will be calculated based on the debt value, not based on debtor’s asset value.
Minority investors will be protected by the existing regulations.
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Logistic and Bounded Zone facilities President Decree No. 85/2015 Facilities on VAT in Port Service President Decree No.75/2015 VAT incentive President Decree No. 69/2015; No. 81/2015; No. PP 106/2015 MoF Decree No. 267/2015, No. 268/2015 Incentive for Industrialized Zone President Decree No. 142/2015 Luxury tax incentive MoF Decree No. 206/PMK.010/2015 Import duty exemption for Industry MoF Decree No. 188/PMK.010/2015 Deposit interest for Export Proceed President Decree No. 123/2015 MoF Decree No. 26/PMK.010/2016 VAT Exemption for Transportation President Decree No. 39/2015 MoF Decree No. 192/2015; No. 193/2015 Fiscal Incentive in Logistic Area MoF Decree 272/PMK.010/2015 (Cikarang &Merak)
Issued Regulation in 2nd Package
Facilities for Investment in Special Economic Zone President Decree No. 96/2015 0% duty for airline related goods MoF Decree No. 35/2015 Tax incentive for Asset Revaluation MoF Decree No. 191/PMK.010/2015 MoF Decree No. 233/PMK.003/2015 Elimination of Double taxation in REITS MoF Decree No. 200/PMK.003/2015 Tax Cut for REITS Issuance
Issued Regulation in 1st Package Issued Regulation in 6th and 8th Package Issued Regulation in 4th Package
Regulation in Pipeline (Mostly 70% in Issuing)
Tax and Custom Exemption Facility in Industrial Area Import Duty Exemption for Export Oriented Product Physical Check Easing by DG Custom and Excise Shorten Tax Allowance and Tax Holiday Process Income Tax Relief for Labor Intensive Industry Expanding Industry Eligibility for Tax Allowance
…comprehensive approach across sectors Stimulus to Enhance Household Purchasing Power
Indonesia
Source: Ministry of Finance
advantage on domestic industries
lowered to 12%, less than general SMEs credit rate
improvements in capital structure
apartments and IDR 20 billion (~US$ 1.4 million) for landed houses
government capital allocation and National Interest Account
airplanes, including spare parts)
Implemented
including amendment of Income Tax Law, VAT Law, General Tax Administration Law and regulation regarding Tax Amnesty
special incentives (tax allowance, tax holiday and elimination of customs fee)
via longer tax holiday up to 25 years
regulations by providing free import fee facilities and more efficient administration process
On Pipeline
69
exchange market confidence by controlling currency volatility
confidence in tradable government securities (SBN) through purchases
while monitoring its impact
terms of inflow and money market liquidity.
Strengthening inflation control and stimulating the real sector from the supply side Maintaining rupiah exchange rate stabilization Strengthening liquidity management Rupiah, through Open Market Operations (OMO), in
liquidity to longer tenors
amongst the National and Regional Inflation Control Teams to accelerate implementation of the national and regional inflation control roadmap. There are currently more than 430 regional inflation control teams throughout Indonesia, each having a regional inflation roadmap.
Economic and Financial cooperation between Bank Indonesia and the Government
mechanism of Reverse Repo (RR) SBN from variable rate tender into fixed rate tender, adjust the pricing of RR SBN, and extend the tenor by issuing RR SBN 3 months
mechanism of Certificates of Deposit of Bank Indonesia (SDBI) from variable rate tender into fixed rate tender, adjust the pricing of SDBI, and issue SDBI with 6 months tenor
Certificates (SBI) tenor of 9 months and 12 months with a fixed rate tender auction mechanism as well as pricing adjustment
Strengthening foreign exchange supply and demand management
auctions of Foreign Exchange (FX) swap from 2 times/week to 1 time/week
Term Deposit (TD) auction mechanism from variable rate tender into fixed rate tender, pricing adjustment, and extend the tenor of up to 3 months;
foreign currency by verifying the underlying documents from US$ 100,000 to US$ 25,000 per customer per month and requires the use of Tax Identification Number (NPWP)
debt approval process while adhering to prudential principles
Deepening the money market
facilities to shore up investment infrastructure and simultaneously strengthen foreign exchange reserve assets.
regulations covering all components of market development, including the instruments, players and infrastructure.
In line with the government’s effort to promote economic growth, Bank Indonesia introduced the September Policy Package to support macroeconomic and financial system stability
70
30th September 2015
The presence of Bank Indonesia in the domestic foreign exchange market to stabilise the rupiah exchange rate was strengthened through intervention in the forward market. In addition to intervention in the spot market, Bank Indonesia also intervenes in the forward market to help balance supply and demand. Maintaining balance in the forward market is important to alleviate pressures in the spot market.
Bank Indonesia reinforced rupiah liquidity management by releasing three-month Bank Indonesia Certificates of Deposit (SDBI) along with two-week reverse repo tradable government securities (SBN). The release of such open market operation instruments will absorb liquidity, prompting a shift towards longer tenor instruments, which should reduce the risk of excessive use of rupiah liquidity that could intensify pressures on the rupiah exchange rate.
requires an underlying document from US$1 million to US$5 million per transaction per customer and broaden the scope of underlying assets for forward sells to include domestic and offshore foreign currency term deposits.
exchange market.
banks in Indonesia or converting the proceeds into rupiah as requested by the government. The policy is expected to keep FX earnings in the country for longer.
participants are obliged to report their use of FX through supplementary supporting documentation for transactions of a certain value. The regulation is pursuant to Act No. 24 of 1999 concerning the Flow FX and the Exchange Rate System, where Bank Indonesia is authorised to request information and data regarding the flow of FX from residents. 71
As part of national efforts to reverse the recent economic slowdown, OJK has issued a series of financial sector
and to support the Government’s infrastructure development.
sector: measure are focused
increasing bank loans to MSMEs and housing financing – Adjustment of risk weighting for certain types
– Relaxation
requirements for debt restructuring
supporting financing for housing and infrastructure, as well as developing SMEs through financing from the capital market – Development & expansion
investment products – Development of municipal bonds – Unlocking opportunities for SMEs to go public
the growth
multifinance companies and microfinance institutions – Relaxation
regulations
NPF in multifinance companies – Development of microfinance institutions – Establishment of a rating agency for MSMEs
trust
agricultural insurance scheme
venture capital, especially to finance start-up businesses
financing industry consortium, especially to provide financing for creative industry, export-
Financing Agency (LPEI)
in assessing quality of loans
July 2015 October 2015
currency account
for foreign residents – Opening an account up to $50,000
need to present a passport – Opening an account with
subject to simple customer due diligence process
and
supporting documents
September 2015
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PPP Unit under Ministry of Finance will facilitate project development of PPP projects, by providing facilities such as Project Development Facilities (PDF), technical assistance, arrangement of guarantee with IIGF, and infrastructure funding with PT SMI and PT IIF. PPP Unit will also help capacity development for PPP and promotion of PPP projects Minister has approved the establishment of PPP unit, and the funding arrangement with donor and regulatory framework are under progress. KPPIP (The Committee for Accelerated Infrastructure Delivery) is a central government body that will coordinate the delivery of the government’s priority infrastructure projects, which consists of key government ministries related to infrastructure delivery, such as the CMEA, MoF, BAPPENAS and the BPN. KPPIP has established 30 priority projects for 2016 to be implemented. Establishment of PT SMI (Sarana Multi Infrastruktur), PT IIF (Indonesia Infrastructure Finance) to provide long-term financing Reform of National Land Agency (BPN), including establishment of special deputy for land acquisition acceleration and dedicated team for priority infrastructure projects, development of SOPs for every BPN activities etc.
To ensure sound implementation, some institutional reforms and new institutions have been established.
National Land Agency (BPN) Reforms Establishment of PPP unit under MOF Increased Fiscal Contribution by GoI through PT SMI, PT IIF, and IIGF Establishment of KPPIP
The government is also in the process of establishing more institutions to further accelerate infrastructure delivery
INSTITUTIONAL REFORMS 73
implementation of the law is the city of Bojonegoro, where the civil society was socialized early to the law and where the land appraisal and compensation amount were attractive.
acquisition process for the Java North Line Double Track Rail project took less than 2 years.
Neutral decision making regarding community rejection BPN as central agency in implementation of land acquisition More detailed regulation on implementation of land acquisition
One of the major reforms is the New Land Law No.2/2012:
Law No. 2 /2012 regarding Land Acquisition for Public Interest Presidential Regulation (PR) no 38/2015 regarding PPP Presidential Regulation (PR) no 39/2014 regarding the New Negative List of Investment The new law will ease land acquisition bottlenecks and disputes for infrastructure projects such as road, railway, station, port, airport, etc. The law regulates procedures of land acquisition, funding for land acquisition land appraisal, amount and types of compensations, objections and dispute
contributing to land acquisition process. Government has revised the original regulation on PPP (Presidential Regulation no 67/2005) three times to accommodate more concerns regarding PPP development in Indonesia. For example, the revision accommodates foreign companies/investors in procurement of PPP projects, criteria and compensation for unsolicited project proposal, the need for fiscal support from Ministry of Finance. Government has revised the previous Negative list of investment to encourage more foreign businesses to take part in infrastructure development. For example, in transport sector, foreign
government also allows 100% foreign ownership of power plant >10MW during PPP concession period (previously 95%).
Better Land Appraisal Team Appointment Less bureaucratic land right revocation process
Successful case of the implementation of the New Law
New Law no 2 / 2012
REGULATORY REFORMS
Minister of Energy & Mineral Resources Reg. No. 3/2015 regarding Procedure for Power Purchase This regulation allows for power purchase from mine mouth coal power plant, coal power plants, gas/micro gas power plants, and hydro power plants can be done with direct selection and direct appointment with the purpose to accelerate procurement process.
74
Progress of Infrastructure Projects Still Positive Despite Some Administration Issues in the Beginning of 2015
Projects Already Being Auctioned
NATIONAL TOLL ROAD
Trans Java Pejagan – Pemalang (58 km) Semarang – Solo (73 km) Trans Sulawesi Manado – Bitung (39 km) Trans Sumatera Medan – Binjai (16 km) Palembang – Indralaya (22 km) Pekanbaru – Dumai (135 km) Medan – Tebing Tinggi (62 km)
1 MILLION HOUSE PROJECT
West Jakarta, Banten, Kalimantan, Batam, NTB, NTT, East Java, Central Java, South Sulawesi, West Sulawesi, Southeast Sulawesi
DRINKING WATER INFRASTRUCTURE
Central Java (West Semarang);
DAM
East Java (Bendo), Central Java (Gondang, Pidekso), North Sulawesi (Lolak), NTT (Raknamo), NTB (Mila), Banten (Karian)
INTERCITY RAILWAY
South Sumatera (Prabumulih – Kertapati), North Sumatera (Tebing Tinggi – Kuala Tanjung), Southern Java Double Track
COMMUTER RAILWAY
Jakarta MRT (North – South Corridor), Jakarta LRT, SHIA Airport Railway
AIRPORT DEVELOPMENT
Revitalization Central Kalimantan, Bangka Belitung, New Project West Java (Kertajati) Expansion Terminal 3 Soekarno-Hatta International Airport
PORT AND HARBOUR
East Kalimantan (Maloy), Jakarta (Kalibaru), South Sulawesi (Makassar New Port), Central Sulawesi (Parigi)
Source: Varipus Sources
Source: Ministry of Finance Infrastructure development target reflects Government target from 2014 – 2019
75
IDR 66.4 tn allocated to:
and clean water)
MINISTRY OF PUBLIC WORKS & HOUSING MINISTRY OF TRANSPORTATION
IDR 32.5 tn allocated to:
maintenance of railway infrastructure
ships
MINISTRY OF AGRICULTURE
IDR 4.6 tn allocated to:
for agriculture sectors IDR 4.0 tn allocated to:
energy infrastructure
MINISTRY OF ENERGY & MINERAL RESOURCES
76
Improvement on PPP Regulation
2005 on PPP and its amendments by issuing the new Presidential Regulation No. 38 of 2015 on PPP on 20 March 2015.
infrastructure; a low quality of pre-feasibility studies; gaps of quality in assets that were partly constructed by the Government; unattractive investment return scheme; and weak Ministries/Institutions commitment for PPP projects.
The Ministry of National Development Planning has issued the Ministerial Regulation No. 4 of 2015 on the implementation Procedures for a Public-Private Partnership in Infrastructure Provision. This Ministerial Regulation is a derivative regulation to supplement the Presidential Regulation No. 38 of 2015 on PPP.
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
77
Regulation improvement to accelerate land procurement process
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.
Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30 of
funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement.
Land Procurement Process as Stipulated in Law No. 2 of 2012 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
78 Financing Breakdown (2015 – 2019)
Govt & Local Budget (41.3%) Financing Gap Total Financing Needs: ~ US$345.1 Bn
~ US$142.4 Bn
SOE (22.2%) PPP (36.5%)
~ US$76.7 Bn ~ US$126.0 Bn Alternative Financing Scheme
Establishment of PPP Unit
in Indonesia Broad Objective Core Mandates
Transaction Advisor
approvals for projects Additional Mandates
New Roads 2,650 km Hig ighw hway 1,000 km Roa
tena nance 46,770 km Bus Bus Co Corrid idors rs 2 New Sea Ports 24 Sea port developments 59 Railway Lines 2,159 km Intra City Rail Lines 1,099 km New Airports 15 Airplanes for new routes 20 Sea Port Roads Railways Airport Budget Public Private Partnership State Owned Enterprise & Private Sector
Budget (Special Allocation Fund & Rural Transfer)
basic infrastructure projects:
‒ Food Security:
Irrigation, dams etc.
‒ Maritime: Seaports,
shipyards etc.
‒ Connectivity:
Village roads, public transportation etc.
partnership between the Indonesian government and private sector companies
‒ Projects Ready for Auction under 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 such as West Semarang water supply project
‒ Land Fund: Modification and simplification of land acquisition
process
‒ Project Development Facility (PDF) through PT Sarana Multi
Infrastructure
‒ Indonesia Infrastructure Guarantee Fund (IIGF): A mutual
government guarantee scheme for infrastructure risks
‒ Viability Gap Fund (VGF) for PPP projects with near-term
financial constraints
‒ Infrastructure Fund: To offer long term financing for
infrastructure projects
‒ Availability Payment (AP): To allow availability of infrastructure
services provided by PPP companies
into SOEs – intention is that through a multiplier effect, more infrastructure projects can be developed
‒ Infrastructure and maritime
development
‒ Transportation and
connectivity
‒ Food security
developments in focus:
‒ Water Supply ‒ Airports ‒ Seaports ‒ Electricity and power plants ‒ Housing ‒ Mining
79
1 USDIDR exchange rate of 13,200
Guarantee Program based on Guarantee Classification
In 2016, Government will add credit guarantee program (i) infrastructure financing through direct loans from international financial institutions (ii) acceleration of toll road construction in Sumatera
75,8 67,3 47,2 46,3 69,2 60,0 45,0 3,8 1,1 0,8 2,7 0,2 0,1 0.1 4,5 3,7 3,8 24,5 79,5 68,5 48,0 53,4 73,0 63,9 69,6 2010 2011 2012 2013 2014 Revised Budget 2015 2016
Electricity Development Clean Water Program PPP & Electricity Dev. Project
Budget Allocation for Claims on Government Guarantee (1)
Program Guaranteed Party
Letters Currency Value (bn) Outstanding as
A Credit Guarantee 47 US$ 4.0 2.7 IDR 36,007.0 19,138.9
fired power plant project (10,000 MW) – stage 1 PLN 11 US$ 4.0 2.7 25 IDR 35,678.7 18,975.7
drinking water supply project PDAM 11 IDR 328.3 163.2 B Investment Guarantee 10 US$ 8.2 – IDR – –
fired power plant project (10,000 MW) – stage 2 IPP 9 US$ 5.0 –
partnership with Enterprise Infrastructure Guarantee Agency Private 1 US$ 3.2 – Total 57 US$ 12.1 2.7 IDR 36,007.0 19,138.9
Source: Ministry of Finance
(US$ mm)
1,000.0 889.0 623.3 611.2 913.7 792.0 593.9 50.0 15.0 10.0 35.0 2.2 1.8 0.9 – – – 59.2 48.2 49.7 323.2
(IDR bn equivalent)
80
OBC Development Ready for PPP Tender Permit and Land Acquisition Financial Close Construction
(Rp13,1 T) 10.Batang 2.000 MW Power Plant (Rp40 T)
(Rp 54 T)
(Rp20 T)
(Rp7,64T)
Development (NCICD) Tahap A (Rp 20 T)
(Rp70 T, Zona 1 Rp7 T)
Project (Cilacap, Balongan, Plaju, Dumai, dan Balikpapan) (~Rp210T)
Java (TBA)
Bekasi – Laut (CBL) (Rp35T)
Implementation Stage Preparation Stage
81
Roads Dams Housing
Trans-Sumatra Highway Cikampek-Palimanan Highway (Operational) Jatigede Dam (Operational) Raja Ampat Housing Project, Papua
Transportation
Jakarta MRT Project1 Terminal 3 Ultimate Soekarno-Hatta1 New Tanjung Priok Port Project1 Komodo Airport, NTT Matahora Airport, Southeast Sulawesi Tual Airport, Maluku Juwata Airport, Tarakan 1 Not funded from National Budget
* Source: Ministry of State Owned Enterprises ** Source: Anecdotal information from various media e.g. Kompas, Media Indonesia, Liputan6, Republika, Tribunnews, Merdeka, etc 82
Description Length (km)* Investment (Rp trillions)* Concession By** Status** Remarks** Completion Target** Solo-Ngawi-Kertosono 177,1 10 Waskita Karya, Jasa Marga In Progress Solo-Ngawi: Construction 80% completed (by end-2015) Ngawi-Kertosono: Construction 40% completed (will finish by end of 2017) 2018 Soreang-Pasir Koja 10,57 1,2 Wijaya Karya, PT. Jasa Sarana In Progress Land Clearing: 96% completed June 2016
57 5,5 n/a In Progress n/a n/a Manado-Bitung 39 3,2 n/a In Progress Land Clearing: 64% completed (Section I) Construction: 4% 2018 Balikpapan-Samarinda 99 8,5
Samacita, Waskita Karya, Hutama Karya, Adhi Karya In Progress Land Clearing: 80% completed 2019 Cinere-Serpong 10,14 1,8 Jasa Marga, Waskita In Progress Land Clearing: 1% completed 2019 Medan-Binjai 16,72 1,5 Jasa Marga, Hutama Karya, Waskita Karya In Progress Land Clearing: 70% (11,7 km) completed Construction: 8% completed 2016 Bakauheni-Terbanggi Besar 140 14,2 Hutama Karya, PP, Waskita Karya, Wijaya Karya, Adhi Karya In Progress Land Clearing: 18% (25,2 km) completed Construction: 5% completed 2018 Palembang-Indralaya 22 3,3 Hutama Karya In Progress Land Clearing: 49,1% (10,8 km) completed Construction: 10,4% completed 2018 Pekanbaru-Dumai 131 11,9 Hutama Karya In Progress Land Clearing: 19,5% completed Construction starts in 2016 2018 Bekasi-Cawang-Kampung Melayu 21,04 7,2 Waskita Karya In Progress Groundbreaking: October 2014 Land Clearing: Section 1 - 70% completed, Section 2 - 30% completed 2017 Pejagan-Pemalang 57,5 5,5 Waskita Karya In Progress Land Clearing: 99% completed Construction: Section I & II 92% completed 2017 Pemalang-Batang 39,2 4,1 Jasa Marga, Waskita Karya In Progress Land Clearing: 4.25% completed 2018 Batang-Semarang 75 7,2 Waskita Karya In Progress Land Clearing: 3% completed 2018 Ciawi-Sukabumi 7,78 7,7
In Progress Groundbreaking: Februari 2015 Land Clearing: 70% completed 2016 Krian-Legundi-Bunder 30 4,6 Waskita Karya In Progress Land Clearing: uncompleted, followed by concession tender (June 2016) 2018 Medan-Kualanamu-Tb. Tinggi 61,7 4,1 Jasa Marga, Waskita, Hutama Karya In Progress Land Clearing: 85.98% completed Construction: 6% completed 2017 Total 994,75 101,5
Cabinet Meeting Progress of 35,000 MW Debottlenecking through regulation:
electricity supply cooperation and joint utilization of the electrical network among license holders.
Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection and Appointment. Cabinet Meeting “There’s electricity crisis in Indonesia, requires construction of large capacity plant "
Launching 35.000 MW by the President in Goa Beach Sanden DIY. Average economic growth of 6.7 requires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)
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