[PPT] - Synergized nergized Ref eforms orms Mo Move Februar bruary 2019 PowerPoint Presentation

SLIDE 1

Februar bruary 2019 Republic ublic of Indon

nesi

esia

Sta tability bility at t th the F e Forefr efront,

nt,

Synergized nergized Ref eforms

rms Mo

Move

SLIDE 2

1

About t Invest estor

r Relati

lations

ns Uni

Unit t of the Repub ublic lic of Indonesi esia

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

f

its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit – Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Wiwit Widyastuti (International Department - Bank Indonesia, Phone: +6221 2981 8279) Evy Mulyani (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

SLIDE 3

2

What’s New in This Edition

…page 24-26

Indonesia’s Stron

ng

g GD GDP

…page 88

Progr gress ess of NC NCSA A Progr gram ams

SLIDE 4

3

Overvie view

1 2 3 4 5 6

Instit ituti tional

nal and Govern

ernance nce Effec ecti tiven enes ess: : Accelera elerated ed Reform rms Agen enda da with Instit ituti tional

nal Improvem

emen ent Econom nomic ic Factor: Strong ng and Stable le Growth th Prospec ects ts Remain in Intac act External nal Factor: tor: Improved

ved Extern

rnal al Resilience lience Fiscal al Perform

rman

ance and Flexibi ibility lity: : More Fiscal al Stimulu ulus with Pruden ent t Fiscal al Managem gemen ent Monetary tary and Financi ncial al Factor: tor: Credib ible le Monetary tary Polic icy Track k Recor

rd

d and Favou

urab

rable le Financi ncial l Sector tor Progres ressiv ive Infras rastruct ructur ure e Develop velopmen ent: t: Strong ng Commit itmen ent t on Accelera elerati tion

n
f
f Infras

astr truct ucture ure Provis ision ion

SLIDE 5

Instit itution utional l and d Gover ernme ment t Effecti ectiven eness: ess: Accel celerat erated ed Ref eform

rms Age

gend nda a wit ith Instit itution utional l Impr mprovem emen ent

Se Sect ction ion 1

SLIDE 6

5

Improving ving Global al Percepti eption

n

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

n inde

dex x and governa rnanc nce e indica dicator

r

1. Source: World Economic Forum – The Global Competitiveness Report 2018; 2. Source: World Bank – Doing Business 2019 Report; 3. Source: World Bank – World Governance Indicators 2018; 4. Source: Transparency International – Corruption Perceptions Index 2018 Report

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

bal Competiti

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

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

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

51 29 5… 5… 41 48 15 20 25 30 35 40 45 50 55 2010 2011 2012 2013 2014 2015 2016 2017 Voice and Accountability Political Stability/Absence of Violence Government Effectiveness Regulatory Quality Rule of Law Control of Corruption 38 41 42 36 30 32 34 36 38 40 42 44 2012 2013 2014 2015 2016 2017 2018 Indonesia India Philippines Bulgaria Colombia

SLIDE 7

6

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

…another

ther leap on Indonesia’s Rank on Ease of Doing

ng Busines ness (EODB)*

EoDB DB 2019 Rank nk EoDB DB 2018 Rank Change e in Rank EoDB DB 2019 Points ts EoDB DB 2018 Points ts Change e in Points ts

Ove verall rall 73 73 72 72 1 67.9 .96 66. 66.54 54 1.42 Startin ting g a busines ess 134 134 144 10 81.2 1.22 77.9 .93 3.29 Dealing ling with Constr truct uction ion Pe Permit it 112 108 4 66.5 .57 66.0 .08 0.49 Gett tting ing Electri tricit ity 33 33 38 38 5 86.3 .38 83.8 .87 2.51 Registerin ering g Proper erty ty 100 106 6 61.6 .67 59.0 .01 2.66 Gett tting ing Credit it 44 44 55 55 11 70.0 .00 65.0 .00 5.00 Prot

tecti

ting ng Minor

rit

ity Inves vestor

rs

51 51 43 43 8 63.3 .33 63.3 .33 0.00 Paying ing Taxes 112 114 2 68.0 .03 68.0 .04 0.01 Trading ing Acros

ss Borders

116 112 4 67.27 67.27 27 0.00 Enfor

rcing

ing Contrac racts 146 145 1 47.2 .23 47.2 .23 0.00 Resolvin lving g Insolv lven ency 36 36 38 38 2 67.8 .89 67.6 .61 0.28

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 2019 was published in October 2018

SLIDE 8

7

BBB / Stable Baa2 2 / Stable BBB BBB- / Stab able

Apr 201 2018, Baa2, , Rating g Upgra graded ded “The upgrade to Baa2 is underpinned by an increasingly credible and effective policy framework conducive to macroeconomic stability. Together with a build-up of financial buffers, prudent fiscal and monetary policy strengthens Moody’s confidence that the sovereign’s resilience and capacity to respond to shocks has improved.” May 2018, BBB-, Stabl ble e Rating g Affi firm rmed ed “The sovereign ratings on Indonesia are supported by the government’s relatively low debt levels and its moderate fiscal performance and external indebtedness.” Sep ept 2018, BBB, Rating g Affi firm rmed ed “Indonesia's ratings balance a low government debt burden and a favourable GDP growth outlook with external challenges, including a strong dependence

n external sources of financing, and several structural indicators

that remain below rating peers.”

BBB BBB / Stable

Febru bruary ry 201 2018, , Rating Upgra graded ded to BBB BBB, Outloo

ok Revi

vised sed 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 / Stable

March h 201 2018, , Rating g Upgra graded ded to BBB BBB, Outloo

ok Revised

sed to Stabl ble “Indonesia's economy continues its strong performance, with inflation remaining low and stable. Fiscal deficits have been reined in, and government debt is low. The economy is becoming more resilient to external shocks, reflecting small current account deficits and ample foreign reserves.”

Indone nesia sia is Now Fully ly Rated ed as Investment estment Grade e Countr ntry

SLIDE 9

8

22,5 25,2 26,3 31,9 32,1 34,2 36,4 36,4 38,5 39,2 39,8 48,1 48,7 58,3 10 20 30 40 50 60 70 Myanmar Taiwan South Korea Philippines Hong Kong Malaysia Australia Japan Thailand Singapore Vietnam Indonesia India China 3,7 4,4 5,1 5,6 5,8 8,4 8,6 10,0 13,7 28,8 30,4 33,9 37,1 46,2 52,2 0,0 10,0 20,0 30,0 40,0 50,0 60,0 Russia Taiwan Korea Brazil Germany Malaysia Myanmar Philippines Mexico US Indonesia Vietnam Thailand India China

30,63 33,45 25,56 25,13 22,84 26,58 31,46 33,42 24,33 27,50 23,40 27,48 31,56 33,65 24,66 28,49 24,12 28,37 5 10 15 20 25 30 35 40 India Indonesia Malaysia Philippines Thailand Vietnam 2017 2018 2019e

50 100 150 200 250 300 350 400 450 500 Billion USD 2016 2017

Indone nesia sia Remai mains ns the Investmen stment t Dest stinati ination

n of Choic

ice

1. Source: The Economist – Asia Business Outlook Survey 2018 2. Source: IMF World Economic Outlook, Database October 2018 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2018 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey)

Total Inve vestm tment / GDP DP (%)

Indonesi esia Enjoys

ys Large Invest

estment ents Relative e to Peers within the Region

n2

JBIC: Among g ASEAN countries, es, Indonesi esia is one of the most preferred place e for business ess invest estment (Novemb ember 2018)4 The Econom

mist: Indonesi

esia rounds out the top five of Asian economies es that can look forwar ward to increas eased ed invest estment ent spending.

g. (January

y 2019)1

% of surveyed who consider each country has promising prospects

UNCTAD: D: Indonesi esia is listed ed in the top 20 host economies es based ed on FDI inflo flows ws, 2016 and 2017 (June 2018) 2018)3

(x) = 2016 ranking

SLIDE 10

9

National ional Strat rategic egic Development lopment Plan n (Nawa Cita ta)

Human Development

Educatio ation Health alth Housin ing Char arac acter er

Priority Sector Development

Food d Security urity Energy rgy & Electric ectrical al Securit rity Marit itim ime e & Marine ine Touris urism & Indus ustr try

Water er Securit curity, y, Basic ic Infrastruc ucture ure & Conne nnecti ctivity

Equitable Development

Inter er- Income

me Grou
up

Inter er-Regio ion: : (1) Rural al Area, ea, (2) Periph ipher ery, , (3) Outside side Java, a, (4) Easter ern Area ea.

Security & Order Politic & Democracy Governance

The 3 Dimensions nsions on Econ

nom
mic

ic Develop

pme

ment nt Necess ssar ary Co Condition dition

Legal Certainty & Law Enforcement

SLIDE 11

10

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 of 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

Econom

mic

ic Equality ality Polic licies ies

to suppo pport sustai ustaina nable public welfa fare re.. ...

Source: Coordinating Ministry for Economic Affairs

Economi mic Equ quality y Polici cies es

Human Reso source rce Capa pacity ity

Land

Opportu portunity ity Agrarian ian Reform

rm

Agric icult ultur ure e (Land ndless less Farmer mer) Plantation ntation Urban n Poor & A Afford

rdable

le Housing ing Fisher erme men n & S Seaweed weed Cultiv ivation

n

Fair Tax x System em Manufacture e and ICT Retail il and Market ket Financ ncing ing & Gover ernme nment nt Bud udget get Vocati ationa

nal,

, Entrepr epreneur eneursh ship ip & & Labor

r Market

ket

Priority

SLIDE 12

11

The Economic

mic Policy

icy Pa Packages ages

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

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

Harmoni nizing ng Regul ulat ation

ns

Simplifying g Bureau eaucrat atic Proc

ces

ess Ensurin uring g Law Enfor nforceab eability

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

Source: Coordinating Ministry for Economic Affairs

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

n to the 16 Policy

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

SLIDE 13

12

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

my

The 16th

th Econom

mic Policy

y Pac Packa kage has been launched hed

Source: Coordinating Ministry for Economic Affairs

TAX HOLIDAY DAY EXPANSI SION

Backgr groun

und

In order to further increase investment value in Indonesia, there is a need for expansion of sector and standard classification of Indonesian Business Fields (KBLI) that are given tax holiday, complemented with a process simplification to receive the tax holiday according to the Online Single Submission (OSS). Objecti tives es and benefit its 1) Increasing investment and strengthening the industrial sectors from the downstream to the upstream through the expansion of the business sector, KBLI’s pioneer industries, and Special Economic Zones (SEZ) that can receive tax holiday facilities 2) Increasing the process of convenience of filing process and tax holiday facilities provision

EXPORT PROCEEDS DS (DHE) SCHEME

Tax Rates es on Deposit Inter eres est Incom

me

Tax Rates es on Deposit Inter eres est Incom

me

SLIDE 14

13

Progr gress ess of the Economic

mic Policy

icy Pa Packages ages*

Initially, there are 233 regulations which need to be deregulated As of September 26th, 2018, deregulation of 220 regulations are finished (99%), comprising 51 regulations at Presidential level and 169 regulations at Ministerial/Institutional level Unfin inishe ished regu egula lation tions: Proposed Policy on Development of Business and competitiveness of National Logistics Service Providers

I–XII

220 20

SET SET

99% 99% 11 11

REVOKE OKED REGULA ULATIO IONS

2

ON GOIN ING DISCUS CUSSION ION

1%

170 170 TOTAL

169

MINISTERIAL/I AL/INSTITUTIONAL AL LEVEL EL

99% 99%

47 47 42 42

SELESAI AI

PRESIDE IDENTIA TIAL

52 TOTAL

51 51

FINISH ISHED ED

PRES ESIDENTIAL AL LEVEL EL

98% 98% I–XV

FINISH ISHED ED

I–XII

233 33

TOTAL INITIA IAL REGULA ULATIO IONS NS

I–XV

I–XII

222 22

TOTAL REGULA ULATIO IONS NS

I–XV

Based on the further assessment, 11 regulations has been revoked from deregulation process Total regulation subject to be deregulated: 222 regulations

Source: Coordinating Ministry for Economic Affairs *as of September 26, 2018

SLIDE 15

14

Other er Progress

gress on Econom
mic

ic Polic licy y Pa Packages ages

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

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

The Provinces of Central Java proposed 3

IZ’s: Kendal, Demak, and Ungaran

Pharmaceutical IZ in Bitung (North Sulawesi)

in 2017

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

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

Deregul ulati ation n on Logist stics cs Sector

r

SLIDE 16

15

Investment estment Incentiv entives es to

Boo
ost

st Industr ustry y Sect ctor

r

BUSINESS INESS EXPAN ANSION ION

Tax all

llowa

wance

ce

Exem

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

Exem

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

Exem

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

Accelerate depreci

reciation tion or amortiz

rtization

tion (part of tax allowance); and

Property

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

Combine with Online Single Submission (OSS)

Tax holid

liday of corporate income tax in a certain amount and time

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

No coll

llec ection tion of VAT and Luxury ry Goods

ds Sales

les Tax (PPnBM BM), ),

Custo

toms s tax exem emption ption,

Tax Allow

lowance ce and Tax Holi liday,

Suspe

spensio sion of Impo port t Duty ty,

0% Import

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

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

VAT exem

emption ption on import or delivery of capital goods,

Impo

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

Tax Allow

lowance ce and Tax Holi liday Exem emption ption of:

Impo

port t Duty ty

VAT
Luxury

ry Goo

ods

s Sales les Tax (PPnBM BM)

Custo

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

Sales from customs areas for non

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

Sales from customs areas for small

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

Source: Coordinating Ministry for Economic Affairs

SLIDE 17

16

New w Tax Hol

lida

iday y Pol

licy

icy*

to boost t indu dustr stry y sector

Taxpa payer er

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

me Tax (CIT)

reduc uction ion rate

Conces cession ion perio iod Transiti ition

n

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

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

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

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

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

PROVIS VISIO ION BEFORE RE AFTER ER

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

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

SLIDE 18

17

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

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

Source: Coordinating Ministry for Economic Affairs

Policy cy Goals

1 2 3 4 5 6

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

Main Policy cy

Forming a Task Force to identify &

vercome the end-to-end licensing

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

Business license regulatory reforms Implementation of the Single Submission system

1st

st Phase

2nd

nd Phase

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

SLIDE 19

18

Improving ing Invest estment ment Climat mate

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

Source: Coordinating Ministry for Economic Affairs

OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations

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

r

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

r

Transporta

rtation

ion Secto tor Trade e Sector tor Infor

rmation

ation & Commun unic icati ation

n

Secto tor Other r Sector

r

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

SLIDE 20

19

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

f

Finance as part

f

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

To To dat ate, e, 52 Bond

nded

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

rt var

ario ious us industries stries.

Improving ving Investmen stment t Clima imate

…Bonded Logistic Center to Improve Indonesia’s Competitiveness

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

nal

care/ home care e industry Textile ile (cott

tton
n)

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

Bonded Logistic Center

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

SLIDE 21

20

Improving ving Investmen stment t Clima imate e

…revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

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

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

, Small and

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

n of nega

gati tive investmen estment t law throu

ugh active

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

vernments

ments

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

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

r,

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

rt Support Service

ices, s, Travel el Bureau

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

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

n for Stra

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

SLIDE 22

21

Investment estment Realization lization (Q4-2018) 8)

IDR tn

2013 2014 2015

Direct rect Inves estm tmen ents ts

2016

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

d Crops,

ps, Planta tation tion, and Lives esto tock ck Electrici ectricity ty US$773.9 73.9 mn mn US$185.4 85.4 mn mn US$379.3 79.3 mn mn US$807.6 07.6mn mn US$1,406.2 ,406.2 mn mn US$1,063.9 ,063.9 mn mn Transporta portation tion, , Wareh rehouse se, , and Teleco lecommunic ication tion

3.5%

US$162.9 62.9 mn mn

80.4% 9.6% 31. 1.0% 11. 1.7% 7.7% 12.4% Investme stment nt Realizat zation

Textil tile e Industry stry US$60.3 0.3 mn mn

53.1%

FDI I Realiz izati tion

n by Sectors

tors (yoy

y)

Source: Investment Coordinating Board (BKPM), compared to Q4-2017 period

2017

Rp145.4 5.4 T Rp159.4 9.4 T IDR99.0t 99.0tn 434 434,463 463

9.6% 15.6% .6%

11.

1.6% 28.6%

Q1-2016 Q1-2017 Q4-2017 Q4-2018 Q1-2016 Q1-2017 Q4-2017 Q4-2018

*

* * person 37 375,982 ,982 IDR185 85.9tn .9tn

3.5%

Q4-2017 Q4-2018

IDR179 79.6tn .6tn IDR86 86.9tn .9tn IDR67.6t 67.6tn IDR112.0tn 112.0tn Pape per and Printing ting Industry try Non Meta tall llic ic Minera eral l Industry try 99,0 185,9

20 40 60 80 100 120 140 160 180 200 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FDI DDI TOTAL

2018

Decrea reasi sing

SLIDE 23

Econom

nomic

ic Factor:

r:

Strong

ng and S

d Stable Growth wth Prospect spects Rem emain in Intact ct

Se Sect ction ion 2

SLIDE 24

23

Condu duciv cive e Envir ironmen

nment

t Und Under erpin pinning ning Stron

ng

g Growt wth Fundament amentals ls

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

From commod

dity

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

pment

From consu sumpti mption

n-led to invest

estme ment-led growth

wth

via a stron

nge

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

my in the midst

t of weaken ening ing macroe

econ

conomic ic condit ition

ns

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

mic

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

ne reduce

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

ducti

tive e alloca cati tion

n

Pruden ent t debt managem gemen ent

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

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

nal budget,

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

n-fisca

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

jec

ects ts

Large e and Stable table Econ

nomy
my

Consis sisten tent Budget et Refor form New w Economic

nomic

Structure High Infrastructu astructure Inve vest stme ments ts

SLIDE 25

24

Indonesia’s Strong GDP

Grow

wth

th Prospe spect Stron

ng

g GDP DP Growt

wth1

%

Institution stitutions 2019 19 GDP P growth

wth (%YoY
Y)

2019 Budget 5.3 Bank Indonesia 5.0 – 5.4 IMF 5.1 World Bank 5.2 ADB 5.2 Consensus Forecast (February 2019) 5.1

Favou

ura

rabl ble GDP P Growt

wth Compa

pared red to Peers rs2

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2018; * indicates estimated figure %

Solid economic growth recorded in the final quarter of 2018 points to maintained

economic momentum in Indonesia. Actual GDP growth was realised at 5.18% (yoy) in the fourth quarter of 2018, up slightly on the 5.17% (yoy) posted in the previous period. Growth for the year, therefore, increased to 5.17% (yoy) in 2018 from 5.07% (yoy) in 2017, representing the fastest rate recorded in the past five years.

Domestic demand was the key driver of economic growth in the final three

months of 2018, influenced primarily by household consumption as well as consumption by non-profit institutions serving households (NPISH). Strong domestic demand also stems from sound investment performance. In contrast, exports declined in 2018 as a corollary of global moderation.

By sector, the main driver of growth was the tertiary sector, financial services in
particular. While the secondary sector, manufacturing, grew at the slower pace in

the fourth quarter of 2018.

3,1 3,6 7,4 5,1 6,6 0,0 1,0 2,0 3,0 4,0 5,0 6,0 7,0 8,0 9,0 2012 2013 2014 2015 2016 2017 2018* 2019* Bulgaria Colombia India Indonesia Philippines

0,04 3,83 3,27 (2,07) (0,16) 3,74 3,31 (1,73) (0,36) 4,01 3,14 (1,81) (0,30) 4,01 3,19 (1,70) (0,42) 4,21 3,09 (1,69) 5,12 4,94 4,93 5,05 4,82 4,74 4,77 5,17 4,92 5,18 5,01 4,94 5,01 5,01 5,06 5,19 5,06 5,27 5,17 5,18

3,0
1,0

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

SLIDE 26

25

GDP Growt wth Brea eakdo kdown

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

By sectors rs 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t

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 3.3 2.8 2.4 3.9 3.3 4.7 3.7 3.9 3.9 Mining and Quarrying

1.2

0.7 0.7 1.5 0.4 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 (1.3) 2.1 1.8 0.0 0.7 1.1 2.6 2.7 2.2 2.2 Manufacturing 4.5 4.9 5.0 4.2 4.6 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4.6 3.9 4.4 4.2 4.3 Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 6.0 7.0 7.0 7.2 6.8 7.4 5.7 5.8 5.6 6.1 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 4.5 5.0 5.2 5.3 4.4 5.0 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 8.6 8.7 5.6 5.3 7.0 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 8.3 9.6 7.8 5.1 8.1 7.2 7.0 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 6.1 3.8 5.5 4.2 3.1 3.1 6.3 4.2 Other Services* 5.4 4.7 5.9 6.5 5.7 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 6.0 4,6 5.4 6.2 6.7 6.4 6.2 GDP GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008)

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

By expen enditure re 2014 2014 2015 2015 2016 2016 2017 2017 2018 2018 Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t.

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t

Q1 Q1 Q2 Q2 Q3 Q3 Q4 Q4 Tot

t
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 5.0 4.9 5.0 4.9 4.9 5.2 5.0 5.1 5.0 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 5.3 6.9 8.1 8.8 8.6 10.8 9.1 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 2.7 5.2 6.3 4.6 4.8 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 7.9 5.9 7.0 6.0 6.7 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 2.7 16.5 8.4 8.9 5.9 7.6 8.1 4.3 6.5 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 15.4 11.9 8.1 12.6 15.2 14.0 7.1 12.0 GDP GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption

SLIDE 27

26

Regio gional nal Growth th Remai mains ns Posit sitiv ive

Economi mic Growth th has accelera rated ed in most t regions ns, , parti ticula ularl rly y in Java va and Kalimant mantan

Source: Central Bureau of Statistics of Indonesia (BPS)

Aceh 5.43 North Sumatra 5.30 Riau 1.28 West Sumatra 5.50 Jambi 4.77 Riau Islands 5.48 Bengkulu 4.76 Babel Islands3.70 South Sumatra 6.07 Lampung5.38

SUMA MATR TRA (22% 2%) KALIM IMANTA TAN (8%) %)

North Sulawesi 6.10 Gorontalo 7.25 Central Sulawesi 5.37 West Sulawesi 5.32 South Sulawesi 6.47 Southeast Sulawesi 6.23

SULA LAWESI SI (6%) %)

Maluku 6.41 North Maluku 8.25 Papua -17.79 West Papua 0.18

MA MALUK UKU-PA PAPUA UA (2.5%) .5%)

Banten 5.98 Jakarta 6.41 West Java 5.50 Central Java 5.28 East Java 5.65 Yogyakarta 7.39

JAVA (58.5 8.5%)

Bali 7.59 West Nusa Tenggara - 1.43 East Nusa Tenggara 5.32

BALI-NUS USA TENGGARA RA (3%) %)

West Kalimantan 5.07 Central Kalimantan 6.12 South Kalimantan 5.78 East Kalimantan 5.14 North Kalimantan 7.69 RGDP ≥ 7.0% 6.0% ≤ RGDP < 7.0% 5.0% ≤ RGDP < 6.0% 4.0% ≤ RGDP < 5.0% 0% ≤ RGDP < 4.0% RGDP < 0%

SLIDE 28

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

Se Sect ction ion 3

SLIDE 29

28

2,04 4 (6,99) 99) (1,62) 62) (2,58) 58) (9,15 15)

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* 2013 2014 2015 2016 2017 2018* Goods Services Primary 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 3 5 7 9 11 1 2013 2014 2015 2016 2017 2018 2019 FX Reserves (LHS) Month of Import & Debt Service (RHS)

Month 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 1 3 5 7 9 11 1 2013 2014 2015 2016 2017 2018 2019 OG Non-OG Total

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

Current ent Accoun unt Deficit within hin Safe Thresh eshold ld Balanc lance e of Payment nts Portrait ait Substant antial al FX Reserves es to Mitiga igate Externa nal l Challe alleng nges es Trade Balanc lance Defic icit it in line ne with h Improving ing Economic ic Activ ivit itie ies

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

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

Source: Bank Indonesia FX Reserve ves as of January 2019: US$120.1 bn n (Equiv. to 6.5 month ths of imports ts + servicing of government debt) t) US$bn

2015: CA Deficit (US$17.5bn) n) 2013: CA Deficit (US$29.1bn) n) 2014: CA Deficit (US$27.5bn) n) 2016: CA Deficit (US$16.9b 9bn) n) 2017: CA Deficit (US$16.2bn) n)

2018: Deficit (US$ S$8.57bn) n)

(9,15) 15) 15,68 68 5,42 2 121 121 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* 2013 2014 2015 2016 2017 2018* Current Account Capital and Financial Account Overall Balance Reserve Asset (rhs) US$bn US$bn 2018: CA Deficit (US$31.1bn) n)

SLIDE 30

29

1,88

2,25 0,97

2,30
4,08
1,62

0,62

0,48
8,69

0,93

3,64
1,89
3,48

4,29 4,14 2,42 2,42 1,97 1,61 1,02 0,81

0,29
0,67
0,83
1,13
1,93
10,0
8,0
6,0
4,0
2,0

0,0 2,0 4,0 6,0 BRL THB IDR CNY ZAR MYR PHP SGD TRY JPY EUR KRW INR point-to-point average

%

Data as of February 20th, 2019

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

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

IDR/US$

The Ru Rupiah iah app appreciat eciated, ed, thus us sup uppor

rting

ing econ econom

mic

ic stabilit

ility. Point

to point, the Rupiah gained 3.63% (ptp) in the fourth quarter of 2018 compared with conditions at the end of the previous period, boosted by a positive balance of payments. The strong Rupiah persisted into January 2019, appreciating another 2.92%, with the trend continuing into February 2019 on the back of non-resident capital inflows to domestic financial markets, drawn by solid economic fundamentals as well as attractive on domestic financial assets and less global economic uncertainty. Bank Indonesia believes that the Rupiah will remain stable, in line with market mechanisms.

Source: Bank Indonesia

YTD 201 2019 vs vs 201 018

Rupia iah Exch change ge Rate te Volati latilt lty

14040 15.176 14.661 14.493 14.031 14798 14798 14109 13.900 14.000 14.100 14.200 14.300 14.400 14.500 14.600 14.700 14.800 14.900 15.000 15.100 15.200 15.300 15.400 15.500 1-Oct-18 17-Oct-18 2-Nov-18 18-Nov-18 4-Dec-18 20-Dec-18 5-Jan-19 21-Jan-19 6-Feb-19 IDR/USD Monthly Average Quarterly Average Data as of February 20th, 2019 7,8 22,3 13,0 10,0 9,1 5,0 4,7 15,1 3,6 5,6 23,5 21,0 20,8 13,1 5,9 10,2 7,5 7,9 5,8 7,6

5

10 15 20 25 30 35 40 45 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Dec-18 Jan-19 %

SLIDE 31

30

Bank Indonesia’s Pol

licy

icy Direc ection ion

To mainta ntain n Rupiah h stability ty and suppor pport t growth

A pre-emptive, front-loading and ahead-of-the-curve policy response Strengthening the monetary

perations in the foreign

exchange and money markets To stabilise the rupiah exchange rate, while consistently controlling inflation within the 2018-2019 target range of 3.5±1% To stabilise the rupiah exchange rate, adjust fair prices in the financial markets and maintain adequate liquidity in the money market To maintain adequate liquidity in the rupiah money market and interbank swap market To form rational expectations, thus helping to mitigate the rupiah

vershooting its fundamental level.

Dual intervention in the foreign exchange market and government securities (Surat Berharga Negara – SBN) market in a measured way Intensive communication, especially to market players, banks, businesses, and economists

4 3 2

Measures ures To To Stabil biliz ize e Rupia iah Exchange ge Rate Measures ures To Suppor port Growth

wth

Further easing of macroprudential policy Payment system development to support digital economy To bolster the growth of the property sector which has positive impact to the economy Coordination with the Coordinating Ministry of Economic Affairs, the Ministry

f Finance, and the Financial Services

Authority to accelerate financial market deepening, particularly in private financing for infrastructure. Electronification to support social assistance disbursement and financial transcation of the central and regional government Sharia economy and finance development to create halal value chain, sharia financal sector development both for commercial and social purposes, including its education and communication Policy coordination to accelerate financial market deepening Sharia economy and finance development

4 3 2 1 1

Source: Bank Indonesia

SLIDE 32

31

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



Ample level of FX reserves to buffer against external shock



FX Reserves as of January 2019: US$120.1 billion

South Korea rea



Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2017

Australia ralia



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

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



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



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



Doubled to US$240 bn effective July 2014

Japan



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



The facility is available in USD and JPY

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



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



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

Bilat ateral eral Region ional al Global al FX Reserve

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

Source: Bank Indonesia

ASEAN Swap p Arrangemen ngement (ASA)



Entitled to a maximum swap amount of USD600 million under ASA



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



Doubled to USD2 billion in 2005

Singap gapore

re



Established a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2018

China



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

SLIDE 33

32

Solid lid Polic licy y Coordination dination

In Managing ging Financi ncial al Markets ts Volat atility ility

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

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

Gov’t Securities Crisis is Managem agemen ent t Protoc

col
l (CMP)
Indicato

tors rs:

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

licies s to address the crisis at every level :

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

Bond Stabil iliz izati ation

n Framew

ewor

rk

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

CMP

Implementing Bond Stabilization Framework (BSF)

BSF

SLIDE 34

33

23,3 34,8 20,3 39,6 68,8 21,9 35,2 19,5 40 63,5 20,8 34,4 21,5 39,6 62,7 10 20 30 40 50 60 70 80 Philippines Indonesia India Colombia Bulgaria 2019F 2018F 2017

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

Regu gulati tion

n Key Points

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

Object ect of Regul egulation

n

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

n to meet

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

n

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

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

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

Source: Bank Indonesia

Liquid uidit ity Ratio io* Hedgin ging Ratio io*

*Data as of Q3 2018, with total population 2.706 corporates

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

Source: Bank Indonesia

Source: Moody’s Statistical Handbook, November 2018

2.441 ; 90,2% 265 ; 9,8%

≤ 3 months

2.575 ; 95,2% 131 ; 4,8%

> 3 - 6 months hs

2.389 ; 88% 317 ; 12%

Comply Not Comply

SLIDE 35

34

Health althy Ext xternal ernal Debt t Composition

sition

Extern ernal l Debt bt Structure cture

Source: Bank Indonesia, External Debt Statistics of Indonesia, February 2019 *Provisional Figures **Very Provisional Figures

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

min

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

11,5 17,1 11,3 12,0 5,4 10,2 5,9 3,0 10,1 8,9 5,7 4,2 6,9 0,0 2,0 4,0 6,0 8,0 10,0 12,0 14,0 16,0 18,0 20,0 50.000 100.000 150.000 200.000 250.000 300.000 350.000 400.000 % Million USD External Debt External Debt Growth (rhs) 18,3 21,2 20,7 21,7 21,2 20,2 17,9 17,1 15,6 16,2 16,0 16,1 16,7 16,8 16,0 16,8 16,8 17,0 16,3 16,3 15,8 81,7 78,8 79,3 78,3 78,8 79,8 82,1 82,9 84,4 83,8 84,0 83,9 83,3 83,2 84,0 83,2 83,2 83,0 83,7 83,7 84,2 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Short Term External Debt Long Term External Debt 42,6 41,4 47,4 50,0 53,6 55,8 54,1 50,5 48,8 48,7 49,1 48,5 48,6 49,2 49,5 49,5 49,7 50,1 50,5 50,8 50,6 57,4 58,6 52,6 50,0 46,4 44,2 45,9 49,5 51,2 51,3 50,9 51,5 51,4 50,8 50,5 50,5 50,3 49,9 49,5 49,2 49,4 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Private Debt Government and Central Bank Debt 121,8 114,9 101,0 113,8 123,1 139,5 168,4 176,1 168,0 166,4 159,9 157,1 163,8 31,8 26,5 25,0 27,4 29,1 32,9 36,1 34,3 34,7 34,8 34,1 34,4 36,2 5 10 15 20 25 30 35 40 80 100 120 140 160 180 200 % % External Debt to Export Ratio External Debt / GDP Ratio (rhs)

SLIDE 36

35

Managea geable ble Ext xtern ernal al Debt t Profile ile

Shor

rt term non-ban

ank corp rpor

rat

ate e debt (non

n affiliation)

) represe sents only ly 8.0% 0% of tot

tal private externa

nal l debt

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

Af Affiliati tion

n

Non Af Affiliati tion

n

US$144.3bn

r

75.7%

f Private Ext.

Debt US$20.6bn

r

10.8%

f Private
Ext. Debt

US$10.5bn

r
r

5.5%

f Private

e

Ext. Debt

US$15.2bn

r
r

8.0%

f Private

e

Ext. Debt

Public lic Long g Term 1 Privat ate Bank nk

US$25 25.7bn

r

13.5% 5%

f Private
Ext. Debt

US$1 $190 90.6b 6bn

r

50 50.6%

f total
Ext. Debt

US$ US$46.3bn

r

24.3%

f Private
Ext. Debt

External Debt Position as of December 2018

1 Based on remaining maturity

Source ce: External Debt Statistics of Indonesia, February 2019

US$376 76.8bn bn

US$186.2bn

r

49.4%

f Total Ext.

Debt

SLIDE 37

Fi Fiscal Per erforma

rmance

nce and F d Flexib ibil ilit ity: More e Fi Fiscal al Stim imulus ulus wit ith Pr Prud uden ent t Fi Fiscal al Policy icy

Se Sect ction ion 4

SLIDE 38

37

Integrat egrated ed Refor

rm

m to Provide ide Higher her Qualit lity y of Economi

mic Growth

wth

Structura ructural reforms rms to enhanc nce pot

tenti

ential growth th and navigat ate through ugh challeng nges es

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

Monetary policy to support

macroeconomic stability

Price stability and sustainable

current account deficit

Efficient and credible

financial sector Fiscal Real al Sec ector

r

Moneta tary & Financi ancial al Sec ector

r

Synergy ergy in reform rm to to boost t the more sustainab inable le and inclus lusiv ive e grow

wth

th

Source: Ministry of Finance

SLIDE 39

38

Growt wth Momen entum tum is Expe pect cted d to Conti tinue nue

Severa ral key driver ers s and strat rategies gies to accelera rate e growth th

Strat rateg egies ies to Encou

urage

rage Growth th Key Driv ivers

Consumpti

tion

n remains robust among others

supported by benign inflation

Inves

estm tmen ent t grows stably supported by infrastructure acceleration, business climate improvement, rating upgrades, economic packages

Export

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

Support from sever

veral al impor

rtant

tant even vents ts such as Asian Games, Regional Elections, and IMF-WB annual meeting

Maintainin

aining g purchas asing ing power, r, boosting ting domestic tic demand nd and supporti rting ng busines ess activi ivity ty.  Improve distribution channels  Increased shopping events, creative industries and festivals in tourism areas  Incentives for manufacture  Developing e-commerce industry

Encour
uraging

aging privat vate sector's

r's role

e in inves estm tmen ent  Strengthening and deepening financial markets  Making a stable investment climate through political stability

Expand

nd servic ices es sector

r,

, especially ially touris ism  Increasing foreign tourists arrival through cooperation with other countries by increasing the direct flight schedule  Encouraging national creative industry growth

Risks sks & Challe llenges es

Global al econom nomic ic uncer ertai tainti ties es: China economic rebalancing and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change

SLIDE 40

39

2019 9 State Budge get (APBN BN 2019) 9)

Healthie hier, More Equ quitable, , Self-Suf Sufficie ficient nt

Health althie ier

Deficit 1.84% of GDP, the

lowest since 2013

Towards positive primary

balance

Debt to GDP ratio below 30%
f GDP

More equ quitab itable le

Strengthening

decentralization (increasing fiscal transfer to regions)

Strengthening social

protection programs

Focusing on human capital

quality improvement (inter- generational fairness)

Self lf sufficien icient

Increasing tax revenue
Increasing the share of local

currency bond issuance

Domestic financial

deepening

Driving export

Mac acroec economic

mic

Assumption tion

Grow

wth

th 5.3% Infla lation tion 3.5% 3 months hs T-bills lls 5.3% Exchange ge Rate 15,000/US$ ICP 70/barrel Oil Lifting ting 775 thousands barrel/day Gas Liftin ting 1,250 thousands barrel/day

Developm lopment t Target Unemplo loyme ment 4.8% – 5.2% Pover erty ty 8.5 – 9.5 Gini ratio tio 0.38 – 0.39 HDI 71.98 REVE VENUE NUE Rp2,165.1 T  Tax Rp1,786.4 T  Non Tax Rp378.3 T  Gran ant Rp0.4T EXPENDITU ENDITURE RE Rp2,461.1 T  Centra tral l Gover ernmen ent Rp1,634.3T  Tran ansf sfer er to Regio ion Rp756.8 T  Villa lage e Fund Rp70.0 T

Defic icit it Rp296.0 T (1.84% of GDP) Primar ary Balanc ance (Rp20.1 T) Debt t Financ ancing ing Rp359.3 T Inves estm tmen ent Rp75.9T

Source: Ministry of Finance

SLIDE 41

40

Cred edible ible and Healthi althier er Budge get

…providing more certainty to all stakeholders

Indicator 2017 2017

2017

2018 2018 2019 2019 R-Budge dget Realization

n

Budge get Budge get Econom

nomic grow

rowth (%, yoy)

5.2 5.1 5.4 5.3

Inflation

n (%, yoy)

4.3 3.6 3.5 3.5

3-Mont

nth Trea

easu sury ry Bill (SPN) N) (%)

5.2 5.0 5.2 5.3

Excha hange Rate e (Avera verage ge, IDR/USD)

13,400 13,384 13,400 15,000

ICP (USD SD/ba barr rrel)

48 51.2 48 70

Oil Oil Prod

duction
n (thou
usand barr

rrel el/day)

815 804 800 775

Gas Produ duction

n (millions
ns barre

rel/da day)

1.15 1.14 1.20 1.25 Macr croe

eco

conomi

mic

c Assu sumpti mption

n for 2018

8 & 2019 19 Budget et

Source: Ministry of Finance

2018 Budget realization showed healthy and credible performances:
with tax revenues grew relatively high
improving tax ratio
ptimal level of expenditure
2019 Budget is healthier, more equitable, and self-sufficient
towards positive primary balance
strengthening decentralization
increasing tax revenue

Descri cript ptio ion (IDR R Trillion)

n)

2016 16 Audite ted Realiza izati tion

n

2017 Audite ted Realiza izati tion

n

2018 18 2019 19 Budget et Realiza izati tion

n

(a.o.

. Dec 31)

% Realiza izati tion

n

to Budget et Propo

posed

sed Budget et Budget et Realiza izati tion

n

(a.o.

. Jan 31)

% Realiza izati tion

n to

Budget et A. A. Reven enues es and Grants ts 1,555. 555.9 1,666. 666.4 1,894. 894.7 7 1,942. 942.3 102. 2.5 2,142. 142.5 2,165. 165.1 108. 8.1 5.0 5.0

I. Domestic Revenue

1,546.9 1,654.8 1,893.5 1,928.4 101.8 2,142.1 2,164.7 108.1 5.0

1. Tax Revenue

1,285.0 1,343.5 1,618.1 1,521.4 94.0 1,781.0 1,786.4 89.8 5.0

2. Non Tax Revenue

262.0 311.2 275.4 407.0 147.8 361.1 378.3 18.3 4.8

II. Grants

9.0 11.6 1.2 13.9 1161.4 0.4 0.4 0.0 B. Expe penditu ture 1,864. 864.3 2,007. 007.3 2,220. 220.7 7 2,202. 202.2 99.2 2,439. 439.7 2,461. 461.1 153. 3.8 6.3 6.3

I. Central Government Expenditure

1,154.0 1,265.3 1,454.5 1,444.4 99.3 1,607.3 1,634.3 76.1 4.7

1. Ministerial Spending

684.2 765.1 847.4 836.2 98.7 840.3 855.4 32.0 3.74

2. Non Ministerial Spending

469.8 500.2 607.1 608.2 100.2 767.1 778.9 44.1 5.7

II. Transfer to Region and Village Fund

710.3 742.0 766.2 757.8 98.9 832.3 826.8 77.7 9.4 C. C. Prima mary Balance ce

125.

25.6

124.

24.4

87.

7.3

1.8

2.1

21.

1.7

20.

0.1

22.

2.8 113. 3.2 D. Surpl plus s (Deficit it)

308.

08.3

340.

40.9

325.

25.9

259.

59.9

297.

97.2

296.

96.0

45.

5.8 % of GDP

2.49
2.51
2.19
1.76
1.84
0.28

E. Finan anci cing 334.5 4.5 366. 6.6 325.9 5.9 300.4 0.4 106.2 6.2 297.2 7.2 296.0 6.0 122.5 2.5 41.4 .4

SLIDE 42

41

Increasing easing Tax x Revenue nue Over The Years

Tax revenue in 2019 is expected to grow by 15,4% from 2018’s outlook, supported by continuous tax reform rm

Source: Ministry of Finance

Tax Revenue ue (in n IDR trill llion) n)

1.146,9 1.240,4 1.285,0 1.343,5 1.548,5 1.786,4 13,7% 7% 11,6% 10,8% 10,7% 11,6% 12,2%

1%

1% 3% 5% 7% 9% 11% 13% 15%

200 400 600 800 1000 1200 1400 1600 1800 2000 2014 2015 2016 2017 2018 Outlook 2019 Budget

Rati tio

to GDP

P (%) - RHSa

aTax ratio derived from tax revenue + revenue from natural resources/GDP

The contribution of tax revenues to

total revenue is increasing From 74% in 2014 to 82.5% in 2019

Fiscal incentives (tax holiday, tax

allowance, etc) are provided to maintain the sustainability of the investment climate and increase competitiveness

Improving ing the dwelling time:  Accelerating the service of Bonded Logistics Centre (Pusat Logistik Berikat)  Simplifying the import procedure  Import duty and tax payment 24x7 (with MPN G2)  including customs service 24x7 Continuing the preven enti tion

n of smugg

ggling ing and control trolling illegal excise e good

ods

s (cigarettes, alcohol) Efficien ency y of logisti istic c costs sts Continuing the contro trol of impor

rte

ters, expor

rters, and

high gh risk excise policy (PIBT, PEBT and PCBT)  synergy with DG Tax, army, police, and public prosecutor Developing/expanding Kemudahan Impor por Tujuan Ekspor spor (KITE) E) facility for SMEs Es Adding new excise e good

ds

s (plasti tic pack ckaging)

2019 CUSTOM M AND EXCISE SE POLICY CY

Law w enfor

rcem

emen ent a. Conducting fair law enforcement b. Improving audit quality by reforming governance Tax compl plian iance ce supe pervision ision a. Implementing the AEol and financial information access b. Extensification and enhancing supervision as a follow-up to tax amnesty c. Handling SMEs end-to-end by Business Development Services (BDS) approach d. Establishing DG Tax-DG Customs and Excise joint program e. Improving tax database f. Implementing the Compliance Risk Management (CRM) Stren ength then ening ing the taxati tion

n servic

ice

a. Simplifying registration and expanding number of service center
b. Expanding e-filling coverage, and

c. Simplifying refund system

2019 TAXA XATION ION POLICY CY

SLIDE 43

42

Non-Tax ax Revenue enue

Encoura urage ged d by r rising sing in oil price ces, s, increa reasing sing qu quality ty and volume me of servi vices, es, and impr mproving ving governa nance nce (non-ta tax x revenue ue in 2019)

Source: Ministry of Finance

Use of Integra egrated ed Tech chnolog nology y with Non-tax income payment system. Follow lowing ing-up up the e amendmen dment of non tax x revenu enue e law

Simplifying non-tax revenue tariff, particularly related to service.
Executing non-tax revenue tariff policy up to Rp 0.0 (zero percent)
Strengthening the non-tax revenue supervision and inspection
Implementing objection, remission, and reimbursement option.

398,6 255,9 262,0 311,2 349,2 378,3 50 100 150 200 250 300 350 400 450 2014 2015 2016 2017 2018 Outlook 2019 Budget

Non-Tax x Revenue ue (in IDR trillion)

n)

Prod

duct

uct Optimiza imization ion

Followed by cost efficiency effort, downstream industry expansion,

environment sustainability, and business continuity. Improving roving Services ervices and Adjus usting ing Tarif riffs fs

While still considering purchasing power, expanding business, and
ptimizi

imizing ng stat ate e proper

perty

y management agement. Incr creas easing ing Stat ate-Owned ned Enter erpr pris ises es (BUMN) N) Dividend idend

While still considering BUMN cashf

hflow low and financial ability by expanding business and executing government assignment.

Non-Tax Revenue ue General Policy

SLIDE 44

43

Co Commitment ent to Co Contin inue ue Strengt ngthe heni ning g Product uctiv ive Spendi ding ng

Allocati ting ng budget et to a m more productiv ductive spending nding

2015 Rp1,183.3 T 2016 Rp1,154.0 T 2017 Rp1,259.6 T 2018 18 Outlook

ok

Rp1,453.6 T

Central tral Governmen ernment t Spendin ding

Line e Ministries stries

Non Line Ministries es

Rp. 855

855,4 ,4 T Rp.778 78,9 T T

Focused on more

targeted subsidies.

Towards non-cash

distribution.

Continuing the

limited subsidies

f diesel.
Increasing the use
f renewable

energy.

Ener ergy Subsidy sidy Non Ener ergy gy Subsid idy Debt bt Inter erest st

Maintain

accountability of debt management.

Optimal choice of

debt composition and utilization of hedging.

Decreasing the

growth of debt financing.

Improving the quality of state apparatus by

strengthening bureaucratic reform

Strengthening social assistance
Capital Expenditure optimization
Goods Expenditure management
Focused on

subsidy policies that are more targeted.

Source: Ministry of Finance

2019

Rp1,634.3 T

Supporting competitiveness improvement, exports

and investment increase, followed by strengthening value for money.

Accommodating

strategic initiatives (i.e. natural disaster reconstruction rehabilitation, democratic agenda).

SLIDE 45

44

Investm estment nts s in n Huma uman n Capital ital Has s Been n Ramped ped Up

20% of national

nal budget

et is allocated d for educati tion n and anot

ther

her 5% for health

353,4 390,3 370,8 406,0 435,0 492,5

100 200 300 400 500 600

2014 Real 2015 Real 2016 Real 2017 Real 2018 Outlook 2019 Budget

IDR IDR tn

59,7 65,9 91,4 92,4 107,4 123,1

25 50 75 100 125

2014 Real 2015 Real 2016 Real 2017 Real 2018 Outlook 2019 Budget

IDR tn

Budge get for Education tion Progra gram Budge get for Hea ealt lth Progra gram Quality and Access Improvement: a. Increasing the effectiveness of BOS (School Operations Aid)  BOS is based on performance and affirmation. b. The continuity of Program Indonesia Pintar is followed by the increasing of target accuracy. c. Acceleration of the construction of school and university facilities (part of which is carried out by the Ministry of Public Works and DAK supervised by the Ministry of Public Works). d. Expansion of the affirmation/Bidik Misi Scholarship program. e. Allocating the endowment research. f. Enforcement fulfills the education budget by the Regional Government. g. Link and match vocational education.

Some Improvem emen ents ts are made e for 2019 Educat ation ion Program ram Some Improvem emen ents ts are made e for 2019 Health th Program ram

Quality and Access Improvement: a. Expansion of Contribution Aid Recipients (PBI) in the framework of National Health Insurance (JKN) (2015: 86.4 million people; 2019: 96.8 million people) followed by an increase in target accuracy. b. Improving services at first-level health facilities. c. Strengthening the stunting handling by specific and sensitive nutrition intervention in 160 regencies/cities (2018: 100 regencies/cities). d. Continuing the optimalization of BPJS health deficit handling policy:

Cigarette tax policy
Improvement of referral system
Improvement of claim management.

SLIDE 46

45

Subsidy sidy Policy icy is Direct ected ed to be Bet etter er Targe geted ed and d Toward Non-cash cash Distribution stribution

throug

ugh

h va various us polici cies es in energy gy and non-ener energy y subsidy sidy

Source: Ministry of Finance

(Tn IDR)

Ener ergy Subsidy sidy increa eases ses, Partly tly due to to the chan ange ge of

f exchan

hange rate assum umptio tion Oil and gas subsidy idy Elec ectr trici icity ty subsidy sidy

100.7 59.3

Non Non-en ener ergy su subsidy bsidy amou amount is is the the sam same wi with th government’s proposal sal in in RAPBN BN 2019 Fertili tilizer subsidy sidy

29 29.5

Continuing diese

sel limit ited ed subsidy idy

Improvin

ing the the ta target get of

f gas

gas benef beneficiar iciaries ies: households, micro businesses, and low- income fisherman

Improvin

ing th the targe arget subsidy bsidy ac accurac acy for 450 and 900 VA users

Increasing of electri

trificat ication ion ratio io Supporting food security is fitted to the land d area

119,1 106,8 97,6 163,5 160,0

50,0

100,0 150,0 200,0 2015 2016 2017 2018 Outlook APBN 2019

Energy Subsidy

BBM dan LPG 3 Kg Listrik

3.5% 67.4% 8.6% 10.3%

Tn IDR

66,9 67,4 68,8 64,7 64,3

20,0

40,0 60,0 80,0 2015 2016 2017 2018 Outlook APBN 2019

Non-energy Subsidy

Pupuk Pangan Benih PSO Bunga Kredit Program Pajak DTP

0.5% 6.0% 1.9% 0.8%

Business ess credit edit (KUR UR) ) subsid sidy

12 12.0

KUR distribution target is Rp120 T with 7% interest rate for SMEs and Indonesian workers

Housin sing inter erest est subsidy sidy

3.5

For

r

lo low-in income

me

popu

pulat

ation ion with 100 thousand units publishing

Oil and Gas 3 Kg Electricity

Tn IDR

Fertilizer Food Crops Credit interest Tax borne

224.3

2019 Subsidy sidy Budget

SLIDE 47

46

Incr crea easing sing Transf nsfer er to Regions gions and d Villa llage ge Fund d (TKDD) KDD)

to suppo pport public c servi vice ce in the region

n

Source: Ministry of Finance

Increasing allocation of Transfer to Regions and Village Fund (TKDD) Budget propor

portionally

tionally (fits to the region’s needs and capacity, and also state financial capabilities) Supporting the regions financing needs (to provide services and developments) Focus on dec ecrea easin sing service ice ineq equali ality between- region Synchr hroniz

nizin

ing planning and budgeting of TKDD dengan belanja K/L Maintaining the 5 years sustainability development program (human resource development, connectivity, tourism destination, poverty reduction, village fund strengthening) Encourage ef effecti tive, ef effici icient, , and and prod

ducti

tive use

f region’s budget with value for money as its

principle.

573.7

623.1

710.3

742.0 763.6 826.8

11,8 8,6 14,0 4,5 2,9 8,3

02

04 06 08 10 12 14 16

100

200 300 400 500 600 700 800 900 2014 2015 2016 2017 2018 Outlook 2019 APBN DBH DAU DTK DID Otsus & DIY Dana Desa Growth (%)

Village Fund Trilion IDR %

SLIDE 48

47

2017 Achievemen ements ts of Stat ate e Budget

Value creati tion n on va various us projec

jects

ts and countr try y developme pment nt

Healt althc hcare e and nd Social ial Secur urity:

Distribution of Indonesian Health Card to 92.1

million people

Educ ucat ation ion:

Distributed Indonesian Smart Card to 19.8

million students

School Operational Benefit for 8.0 million
Scholarship for 364.4 students

Infr nfrastructure: e:

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

Local al Gover ernm nment ent Achiev hievemen ements Cent ntral al Gover ernment ent Mile lestone

nes

15. 5.5% 101. 01.7% 7% 118 18.5% 7.4% 4% 23. 3.0% 27. 7.8%

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%

ver 2017 revised

Budget.

Growth of transfer to

village vs. 2016, 99.6%

ver 2017 revised

Budget Roads: s: 1,033 km in development, 1,503 km maintenance, 9,789 km improvement Bridges: es: 3,749 m bridge in development, 291 m maintenance, and 2,916m improvement Class ssroom:

m: 1,351 new

classrooms, 11,006 rehabilitation, 11,758 rural library collection Medica cal: Improved facilities in 347 hospitals and 3,873 clinics Tuit ition: Reduced tuition costs for 46.6 million students and 5.6 million kindergarten-aged children Welfare: e: Increased welfare and work ethics of 1.7 million civil teachers in rural areas and compensated 41,000 teachers in special regions Rural: 107,9 village roads, 89,200 health clinics, 178,800 toilets, and 107,700 connected clean water and 25,903 Ha irrigated lands Source: Ministry of Finance

SLIDE 49

48

Indonesia’s Tax Amnesty Program – A Suc uccess ess Stor

ry

With th more than 965, 965,900 00 taxpayers parti tici cipati pating ng in the progra gram

Tax Amnesty sty Result lt (as s of the e end of March rch 31st

st,

, 2017) Redemption tion Money Asse sets ts Decla eclared red

114,2 18,8

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

Reven venue IDR R 134.8tn (~1.1% GDP)

3.323, 23,36 36 861,81 594,99 85,59 59 Individuals 68% Individual SMEs 18% Companies 12% SMEs 2%

Com

mposi
sition
n of Participants

s Based ed on Asset et Declared red

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 98 1,036 36 147,1

Onshore Declaration 76% Offshore Declaration 21%

Repatriation 3%

Asset Declared IDR 4,881tn (~39.4% of GDP) Source: Ministry of Finance

SLIDE 50

49

2019 F Financ ancing ing Needs

Fulfilled d from m Government nment Securi urities es IDR 771. 1.7 7 tn tn (92.5%) 5%) and Loan IDR62.2 .2 tn tn (7.5%)

Source: Ministry of Finance

Financing need IDR833,94 T

Budget Deficit IDR296,0 T Non-Debt Financing (nett) IDR63,25 T

Investment Financing IDR75,9 T Lending IDR2,35 T Other Financing (IDR15,0 T)

Matured Debt IDR474,68 T

GS IDR382,74 T 80,63% Loan IDR91,94 T 19,37%

Financing Sources IDR833,94 T

Domestic Debt IDR653,66 T (78,38%)

Domestic GS IDR651,70 T (78,15%) Domestic Loan IDR1,96 T (0,24%)

Foreign Denominated Debt IDR180,28 T (21,62%)

Foreign Denominated Bonds IDR120,0 T (14,39%) Foreign Loan IDR60,28 T (7,23%)

2019 Matured T-Bills Issuance IDR54,0 T

Gross GS IDR825,70 T

GDS 70 – 75% Sukuk 25 – 30%

Debt to GDP ratio Projection

2018 2019

30,3% 30,0%

(Through auction & non-auction)

SLIDE 51

50

Govern ernment ment Securi riti ties es

Indi dicati ative Fina nanci ncing ng Plan for 2019

Source: Ministry of Finance

SBN Neto [388,96] SBN Matures [382,74]

SBN Cash Management [54,00]

SBN Issuance Need [825,70]

Issuance

Composition

SBN Rupia iah Domestic [83% - 86%]

Auction [74% – 76%] Non-auction [9% - 10%]

Forei eign gn Deno nomina minated ed SBN International [14% - 17%]

Auction:
Conventional Securities – 24x
Islamic Securities – 24x
Non-auction:
ORI, Retail Sukuk, Online Retail Bonds;
Private Placement – based on request.
Foreign denominated SBN as co

comple plementer ter  Avo Avoid id crowding ing out

ut in domestic market.
The target

rget amou

unt can be

be adjus juste ted to the potential of

ther financing sources and financing needs.

*in triliun IDR

The issuance target for Semester I - 2019 = 50%
60% of the gross target of SBN;
Especially for financing in IDR, issuance in

Semester I = 52% of the IDR SBN gross target.

SLIDE 52

51

Government ernment Secur curit itie ies Reali alizati ation

n

As of End of Januar ary y 31, 1, 2019 – in Trillion n IDR

Government Securities realization as of January 31, 2019 IDR146.66 6.66 T T or 17,76% from the target From

m IDR146,66

,66 T T consis sist t of:

388,96 825,7 118,21 (30.39%) 146,66 (17.76%)

200 400 600 800 1.000 Go Govern rnment Se t Secu curit rities N ies Net et Isu Isuance ce Ne Need ed f for

r 2019

Realization as of Jan 31, 2019 Budget 2019 83,2 57% 43,4 29% 18,65 13% 1,41 1%

IDR Government Debt Securities FX Government Debt Securities IDR Sovereign Sharia Securities FX Sovereign Sharia Securities

Source: Ministry of Finance

SLIDE 53

52

Domestic Debt IDR595.5 tn (75%) Foreign Debt IDR197.8 tn (25%)

Domestic GS IDR591.0 tn Domestic Loan IDR4.5 tn Foreign Denominated Bonds (JPY, EUR, USD) IDR139.3 tn Foreign Loan (Program & Project) IDR58.5 tn

Financing Needs IDR793.3 tn

2018 F 18 Finan ancin cing g Needs

Fulfilled d from m Government nment Securi urities es IDR 730.2 .2 tn tn (92%) %) and Loan IDR63.1 1 tn tn (8%)

Def eficit icit Rp325,9 5,9 T Debt matures ures Rp394,1 4,1 T (incl clud ude e Rp10,1 0,1 T of Private e Place cemen ment) Inves estmen ment Financ ncing ing Rp65,7T 5,7T Gover ernme nment nt Guarant ntee ee Obligati igation

n

Rp1,1T ,1T Other er fina nanci ncing ng (Rp0,2T 0,2T) Lending g Rp6,7 ,7T

Source: Ministry of Finance

SLIDE 54

53

6,7
6,4
6,2
4,3
3,1
3,1
2,8
2,1
1,6
1,1

1,0 3,3 1,3 0,5 1,1 2,1

0,6

2,1 2,7 4,8 5,6 9,0 3,3 3,8 USA Japan UK Brazil Italy S Africa Australia Turkey Indonesia China Korea Saudi Arabia Fiscal Deficit (% GDP) GDP Growth

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

lio Managemen

gement

Weig ighted ted Avera erage ge Debt bt Maturity turity of ~8. 8.4 Years rs Defici icit t Productiv ctivity ity**

Source: MOF, World Economic Outlook

Well ll Divers ersif ified ied Acros ross Differen erent t Curren rencie cies

% of Yearl rly y Issuance Source: Ministry of Finance Source: Ministry of Finance Source: Ministry of Finance

Stabl ble Debt bt to GDP DP Ratio tio Over er Recen cent t Yea ears rs

US$ bn Government Debt / GDP (%) Note: using GDP assumption IDR14,735.85 (Outlook 2018) *Preliminary Data **GDP growth and fiscal deficit numbers are average of 2012-2016 (5 years) 136,3 155,2 174,7 207,0 239,8 249,5 263,1 58,6 54,5 54,7 54,7 55,1 55,6 56,6 24,9% 24,7% 27,4% 28,3% 29,4% 29,8% 30,1% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 0,0 50,0 100,0 150,0 200,0 250,0 300,0 350,0 2013 2014 2015 2016 2017 2018 *) 2019**) Bond Loan Debt/GDP Ratio 9,8 9,4 9,1 8,7 8,4 8,4 2014 2015 2016 2017 2018 Jan 2019 ATM (in years) 53% 57% 55% 57% 59% 59% 29% 29% 32% 31% 30% 30% 12% 9% 8% 7% 6% 6% 3% 3% 3% 4% 4% 4% 3% 2% 2% 1% 1% 1% 0% 20% 40% 60% 80% 100% 2013 2014 2015 2016 2017 2018 IDR USD JPY EUR OTHER

SLIDE 55

54

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

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

IDR tn tn

Note: using GDP assumption

Source: Ministry of Finance

14,8 13,7 12,1 10,6 10,6 10,4 21,0 20,7 17,5 19,2 19,7 19,3 2014 2015 2016 2017 2018 Jan 2019 Variable rate ratio [%] Refixing [%]

300 191 198 166 182 223 51 128 140 133 147 29 141 92 89 104 5 100 29 90 21 15 26 23 21 28

5

5

144

130 151 154 159 131 150 102 100 117 48 28 24 23 20 15 33 7 26 31 2 2 2 33 23 30 30 19 36 25 21

50 100 150 200 250 300 350 400 450 500 IDR Denominated Other Currencies 10,7 12,2 12,1 12,1 12,3 12,2

43,4 44,5 42,6 41,3 41,0 40,4 2014 2015 2016 2017 2018 Jan 2019 FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 7,7 8,4 6,5 9,9 10,6 10,3 20,1 21,4 22,7 25,0 25,5 25,5 33,9 34,7 36,0 39,3 40,4 40,2 2014 2015 2016 2017 2018 Jan 2019 in 1 year (%) in 3 year (%) in 5 year (%)

SLIDE 56

55

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

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

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

r

Hold lders ers of Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

31,0% 23,9% 22,5% 23,4% 20,3% 26,8% 30,8% 37,8% 39,9% 36,8% 42,0% 35,9% 38,1% 38,2% 37,5% 39,8% 37,7% 37,3% Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Jan-19 Foreign Holders Domestic Non-Banks Domestic Banks 4,6% 3,2% 3,5% 5,0% 4,3% 3,8% 3,7% 1,3% 5,3% 5,1% 1,9% 1,8% 15,2% 11,8% 17,8% 17,3% 18,4% 18,1% 33,6% 39,0% 37,4% 35,6% 36,8% 36,7% 42,8% 44,7% 36,0% 37,0% 38,6% 39,6% 38,1% 38,2% 37,5% 39,8% 37,7% 37,3% 0% 20% 40% 60% 80% 100% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 Jan-19 0-1 ≥1-2 ≥2-5 ≥5-10 ≥10 %Foreign Ownership of Total

SLIDE 57

56

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

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

(IDR tn) Desc script ription ion Dec-15 15 Dec-16 16 Dec-17 17 Dec-18 18 Jan-19 19 Banks ks*

350.07 23.95 95% 399.46 22.53 53% 491.61 23.41 41% 481.33 20.32 32% 652.81 26.78 78%

Govt Institution stitutions (Bank k Indon

nes

esia ia**)

148.91 10.19 19% 134.25 7.57% 7% 141.83 6.75% 5% 253.47 10.70 70% 123.29 5.06% 6%

Bank Indonesia (gross)

157.88 8.90% 179.84 8.56% 217.36 9.18% 219.42 9.00%

GS used for Monetary Operation

23.63 1.33% 38.01 1.81% (36.15) (1.52%) 96.13 3.94%

Non Non-Ba Banks ks

962.86 65.87 87% 1,239 39.57 57 69.90 90% 1,466 66.33 33 69.83 83% 1,633 33.65 65 68.98 98% 1,661 61.75 75 68.16 16%

Mutual Funds

61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01% 120.38 4.94%

Insurance Company and Pension Fund

221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50% 421.08 17.27%

Forei eign gn Hold lders rs

558.52 38.21 21% 665.81 37.55 55% 836.15 39.82 82% 893.25 37.71 71% 909.93 37.32 32% Foreign Govt's & Central Banks 110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91% 166.74 6.84%

Individual

42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09% 73.06 3.00%

Others

78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67% 137.31 5.63%

Tota tal

1,461.85 100.00% 1,773.28 100.00% 2,099 99.77 77 100.0 .00% 0% 2,368 68.45 45 100 100.00 .00% 2,437 37.86 86 100.0 .00% 0%

Source: Ministry of Finance

SLIDE 58

Monet etary y and d Fi Financia ial Factor:

r:

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

rd

d an and d Favoura urable ble Financial Sector

r

Se Sect ction ion 5

SLIDE 59

58

Bank Indonesia’s Policy Mix

To Maint ntain in Macroeco

econo

nomi mic c and Financi ncial System em Stabil bilit ity

Source: Bank Indonesia

 Implementing Macro prudential Intermediation Ratio (RIM)  Implementing Macro prudential Liquidity Buffer (MLB)  Electronification: Social program, e- payment for Government  Financial technology  National Payment Gateway (NPG)  Developing market instruments for financing infrastructure  Developing financial market infrastructures  Controlling inflation: TPIP, TPID  Structural reforms: Government  Financial deepening & stability: KSSK (Financial System Stability Committee), OJK (Financial Services Authority)  Pre-emptive, front loading and ahead-of-the-curve policy rate response  Stabilize exchange rate consistent with fundamentals  Accelerate implementation of reserve requirement averaging

Monetar etary Po Polic icy Coordina dinati tion

n

with ot

ther

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

1 2 3 4 5

SLIDE 60

59

Bank k Indones esia ia Polic licy y Mix: : Februar ruary y 2019

The e BI Boar

ard of Gove

vernor

rs agree

eed on 20 20th

th and 21st st Febr

bruar ary 2019 to hold d the BI 7-Da Day Reve verse se Repo

Rate

te at 6.00%, %, while le also so main inta tainin ing the Deposit

sit Facili

ility (DF) and Lending ding Facili ility ty (LF) rates tes at 5.25% % and 6.75% resp spec ectiv ively ly.

Consistent with efforts to strengthen external stability, especially to control the current account deficit within a manageable threshold and maintain the attractiveness of domestic financial assets. Holds the Bl 7- Day Reverse Repo Rate at 6.00%. Coordination with the Government and other relevant authorities are increased in order to maintain economic stability, to maintain economic growth momentum.

Source: Bank Indonesia

Institutes a monetary

perations strategy to

increase liquidity, to boost financing in the banking sector. Undergo accommodative macroprudential policy and strengthen payment system policy to expand economic financing.

SLIDE 61

60

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

s Impr

provement vement

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

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

Improvement in average reserve requirement is a follow up

to the monetary policy

perational

framework reform implemented by Bank Indonesia since 2016.

Monetary policy operational framework reform started in

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

The current improvement aims to elevate flexibility in

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

f

monetary policy transmission in maintaining economic stability.

Consid iderati erations

ns for the Average

rage Reserve ve Requir uirem emen ent Ratios ios Improve

vemen

ent t

Source: Bank Indonesia

SLIDE 62

61

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

(MIR)

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

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

f Governors Regulation (PADG) No.

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

Conside ideratio rations ns for r Mac acrop

pru

rude dential ntial Instru truments ments Mac acropr

prude

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

1 2 3 4

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

Source: Bank Indonesia

SLIDE 63

62

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

Regulati lation

n

MIR (Con

nventional

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

1 MIR Accounting Formula Credit + Owned Bond Deposit + Issued Bond Financing + Owned Sharia Bond Deposit + Issued Sharia Bond 2 Rate and Parameters  Ceiling 92%  Floor 80%  Minimum Capital Adequacy Requirement 14%  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1  Ceiling 92%  Floor 80%  Minimum Capital Adequacy Requirement 14%  For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1 3 Scope of credit/financing and deposits to calculate MIR / MIR Sharia  Credit: rupiah and foreign currency  Deposits in rupiah and a foreign currency: (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds  Financing: rupiah and foreign currency  Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds 4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports 5 Criteria for securities held  Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution

SLIDE 64

63

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

Regulati lation

n

MIR (Con

nventional

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

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

ffices in Indonesia

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

f:

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

ffices and sharia business units in Indonesia

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

ther liabilities

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

SLIDE 65

64

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

Regulati lation

n

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

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

perations (including SBI/SDBI/SBN); and

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

f

Data

n

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

SLIDE 66

65

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

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

account
unt aspects

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

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

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

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

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

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

3. Adjusting the arrangement of stages and amount of property

loan/financing disbursement of indent property:

Source: Bank Indonesia

SLIDE 67

66

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

s

1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank’s risk management policy (e.g.the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debitor and developer/seller’s bank account.

LTV / F FTV Exempt mptions

ns

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

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

Source: Bank Indonesia

SLIDE 68

67

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

Purposes ses

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

Genera eral Provisi sions

ns

 Domes estic tic Non-De Deliv livera rable ble Forwar ard d Tran ransaction tion (DNDF Tran ansac actio ion)

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

 Forward Trans ansac actio ions

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

 Fixing Mec echan hanism sm

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

 Other er Definit initio ions

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

Source: Bank Indonesia

SLIDE 69

68

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

Bank can perform

rm DNDF Transa

nsacti ctions ns as follows: ws:

Bank – Customer Bank – Foreign Party

Bank – Bank

Tran ansac saction tion bet etween en:

Can only be performed to hedge rupiah exchange rate risk.

1. Must have Underly

lyin ing Transac sactions tions:

Includ cluding ing all foll llow

wing

ing activ ivit ities ies : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excludi luding g foll llowi wing g activ ivit ities ies: a. Bank Indonesia certificates; b. Placement of funds with bank; c. Unwithdrawn credit facilities; d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities.

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

Source: Bank Indonesia

SLIDE 70

69

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

Transac nsacti tion

n Set

ettl tlement ent

Use Fixing mechanism
Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR
Settlement currency : IDR
Roll over and early termination are not allowed

Roll ll over er and d early ly termi

mina nati tion for DNDF is proh

hib

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

Cover He Hedging ng

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

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

Custom

mer

er / / Foreign eign Party ty

Bank Overseas seas Bank

Hedging

Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge.

Cover Hedging

Source: Bank Indonesia

SLIDE 71

70

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

Source: Bank Indonesia

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

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

f

the contract based

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

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

1 2 3 4

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

Strengthening reference rate based on real transactions

SLIDE 72

71

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

ns

Source: Bank Indonesia

Mar arket Pl Player

ers. Banks, bank clients, both individual

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

n Nee

Needs ds Analys nalysis

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

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

nventio

entions

ns. When performing IRS and OIS

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

ent. Settlement can be performed as a netting

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

ut

ne nett tting ing can be applied under predetermined conditions.

Market Conventions

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

und

d Floatin ting Rates s (CFR) based d

n 5 decima

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

tion
nal

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

tation

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

tation

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

f the OIS tenor
r

(MD+1bd) bd).

SLIDE 73

72

Bank nk Indo donesi nesia a Policy icy Mix: 2015 5 – 2017

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
f 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. Monetar ary Policy Policy Rate Reserve e Requir irement ent 2. 2. Excha hang nge e Rate Policy 3. 3. Macroprudent ntia ial l Policy

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. Payment ent System em Policy

National Payment Gateway

(June)

Modernized cash

management underway 2015 2015 2016 2016 2017 2017

Source: Bank Indonesia

SLIDE 74

73

1,88

2,25 0,97

2,30
4,08
1,62

0,62

0,48
8,69

0,93

3,64
1,89
3,48

4,29 4,14 2,42 2,42 1,97 1,61 1,02 0,81

0,29
0,67
0,83
1,13
1,93
10,0
8,0
6,0
4,0
2,0

0,0 2,0 4,0 6,0 BRL THB IDR CNY ZAR MYR PHP SGD TRY JPY EUR KRW INR point-to-point average

%

Data as of February 20th, 2019 3,00 4,00 5,00 6,00 7,00 8,00

Stable able Monetar tary y Envir ironmen

nment

t Despit pite Chall lleng nges es

Rupia iah Exch change ge Rate te Remains ins Compa para rable le to Peers ers Well ll Maint intaine ined Infla lation tion Ensu sured red Price ice Stabi bility ity Stren engt gthened ed Moneta etary ry Poli licy cy Framew ework

rk

Pick ck Up in Credit it Grow

wth

th

BI 7Day RR Rate: e: 6.00

(%)

LF Rate: e: 7.00 LF Rate: e: 6.75 75 BI Rate: e: 6.50 DF Rate: e: 5.25

19 Augu gust 2016

The New Moneta tary ry Opera ratio tion Framewor

rk

Source: Bank Indonesia

YTD 201 2019 vs vs 201 018

8,38 8,36 3,35 3,02 3,61 3,13 2,82

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

2

2 4 6 8 10 12 14 16 18 20 2013 2014 2015 2016 2017 2018 Jan-19 (%) CPI (%, yoy) - rhs Volatile Food (%, yoy) - lhs Administered (%, yoy) - lhs Core (%, yoy) - lhs 11,8 13,0 10,9 10,4 2 4 6 8 10 12 14 16 18 20 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 2015 2016 2017 2018 %,yoy

y

Total Growth Working Capital Loans Investment Loans Consumption Loans

SLIDE 75

74

Regio gional nal Inflation ation under er Contr trol

l

On January ary 2019, , almos

st all provinc

vinces es recor

rded

ded inflati lation n (yoy

y) within

in national ional inflati ation

n target

et corridor.

idor. Lowest

t inflat lation ion was recorded

rded in

Sumatra tra (1.8 .83%, %, yoy), , Bali-Nus usa a Tengga ggara ra (2.8 .84%, %, yoy), , and Java (2.9 .92%, %, yoy). . Some region ions recorded rded higher her infla lati tion

n rate,

, as in Papua ua, , Central ral Sulawes esi, i, North h Kalim limantan, ntan, and West Papua, a, due to higher her prices es of airfa fares res and fish..

Source: Bank Indonesia

SLIDE 76

75

4 Strat ategies gies to

Achie

hieve e the he Inflat ation ion Targe get

Achieving inflation at 3,5%±1%

Maintaining core inflation
Maintaining volatile food stability at 4-5%
Controlling administered price inflation

2018-2019 Target

Stabilizing the price

1. Price

e Affordabil dabilit ity Achieving inflation at 3,0%±1%

Maintaining core inflation
Maintaining volatile food inflation less than 4%
Controlling administered price inflation

20 2020 20-20 2021 Targe get

Managing demand side Strengthening production, Government food reserves and food export- import management

2. Supply

ly Availabi lability lity

Strengthening institution Encouraging trade cooperation between regions

3. Well

l Managed ged Distr trib ibution ion

Improving trade infrastructure Improving data quality

4. Effec

ectiv ive e Communic ication ation

Strengthening central-regional coordination

Source: Bank Indonesia

4 Strat ateg egies ies

SLIDE 77

76

Improving ving the Effecti ctiveness eness of Monetar etary y Policy icy Transmi ansmissi ssion

n

Bank nk Indon

nes

esia ia has instit ituted uted a Reformulation

rmulation of Monetary

netary Policy icy Operations ions Framewo mework k which ich consists of 3 pill llars; ; (1) (1) impleme lement ntation

n of BI 7day Reverse Repo
Rate;

e; (2) (2) impleme lement ntation

n of reser

erve e requir uiremen ement averaging ging; ; and (3) (3) continue inue to impl plemen ement money ey market ket deepening epening progr

gram.

Enhancement of monetary policy signal Enhancement of banking liquidity management Implem lemen entat tation ion of BI 7 Day Rever verse e Repo Rate Implem lemen entat tation ion of Reserve e Requiremen quirement t (RR) Aver veragin aging Reform rmula ulati tion

n of

Moneta etary Po Polic icy Operat ational ional Framewor

rk

Enhancement of instruments and transactions Implem lemen entat tation ion of Money Market et Deepen ening ing Program ram

Source: Bank Indonesia

SLIDE 78

77

Enhan ancemen cement t of Monetar tary y Operation ations s Frame mewor

rk
Can be traded among contributor banks for 10

minutes.

Up to the amount of 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 RRENT ENT JIBOR OR (as per June 1st, 2016) PREVIOU VIOUS JIBOR OR

Source: Bank Indonesia

SLIDE 79

78

Finan ancial cial Interm ermed ediation iation Perform

rmance

nce Remai mains ns Posit sitiv ive

Banking nking inter interme mediation iation by by the end end of

f 2018

2018 gr grew ew hig igher er than pr prev evious ious year

year. In

In the domestic ic ca capit pital ma market kets, ca capit pital raising ing by by co corpor porations ions (part (particula icularly ly right ight issues ues and corpor porate bond nd issua uance nce) remains ins stable le.

Source: Financial Service Authority (OJK)

Financin cing distri ribu buted ted by mult ltif ifinance ce companies ies grew by 5.1 .17 (yoy

y)

) The e growth th of gros

ss

s prem emium ium reven enues es in the e dom

mes

estic tic insu sura rance ce industry stry have e also lso been en positive sitive Capit pital l raisi ising g throu rough righ ghts ts issu sues es and corpo pora rate te bond issu suance ce rem emains ins sta tabl ble The e growth th of bank lending g was s 11.7 .75% (yoy

y)

) as s of Dec-18 18

5295 11,75% 0% 2% 4% 6% 8% 10% 12% 14% 16% 3.500 4.000 4.500 5.000 5.500 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 IDR tn % yoy Bank Loans YoY Growth (rhs) 436 5,17% 0% 2% 4% 6% 8% 10% 350 375 400 425 450 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 yoy IDR tn Financing Growth (rhs) 16,43 0,30 35,45 5,29 114,18 0,88 20 40 60 80 100 120 140 160 180 2012 2013 2014 2015 2016 2017 2018 25 Jan'19 IDR Tn IPO Saham Rights Issue Surat Utang Korporasi & Sukuk IPO equity 433 50 100 150 200 250 300 350 400 450 500 2012 2013 2014 2015 2016 2017 2018 IDR Tn

SLIDE 80

79

Finan ancial cial Insti titu tuti tions

ns Remai

main Robust ust

CAR of the bank nking ng sector remains ains at a high gh level. As of Dec-18 18, CAR & Tier-1 Capit ital al was 22.97% % & & 21.29%, respectively ely Risk-based ed capit ital al (RBC) of the insur uranc ance indus ustry also remain ains high gh, well above the minim nimum um threshold ld (120%) Gearing ing ratio io of multifi ltifina nanc nce companie anies is 2.99 9 times, , providin ding g ample le room for futur ure e growth Profit itab abili ility of the bank nking ng sector has been relat ativ ivel ely stab able le despit ite the increas ease e

f interest

est rates es within hin the last six x months hs

Domes mestic ic fina nancia ncial l instit itutions utions exhib ibit it a gener nerally ly robus ust cond ndit ition.

ion. Capit

ital adequac equacy y is maintai ntained ned well ll above e the minimum imum requir irem emen ents. . Profit itabil bilit ity and lever erage ge are maintained ntained at a suf ufficient icient level. el.

Source: Financial Service Authority (OJK) 22,97 21,29 10,0 12,0 14,0 16,0 18,0 20,0 22,0 24,0 26,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 CAR Tier 1 441% 332% 200% 230% 260% 290% 320% 350% 350% 400% 450% 500% 550% Jan-17 Feb-17 Mar-17 Apr-17 May-17

Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Life Insurance General Insurance (rhs) 5,14 2,55 1,0 2,0 3,0 4,0 5,0 6,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 % Net Interest Margin Return on Assets 2,99 1,0 1,5 2,0 2,5 3,0 3,5 4,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

SLIDE 81

80

Adequat uate e Liquid uidit ity; ; Managea geable ble Credit dit Risks ks

Banks anks are are eq equip uippe ped wi with suf sufficient cient li liqui uid asset

ets. In

Insurance surance in industr ustry also also demonstr monstrates ates an an enha enhance nced lev level el of

f inv

investme estment nt adeq equacy acy rati

atio. The

The non non-per perfor

rming

ming loan ratio io and non non-per perfor

rmi

ming ng fina nancin ncing ratio io are well ll maintained ntained below low the thres eshold

ld.

The ratio io of liquid uid assets to deposit its in the bank nking ing sector has been manag nageab able le As of Dec-18 18, the gross & net NPL ratios ios of the bank nking ing sector were 2.37% % & 1% respect ectiv ivel ely, well maint intained ined below the thresh eshol

ld

NPF ratio io of the mult ltifin ifinanc ance indus ustry is 2.71% % as of Dec-18 18 Invest estment nt adequac uacy ratio io in the insur uran ance indus ustry is maint intai aine ned above 100%

Source: Financial Service Authority (OJK)

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

*

123 186 90 110 130 150 170 190 210 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 % Life Insurance General Insurance 1 2,37 0,0 0,5 1,0 1,5 2,0 2,5 3,0 3,5 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 % NPL Net NPL Gross 2,71% 0,0% 0,5% 1,0% 1,5% 2,0% 2,5% 3,0% 3,5% 4,0% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18

SLIDE 82

81

Managea geable ble Mark rket t Risks sks

Amid midst st the he incr increas easin ing ma market ket volat

latil

ilit ity, y, the he risk isk pr prof

fil

ile of

f financia

inancial insti institut utio ions ns remain emain mana manage geab able

le. Net

et open

pen pos

posit ition ion of

f the

he banking anking sector sector has has been een ma maintained intained at at a lo low level, level, while while the inv inves estmen ment value lue of

f dome
mestic ins

instit itutiona utional in inves estors

rs (mu

(mutua ual fun unds, ins nsurer urers, and nd pen pension ion fun unds) has has been een still ill rela elatively ively stable le. Net Net ope

pen po

position sition in in th the ban banking king secto ector is is kept kept far be below low th the maximum li limit it (20 20%) The e inves estm tmen ent t value lue of insurers rers & pensi sion

n funds is rela

lative tively sta tabl ble Multi tifina inance ce companies’ exposures to foreign debt has generally been mitigated throu rough hedgi ging g mea easu sures res Mutua utual funds’ net net asset et value (NAV (NAV) co continue ntinues to to grow row wit ith a low

w lev

evel el of

f

vola latil tility ty

Source: Financial Service Authority (OJK) 1,73 1 2 3 4 5 Jan-17 Feb-17 Mar-17 Apr-17 May-17

Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 % 5.000 5.200 5.400 5.600 5.800 6.000 6.200 6.400 6.600 6.800 260 290 320 350 380 410 440 470 500 530 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 IDR Tn NAV Mutual Funds IDX (rhs) 1073,6 260,9 200 225 250 275 300 800 850 900 950 1.000 1.050 1.100 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 IDR Tn IDR Tn Insurance Pension Funds (rhs) 181 105 60 80 100 120 140 160 180 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 IDR tn Domestic Debt Foreign Debt

SLIDE 83

82

Domest estic ic Capital ital Mark rkets ts Improved ed due to Nonreside resident nt Inflow w

In In the mi midst of

f slo

lower wer gl global

bal pr

pros

spect

pect co couple upled wi with tighter ighter gl global

bal fina

inancia ncial co condit ition, ion, dome

mestic

ic ca capi pital ma market kets rema emain in stable. Since ince ea early ly 2019 2019, ca capi pital market kets has has been posit itiv ive due to to nonres esid ident ent inflow lows.

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

Dom

mes

esti tic c capi pita tal mark rkets ets perform

rmance

nce tends s to incre rease se recentl cently Nonres residen ents ts have e sta tarted rted to re-en enter ter our financia ial l market rket amidst st tigh ghter ter financia cial l condition tions The IDX Stoc

ck Composit

ite Index has demon

nstr

trated ated a posit itiv ive growth

wth in early

ly 2019 Hence ce, , govern ernmen ent t bond yield elds s tends s to decrea rease

*as data 25 February 2019

Stock

ck Index

ex Perf rfor

rmance 28 December

r 2018 vs vs 15 15 Febru bruari ri 201 2019 13,58 10,97 5,58 12,23 9,05 4,43

0,19

7,56 5,93 6,10 9,40 3,14 7,60 4,67 9,34

1

2 4 6 8 10 12 14 TURK BRAZ RUS AS EURO JPN MAL CHIN PHIL SIN HKN INDO KOREA THAI WORLD % 5.000 5.500 6.000 6.500 7.000 180 200 220 240 260 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Comp Bond Index Comp Stock Index (rhs)

40
30
20
10

10 20 30 40 50 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 15Feb'19 Rp Triliun SBN Saham 12.000 12.500 13.000 13.500 14.000 14.500 15.000 15.500 5 6 7 8 9 10 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Yield (%) 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs)

SLIDE 84

83

Strat rategic egic Polic licies ies in Finan ancial cial Sector

r

Source: Financial Service Authority (OJK)

Suppor upporting inf nfrast astruct uctur ure e fina nanci ncing ng and deepen pening ng the capi pital ma market

Enhanci ancing va varia iabi bilit lity of financi ancing instrume ments ts

Perpetual bonds, green bonds, municipal bonds
Investment products for mortgage

Simplif lification ication of issuance ance proc

cess

s in the capital ital market

Simplifying issuance process of debt securities and

sukuk for professional investors

Expan anding ding the invest estor

r base

se

Expanding the access of domestic retail investors

to the capital market

Promoting the participation of local financial

institutions through the establishment of local securities companies

Stren rength then enin ing the role

le of NBFIs

in infrastructure astructure developm lopmen ent

The provision of credit guarantee

products by credit guarantee companies & insurers

Supp uppor

rting inn

nnovati tion

ns in digital

l finance nce

Issuing the guiding principles for the providers of digital financial services, including for registering, licensing, and the crowdfunding scheme Directing financial institutions to synergize with the fintech sector or to establish a fintech business line Promoting the role of fintech lending in supporting government programs, including in

nline retail sales of government debt securities

SLIDE 85

84

Strat rategic egic Polic licies ies in Finan ancial cial Sector

r

Enhan Enhancing g fina nanci ncial al litera eracy cy & incl nclusion

Source: Financial Service Authority (OJK), June 2017

OJ OJK has s also so built ilt a str stron

ng foun
undati

tion for

r finan

inancial incl inclusion prog

grams, to
en

ensu sure access ss to

f

fina inancial products ts & & servic ices es by In Indo donesians of all ll soc

cial

l cla lasses. . Such h in initia itiatives also in include th the e en enhan hancement of fin inan ancial liter eracy and d finan inancial cons

nsumer protection.

Developing financial education models utilizing various delivery channels Enhancing the role of the “Investment Alert Taskforce” The he resu esult t of

f OJK’s 2016 natio

ional al survey demo emonstr strated an imp mprovement t in financia ial literacy & & inclus lusio ion amo mong g Indo donesian ans com

mpared

ed to that at of

f 2013,

3, but ther ere is still ill room

om for further

herimprovement. t.

Fina inanc ncial Lit iter eracy cy Fina inanc ncial Inclu clusio ion

21. 1.8% 29.7%

2013 13 2016 16

59.7% 67.8%

2013 13 2016 16

Developing micro-credit products with additional business support (“KUR Klaster”) Promoting the establishment

f Islamic

microfinance institutions (“Bank Wakaf Mikro”) Strengthening the role of Financial Access Acceleration Taskforce (TPAKD) in local areas

SLIDE 86

85

A A Comprehen prehensiv sive e Financ ncia ial l Deepe pening ning Program

gram

…strat

trategy gy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

In Apr-2016 2016, the Minis nister er of Fina nance nce, , the Gover erno nor of Bank nk Indon

nes

esia, ia, and the Chair irma man n of the Board of Commi missione ioners of the Financi ncial l Service ices Authorit

rity

launc nched ed a Coordina ination ion Forum um for Developme elopment nt Financin ncing throug ugh Financia ncial Market ket (FK-PPPK). K). The e three ee authorit

rities

ies have e agreed eed to formula mulate e “The Natio ional l Strategy egy of Fina nancia ncial l Market ket Development elopment”

Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market

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

Mission: Financial Market as Sources of National Development Financing

1 2 3

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

3 Pilars 6 Markets 7 Elements

f Financial

Market Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

SLIDE 87

86

Continuou tinuous s Progr gram am on Capital ital Mark rket t Deepen ening ing

…continuously strengthened, including through capital market deepening ini niti tiativ atives es

Stren engthen thening ing market t infras astr tructure

Expansion of Single Investor Identification (SID) coverage
Development of electronic trading platform (ETP) in the debt

market

Development of Integrated Investment Management System

(S-INVEST)

Enhancing the clearing and settlement process
Enhancement of capital market data warehouse
Development of Extensible Business Reporting Language

(XBRL) for issuers

Enhanci ancing the supply-side side

Simplification of public-offering requirements and

procedures

Development of debt market
Development of mutual fund industry
Development of other products, including those to support

infrastructure development (private equity funds, REITs, ABS)

Development of Islamic capital market
Development of municipal bonds

Enhan ancin ing the deman and-side ide Stren rength then enin ing governan rnance

Development of market players’ capacity
Enhancement of GCG for publicly-listed companies
Development of repo regulations and infrastructure

Source: Financial Service Authority (OJK)

Enhancing the role of the domestic institutional investors

(insurers & pension funds) in capital markets

Development of the domestic investor base (conducting

investor education programs)

Expansion of distribution channels of market products

SLIDE 88

87

BI’s Roles in Supporting Distribution of Non-Cash Cash Soc

cial

ial Assistance stance (NCS CSA) A)

BI suppor

rts

ts gover ernme ment’s progra

gram

m of shiftin ing socia ial l assista istanc nce to targeted ed non cash sh soc

cial

ial assistan istance disbu sburse seme ment t throu

ugh

h the elec ectr tronic ic paymen ent system

em. In the future,

re, elec ectr tronic ic mechan hanism ism disbu bursem rsement t will l be also

applie

ied d to LPG subsidy sidy. . NCSA A Programs ams

Family ily Hope Program ram (Program gram Keluarga uarga Harapan an -PKH KH) Smart Indone

nesia

ia Program ram (Program gram Indon

nes

esia ia Pintar tar-PIP PIP) Non Cash Food d Assistan tance e (Bantuan tuan Pangan gan Non Tunai ai – BPNT)

2016-20 2020 20

Pilot Proj

jec

ect Gradu adual al Impl mpleme ementatio tation

Inter erconne

nnected

ed & inter eroperable

perable

paymen ent t syst stem em

LPG Subsidy idy

Full Imp mpleme lementati tation

XXYYZZ 1234567 678

9876543210

Source: Bank Indonesia

SLIDE 89

88

Prog

gres

ress of

f NCSA

A Prog

grams

ms

Family ly Hope e Program

gram

(Program ram Kelu luarga rga Harap rapan an - PKH) Non

n Cash Food
d Assistance

istance (Ban antuan Pangan gan Non

n Tunai -

BPNT)

The Family Hope Program (PKH) is a program that

provides cash to very poor households. 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 has been distributed

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

In 2018, PKH has been distributed to 10 million

households on non-cash basis.

BPNT is a poverty alleviation and social protection

program that is managed by the central

government. It provides subsidized rice and eggs

to low-income households. 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.

In 2018, BPNT has been distributed to 10.1

million households (65.1% of the target of 15.5 million households target).

Source: Bank Indonesia

SLIDE 90

89

2,42

35
197

20-Feb-18 2008 1998

Strong

nger

er Fundamentals amentals Facing ng the Headwi dwind nds

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

Inflation tion Rate te (%) IDR R Movem emen ent t (%) Non Non-Perf Perform

rmin

ing g Loa

an/NPL

PL (% (%) Government ent Debt/G t/GDP Forei eign gn Reserv rves (USD D bn)

100.0% 1998 98 27.4% 2008 08 30.0% Q4 - 201 2018 8.6x 1998 98 3.1x 2008 08 3.3x Q4 - 201 2018 116.8% 1998 98 33.2% 2008 08 36.2% Q4 - 201 018

More e Liquid quid Market rket (%) Extern ernal l Debt bt (Publ blic ic & Priva ivate) te) to FX Reserv erve e Ratio tio Extern ernal l Debt bt/G /GDP

Inflat ation contro trolled d withi thin the target t range IDR apreciat ated year-to to-date te in February ary 2019 NPL NPL level (gross) is below w the maximum um thresho hold of 5% Consiste tentl tly y well-mai ainta tained Significan antl tly y highe her than n 1998 & 2008, ample to cover 6.5 months ths of import t and exte ternal al debt t repaym yment Significan antl tly y lower than n 1998 crisis Slightl tly higher than n 2008, but significan antl tly y lower than 1998 Jan ‘19 120.1

Jan ‘19

2.82 82 (yoy)

Dec ‘18 2.4 62 62 10,5 5,7 1998 2008 Jul-15

Overnight ht interbank k money y market t rate is relati tively y lower

Dec 2018

5.8 (ytd)

SLIDE 91

90

Outlook look of Domest mestic ic Econom

my

y Remai mains ns Robust st

...d ...dome mestic stic economic mic growth th is predi dict cted ed to be h highe her r in 2019

2019 Economic

nomic Outloo
ok

 Bank Indonesia projects national economic growth in the 5.0-5.4% range in 2019, buoyed by domestic demand and improvements in

terms of net exports.

 Bank Indonesia will consistently maintain price stability and strengthen policy coordination with the Central Government and Local

Administrations to maintain low and stable inflation, which is projected within the inflation target of 3.5±1% in 2019.

 Bank Indonesia projects credit growth in 2019 at 10-12% (yoy), while predicting deposit growth in the 8-10% (yoy) range. Bank

Indonesia will continue to monitor liquidity adequacy and distribution in the banking system in conjunction with the other relevant authorities consistent with efforts to help maintain financial system stability. Economic

nomic Grow
wth

Inflat lation ion CAD D (% (% of

f GDP)

DP) Cred edit it Grow

wth

Source : Bank Indonesia

2018 Real aliza izatio ion 5.17% 3.13% 2.98% 11.75 .75% 201 2019 5.0–5. 5.4 % 3.5±1% ±2.5% .5% 10 10.0 .0-12 12.0% .0%

SLIDE 92

Pr Progres gressiv sive e Inf nfras astruc tructure ture Devel elopmen pment: Strong

ng Commi

mmitme tment t on Accel celer eration ation of Infrastructure structure Provi vision ion

Se Sect ction ion 6

SLIDE 93

92

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

The Governmen rnment t has Enact cted ed Various ious Reform rms s to Accelerat erate e Inf nfrastructur rastructure e Provis ision ion

Fiscal l Refor

rms

ms Instit itutio ional al Refor

rms

Regulat lator

ry Refor
rms

ms

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

Viabil ilit ity Gap p Fund nding ing (VGF) F) KPPIP IP Direct ect Lend nding ing Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Avail ilab abil ilit ity y Payment ent Land nd Revolv

lving

ing Fund nd Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF

Reg. No. 190/2015 for Central Gov’r and MoHA
Reg. No. 96/2016 for Regional Gov’t.)

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

f priority infrastructure projects
PT. Sarana

na Mult lti Infrastruk uktur ur Merging between PT. SMI and Gov’t Investment Center (PIP) to become an infrastructure funding company Indon

nes

esia ia Infras. . Guarantee ntee Fund nd (IIG IGF) F) PPP Unit it Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land nd Acquis uisit itio ion Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg. No. 148/2015) and land acquisition fee payment for impacted community (Presidential Reg. No.56/2017) Econo nomy my Packa kages ges Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation Risk-sha haring ing Guid ideli elines nes IIGF has issued risk allocation and mitigation guidelines for PPP project Tax x Incent entiv ives es (Tax ax Holid iday ay) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 – 20 years depending on the investment value Indon

nes

esia ia Infrastructur ucture e Guarantee ntee Fund nd (IIGF) F) IIGF has the potential to provide project guarantee for non-PPP projects

SLIDE 94

93

Some me of Most t Recen ent t Reforms

rms

Policy y reforms rms are aiming ming to create a more conduci ducive e invest stment ent climat mate e for infrast frastructure ructure deliver ery

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

Presid ident entia ial l Reg. No. 20/2 /2018 on Use of Foreig eign Labor

r – released on March 2018

This regulation aims at t simp mplif ifying ng the e perm rmit it appl plic icati tion

n proce

cess ss for foreig eign n workers kers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia

Presid ident entia ial l Reg. No. 56/2 /2017 on Socia ial l Imp mpact t Handling ling in Land Acquis uisit itio ion n Proces ess for PSN – released on June 2017

This Presidential Reg. allows the Execu cuting ting Agency cy to pay land d acqu cquisi isition tion compe pensation tion to the impac pacted ted community ity who does not have officia icial l righ ghts ts

ver

r the land d required ired for PSN. . This regulation helps to solve the land acquisition problem due to community objection over the land use.

MoF MoF No. 60/20 2017 on Proced edures res for the Provis isio ion of Central ral Govern rnmen ent t Guaran rantee ee for the Ac Accele elerat ration ion of the Nation ional al Strateg egic ic Projec ects ts Imp mplem lement entati tion

n – released on May 2017

The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This is regula gulation tion regulates tes the scope pe and d genera ral l requirem irements ts and d proce cedu dure res to propo pose and d gra rant t guara rante tees, , as well l as all llocate cate state te budget dgetob

bli

liga gatio tion on govern rnment t guara rantee tees to all ll PSN. . The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

Gover ernment nment Reg. . No. 13/2 /2017 on Natio iona nal l Spatia ial l Plan n (RT RTRW RWN) – released on April 2017

The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg.

No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister

ister of Agra raria rian and Spatia tial can issu sue e a recom commen endation tion of spa patia tial l util iliz ization tion; ; so that t the proce cess of obta tain inin ing g projec ject t perm rmiss issio ion can be done.

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset t Managem agemen ent t of Land d Acquis uisit ition ion by State e Asset t Management gement Agenc ncy – released on February 2017

The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN.

SLIDE 95

94

Reforms Along the Project’s Life Cycle

...to

encoura

urage and accelerat rate infrastructur nfrastructure project ect usi sing ng PPP sche heme me Government nment of Indonesi nesia

Proj

jec

ect Develop lopment t Facili ility ty (PDF) Viabi ability lity Fundin ing Gap (VGF) Guarantee e Fund Tax x Facili ilitie ies Avail ailab abili ility Paymen ment Land d Ac Acquisition ition Preparation Bidding Process Construction

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

n GCA proposal

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

Guaranteeing

Govt. contractual
bligations under

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

MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment industries. Sector will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion

f an asset.

MoF Regulation, and MoHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov’t. commitment: US$ 12 mn (2016) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

SLIDE 96

95

Effor

rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

n

Regulat ation ion imp mprovem emen ent to to accele elerat ate land procurem emen ent proces ess

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

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

For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation
No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which

has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement.

Land nd Procurem

curement

t Process as Stipul ulate ated d in Law No. 2 of 2012

Law No

No. 2/201

012 was succe ccessfully ully applied lied in in: 1.

1. Palemb

lembang ng – Ind Indralaya laya section ection of

f the Trans

ns Sumater era Toll Road Project ject 2.

2. Java North Line Doub

uble le Track ck Rail Projec ject

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

SLIDE 97

96

Effor

rts

ts to Accelerat erate e Infrastru astructure cture Provisi vision

n

…the establishment of Indone

nesia

sia Asset et Management ent Agency (LMAN)

Source: Ministry of Finance

Government nment has establish shed ed Stat ate Asset set Management nt Unit t (LMAN) as a s soluti ution n to accelera rate e the land acqu quisiti tion n through ugh the provisi vision n of land d acqu quisiti tion n fund

1. Unutilized fund can be allocated for the following year 2. Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the

ther project

3. Land acquisition fund for PSN projects is managed under one agency

1. LMAN was established in December 2015

through the issuance of MoF Reg. 219/2015 concerning State Assets Management

2. In 2016, BLU LMAN was mandated to provide

land acquisition fund as a support to Ministry

f Public Works due to US$ 1,081 Mio

shortage of fund to acquire land for priority toll roads

3. The scope of support is broaden for all

National Strategic Projects through the issuance of MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN

4. In January 2018, LMAN has disbursed up to

US$ 881.48 Million (IDR 11.9 Trillion) through bridging finance scheme for 27 toll road projects, and planned to start the implementation of direct payment scheme

Land Ac Acqui quisitio tion n Budgeting ting Scheme LMAN at a Glance This LMAN initiativ nitiative provi vides des bet etter r flexibil xibility ty, coordi dina nati tion n and management ent of land acqu quisit sition

n fund

nd provisi vision n for National

nal Strat

rategic gic Projects cts (PSN)

SLIDE 98

97

New ew Fundame ament ntal al Regulations ulations Have Been een Initiat tiated ed in 2017

to accelerat rate infrastru frastructu ture re projects cts deliver ery

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

1

Gover ernm nmen ent Reg. . No. 13/2017 on National ional Spatial ial Plan n (RT RTRWN RWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of

btaining project

permission can be done.

2

MoF MoF No. 60/2017 on Proced edure ures for the Provisio ision n of Central ral Governm rnmen ent t Guarant rantee ee for the Ac Accele elera ration tion of the Nation ional al Strateg egic Projects ects Implem emen enta tation tion The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects

Implementation. This regulation regulates the scope and general requirements and procedures to propose and

grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN.

3

Presid iden enti tial al Reg. No. 56/2017 on Social ial Impact t Handling ling in Land d Acquis uisit ition ion Proces ess for PSN PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use.

4

MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset Managem gemen ent t of Land d Acquisit isition ion by State e Asset t Managem gemen ent Agen ency The implementing regulation of Presidential Reg. No.102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN

SLIDE 99

98

Und Under er Preside esident ntial ial Reg. . No.56/2 6/2018 18, , PSN N list st has been revised ised int nto

223 Proje
jects

cts and nd 3 P Progr grams ams

projects

26 26

Projects

53 53

Projects

18 18

Projects

12 12

Projects

Sulawe awesi

US$22. 22.8 B

Kalim limant ntan

US$35 35.6 6 B

Sumat atra

US$40. 40.4 B

Maluk luku & Papua ua

US$34. 34.4 B

89 89 3

Programs

Projects

National ional

Projects

1 2

Projects

Java

US$73 73.8 8 B US$99. 99.7 B

13 13

Bali & Nusa sa Tengga ggara ra US$0. 0.7 7 B

Exchange rate: US$ 1 = IDR 13,500

Road 69 Projects Dams 51 Projects SEZs & IEs 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation 8 Projects Airports 7 Projects Irigation 6 Projects Smelter 6 Projects Electricity 1 Program Technology 4 Projects Housing 3 Projects Fisheries/Farming 1 Projects Sea Dike 1 Projects Education 1 Projects Economic Equality 1 Program Aeroplane Industry 1 Program

Projec ect Program ram

PSN incl clud udes s 15 sector

rs

s at project ct level and 3 sector

rs at progra

gram m level

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

Projects

SLIDE 100

99

PSN may y rece ceiv ive e privil vileges eges as s stipulat ipulated ed in the e Presidential sidential Reg.

g. No.

. 3/20 2016 j.o j.o. . the e Pr Presid sidential ential Reg.

g. No. 58/20

/2017

01 01 02 03

Determination of National Strategic Projects

04 05 06 07 08 09 10 10 11 12

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

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

SLIDE 101

100

Progr gress ess on 223 Projects jects and 3 P Program

grams

s PSN

Progress ess of Natio ional al Strategic ategic Proj

jec

ects s + 3 Program

grams (per Dec

ecemb ember 2018)2 The e Estimated ated Invest estment t Valu lue for 223 3 Proj rojec ects s + 3 Program

grams PSN1

1Exclude 7 projects which investment value are still unknown

Exchange rate : US$ 1 = IDR 13,500

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

2) Excluding the economic equality program that will be reported separately

State Budget 10% SOEs/ RSOEs 31% Private 59%

Total tal Invest estme ment t Valu lue2

US$ 307.4 Billion llion

State Budget US$ 31. 1.6 Bn Bn SOEs/RSOEs US$ 96.6 Bn Bn Private US$ 179.2 2 Bn Bn

5 Sectors rs with th Hi Highe hest st Invest stment ent Value

Energy gy 11 Projects US$ 89.8 Bn Electr tric icit ity 1 Program US$ 76.7 Bn Roads 69 Projects US$ 49.7 Bn Railw lways 16 Projects US$ 29.2 Bn SEZs and IEs 31 Projects US$ 31 Bn

32 projects already completed 32 projects and 1 electricity program are in construction and partial-operation phase 48 projects are in construction and will start operating in 2019 52 projects are in construction and will start operating after 2019 14% 14% 14% 14% 22% 22% 23% 23% 3% 3% 24% 24% 6 projects in transaction 53 projects and 1 Aircraft Industry Program in preparation

SLIDE 102

101

In 2016 6 - Sept ptem embe ber 2018 18, , 33 PSNs have e been een Compl

mpleted

d wi with th Total al Investment estment Value ue of

f IDR 7.2 Trill

llion ion

21 Soreang – Pasirkoja Toll Road, West Java (11km) 22 Mojokerto – Surabaya Toll Road, East Java (36,3km) 23 Tanjung Priok Access Road, DKI Jakarta (16,7km) 24 Raden Inten II Airport, Lampung 25 Jangkrik and Jangkrik North East Field Development, East Kalimantan 26 Nanga Badau National Border, West Kalimantan 1 Gempol – Pandaan Toll Road, East Java (14km) 2 Sentani Airport, Jayapura, Papua 3 Juwata Airport, Tarakan, North Kalimantan 4 Fatmawati Soekarno Airport, Bengkulu 5 Mutiara Airport, Palu 6 Matahora Airport, Wakatobi, Southeast Sulawesi 7 Labuan Bajo Airport, Komodo Island, East Nusa Tenggara 8 Soekarno Hatta Airport Development (Including Terminal 3), Banten 9 Kalibaru Port, DKI Jakarta 10 Belawan-Sei Mengkei Gas Pipe (75 mmscfd), North Sumatera 11 Entikong National Border, West Kalimantan 12 Mota’ain National Border, East Nusa Tenggara 13 Motamassin National Border, East Nusa Tenggara 14 Skouw National Border, Jayapura, Papua 15 Paya Seunara Dam, Sabang, Aceh 16 Rajui Dam, Pidie, Aceh 17 Jatigede Dam, Sumedang, West Java 18 Bajulmati Dam, Banyuwangi, East Java 19 Nipah Dam, Madura, East Java 20 Titab Dam,Buleleng, Bali 31 Prabumulih - Kertapati Railway (Part of Trans Sumatera Railway Network 32 Raknamo Dam 33 Tanju Dam 27 Aruk National Border, West Kalimantan 28 Wini National Border, East Nusa Tenggara 29 Teritip Dam, East Kalimantan 30 Umpu Irrigation System (Way Besai), Lampung

2016 2017

Jan - Sep 2018

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

SLIDE 103

102

Progr gress ess on 37 P Prior iorit ity y Projects jects

From

m the revi

vise sed d Natio ional al Strat ategic egic Proje jects, ts, the Government nment has select lected ed a list t of 37 Prior

rity

ity Proje jects s to be the focus s of

f

infrastructure astructure provisio sion.

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

SLIDE 104

103

Progr gress ess on 37 Prior iorit ity y Projects jects

Recent ent Milestones ilestones Progr gres ess of 37 Priorit

rity

y Project jects (per Decem cember 2018 2018) Fund nding ing Scheme eme of 37 Priorit

rity Projec

jects

Loan Agreement has been signed on 15 November 2017. On March 2018, pre-qualification stage has resulted 4 shortlisted bidders 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.

Patimba ban Port

West Semarang rang Water Supply ly System em:

Mass Rapid d Tran ansit sit (MRT RT) Jaka karta ta South-Nor North

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

66% 66% 26% 26% 8% 8%

US$125.4 billion from Private/ PPP US$49.5 billion from SOE/ Regional SOE US$16.1 billion State/ Regional Budget (including G-to-G loan)

Exchange rate : US$ 1 = IDR 13,000

Total Investment Value US$ 191 Billion

West package has been fully operasional since April 2018.

Pa Palapa a Ring

Note: This data is still going to be verified by The Executive Office of President (KSP) and Indonesia’s National Government Internal Auditor (BPKP)

Outline Business Case has been done on December 2017.

Yogyakar akarta ta-Ba Bawen en Toll Road

2% 2% 11% 11% 38% 38% 19% 19% 11% 11% 19% 19% 4 projects in transaction 7 projects in preparation 4 projects in construction and partial operation phase 1 project is completed 14 projects in construction and will start operating in 2019 7 projects in construction and will start operating after 2019

SLIDE 105

104

Energy ergy Sector

r:

: the Progres gress s of 35.000 MW Progr gram am

No No Phase MW MW % 1 Operating 2,899 7 2 Construction 18,207 52 3 Signed Power-purchase Agreement 11,467 32 4 Procurement 1,683 6 5 Planning 954 3

17 Dec ‘14

Cabine inet Meeting ing “There’s electricity crisis in Indonesia, requires construction of large capacity plant "

Jan ‘15

Average econom

mic

ic growth of 6.7% % requir ires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024)

Jan ‘15

Debottle leneck neckin ing g through

ugh regula

latio ion: n:

1. Regulation

No.1/2015 concerning electricity supply cooperation & joint utilization

f

the electrical network among license holders.

2. Regulation No.3/2015, concerning Procedures of

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

16 Mar ‘15 4 May ‘15 June‘17

Cabine inet Meeting ing Progress of 35,000 MW Launc unching hing 35.00 000 0 MW by the President in Goa Beach Sanden DIY The progress so far:

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

35,00 000 0 MW Progr

gram

m Dist istrib ibution ution

Source: PLN

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

Note : Progress of 35,000 MW Electricity Program as of December 2018

SLIDE 106

105

Acceleratio eration n of 35.000 MW Progr gram am

Governme ment PT PLN

EPC Power werpl plant nt and Trans nsmis missio ion PLN Subsid idia iary (Joint int Ventur ure) e) Independ ependent ent Power wer Produc ucer er

Streng ngthe then n Equity uity 2B 2B 1

Gover ernme nment nt Suppor port (outsid ide e Guarantee) ntee)

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

Loca cal l Content ent Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content.

2A 2A

Assign ignmen ent SJKU KU* * Minis nistry y

f Financ

nce

Strengthe gthen PLN‘s Balance e Sheet et

*)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter The Gover ernme nment nt has issued ued Presid idential ential Regul ulation ion No. 4/201 016 6 on Electr ectricit icity y Infrastructur ucture e Accel eler eratio ion n to accel eler erate e power er projec ects

Provis ision ion of Elect ectric icit ity Refina inancin ncing Hedging ging Financ ncial ial Asset et Optimiza imization ion Direct Lending Direct Lending Bond issuance by PT PLN Company Tax Holiday PT PLN’s divident allocation Loan from independent lenders Asset Revaluation Other types of funding Equity Injection by the Government

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

SLIDE 107

106

Sign gnif ific icant ant Progress

gress on Infrast

rastructure cture Proje

jects

cts

Datab abas ase Project information such as map, track, existing study and latest project status. An integrat grated ed IT system with monitoring capacity for stakeholders, so that they can have real l time data. Platf tform rm data outlook that is efficient and functional using a user- friendly framework. Record decisions related to projects and synchr hroniz nize e the implementation schedule that can be utilized by stakeholders.

KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects’ latest status which can be effectively utilized for monitoring and decision- making purposes. Improvi

ving

ng Monitor nitoring ing System em on Infrastructur ucture e Projects jects1 Roads

Trans-Sumatr tra Toll Road Merah Puti tih Bridge, Ambon

Dams

Jati tigede Dam (Operati ational)

Transporta portation tion

Jakar karta ta MRT Project ct2

Drinking inking Water ter Proce

cess

ssing ing

Umbulan Drinking Wate ter Provision System, East t Java va

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

Terminal 3 Ultimate Soekarno-Hatta ta2 New Tanjung Priok k Port t Project ct2 Nop Goliat t Dekai, kai, Papu pua

SLIDE 108

107

Infrast rastructure cture Projects jects and Financ ancing ing Schemes mes

Promoti

tion

n of Infra frast structure ructure Developme pment nt to Ac Accelerat ate Economi mic Growth th

Establis ishment ent of PPP PPP Unit it

Broa

ad

Objecti tive  Champion project preparation and acceleration of the PPP agenda in Indonesia Core e Mandates tes  Improve quality of project selection under KPPIP – OBC criteria  Support project preparation through PDF support and highlyqualified transaction advisors  Act on behalf the Minister of Finance in providing government support and approvals for projects Additiona ional Mandates es  Coordinate all public financeinstruments  Provide input for PPP Policy program Development and Regulations  Implement capacity building forGovt. Contracting Agency(GCAs)  One stop shop for PPP promotion & Information

Bud udget get Publi lic Private Partner nership ip SOE & Private Sector

r

 Cen entr tral & regio gional budge get (speci special alloc

cati

tion fund & rural transfer) er)  Pr Prim imaril ily to to supp pport basic sic infrastruct cture project ects: – Food secu security ty: Irrigation, dams etc. – Marit itim ime: e: Seaports, shipyards etc. – Connecti ectivit ity: Village roads, public transportation etc.  Certa tain in infrastr truct cture e proj

ject

ects to be funded ed and opera perated ted throu

ugh

gh a pa partner ership ip between en the Indon

nes

esian ian gov

vern

ernment ment and the e priv ivate secto ctor – Projects ready for auction under the PPP Scheme: – Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung – Railway projects such as an express line into Soekarno-Hatta International Airport – Water supply projects such as the West SemarangProject  Vario ious gov

vern

ernmen ment t suppo port t for PPP: P: – Proje

ject

ct Devel elopmen pment t Facil cilit ity (PDF): ): Helps Government Contracting Agencies (GCAs) in project preparation and transaction – Viabil ilit ity y Gap p Fund: improves financial viability of PPP projects – Gov

ver

ernmen ment Guarantees ees: Supports PPP projects’ bankability by providing sovereign guarantees – Infrastructu cture e Financin cing Fund: Provided through PT SMI and IIGF – Availabilit ity Payme yment t (AP): P): GCA pays private partner based of availability of infrastructure services  Gov

ver

ernme ment to inject ect capi pita tal into to SOEs Es: Intended multiplier effect to develop more infrastructure projects  Key y focu cus area eas: – Infrastructure and maritime development – Transportation and connectivity – Food security  Medi dium m term infrastruct cture e develop elopme ments ts to focu cus on: – Water Supply – Airports – Seaports – Electricity and power plants – Housing – Mining

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

 Infrastru tructu cture e Develop

pmen

ent t in order to:

1. Accelerate growth particularly in rural areas
2. Support industrial development and tourism
3. Reduce unemployment and poverty

 Infrastru tructu cture e fundraisin sing needs: s: $357. 57.9 9 bn bn (or equivalent to IDR4,796.2 tn)  245 5 Nati tion

nal Strategy

gy Proje

jects

cts under National Medium Term Plan for 2015 – 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn)  37 prior

rity

ty infrastru tructu ture proj

jects

ects with an estimated cost of IDR 2,490 tn (USD 180 billion)  Majority of 37 priority projects are expected to commence commercial operation by 2018 - 2022

Infrastruc uctur ure Development nt is a Key Priorit ity

SLIDE 109

108

Govern ernment ment Guara rant ntee ee For Basic sic Infrast rastructure cture Development lopment

Reflec ects ts strong

ng commitm

tment ent to nati tiona nal developme pment nt planning nning

Source: Ministry of Finance No. Central Govern ernme ment t Guarantee tee for Infrastru tructu cture Prog

grams

ms Expos posure/ Outsta tstanding ing (USD bn bn) 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 2.49 2 Clean Water Supply Program 0.01 3 Direct Lending from International Financial Institution to SOEs 0.56 4 Sumatra Toll Road 0.48 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 1.59 6 Public-Private Partnerships (PPP) 1.42 7 Regional Infrastructure Financing 0.09 8 Light Rail Transit (LRT) Jakarta Bogor Depok Bekasi

Tota

tal 6. 6.63 63

Conting tingen ent t Lia iabi bili liti ties es from

m Gov
vern

ernmen ent t Guara rantee tees Governmen ent t Guarantee ntee Progra gram

Credit it Guaran antee PPP Guarant antee

Busines iness Viability ty Guarante tee (BVG)  Power (Elec ectric tricit ity) – Full credit guarantee for PLN’s debt payment obligation under FTP 1 10,000 MW and 35GW  Celan Water – Guarantee for 70% of PDAM’s debt principal payment obligations  Infrastru tructu cture - Full credit guarantee on SOE’s borrowing from international financial institution & guarantee for PT SMI’s local infrastructure financing  Toll road – Full credit guarantee for PT Hutama Karya’s debt payment obligation (Sumatra Toll Road Development)  Public ic Transp spor

rta

tati tion

n (Ligh

ight t Rail Transit) t) – Full credit guarantee for PT Kereta Api Indonesia’s debt payment

bligations for the development of LRT Jabodebek

 Powe wer (Elec ectric tricit ity) ) – Guarantee for PT PLN’s obligations under Power Purchase Agreements with IPPs (off-take and political risk) under FTP-2 10.000MW and 35GW programs*  Infrastru tructu cture – Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements  From 2008 to Q1-2018, the Government has issued 75 guarantee documents with total value of USD28.84 billion, 5 of which (worth USD0.05 billion) have expired.  The Maximum Guarantee Limit for the period 2018 – 2021 is set at 6% of GDP. P.  The space for guarantee issuance for the period 2018-2021 is approximately IDR 1,200 trillion (cumulative). As of end of March 2018; currency conversion of IDR 13,756/USD1 (March 29, 2018)

Politic ical l Risk Guarantee

 Infrastru tructu cture – Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees *) MOF provides both credit guarantees and BVGs for 35GW program

SLIDE 110

109

Go Govern ernmen ment t Fina nancial ncial Facilit ilities es for PPP PP Projects jects

Financ ancial ial Facilit ilities ies to to Attrac tract More e Privat vate Parti ticip ipati ation

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

f the following PPP projects:

Viabilit ility Gap Fund d (VGF) Projec ect t Develop elopmen ent t Facilit ility (PDF) Gover ernm nmen ent Guar arant antees ees (direc rectly tly by MoF MoF or throug ugh h IIGF) F) Finan ancing ing from PT

PT. SMI and PT. IIF

Availa vailabil ilit ity Paymen ent t Schem emes es More Funding ing Schem emes es are on the Pipelines elines

Project Financing fund nded by the privat ate sector

r through

the granting of concessions for an operating asset

wned by the Government/SOE (based on the policy
f the Government) to the private sector to be
perated & managed.

Project Financing fund nded by any source of funds

ther than Government’s budget, e.g. long term

management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas.

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

years

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

Scheme e Charac acteris istic ics Scheme e Charac acteris istic ics

LCS (Limit ited ed Concession ion Schem eme) e) PINA (Non-Gover ernm nmen ent Budget get Infras astruc tructure ure Financ ancing) ing)

Source: Ministry of Finance

SLIDE 111

110

Progr gress ess of PPP P Inf nfrastru rastructure ture Project

jects

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

Succes essful ful Projec ects ts Reaching hing Financi ncial l Close e in 2016 and 2017

No No Project ct Name Project Cost (IDR tn tn) Financ ancial ial Faciliti ilities Status us 1 Batang–Semarang Toll Road 11 IIGF Guarantee PPP & guarantee contracts signed on April 27th, 2016 2 Manado–Bitung Toll Road 5.1 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 3 Samarinda–Balikpapan Toll Road 9.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 4 Pandaan–Malang Toll Road 5.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016 5 Serpong–Balaraja Toll Road 6.0

PPP contracts signed on June 8th, 2016

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

Signed ed PPP Projects ects in 2016 and 2017

Source: Ministry of Finance, as of July 2017

SLIDE 112

111

New Guarant antee e Schemes emes for Non-PP PPP P Proj

ject

ects

The Government had issued Presidential idential Regu egulati lation No No 82 82/2015 and Mini Ministry of

f Fi

Finan nance Regu egulati lation No No 189 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. Guarant rantee ee on SOE Direc ect Lending ding from Internat rnational ional Financ ancial ial Instit itutions utions (IFIs Is) Guarant rantee ee for Regiona ional l Infras rastruct ructur ure e Financ ancing ing Provis ision ion State e financ ance e soundne ness Fiscal al sustainab inabiliy iliy Best practi tice e of fiscal al risk managem gemen ent The objective of this guarantee is to to provid vide e credit dit enhancem ncemen ent in terms of low

w intere

rest rate and long g tenor fina nanci ncing ng, with 3 main princi nciples les:

The Government had issued Minis inistry of

f

Fin Finance nce Regulation egulation No No 174 174 of

f 2016

2016 to provide guarantee to PT SMI on the assignment

f

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

n

Gover

vernme

nment nt Regulation egulation No

No. 95

95/2015 2015 and Min inis istry of

f Fin

Finance ce Regulation egulation No

No. 232

232/2015 2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried

ut

by PIP (Government Investment Center). The objective is to giv give stimulus imulus to to the acc accele elerat ation ion

f
f

lo local cal infrastr infrastruct uctur ure dev evelopment elopment through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in

rder

to meet local infrastructure development needs and to reduce reliance on state/local budget.