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REPUBLIC OF INDONESIA Recent Economic Developments Recent Economic Developments January, 2 0 0 9 Published by Investors Relations Unit Republic Indonesia Address Bank Indonesia International Directorate / Division of Foreign Debt Analysis

  1. The Energy Mix Plan For Electricity 15 Oil fields and lack of investments while strong domestic oil demand supported by subsidies contributes to drag its export potential � � The prospect of declining capacity has finally taken the government into action to reverse this situation. The long-term plan is to reduce its imports while increasing investment in exploration, production and refining � The government also designed a target mix of energy plan which gradually lowering oil and raising coal composition to fulfill the energy needs until 2025 � Actions taken for the moment include increasing domestic oil prices (to foster energy efficiency and substitution of oil for coal and gas). On the regulatory front, BP Migas has putting effort into bringing a more transparent and efficient rules aimed to increase exploration and production Firm Policy to Gradually Lowering Dependency on Oil for Electricity to be Only 2% in 2010 Source: Department of Energy and Mineral Resources. Note: Coal for 10,000 MW + 3 million ton/year. 15

  2. Strong Policy Commitment to Support Investment and Growth in Real Sector 16 Fiscal Incentive for oil and natural gas sector to increase oil production � 1) Exemption of import tariff of goods that will be used in upstream oil and gas or geothermal operation 2) Government coverage for Value Added Tax of imported goods that will be used in upstream oil and gas or geothermal operation 3) Reducing import tariff of drilling platform, floating production facilities or under water operation Support on capital investment and international trade � 1) Exemption from import duty and excise on the importation of capital goods and equipment including raw materials for the production process 2) Income tax incentives for investment in priority business lines and/or designated regions i.e. loss carry forward, accelerated depreciation 3) Import tariff reduction in the framework of ASEAN-KOREA FTA and EPA Indonesia-Japan ) p p Infrastructure guarantees and support � 1) (Trans Java and JORR) – Government investment fund to finance land clearing through Toll Road Management Agency – Ministry of Public Works – Guarantee fund to anticipate risk of land’s price increase (above government price limit) 2) Power Plant Project 10.000 MW – Guarantee of PLN (State Electricity Coy) debt service obligations to creditors providing export credits with subject to certain conditions that has been stated in the Ministry of Finance regulation � Key policies for stabilizing prices of staple goods – These policies are aimed at mitigating the impact of spiraling prices and bringing price stability. The staple goods covered by these policies are rice, cooking oil, soybeans, sugar and kerosene. A range of policy instruments are used: fiscal instruments, trading schemes and collaboration with the business community. The medium-term focus of these policies are increased crop production, unhampered distribution of goods, financial intermediation instruments, equilibrium on food crop markets, empowerment of SMEs and food diversification 16

  3. National Industrial Policy Promulgated 17 On 7 May 2008, The Government Promulgated Presidential Regulation No. 28 of 2008 on National Industrial Policy � (NIP) , with a vision that by year 2025 Indonesia will have a competitive, world class manufacturing sector of unabated growth that will be the prime mover of the economy � The Regulation sets out the direction for “National Industrial Development up to year 2025” which is focused upon the g p p y p establishment of two industrial basis for the nation 1) Manufacturing Industry Basis: Petrochemical, steel, capital goods, textile, electronics, as well as certain small and medium scale industries 2) Potential Master Industries: Agro-business, transportation, and internet communication & technology (ICT) 2) P t ti l M t I d t i A b i t t ti d i t t i ti & t h l (ICT) Based on the NIP, highest priority will be given to export orientated industry, industry which provide job opportunities � and/or significantly supporting infrastructure development, poverty alleviation, and enhance state defense industry � The NIP set rules on the provision of fiscal or non-fiscal facilities to be extended to priority industries, pioneer industries, p p y , p , industries located in remote areas, innovative industries, industries carrying out infrastructure development, industries that are focused on technology transfers, and industries that open up job opportunities The NIP will guard a fundamental change in the structure of the Indonesian economy from traditional agriculture � being the most significant contributor to a more diverse and high technology agro-business cluster being the most significant contributor to a more diverse and high technology agro-business cluster. It will also shift in the country’s major exports from textile and forest products to stainless steel, motors and motor vehicles, electronics, and basic chemicals � The regulation also imposes the Minister of Industry the task of compiling the ”Road Map to 2025” 17

  4. Intensive Efforts to Address the Key Concerns of Investors 18 Strong commitment to fight corruption � – Indonesian’s corruption score based on survey by Political & Economic Risk Consultancy (PERC) has improved to 7.98 from 8.03 last year. This new score has placed Indonesia ahead of the Philippine and Thailand � Improvement in business climate – Indonesia move up 10 places in the World Bank’s Doing Business survey to 123rd in 2008 from 133rd in 2007. The largest improvement were seen in dealing with licenses, paying taxes and trading across borders New Presidential Decree on Economic Focus Program (Presidential Decree No.5 of 2008) � – The Regulation has become effective since the day of its issue on 22nd of May 2008 The Regulation has become effective since the day of its issue on 22nd of May 2008. The main objectives are to The main objectives are to revive growth and investment through 1) Further improvement on investment climate 2) Acceleration of Infrastructure Development 3) An enhancement of financial sector and state owned enterprises reform 4) Integrating Energy Security for competitiveness 5) Employment Regulation Reform 6) Environment Protection 6) Environment Protection 7) SME sector reform 8) Better Preparation toward ASEAN Economic Community 2015 18

  5. Debt Management Agenda in 2008 19 Government Securities Management � Optimizing domestic issuance of government securities and issue in international market for complementary purpose � Creating regular calendar of issuance for a full year � Conducting measurable debt switching (government securities) to manage refinancing risk and promote market liquidity � Strengthening the development of primary dealership system � Maintaining benchmark series to enhance market liquidity � Developing and widening institutional investor (Pension Funds, Insurance company and Mutual fund) and retail investors � Diversifying products to widen investor base: Islamic structure securities/Sharia’ bonds (Sukuk) � Enhancing market infrastructure, including development of integrated trading, clearing, and settlement system E h i k i f i l di d l f i d di l i d l Loan Management Prioritizing bilateral and multilateral loans with acceptable and appropriate terms & conditions � – Project loans will mainly come from multilateral and bilateral institutions (World Bank, ADB, IDB, JBIC, KfW) to finance certain project/activities (infrastructure’s rehabilitation and development) carried out by line ministries, and to on-lend them to state own enterprises and regional governments ( p ) y p g g – Program loans from World Bank, ADB, and JBIC to support the improvement of quality of policy reform Gradually reduce loans which have high borrowing cost � Improving the quality of execution of the loan � Conducting loan portfolio management, e.g. g p g , g � – conversion of currency pool loan (CPL) and single currency pool debt (SCPD) into LIBOR based/fixed rate loan, while considering the market condition; – Focusing on fixed spread loan/FSL (for the World bank loan) with an option conversion into IDR loan; – Conducting debt restructuring � debt swap Conducting continuous discussion between The government and lenders through lenders forum � Revising Government Regulation No. 2 year 2006 to improve loan management � Source: Ministry of Finance. 19

  6. 2 2. Bank Indonesia Monetary and Banking Policy B k I d i M t d B ki P li

  7. Economic Fundamentals Remain Solid Amid Adverse Global Economic Conditions 21 Indonesian economy continues to show good overall progress despite significant external pressures stemming from the US sub-prime mortgage crisis and the increasing risks of the global economic slow down. GROWTH: Year 2007 marked as the first year after crises that the economy could grew above the 6% level. The economic growth reached a record high of � 6.3% p.a., mainly supported by rising household consumption and exports. The economy continued to generate a relatively high growth rate in Q3 2008, grew by 6.1% (Y-o-Y) mainly supported by non-tradable sectors (construction, utilities and trade). In line with weaker global economic outlook, the economic growth in the forthcoming quarters is predicted to slow down. Domestic demand will become the main driver of economic growth amid weaker export performance INFLATION: During 2007 inflation was kept under control at 6.59% (Y-o-Y), within the range of the inflation target of 6% ± 1%. Entering 2008, the economy has � been facing a strong inflationary pressures caused by higher energy, food, and other commodity prices in both the world and domestic markets as well as increase in domestic demand. Starting the end of June 2008, the National Statistic Bureau changed the baseline from 2002 to 2007 for CPI calculation. The annual rate of inflation as of December 2008 reached 11.06% (Y-o-Y). EXCHANGE RATES: In the first semester of 2008, the rupiah was relatively stable with mild appreciation at 0.44% to Rp9,288 per USD at the end of June � 2008, even though the financial market turmoil had begun since end of 2007. High international commodity prices support strong balance of payments reinforces Indonesia’s external balances and stability of the rupiah. In the second half of 2008, concern on USD liquidity problems due to the global financial crises has lead the rupiah depreciated because of foreign investor deleveraging from domestic market. During the period, rupiah depreciated 21.6% against the USD, to Rp11,975 per USD at November 18, 2008 FINANCIAL SYSTEM: Stability remained sound during 2007. Banks intermediary function and NPL showed considerable improvement. Credit expansion for FINANCIAL SYSTEM: Stability remained sound during 2007. Banks intermediary function and NPL showed considerable improvement. Credit expansion for � the year increased to 25.5%, well ahead of the 22% target. During the three quarters of 2008, the overall CAR is well maintained at 16.5% per September 2008, and credit risk is mitigated as NPL eased to 3.9% (gross) by end of September 2008. Bank intermediary function has been steadily flourishing as reflected in LDR which reached 80.4% in September 2008. Banking industry continues to perform well THE BALANCE OF PAYMENTS: In 2007 recorded a strong overall surplus (US$12.5 billion), although fairly lower than US$14.5 billion surplus in 2006. � During the first three quarters of 2008, strong economic growth and the onset of decline in world commodity prices led to changes in performance of the balance of payments, most importantly in the current account. The current account began to record a deficit as a result of continued strength of imports. In a similar of payments most importantly in the current account The current account began to record a deficit as a result of continued strength of imports In a similar vein, the capital and financial account sustained pressure from the shift in investor interest in response to the turbulence on global financial markets. As such, in preliminary figures, the capital and financial account recorded yet another surplus in Q3/2008. In the final outcome, international reserves reached USD50.6 billion, equivalent to 4 months of imports and servicing of official debt (31 Oct 2008) Source: Bank Indonesia. 21

  8. Addressing the Impact of Current Global Challenge: Monetary Policy 22 In response to the global crisis, Bank Indonesia enacted policies aiming to provide liquidity into the market. At the same time, BI also promulgated regulation to moderate excessive pressure on rupiah exchange rate, and to mitigate foreign currency purchase for speculative purposes. Bank Indonesia took several policies aiming to provide liquidity into the market � – Ratio declination of foreign reserve requirements for conventional commercial and Islamic banks from 3.0–1.0% with the objective of increasing USD liquidity availability to be used by banks in their transactions with customers – Extended FX Swap tenor from maximum of 7 days to a maximum of 1 month. This measure was taken in the effort of fulfilling the temporary demand of USD currency and in order to provide sufficient adjustment time for banks/market players before actually adjusting their portfolio composition p y y j g p p – Provide foreign currency reserves through banks for domestic companies with the objective of enhancing assurance in fulfilling foreign currency demand by domestic companies – Daily balance position of short-term foreign loan by abolishing the limit of daily balance position. This measure is taken with the objective of decreasing pressures in USD purchase due to transfer of rupiah account to foreign currency account by foreign customers t b f i t – Simplification of Rupiah Reserve Requirement calculation to only 7.5% of Third Party Fund/Bank Deposit for more adequate rupiah liquidity in the banking system, which consists of 5% statutory reserves and 2.5% secondary reserves – Promulgate regulation governing the transaction of export draft using rediscount scheme Promulgate regulation governing the transaction of export draft using rediscount scheme. Bank Indonesia also promulgated regulation to moderate excessive pressure on rupiah exchange rate, and to � mitigate foreign currency purchase for speculative purposes – Regulation governing the purchase of foreign currency against the rupiah through banks in order to support the balance of supply and demand condition of foreign exchange in the domestic market balance of supply and demand condition of foreign exchange in the domestic market Source: Bank Indonesia. 22

  9. Addressing the Impact of Current Global Challenge: Banking Policy 23 1) Adjustment of Bank Reserve Requirements – The Reserve Requirement (RR) was loosened to provide flexibility for banks to manage their liquidity and thus avoiding liquidity to overly tighten. The adjustment involves � A simplification in calculations of the Rupiah RR � A reduction of effective Rupiah RR rate from 9,01% to 7,5% comprising of A reduction of effective Rupiah RR rate from 9 01% to 7 5% comprising of 5% statutory reserve � must be placed in central bank’s account � 2,5% of secondary reserve � in the form of Bank Indonesia certificates or government bonds or excess reserve � � A reduction of foreign exchange RR from 3–1% � Compliance to the secondary reserve becomes mandatory after a one year transition period from 24 October 2008 y y y 2) Extension of swap transactions period (from 7 days to 1 month) – The transaction period is extended to increase effectiveness of open market operations in the foreign exchange market and anticipate shocks in the global financial market 3) New regulations on foreign exchange transactions 3) New regulations on foreign exchange transactions – The regulation aims to lessen pressures on the rupiah by providing certainty in availability of foreign exchange for domestic corporations in need of foreign exchange for productive and non-speculative purposes 4) Adjustment to existing regulation on short-term foreign loans – To help bank’s manage their liquidity banks no longer are to limit their short-term foreign loan daily balances to 30% of To help bank s manage their liquidity, banks no longer are to limit their short term foreign loan daily balances to 30% of their capital 5) Adjustments to current regulation on Bank Indonesia short-term Funding Facility (FPJP) – BI increases access to banks in utilizing BI’s short-term Funding Facility (FPJP) for banks encountering liquidity problems Source: Bank Indonesia. 23

  10. Economic Growth in Q1-Q3-2008 Grew by 6.3% 24 GDP Growth by Expenditure (Y-o-Y) at Constant Price (base year 2000). 2006* 2007** 2008*** I II III IV Total I II III IV Total I II III 3.8 5.6 2.8 3.5 3.9 4.6 4.6 5.3 5.1 4.9 5.5 5.5 6.7 Consumption 2.9 3.0 3.0 3.8 3.2 4.7 4.7 5.1 5.6 5.0 5.7 5.5 5.3 Private 11.5 28.8 1.7 2.2 9.6 3.7 3.8 6.5 2.0 3.9 3.6 5.5 16.9 Government 1.4 0.9 0.8 6.8 2.5 7.0 6.9 10.4 12.1 9.2 15.6 13.1 12.0 Investment 4.3 4 3 1 9 1.9 2 2 2.2 4 5 4.5 3 2 3.2 -0.8 0 8 3.4 3 4 4 4 4.4 9 6 9.6 4 2 4.2 8 5 8.5 8.4 8 4 7 6 7.6 Domestic demand Domestic demand 11.8 11.4 8.3 6.6 9.4 8.1 9.8 6.9 7.3 8.0 15.5 15.9 14.3 Export of goods and services 4.8 9.3 10.9 9.2 8.6 8.5 6.5 7.0 13.6 8.9 17.8 16.7 11.9 Import of goods and services Gross Domestic Product 5.1 5.0 5.9 6.0 5.5 6.1 6.4 6.5 6.3 6.3 6.3 6.4 6.1 In the first three quarters of 2008, the economy grew by 6.1% (Y-o-Y) amid global economic slowdown � – In 2007, Indonesian economy achieved strong economic expansion; the economy grew at the level of 6.3% supported by rising consumption and export. Specifically in Q4 2007, private consumption growth outpaces the 2001–06 average of 3.9%. During Q1-Q3/2008 the economy was able to maintain a strong growth on the back of exports, investment, and consumption – Growth of household consumption in Q1 Q3/2008 reached 5 5%(Y o Y) Growth of household consumption in Q1-Q3/2008 reached 5,5%(Y-o-Y). Household consumption growth remains strong on the Household consumption growth remains strong on the back of high purchasing power and lower interest rate – Investment (gross fixed capital formation) saw more vigorous growth compared to last year. The high investment growth was due to high export and consumption growth, lower interest rate, and stability of the rupiah – Export of goods and services showed outstanding performance in response to rising commodities prices Source: Bank Indonesia. 24 24

  11. Inflation 25 Continually decreasing international commodity prices includes lowered prices of non-subsidized fuel reflecting lower inflationary � pressures, the yearly inflation beginning to decline in November 2008. Monthly CPI inflation for December 2008 underwent 0.04% (m-t-m) deflation following the 0.12% (m-t-m) inflation in the preceding � month. Similarly, Y-o-Y inflation in December 2008 reached 11.06%, down from 11.68% annual inflation one month earlier. Inflation % , y o y % , m t m 2 0 M t m ( S B H 2 0 0 7 ) t ( S 0 0 ) 5 5 1 8 1 8 S b g n b e s a r d m p k Y o Y ( R H S ) f ir s t & s e c o n d T e r u t a m a b e r s u m b e r 1 6 r o u n d k e n a ik a n d a r i d m p k 1 s t r o u n d h a r g a B B M 4 p e n u r u n a n h a r g a 1 4 id i r a t a 2 b b B B M 2 4 M e i, H a r g a 1 2 B B M b e r s u b s id i 2.46 r a t a 2 m e n in g k a t r a t a 2 m e n in g k a t 3 3 2 2 8 ,7 % 1 0 1 1 .0 6 1.65 8 1.37 1.24 2 1.21 1.22 1.04 0.97 0.85 6 0.78 0.76 0.71 0.71 P e r g e s e r a n P a n e n 0.59 0.56 .55 .52 .51 47 P a n e n 45 43 9 8 8 0.4 5 0.35 0.4 0.4 0 4 0.30 0 0 0. 0. 0 0.3 0.3 0.3 0.26 1 0.19 0.21 0.18 0.12 0.12 0.11 0.09 2 -0.02 -0.04 - 1 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 2 0 0 6 2 0 0 7 2 0 0 8 Source: Bank Indonesia. 25 25

  12. Inflation (Cont’d) 26 High International Commodity Prices Exposing the Economy to Higher Inflationary Pressures � During first three quarters of 2008, higher inflationary pressures are identified as a result of the following circumstances – Subsidized oil price lifted by 28.7% on May 24 elevated administered price inflation and publics’ inflation expectation. The indications of stronger inflation expectations could trigger second round effects g p gg – Heightened inflation expectations demonstrated in inflation, mainly in house rentals, long-term housing leases and remuneration levels for tradesmen and domestic servants – Rising commodity price (imported inflation), as reflected by inflation in cooking oil and its derivatives, and gold jewellery. However, continued high international commodity prices exposing the economy to higher i fl ti inflationary pressures – Upward trend in domestic demand has been a contributing pressure to core inflation. Such pressure was indicated by rapid credit expansion and money supply up to Q3- 2008 – Pressure from output gap is kept in check. Increasing amount of investment expands production capacity, which is needed to balance increasing in consumption needed to balance increasing in consumption Note on Changes in CPI Inflation Calculation The 2007 baseline year is replacing the former 2002 baseline year to calculate CPI starting June 1, 2008. The 2007 � baseline year (CPI 2007 = 100) was used for the Consumer Price Index (CPI) calculation from June 2008. The new CPI baseline year (CPI 2007 100) was used for the Consumer Price Index (CPI) calculation from June 2008. The new CPI calculation was based on the 2007 Cost of Living Survey and replaced the former 2002 baseline (CPI 2002 = 100) The CPI basket consists of 774 commodities, up from the previous 744 commodities. Similarly, the survey now covers 66 � cities and towns compared to the previous of 45 cities Source: Bank Indonesia. 26 26

  13. Monetary Policy to Contain Inflation 27 In May 2008 BI started to raise the BI rate, as a timely response to contain high inflationary pressures. Bank Indonesia identified that strong domestic demand has BI Rate & CPI Inflation been elevating core inflation. Therefore, Bank Indonesia 20 started to raise the BI Rate since May 2008. 18 For the sixth time consecutively, BI Rate was raised 25 16 bps to 9.5% in October 2008 . This decision was taken due 14 to the persistently high risk of inflationary pressure. . 12 For the first time in 2008, BI decided to lower the BI Rate 10 25 bps to 9.25 % in December 2008 . and followed by 8 another lowering of BI Rate 50 bps to 8.75% in January 6 2009 . The impact of the financial crisis to the global economy 4 is taking increasing hold. Falling prices for oil and various 2 other commodities have eased domestic inflationary y 0 0 pressure, as reflected in the recent decline in the monthly Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov jan mar may july sep nov jan mar may july sep nov jan inflation figure. 2005 2006 2007 2008 2009 CPI (%) (y-o-y) BI rate (%) Source: Bank Indonesia, BPS. 27

  14. Improvement of Monetary Policy Implementation 28 Strengthening the effectiveness of its monetary policy implementation with the objective to restore money market infrastructure that constitutes sound, stable, and efficient money market. I t e m Before 2008 New SB I S B I - Auction s ys tem F R T (F ixed R ate T ender) : 1 mo S BI VR T for all auctions of S BI VR T (Variable R ate T ender) : 3 mo S BI - T enure 1 and 3 months 1, 3, 6 and 9 months - Incremental Bidding Incremental Bidding 0 0625% or 6 25 bp 0,0625% or 6,25 bp 0 01% or1 bp 0,01% or1 bp DAIL Y LIQUIDITY ABSOR BING/INJ EC TING OP ER ATION - Auction s ys tem F R T VR T - F requency Not active Active: up to twice a day , morning and afternoon s morning and afternoon s es es s s ion ion - Collateral for F TE S BI, plafond 100% S BI & S UN, plafond 100% - F X S wap Not available Available STANDING F ACILITY - Window Time Window Time F F AS AS BI: 08:00 BI: 08:00 – 16:00 WIB 16:00 WIB F F AS AS BI: 16:00 BI: 16:00 – 17:00 WIB 17:00 WIB R epo : 15:00 – 17:00 WIB R epo : 16:00 – 17:00 WIB - Collateral for R epo S BI, plafond 50% S BI & S UN, plafond 100% HAIR CUT - F F or Daily L or Daily L iquidity Injecting Operation and R iquidity Injecting Operation and R epo: S epo: S BI0% ; S BI 0% ; S UN5% UN 5% Source: Bank Indonesia. 28

  15. Monetary Policy Outlook 29 � In view of the risks and upward pressure on inflation in the coming months, Bank Indonesia predicts inflation in 2008 to reach 11.5–12.5% � BI will stay the course with flexible, measured use of existing policy instruments to curb inflation in 2009 within the 6.5–7.5% range. To achieve this, BI will coordinate actions very closely with the Government Increasing Inflation Expectation % , y o y % , m t m 2 0 M t m ( S B H 2 0 0 7 ) 5 1 8 S b g n b e s a r d m p k Y o Y ( R H S ) f ir s t & s e c o n d T e r u t a m a b e r s u m b e r 1 6 r o u n d k e n a ik a n d a r i d m p k 1 s t r o u n d h a r g a B B M 4 p e n u r u n a n h a r g a 1 4 b b id i r a t a 2 B B M 2 4 M e i , H a r g a 1 2 B B M b e r s u b s i d i 46 2.4 r a t a 2 m e n i n g k a t 3 2 8 , 7 % 1 0 1 1 . 0 6 1.65 8 1.37 1.24 2 1.21 1.22 1.04 0.97 0.85 6 0.78 0.76 0.71 0.71 P e r g e s e r a n P a n e n .59 55 .56 52 51 47 P a n e n P a n e n 45 3 9 0.39 0.5 0.5 8 0.38 8 0.38 0.4 5 0.35 0. 0.4 0. 0.4 0 4 0.30 0.26 1 0.19 0.21 0.18 0.12 0.11 0.12 0.09 2 -0.02 -0.04 - 1 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 2 0 0 6 2 0 0 7 2 0 0 8 Source: Bank Indonesia. 29

  16. Strong Banking Performance 30 Major Banking Indicators Credit Growth 23 10 50 22 9 45 Working Capital Working Capital 21 8 20 Investment 7 40 19 6 Consumption 18 35 5 17 CAR 4 30 16 NPL Gross (RHS) 15 3 25 0.8 85 80 20 NIM 0.7 75 LDR (RHS) 15 70 0.6 65 10 0.5 60 60 5 55 0.4 50 0 0.3 45 Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- Jan- May- Sep- 2005 jul 2006 jul 2007 jul 2008 jul 05 05 05 06 06 06 07 07 07 08 08 08 In the midst of global financial turmoil, banking performance remained positive. The banking intermediation function continued to � improve as shown by high credit growth (34.6%, Y-o-Y) accompanied by low NPL ratio (gross NPL ratio reached 3.9%). High credit growth combined with lower deposits growth lead to LDR of 80.4% � The performance of micro banking remains robust. Small and medium-scale (MSM) credit grew by 31.5% (Y-o-Y), while the gross NPL NPL ratio has slightly declined from 3.4% (July) to 3.3% (August) ti h li htl d li d f 3 4% (J l ) t 3 3% (A t) Source: Bank Indonesia. 30

  17. Strong Banking Performance 31 Gross NPL has declined to 3.9% (net NPL: 1.4%) while CAR levels are currently at 16.5%. � Buoyed by this climate, Banks have solid solvency ratio and liquidity as well as steady profitability, adding to the domestic financial system stability amidst increasing uncertainty in global financial markets. Bank intermediary function has been steadily flourishing as reflected in LDR which reached 80.4% by of September 2008. � The Islamic banking industry also charted healthy growth. With expanding service coverage, the Islamic banking industry is now positioned to become a promising alternative source of financing banking industry is now positioned to become a promising alternative source of financing � Similar gains were also reported for micro-banking operated by rural banks. With support from various policy schemes for improving public access to micro, small and medium-scale (MSM) credit, the rural bank industry has established itself as a spearhead for improving the welfare of low-income groups through MSM loans Source: Bank Indonesia. 31

  18. Banks: Remained Positive 32 Main Indicator Main Indicator Main Indicator Dec-04 Dec-04 Dec-04 Dec-05 Dec-05 Dec-05 Dec-06 Dec-06 Dec-06 Dec-07 Dec-07 Dec-07 Jan-08 Jan-08 Jan-08 Feb-08 Feb-08 Feb-08 Mar-08 Mar-08 Mar-08 Apr-08 Apr-08 Apr-08 May-08 May-08 May-08 Jun-08 Jun-08 Jun-08 Jul-08 Jul-08 Jul-08 Aug-08 Aug-08 Aug-08 Sep-08 Sep-08 Sep-08 Total Assets (T Rp) Total Assets (T Rp) Total Assets (T Rp) 1,272.3 1,272.3 1,272.3 1,469.8 1,469.8 1,469.8 1,693.5 1,693.5 1,693.5 1,986.5 1,986.5 1,986.5 1,940.3 1,940.3 1,940.3 1,940.7 1,940.7 1,940.7 1,944.7 1,944.7 1,944.7 1,949.3 1,949.3 1,949.3 1,972.5 1,972.5 1,972.5 2,040.9 2,040.9 2,040.9 2,057.1 2,057.1 2,057.1 2,066.6 2,066.6 2,066.6 2,122.6 2,122.6 2,122.6 Deposits (T Rp) Deposits (T Rp) Deposits (T Rp) 963.1 963.1 963.1 1,127.9 1,127.9 1,127.9 1,287.0 1,287.0 1,287.0 1,510.7 1,510.7 1,510.7 1,471.2 1,471.2 1,471.2 1,474.5 1,474.5 1,474.5 1,466.2 1,466.2 1,466.2 1,481.8 1,481.8 1,481.8 1,505.6 1,505.6 1,505.6 1,553.4 1,553.4 1,553.4 1,532.9 1,532.9 1,532.9 1,528.1 1,528.1 1,528.1 1,601.4 1,601.4 1,601.4 - Demand Deposits - Demand Deposits - Demand Deposits 245.7 245.7 245.7 281.4 281.4 281.4 338.0 338.0 338.0 405.5 405.5 405.5 379.7 379.7 379.7 374.6 374.6 374.6 379.7 379.7 379.7 378.0 378.0 378.0 392.4 392.4 392.4 409.0 409.0 409.0 404.5 404.5 404.5 386.4 386.4 386.4 395.4 395.4 395.4 - Saving Deposits - Saving Deposits - Saving Deposits 296.4 296.4 296.4 281.5 281.5 281.5 333.9 333.9 333.9 438.5 438.5 438.5 429.3 429.3 429.3 430.1 430.1 430.1 428.0 428.0 428.0 434.1 434.1 434.1 440.5 440.5 440.5 457.4 457.4 457.4 453.6 453.6 453.6 450.9 450.9 450.9 459.1 459.1 459.1 - Time Deposits - Time Deposits - Time Deposits 421.0 421.0 421.0 565.0 565.0 565.0 615.1 615.1 615.1 666.7 666.7 666.7 662.2 662.2 662.2 669.7 669.7 669.7 658.5 658.5 658.5 669.7 669.7 669.7 672.7 672.7 672.7 687.0 687.0 687.0 674.7 674.7 674.7 690.9 690.9 690.9 746.8 746.8 746.8 Earning Assets (T Rp) Earning Assets (T Rp) Earning Assets (T Rp) 1,146.8 1,146.8 1,146.8 1,353.2 1,353.2 1,353.2 1,556.2 1,556.2 1,556.2 1,792.0 1,792.0 1,792.0 1,776.6 1,776.6 1,776.6 1,784.0 1,784.0 1,784.0 1,786.0 1,786.0 1,786.0 1,794.2 1,794.2 1,794.2 1,816.0 1,816.0 1,816.0 1,875.6 1,875.6 1,875.6 1,856.9 1,856.9 1,856.9 1,867.1 1,867.1 1,867.1 1,950.3 1,950.3 1,950.3 - Credits (T Rp) * - Credits (T Rp) * - Credits (T Rp) * 595.1 595.1 595.1 730.2 730.2 730.2 832.9 832.9 832.9 1,045.7 1,045.7 1,045.7 1,031.1 1,031.1 1,031.1 1,045.9 1,045.9 1,045.9 1,080.1 1,080.1 1,080.1 1,103.1 1,103.1 1,103.1 1,137.7 1,137.7 1,137.7 1,190.0 1,190.0 1,190.0 1,210.9 1,210.9 1,210.9 1,246.6 1,246.6 1,246.6 1,287.4 1,287.4 1,287.4 - S B I (T Rp) - S B I (T Rp) - S B I (T Rp) 94.1 94.1 94.1 54.3 54.3 54.3 179.0 179.0 179.0 203.9 203.9 203.9 231.4 231.4 231.4 211.2 211.2 211.2 162.1 162.1 162.1 169.35 169.35 169.35 148.73 148.73 148.73 113.66 113.66 113.66 95.51 95.51 95.51 84.53 84.53 84.53 87.70 87.70 87.70 - FASBI (T Rp) - FASBI (T Rp) - FASBI (T Rp) ( ( ( p) p) p) 36.8 36.8 36.8 53.1 53.1 53.1 38.6 38.6 38.6 46.8 46.8 46.8 9.6 9.6 9.6 6.7 6.7 6.7 21.0 21.0 21.0 25.5 25.5 25.5 27.6 27.6 27.6 39.0 39.0 39.0 21.8 21.8 21.8 13.5 13.5 13.5 55.1 55.1 55.1 - Securities + Others - Securities + Others - Securities + Others 348.1 348.1 348.1 350.5 350.5 350.5 342.9 342.9 342.9 350.2 350.2 350.2 347.0 347.0 347.0 348.7 348.7 348.7 353.9 353.9 353.9 347.9 347.9 347.9 351.3 351.3 351.3 352.4 352.4 352.4 348.3 348.3 348.3 349.7 349.7 349.7 350.3 350.3 350.3 - Interbank Placement - Interbank Placement - Interbank Placement 103.5 103.5 103.5 159.1 159.1 159.1 156.8 156.8 156.8 139.8 139.8 139.8 151.7 151.7 151.7 165.6 165.6 165.6 162.9 162.9 162.9 142.6 142.6 142.6 144.7 144.7 144.7 174.5 174.5 174.5 174.3 174.3 174.3 166.5 166.5 166.5 163.5 163.5 163.5 - Equity Investment - Equity Investment - Equity Investment 6.2 6.2 6.2 6.1 6.1 6.1 5.9 5.9 5.9 5.6 5.6 5.6 5.7 5.7 5.7 5.8 5.8 5.8 6.0 6.0 6.0 5.9 5.9 5.9 6.0 6.0 6.0 6.1 6.1 6.1 6.1 6.1 6.1 6.2 6.2 6.2 6.3 6.3 6.3 NII (T Rp) NII (T Rp) NII (T Rp) 6.3 6.3 6.3 6.2 6.2 6.2 7.7 7.7 7.7 8.9 8.9 8.9 8.8 8.8 8.8 8.4 8.4 8.4 9.0 9.0 9.0 8.6 8.6 8.6 8.9 8.9 8.9 9.6 9.6 9.6 9.6 9.6 9.6 9.4 9.4 9.4 9.3 9.3 9.3 CAR (%) CAR (%) CAR (%) 19.36 19.36 19.36 19.5 19.5 19.5 20.5 20.5 20.5 19.3 19.3 19.3 20.1 20.1 20.1 19.2 19.2 19.2 18.6 18.6 18.6 18.4 18.4 18.4 17.1 17.1 17.1 16.4 16.4 16.4 16.2 16.2 16.2 16.0 16.0 16.0 16.5 16.5 16.5 Loans/Earning Assets (%) Loans/Earning Assets (%) Loans/Earning Assets (%) Loans/Earning Assets (%) Loans/Earning Assets (%) Loans/Earning Assets (%) 51.89 51 89 51.89 51 89 51.89 51 89 54 0 54 0 54.0 54 0 54.0 54.0 53.5 53.5 53.5 53 5 53 5 53 5 58.4 58.4 58.4 58 4 58 4 58 4 58.0 58 0 58 0 58.0 58.0 58 0 58.6 58 6 58.6 58.6 58 6 58 6 60 5 60.5 60.5 60.5 60 5 60 5 61.5 61 5 61 5 61.5 61.5 61 5 62 6 62 6 62 6 62.6 62.6 62.6 63.4 63 4 63.4 63 4 63 4 63.4 65.2 65.2 65 2 65 2 65.2 65 2 66.8 66 8 66 8 66 8 66.8 66.8 66.0 66.0 66 0 66 0 66 0 66.0 NPLs Gross (%) NPLs Gross (%) NPLs Gross (%) 5.75 5.75 5.75 8.3 8.3 8.3 7.0 7.0 7.0 4.6 4.6 4.6 4.8 4.8 4.8 4.8 4.8 4.8 4.3 4.3 4.3 4.4 4.4 4.4 4.3 4.3 4.3 4.1 4.1 4.1 4.0 4.0 4.0 3.9 3.9 3.9 3.9 3.9 3.9 NPLs net (%) NPLs net (%) NPLs net (%) 1.72 1.72 1.72 4.8 4.8 4.8 3.6 3.6 3.6 1.9 1.9 1.9 2.0 2.0 2.0 2.1 2.1 2.1 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.8 1.7 1.7 1.7 1.6 1.6 1.6 1.4 1.4 1.4 1.4 1.4 1.4 ROA (%) ROA (%) ROA (%) 3.5 3.5 3.5 2.6 2.6 2.6 2.6 2.6 2.6 2.8 2.8 2.8 3.2 3.2 3.2 2.9 2.9 2.9 2.7 2.7 2.7 2.6 2.6 2.6 2.6 2.6 2.6 2.5 2.5 2.5 2.7 2.7 2.7 2.7 2.7 2.7 2.6 2.6 2.6 NIM (NII/AP) (%) NIM (NII/AP) (%) NIM (NII/AP) (%) 0.55 0.55 0.55 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Op.Cost/Op.Income (%) Op.Cost/Op.Income (%) Op.Cost/Op.Income (%) 76.69 76.69 76.69 87.7 87.7 87.7 86.4 86.4 86.4 78.8 78.8 78.8 79.4 79.4 79.4 78.7 78.7 78.7 79.7 79.7 79.7 81.3 81.3 81.3 80.7 80.7 80.7 80.9 80.9 80.9 79.5 79.5 79.5 79.3 79.3 79.3 79.7 79.7 79.7 LDR (%) LDR (%) LDR (%) LDR (%) LDR (%) LDR (%) 61 8 61 8 61.8 61 8 61.8 61.8 64 7 64 7 64.7 64.7 64 7 64.7 64.7 64 7 64 7 64 7 64.7 64.7 69.2 69 2 69 2 69.2 69.2 69 2 70.1 70.1 70.1 70 1 70 1 70 1 70 9 70.9 70 9 70.9 70 9 70.9 73 7 73.7 73.7 73.7 73 7 73 7 74 4 74.4 74.4 74 4 74 4 74.4 75 6 75 6 75.6 75 6 75.6 75.6 76 6 76.6 76.6 76.6 76 6 76 6 79.0 79.0 79 0 79 0 79 0 79.0 81.6 81.6 81 6 81 6 81 6 81.6 80 4 80.4 80.4 80 4 80.4 80 4 Liquid Assets/TA (%) Liquid Assets/TA (%) Liquid Assets/TA (%) 14.95 14.95 14.95 15.8 15.8 15.8 22.0 22.0 22.0 23.0 23.0 23.0 21.5 21.5 21.5 19.9 19.9 19.9 18.3 18.3 18.3 18.5 18.5 18.5 17.4 17.4 17.4 16.0 16.0 16.0 14.1 14.1 14.1 12.7 12.7 12.7 15.3 15.3 15.3 Core Deposits/TA (%) Core Deposits/TA (%) Core Deposits/TA (%) 0.53 0.53 0.53 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 0.5 Number of Banks Number of Banks Number of Banks 133 133 133 131 131 131 130 130 130 130 130 130 128 128 128 128 128 128 128 128 128 128 128 128 128 128 128 127 127 127 127 127 127 125 125 125 126 126 126 Number of Banks Branches Number of Banks Branches Number of Banks Branches 7,939 7,939 7,939 8,236 8,236 8,236 9,110 9,110 9,110 9,680 9,680 9,680 9,726 9,726 9,726 9,888 9,888 9,888 9,926 9,926 9,926 10,072 10,072 10,072 10,060 10,060 10,060 10,153 10,153 10,153 10,290 10,290 10,290 10,432 10,432 10,432 10,556 10,556 10,556 Source: Bank Indonesia. 32 32

  19. Risk Profile: Cautiously Watched 33 Rigorous risk monitoring is needed, in particular credit and systemic risk. Outlook Outlook Risk/Performance Risk/Performance Level Level Liquidity Risk Liquidity Risk Liquidity Risk Liquidity Risk Moderate – ratio of liquid assets to non core Moderate Moderate Moderate – ratio of liquid assets to non core ratio of liquid assets to non core ratio of liquid assets to non core Stable Stable Stable Stable deposit has increased due to higher banks’ deposit has increased due to higher banks’ placement placement in in BI BI instruments instruments (101.43% (101.43% in in September 2008). September 2008). Increase Increase Increase Increase Market Risk Market Risk Market Risk Market Risk Moderate Moderate – Interest and exchange rate pressures Moderate Moderate – Interest and exchange rate pressures Interest and exchange rate pressures Interest and exchange rate pressures are still under control. However, they could are still under control. However, they could potentially increases banks’ loss. potentially increases banks’ loss. Moderate - Nominal NPL increase, while NPL Potentially increase Moderate - Nominal NPL increase, while NPL Potentially increase Credit Risk Credit Risk ratio slightly decline ratio slightly decline Profitability Profitability Potentially decrease Potentially decrease Decreasing – Monthly NII dan ROA decreases Decreasing – Monthly NII dan ROA decreases slightly slightly Potentially under pressure Potentially under pressure Solvency Solvency Strong – Strong – Capital Adequacy Ratio increase Capital Adequacy Ratio increase slightly. slightly. Source: Bank Indonesia. 33

  20. Bank Policy Direction 34 Within the banking sector, there are three general policy directives for the five years: 1) Continuation of national banking industry consolidation – Bank Indonesia will continue to consolidate and restructure the national banking industry. Within this policy scope, BI will implement three initiatives aimed at solidifying the consolidation process, namely: (1) exploring the possibility of re-establishing a policy bank dedicated to support the funding of long-term development projects; (2) broadening operational opportunities for universal banking by banks deemed capable and feasible of running it; and, (3) optimizing the bank’s role in funding development, especially for foreign-owned banks 2) Development of the rural bank (BPR) considering the potential of local economies – Bank Indonesia deems necessary to re-affirm that rural banks must be more optimal in playing its role and function in servicing the community in various regions. Rural banks must return to their mandate of supporting the local economies, which are the target and focus of their business activity. Economic localities which grow and stem from local people’s socio-culture values should form the backbone of rural banks d t f l l l ’ i lt l h ld f th b kb f l b k 3) Islamic (Sharia’) banking acceleration – Considering recent sharia’ banking indicators, BI expects sharia’ banking to grow by 25% each year. Source: Bank Indonesia. 34

  21. 3. Balance of Payments Performance Q3-2008

  22. Balance of Payments – Q3 2008 Current Developm ents in Q3 2 0 0 8 Indonesia’s Balance of � Indonesia's BOP Payments Payments (BOP) (BOP) in in Q3 Q3 2008 posted a deficit of Million USD Million USD about US$89 million , as 5,000 65,000 4,000 60,000 the result of a current 3,000 55,000 2,000 50,000 account account deficit deficit that that was was 1 000 1,000 45,000 45 000 0 40,000 slightly greater than a -1,000 35,000 -2,000 30,000 surplus in the capital and -3,000 25,000 financial account. The -4,000 20,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 BOP deficit was lower than BOP deficit was lower than that recorded in the 2004 2005 2006 2007* 2008** previous period (Q2 2008, surplus US$1.3 billion). Current Acc. Cap & Fin Acc. Off. Reserve (RHS) The BOP deficit was reflected in the official reserves which decreased from US$59.5 billion at end of June 2008 to � US$57.1 billion (equivalent to 4.4 months of imports and official debt service payments) at end of September 2008. The current account recorded a deficit of US$0.6 billion , better than a deficit of US$1.2 billion in the previous period (Q2 2008). Of the main components of the current account, the trade balance and current transfers account continued to register a more surplus. However, these surpluses fell short of the deficit in the services account and income account. Source: Bank Indonesia 36

  23. Balance of Payments – Q3 2008 Trade Balance: Non-Oil & Gas T ade Balance Non Oil & Gas While export growth remained high, surplus on non-oil & Trade Balance Non Oil & Gas gas trade balance declined in Q.3 – 2008 as a result of continued strength of imports on the back of strong continued strength of imports on the back of strong Milllion USD domestic demand (annual real GDP growth in Q3 2008 reached 6.1%). The non-oil/gas trade balance filed a 40,000 smaller surplus (US$3.8 billion) than that in Q2 2008 (US$4.2 30,000 , billion). Growth of non-oil & gas exports remained high, billi ) G th f il & t i d hi h 20,000 22.4% (y.o.y) greater than that in Q2 2008 (18.9%). The 10,000 performance of most of major non-oil & gas exports was 0 supported by increased prices; meanwhile volume of exports -10,000 10 000 slightly decreased, which might be a reflection of weakening -20,000 world demand. Non-oil & gas imports grew (44,1%) faster than non-oil/gas exports, especially imports of raw materials -30,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 (70% share) and capital goods (20% share); however, there 2004 2005 2006 2007* 2008** were indications of deceleration on prices of consumption goods and raw material in September. Reflecting the strong demand for imports, 11 of 15 major non-oil & gas import commodities grew more than 40% ; 3 of them (iron and steel commodities grew more than 40% ; 3 of them (iron and steel Export Non Oil & Gas Import non Oil & Gas Trade Balance Non Oil & Gas product, motor vehicle, and fertilizer) grew more than 100% Source: Bank Indonesia 37

  24. Balance of Payments – Q3 2008 Trade Balance: Oil & Gas T ade Balance Oil & Gas In contrast to the decline in non-oil/gas trade balance g Trade Balance Oil & Gas surplus, the oil & gas trade balance surplus improved Million USD 6,000 in Q.3 – 2008 due to smaller oil trade balance deficit 5,000 and larger gas trade balance surplus. The smaller 4,000 3,000 deficit of oil trade balance contributed by a decrease in oil deficit of oil trade balance contributed by a decrease in oil 2,000 import volume and oil price. The average unit price of oil 1,000 0 exports reached US$113.4/barrel in Q3 2008, remains -1,000 high although slightly decline from the level in Q2 2008 -2,000 -3,000 3,000 (US$119,3/barrel). Meanwhile, the larger surplus in gas (US$119 3/b l) M hil th l l i -4,000 trade balance was supported by an increase in gas export Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 volume (LNG) and also ascending the price following oil 2004 2005 2006 2007* 2008** price. Trade Balance Oil Trade Balance Gas Source: Bank Indonesia 38

  25. Balance of Payments – Q3 2008 Services, I ncom e, and Current Transfers Services I ncom e and Current Transfers Deficits in income account slightly decreased while Million Services, Incomes & Current Transfers defisit in services and surplus in current transfer USD was stable. 2,000 • Services account recorded a US$3.6 billion deficit in Q3 1,000 2008. It was relatively the same amount as deficit in Q2 2008. Travel services recorded a larger surplus as 2008. Travel services recorded a larger surplus as 0 0 inbound travel outpaced outbound travel. Tourist arrivals -1,000 increased from 1.5 million travelers in Q2 2008 to 1.7 million travelers in Q3 2008. -2,000 • Income account posted a US$4.2 billion deficit, lower than a US$4.5 billion deficit in Q2 2008 as direct -3,000 investment income outflows (especially those related -4,000 with net contractor shares of oil & gas company) decreased and interest payment of government and -5,000 private sectors’ external debt decreased. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2004 2005 2006 2007* 2008** • The surplus in current transfers was relatively stable of US$1 4 billion in Q3 2008 US$1.4 billion in Q3 2008, contributed mostly by the contributed mostly by the transfers from Indonesian workers abroad. Services, Net Income, Net Current Transfer, Net Source: Bank Indonesia 39

  26. Balance of Payments – Q3 2008 Financial Account Fi i l A t The financial account performance in Q3 2008 The financial account performance in Q3 2008 Million Financial Account USD worsen than that of previous quarter (a surplus of 4000 US$0.3 billion in Q3 2008 compared to a surplus of US$2.5 3000 billion in Q2 2008). Direct Investment (DI), net remains 2000 surplus US$0.1 billion, relatively constant with that in Q2 1000 2008. Meanwhile, capital outflows as the impact of global 0 financial crisis leading to a small deficit in Portfolio -1000 Investment of US$58 million in Q3 2008 compared to a -2000 -2000 surplus of US$4.3 billion in the previous quarter. Other Direct Investment -3000 Investment is coming back to surplus US$0.3 billion after Portfolio Investment -4000 Other Investment recorded deficit US$1.8 billion in Q2 2008. Private sector -5000 Financial Account increased foreign g loan drawings g as financing g needs -6000 remained high in Q3 2008, consistent with increased Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 financing demand for investment and imports. 2004 2005 2006 2007* 2008** Source: Bank Indonesia 40

  27. Balance of Payments – Q3 2008 Portfolio Investment and Foreign Direct Investment P tf li I t t d F i Di t I t t Foreign Direct Investment (FDI) Foreign Portfolio Investment Million Million USD 5,000 , 8 000 8,000 4,000 6,000 3,000 4,000 2,000 2,000 1,000 0 0 0 -2,000 -1,000 -4,000 -2,000 -6,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2004 2005 2006 2007* 2008** 2004 2004 2005 2005 2006 2006 2007* 2007 2008** 2008 Equity, net Debt Securities, net Total Inflow (Equity & Loan Disb) Outflow (Debt Repayment) Total The liabilities side of the financial account declined significantly ( a US$3,5 billion surplus in Q3 2008 compared to a US$5.4 billion surplus in Q2 2008), driven mainly by significant decreases in Portfolio Investment of public sector. Foreign Direct Investment (FDI) in Q.3 2008 is recording a surplus at relatively the same level with the previous period. It might be reflected that a lower oil price and slower domestic demand growth had not influenced an FDI reducing in both oil/gas sector and non-oil/gas sector. As global financial crisis emerged, foreign investors reduced g g g g g g their holdings of government bonds and Bank Indonesia Certificate (SBI), mostly in September, leading to a small deficit in net foreign portfolio investment in Q3 2008. 41 Source: Bank Indonesia

  28. Measures Taken to Bolster BoP 42 10 Policies by the Government to Bolster Balance of Payment No. Purpose Policy 1 Maintain sustainability of Balance of Payment Mandate all State Owned Enterprise (SoE) to place all foreign currency reserves in domestic bank. Foreign currency reserves in domestic bank. In one clearing house, SoE is obliged to report information on foreign i d ti b k I l i h S E i bli d t t i f ti f i currency income and needs to Ministry of SoE which transaction will be processed through SoE banks weekly and updated daily 2 Maintain sustainability of Balance of Payment Speed up implementation of projects with financing commitments from bilateral or multilateral cooperation and accelerate infrastructure developments 3 3 M i t i Maintain liquidity stability and avoid price war li idit t bilit d id i Instruct SoE to not move funds among banks I t t S E t t f d b k 4 Maintain trust of market players on SUN by Government together with BI to purchase SUN from secondary market. Buyback SUN will be done stabilizing SUN market periodically with measured amount 5 Maintain sustainability of Balance of Payment Exercise bilateral swaps arrangement from Bank of Japan, Bank of Korea, and Bank of China, if necessary 6 Maintain sustainability of export by providing y p y p g Issuance of re-discount export L/C with recourse p post-shipment guarantees 7 Maintain sustainability of economy (real sector) Eliminate CPO export duty to 0% 8 Maintain sustainability for Fiscal 2009 Steps to maintain sustainability of State Budget 2009 will be announce upon DPR approval in the next 2 days. 9 9 Pre ent Illegal Imports Prevent Illegal Imports a P blish a pro ision on partic lar commodit import garment electronics food and be erage to s shoes a. Publish a provision on particular commodity import; garment, electronics, food and beverage, toys, shoes can only be imported by registered importer and obliged to be verified at shipping dock/harbor; b. Determine specific harbor to allow specified commodity (Harbor: Tanjung Priok, Tanjung Emas, Tanjung Perak, Belawan, Bandara Sukarno-Hatta and specified commodity: garment, electronics, food and beverage, toys, shoes) 10 10 I Increase supervision on flow of goods i i fl f d Set up integrated inter-ministerial task force S t i t t d i t i i t i l t k f Source: Bank Indonesia. 42

  29. 5 5. Fiscal Sustainability Fi l S t i bilit

  30. Summary of 2009 Budget Policy 44 � Increase fiscal reserve to mitigate against any increase in fiscal risk due to deviation of the macroeconomic assumptions – Risk on government revenue (growth, exchange rate and oil price) – Risk on government expenditure (interest rate) � Government Revenue Policy – Tax revenue collection is expected to grow moderately at 20% in 2009. Oil lifting, which exceeds target, helps to increase non-tax revenue – Currently implementing the Income Tax Law which lowers tariffs and increase minimum thresholds and Currently implementing the Income Tax Law, which lowers tariffs and increase minimum thresholds, and provides tax incentives to certain sectors (food, energy, textile and footwear and export-oriented small and medium enterprises) and regions, in order to reduce the costs of businesses. – Improve transparency for the calculation of cost recovery and revenue from the oil and gas sector – Use all fiscal, trade and industry instruments to support the real sector, boost investment climate and increase Use a sca , t ade a d dust y st u e ts to suppo t t e ea secto , boost est e t c ate a d c ease competitiveness of Indonesia’s economy � Government Expenditure Policy – Priority is given to poverty and education (BLT, PKH, PMPH and BOS), health care and infrastructure (road, bridge, airport and electricity) programs bridge airport and electricity) programs – Provide support to infrastructure program (toll roads and electricity) through the Public Private Partnership model – Allocate non-energy tax subsidies of IDR 10 trillion to support the real sector – Consider cutting premium gasoline and diesel subsidies next year by adjusting subsided prices to market prices Consider cutting premium gasoline and diesel subsidies next year by adjusting subsided prices to market prices up to a certain limit 44

  31. Budget Deficit and Debt Ratios 45 Continuing to exercise fiscal prudence and active debt management in the midst of global financial crisis. Budget Deficit (% of GDP) Revised Revised 2008 2008 2000 2000 2001 2001 2002 2002 2003 2003 2004 2004 2005 2005 2006 2006 2007 2007 2008 Budget 2008 Budget Outlook Outlook 2009 Budget 2009 Budget 0% 0% -0.5% -0.5% 0.5% 0.5% -1.0% -1.0% 1 0% 1 0% -1.0% -1.0% 1 0% 1 0% -1.0% -1.0% -1.1% -1.1% -1.2% -1.2% -1.3% -1.3% -1.3% -1.3% -1.7% -1.7% -1% -1% -2.1% -2.1% -2.5% -2.5% -2% -2% -2% -2% -3% -3% Source: Ministry of Finance. 45

  32. 2008 Budget Outlook and 2009 Budget 46 Maintain fiscal stability in the face of external economic shocks. Official State Budget 2008 Key Assumptions Revised 2008 Revised Budget B d t Outlook O tl k 2009 B d 2009 Budget t In Rp trillion I R t illi B d Budget t O tl Outlook k 2009 Budget 2009 B d t A. Total Revenues & Grants 895.0 950.1 985.7 GDP Growth (%) 6.4 6.3 6.0 I. Domestic Revenue 892.0 948.0 984.8 Inflation (%) 6.5 12.5 6.2 (i) Tax Revenue 609.2 642.8 725.8 Exchange Rate (US$/IDR) 9,100 9,606 9,400 (ii) Non-tax Revenue 282.8 305.2 258.9 3 Month SBI Rate (%) 7.5 9.1 7.5 B Total Expenditures B. Total Expenditures 989 5 989.5 1 001 5 1,001.5 1 037 1 1,037.1 Crude Oil Price (US$/Bbl) 927 933 960 I. Central Government 697.1 706.9 716.5 Crude Oil Production (000 Bbl/day) 95 100.5 80 (i) Ministry / Agency 290.0 261.0 322.3 Fuel Consumption (mm KL) 38.0 39.3 36.8 (ii) Non-Ministry / Agency 407.0 446.9 394.2 Interest Payments 94.8 93.1 101.7 Subsidies Subsidies 234 4 234.4 268 2 268.2 166 7 166.7 – Energy 187.1 213.2 103.6 2008 budget outlook deficit is 1.1%, down from original � – Non-Energy 47.3 55.0 63.1 target of 2.1% of GDP II. Regional Transfers 292.4 294.6 320.5 Oil price decline helps to reduce energy subsidies and C. Surplus / (Deficit) (A-B) (94.5) (51.4) (51.3) � % of GDP % of GDP (2 1%) (2.1%) (1.1%) (1 1%) (1 0%) (1.0%) budget deficit b d t d fi it D. Financing (I+II) 94.5 61.6 51.3 No bond issuance since October 2008 due to volatile � I. Domestic Financing 107.6 73.4 60.8 market conditions o/w Government Bonds, Net 117.8 86.4 54.7 II. Foreign Financing (13.1) (11.8) (9.4) The 2009 budget gives the government enough room to � o/w Program Loan o/w Program Loan 26 4 26.4 31.3 31 3 26.4 26 4 adjust for the impact of the global financial turmoil dj t f th i t f th l b l fi i l t il Source: Ministry of Finance. 46

  33. Realization of Revised Budget 2008 47 2008 Description (IDR tn) Revised Budget Realized Oct 29 % to Revised Budget A. Total Revenue and Grants 894.9 762.4 85.2 I. Domestic Revenue 892.0 761.4 85.4 1. Tax Revenue 609.2 536.7 88.1 2. Non-Tax Revenue 282.8 224.7 79.4 II. Grant 2.9 1.0 35.1 B. Expenditure 989.4 697.0 70.4 I. Central Government Expenditure 697.0 479.3 68.8 A. Ministry/Institution Expenditure 290.0 169.0 68.3 B. Non-Ministry/Institution Expenditure B N Mi i /I i i E di 40 407.0 0 310.3 310 3 76.2 6 2 a.1 – Interest payment 94.8 71.3 75.3 – Subsidies 234.4 183.6 78.3 – Oil (Pertamina) 126.8 106.0 83.6 – Electricity (PLN) 60.3 49.1 81.5 – Non-energy subsidies N b idi 47 3 47.3 28 5 28.5 60 2 60.2 – Other expenditures 32.1 21.3 66.5 II. Regional Transfer 292.4 217.8 74.5 1. Balanced funds 278.4 209.3 75.2 a. Revenue Sharing 77.7 49.2 63.3 b b. General Allocation Fund General Allocation Fund 179 5 179.5 149.6 149 6 83 3 83.3 c. Specific Allocation Fund 21.2 10.5 49.6 2. Special autonomy and adjustment fund 14.0 8.5 60.6 C. Fiscal Surplus/(Deficit) (94.5) 65.4 (69.2) % deficit to GDP (2.1) D. Financing D Financing 94 5 94.5 91 3 91.3 96 6 96.6 I. Domestic Financing 107.6 113.7 105.6 II. Foreign Financing (13.1) (22.4) 170.7 Source: Ministry of Finance. 47

  34. 2008 Funding Strategy On Track 48 The Government’s funding plans are well on-track with realized net financing at 87% of net financing required in the revised budget 2008 as of 13 November 2008. Net Issuance Realization as of November 13, 2008 � Issuance in the domestic market will have � Issuance in the domestic market will have 2008 Iss ance Program 2008 Issuance Program IDR tn IDR tn higher priority Original Budget 2008 Government Securities Net Financing 91.6 � Issuance of a variety of domestic government securities Revised Budget 2008 G Government Securities Net Financing S 117.8 – Fixed rate Redemption + Buyback (1) (40.2) – Variable rate Net Realization (13 November 2008) 102.2 – T-bills Gross Issuance: 126.2 – Zero coupon p Coupon GDS(2) 46.5 – Retail bonds Retail bonds 16.2 – Syariah securities – Sukuk Zero coupon GDS(2) 19.5 � With the budget outlook 2008 and the current cash Domestic Sukuk 4.7 position on balance sheet, the government will not iti b l h t th t ill t International bonds 39.3 need to issue any domestic or international bond for Redemption + Buyback (24.0) the remaining year of 2008 Target up to end of FY2008, net 15.6 Source: Ministry of Finance. Source: Ministry of Finance. 1. Redemption and buyback amount is subject to change. 2. GDS stands for Government Debt Securities (SUN). 48

  35. 5 5. Government Debt Management G t D bt M t

  36. Debt To GDP 50 End of year 2005 2006 2007 2008 2009 Debt Outstanding (billion rupiah) 1,313,290 1,302,157 1,389,392 1,462,944 1,509,928 - Foreign Debt (loan & securities) 654,619 609,039 652,266 684,453 695,518 - Domestic Debt (securities) 658,671 693,118 737,126 778,491 814,410 GDP 2,784,960 3,338,196 3,957,400 4,732,560 5,327,538 Debt to GDP Ratio (%) 47.2% 39.0% 35.1% 30.9% 28.3% Source: Ministry of Finance. (1) Very Preliminary. (2) Preliminary. (3) Based on State Budget 2009. 50

  37. Debt Figure (2000–2007) 51 Per Law Number 17/2003 concerning State Budget, stipulated that the growth of debt should not exceed Indonesia economic growth � with the following key measures: – Overall Balance (deficit) should be less than 3% of GDP, and – Total Debt to GDP ratio should be less than 60%. Debt to GDP Ratio (% of GDP) Debt Composition 100 100% 88 90 90% 77 80 80 80% 80% 50% 52% 50% 53% 53% 52% 67 54% 53% 53% 70 70% 61 56 60% 60 47 50% 50 39 35 40% 40 33 30% % 30 50% 50% 48% 48% 47% 47% 47% 47% 46% 20% 20 10% 10 0% 0 (2) (3) (1) (2) (3) 2000 2001 2002 2003 2004 2005 2006* 2007** 2008*** 2000 2001 2002 2003 2004 2005 2006 2007 2008 (1) External Debt Domestic Debt (1) Preliminary. Notes: (2) Very Preliminary. (1) Preliminary. (3) Projection based on State Budget 2007 Preliminary Realization. (2) Very preliminary, as of December 2007. (4) Projection based on State Budget 2008. Source: Ministry of Finance. 51

  38. Total Debt Maturity Profile 52 billions $ billions $ billions $ billions $ 12 12 12 12 10 10 10 10 10 10 10 10 8 8 8 8 6 4 4 4 4 2 2 2 2 0 0 0 0 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 0 0 0 0 1 1 1 1 2 2 2 2 3 3 3 3 4 4 4 4 5 5 5 5 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 5 5 5 5 5 5 5 5 0 0 0 0 0 0 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 - - - - 0 0 0 0 0 0 0 0 4 4 4 4 4 4 4 4 0 0 0 0 LOAN LOAN LOAN LOAN SECURITIES SECURITIES SECURITIES SECURITIES 2 2 2 2 Source: Ministry of Finance. 52

  39. Debt Financing Trend 53 Source of Financing for Budget Deficit (IDR mn) IDR tn % of GDP 150 2.5 2.1 117.8 2.0 2 0 100 1.3 57.2 54.7 1.5 1.1 42.0 36.0 1.0 50 0.9 22.6 20.0 1.0 9.1 6.9 6.1 (1.2) 0.5 0 0.5 (10.3) (10 3) (10 2) (10.2) (9 4) (9.4) (13.1) (23.9) (26.6) (28.1) (50) 0.0 (1) (2) 2004 2005 2006 2007 2008 2009 Gov't Securities - net (LHS) External Loan, net (LHS) Others/Non-Debt, net (LHS) Budget Deficit (% of GDP) D Demand for government bonds will be reduced due to a decrease in investor interest d f t b d ill b d d d t d i i t i t t � – A decline in investor interest from the US and Europe, which are the largest buyers (65%) of Indonesian global bonds – Foreign investors will also reduce the purchase of rupiah bonds – Banks, the primary buyer of government bonds, needs to maintain sufficient liquidity Obtain alternative financing from bilateral and multilateral organizations and institutional investors Obtain alternative financing from bilateral and multilateral organizations and institutional investors � – The availability of loan programs (such as from IMF) to finance the deficit – The demand of the issuance of Sukuk remains strong – Private placement with bilateral agencies, international Financial Institutions and sovereign wealth fund – Standby financing facilities amounting to USD5 billion are arranged with bilateral and multilateral organizations for the next two years (1) Projection based on revised budget 2008. (2) Projection based on 2009 state budget, Others/Non-Debt include privatization and other sources. 53

  40. Outstanding of Total Central Government Debt ( As of End 2007 ) 54 In billion USD % to + 2000 2001 2002 2003 2004 2005 2006 2007 Total a. External Loans 60.77 58.79 63.76 68.91 68.10 63.09 62.02 62.25 42.2% Bilateral *) 36.23 35.06 40.40 46.23 46.01 42.16 41.07 41.03 27.8% Multilateral **) 20.65 20.69 20.61 19.96 19.46 18.78 18.84 19.05 12.9% Commercial ***) 3.05 2.40 2.20 2.19 2.17 1.82 2.01 2.08 1.4% Suppliers Suppliers ***) ) 0.69 0.69 0.48 0.48 0.39 0.39 0.37 0.37 0.29 0.29 0.17 0.17 0.11 0.11 0.08 0.08 0.1% 0.1% Bonds/Notes ***) 0.16 0.17 0.17 0.17 0.17 0.17 - - 0.0% b. Government Securities 67.27 63.16 73.64 76.80 71.28 70.89 82.34 85.26 57.8% FX Denominated - - - - 1.00 3.50 5.50 7.00 4.7% Rupiah Denominated 67.27 63.16 73.64 76.80 70.28 67.39 76.84 78.26 53.1% Total Government Debt 128.04 121.95 137.41 145.71 139.38 133.98 144.36 147.51 Source: Ministry of Finance. Notes: + Preliminary numbers. ++ Very preliminary numbers, as of December 2007. * Some of them are semi commercial. ** Most of them are semi concessional. *** All of them are commercial. 54

  41. Outstanding of Total Central Government Debt ( As of Sept’ 08) 55 In billion USD % 2007 + Sep'08 ++ 2005 2006 Total a. Foreign Debt 63.09 62.02 62.25 61.98 39.0% Bilateral *) 42.16 41.07 41.03 41.38 26.1% Multilateral **) 18.78 18.84 19.05 18.46 11.6% Commersial ***) Commersial ***) 1 82 1.82 2.01 2 01 2 08 2.08 2.06 2 06 1 3% 1.3% Supplier ***) 0.17 0.11 0.08 0.09 0.1% Bond & notes***) 0.17 - - 0.00 0.0% b. Securities 70.89 82.34 85.26 96.50 60.8% USD denominated 3.50 5.50 7.00 11.20 7.1% Rupiah denominated 67.39 76.84 78.26 85.30 53.7% Total Government Debt 133.98 144.36 147.51 158.47 Source: Ministry of Finance. Notes: + Preliminary numbers. ++ Very preliminary numbers. * Some of them are semi commercial. ** Most of them are semi concessional. *** All of them are commercial. 55

  42. Composition of Debt 56 Composition of Central Government Debt 100% 46% 47% 47% 75% 50% 50% 50% 54% 53% 53% 25% 50% 50% 0% 2003 2004 2005 2006 2007 Domestic Debt External Debt Source: Ministry of Finance. Note: Exchange rate of Rp.9,034 per US$ used for 2007. 56

  43. Holders of Tradable Government Securities 57 There is an increasing proportion of foreign and non-bank holders of Indonesian Government securities. Holders of Tradable Domestic Government Securities Developments in the Domestic Market 60 � Yearly issuance schedule publicly available Yearly issuance schedule publicly available � Established primary dealership infrastructure 18% 50 � Benchmark series 16% 13% 3% 3% � Active communication with market participants 40 8% 26% 25% 24% 21% � Variety of domestic securities available 17% – T-Bills, fixed rate, floating rate, variable rate, zero 30 coupon retail bonds and Sukuk (1) coupon, retail bonds and Sukuk (1) 20 72% 66% 56% 75% 59% 10 10 0 Dec-04 Dec-05 Dec-06 Dec-07 May-08 Banks Non-Banks Foreign Holders Source: Ministry of Finance. New Syariah instruments expected to be launched in 2008 in the form of Sukuk. 57

  44. Annex 1: Indonesian Debt Profile A 1 I d i D bt P fil

  45. Table of Contents 1. Government Securities Auction Development 75 2. Profile of Government Debt Securities 76 3. Domestic Issuance 77 4. International Issuance 78 5. Maturity Profile of Tradable Government Securities (as of Nov.10, 2008) 79 6. Debt Switching 2008 g 80 7. Daily Transaction & Diversified bondholders 81 8. Ownership of IDR Tradable Government Securities (nominal) 82 9 9. Ownership of Foreign Holder Ownership of Foreign Holder 83 83 10. IDR Government Bonds : Yield Curve (IDMA) 84 11. Cash Buyback Program 85 12. Outstanding Public External Debt (incl. Bank Indonesia) 86 13. Debt Service Schedule of Government of Indonesia Debt 87 14. Stock of Private External Debt 88

  46. Government Securities Auction Development 60 2002 2003 2004 2005 2006 2007 2008 Domestic Market Fixed Coupon Tenor 8 years 7–9 years 7–10 years 2–15 years 2–20 years 3–30 years 2–30 years (1) Auction Method Bookbuilding √ – – – – – – Open Auction – √ √ √ √ √ √ Issuance Method New Issuance √ √ √ √ √ √ √ Reopening – √ √ √ √ √ √ Frequency Frequency 1 time/year 1 time/year 4 times/year 4 times/year 9 times/year 9 times/year 10 times/year 10 times/year 10 times/year 10 times/year 17 times 17 times 12 times (1) 12 times Primary Market Weighted Average Yield (WAY) [%] 14.67 12.42 11.24 11.14 11.45 9.73 11.17 Retail Bonds(ORI) – – – – √ √ √ Treasury Bills (SPN) – – – – – √ √ Z Zero Coupon (ZC) C (ZC) – – – – – √ √ √ √ Sukuk (SBSN) – – – – – – (2 ) International Market 10 & 30 Tenor – – 10 years 10 & 30 years 30 years 10&30 years years A Auction Method i M h d Bookbuilding – – √ √ √ √ √ Open Auction – – – – – – – Issuance Method New Issuance – – √ √ √ √ √ Reopening – – – – √ – √ (1) up to 26 June 2008. (2) will be issue on August 2008. Source: Ministry of Finance. 60

  47. Profile of Government Debt Securities 61 GOVERNMENT DEBT SECURITIES (GDS) Des'06 Dec '07 Jun '08 Sep '08 Oct '08 10 Nov '08 1. Zero Coupon IDR - IDR 14,669 IDR 24,273 IDR 27,280 IDR 27,280 IDR 27,280 1. Government Treasury Bills IDR - IDR 4,169 IDR 5,250 IDR 10,012 IDR 10,012 IDR 10,012 2. Zero Coupon Bond IDR - IDR 10,500 IDR 19,023 IDR 17,268 IDR 17,268 IDR 17,268 Government Domestic Bonds 1. Fixed Rate *) +) IDR 238,565 IDR 294,453 IDR 330,338 IDR 354,948 IDR 354,948 IDR 354,907 2. Variable Rate *) IDR 180,187 IDR 168,625 IDR 165,617 IDR 154,772 IDR 154,772 IDR 154,772 2. Sub Total Tradable GDS IDR 418,751 IDR 477,747 IDR 520,228 IDR 537,000 IDR 537,000 IDR 536,959 3. Promissory Notes to Bank Indonesia **) ***) IDR 274,367 IDR 259,404 IDR 258,208 IDR 258,208 IDR 258,208 IDR 258,208 4. Total GDS (2+3) IDR 693,118 IDR 737,151 IDR 778,436 IDR 795,209 IDR 795,209 IDR 795,168 5. Total Government International Bonds *) USD 5,500 USD 7,000 USD 11,200 USD 11,200 USD 11,200 USD 11,200 6. TOTAL GOV'T DEBT SECURITIES (4+(5*Exchange Rate Assumption)) IDR 742,728 IDR 803,084 IDR 881,756 IDR 900,242 IDR 918,353 IDR 918,312 GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS) GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS) Government Domestic Islamic Bonds 1. Fixed Rate *) IDR - IDR - IDR - IDR 4,700 IDR 4,700 IDR 4,700 7. Total Tradable GIDS IDR - IDR - IDR - IDR 4,700 IDR 4,700 IDR 4,700 8. TOTAL GOVERNMENT SECURITIES (6+7) ( ) IDR 742,728 IDR 803,084 IDR 881,756 IDR 904,942 IDR 923,052 IDR 923,011 Notes: - Nominal in billion rupiah (domestic bonds) and million USD (international bonds) - *) Tradable - **) Non-Tradable - +) Termasuk ORI (miliar rupiah) IDR 3,284 IDR 18,885 IDR 32,070 IDR 34,699 IDR 34,699 IDR 34,699 ( (e.o Dec 2006) D 2006) (e.o Dec 2007) ( D 2007) (30 J (30 Jun '08) '08) (26 S (26 Sep '08) '08) (31 O t '08) (31 Oct '08) (10 N (10 Nov '08) '08) - Exchange Rate Assumption (IDR/USD1) IDR 9,020 IDR 9,419 IDR 9,225 IDR 9,378 IDR 10,995 IDR 10,995 61

  48. Domestic Issuance 62 Until end of October 2008 the Government has conducted 21 times auctions in domestic market. This year total government � debt securities has been issued is reaching to IDR 86,93 trillion Bids to Auction Date Series Settlement Date Maturity Coupon WAY/ WAP Target Total Bids Total Accepted Accepted Total 2007 47,000,000 205,057,495 86,379,695 2.3 22-Jan-08 FR0046 (Reopening) 24-Jan-08 15-Jul-23 9.50% 10.55% 2,218,000 1,100,000 2.02 5,000,000 FR0050 FR0050 24-Jan-08 24 Jan 08 15-Jul-38 15 Jul 38 10.50% 10.50% 10.81% 10.81% 1,448,000 1,448,000 1,200,000 1,200,000 1.21 1.21 29-Jan-08 ZC0004 31-Jan-08 20-Feb-10 - 8.25% 6,081,000 2,750,000 2.21 3,000,000 ZC0005 31-Jan-08 20-Feb-13 - 9.41% 2,671,000 950,000 2.81 12-Feb-08 FR0048 (Reopening1) 14-Feb-08 15-Sep-18 9.00% 10.10% 1,175,000 300,000 3.92 3,000,000 FR0049 14-Feb-08 15-Sep-13 9.00% 9.25% 4,742,000 750,000 6.32 19-Feb-08 ZC0004 (Reopening) 21-Feb-08 20-Feb-10 - 8.57% 3,825,000 3,650,000 1.05 3,000,000 ZC0005 (Reopening) 21-Feb-08 20-Feb-13 - 9.56% 2,705,000 2,200,000 1.23 4-Mar-08 FR0027 (Reopening 1) 6-Mar-08 15-Jun-15 9.50% 9.77% 3,930,400 1,800,000 2.18 3,000,000 FR0048 (Reopening 2) 6-Mar-08 15-Sep-18 9.00% 10.37% 1,168,600 200,000 5.84 12-Mar-08 ORI004 (Retail Bonds) 12-Mar-08 12-Mar-12 9.50% 9.50% - 13,455,765 13,455,765 1.00 25-Mar-08 ZC0004 (Reopening 2) 27-Mar-08 20-Feb-10 - - 2,000,000 1,839,000 - 15 Apr 08 15-Apr-08 FR0049 (Reopening 1) FR0049 (Reopening 1) 17-Apr-08 17 Apr 08 15 Sep 13 15-Sep-13 9.00% 9.00% - 2,778,300 2,778,300 - 3,000,000 VR0032 17-Apr-08 25-Apr-11 7.83% 100.00 3,671,000 3,000,000 1.22 29-Apr-08 SPN20090430 2-May-08 30-Apr-09 - 10.17% 1,000,000 1,000,000 1.00 3,000,000 ZC0004 2-May-08 20-Feb-10 - - - - 13-May-08 FR0049 (Reopening 2) 15-May-08 15-Sep-13 9.00% 12.30% 6,347,000 4,500,000 1.41 3,000,000 VR0032 (Reopening 1) 15-May-08 25-Apr-11 8.04% 100.00 2,365,000 2,000,000 1.18 27-May-08 SPN20090430 29-May-08 30-Apr-09 - 10.45% 3,195,000 1,900,000 1.68 ZC0004 29-May-08 20-Feb-10 - - 3,000,000 393,000 - FR0046 (Reopening 2) 29-May-08 15-Jul-23 9.50% 12.87% 8,652,000 7,050,000 1.23 10-Jun-08 FR0049 (Reopening 3) 12-Jun-08 15-Sep-13 9.00% - 1,577,000 - FR0048 (Reopening 3) 12-Jun-08 15-Sep-18 9.00% 13.41% 3,000,000 2,101,000 1,000,000 2.10 FR0047 (Reopening 3) ( p g ) 12-Jun-08 15-Feb-28 10.00% % 13.59% % 4,107,000 , , 2,000,000 , , 2.05 24-Jun-08 SPN20090430 26-Jun-08 30-Apr-09 - 10.53% 4,820,000 2,350,000 2.05 3,000,000 FR0027 (Reopening 2) 26-Jun-08 15-Jun-15 9.50% - 1,962,000 - FR0046 (Reopening 3) 26-Jun-08 15-Jul-23 9.50% 13.62% 5,533,000 3,200,000 1.73 15-Jul-08 ZC0004 (Reopening 1) 17-Jul-08 20-Feb-10 - - 3,711,000 - 3,000,000 FR0034 (Reopening 2) 17-Jul-08 15-Jun-21 12.80% 12.81% 5,264,000 4,350,000 1.21 FR0047 (Reopening 4) 17-Jul-08 15-Feb-28 10.00% 13.20% 2,824,000 2,100,000 1.34 29-Jul-08 SPN20090731 31-Jul-08 31-Jul-09 - 10.54% 4,434,000 3,050,000 1.45 3,000,000 FR0027 (Reopening 3) 31-Jul-08 15-Jun-15 9.50% 11.63% 4,701,000 2,250,000 2.09 FR0034 (Reopening 3) 31-Jul-08 15-Jun-21 12.80% 12.24% 6,900,500 2,000,000 3.45 12-Aug-08 FR0026 (Reopening 5) 14-Aug-08 15-Oct-14 11.00% 11.51% 6,274,000 2,250,000 2.79 3,000,000 , , FR0036 (Reopening 2) ( p g ) 14-Aug-08 g 15-Sep-19 p 11.50% 11.81% 2,377,000 , , 1,300,000 , , 1.83 FR0047 (Reopening 5) 14-Aug-08 15-Feb-28 10.00% 12.20% 2,681,000 1,900,000 1.41 22-Aug-08 IFR 0001 26-Aug-08 15-Aug-15 11.80% - 4,839,000 2,714,000 1.78 - IFR0002 26-Aug-08 15-Aug-18 11.95% - 3,231,000 1,985,000 1.63 26-Aug-08 SPN20090731 (Reopening) 28-Aug-08 31-Jul-09 - 10.70% 2,056,000 1,712,000 1.20 FR0036 (Reopening 3) 28-Aug-08 15-Sep-19 11.50% 12.24% 3,000,000 2,680,000 1,500,000 1.79 FR0050 (Reopening 1) 28-Aug-08 15-Jul-38 10.50% 12.51% 949,000 750,000 1.27 1-Sep-08 ORI005 (Retail Bonds) 3-Sep-08 15-Sep-13 11.45% 11.45% - 2,714,875 2,714,875 1.00 9-Sep-08 ZC0006 11-Sep-08 20-Sep-11 - - 552,000 - FR0027 (Reopening 4) 11-Sep-08 15-Jun-15 9.50% - 3,000,000 1,846,000 - FR0050 (Reopening 2) 11-Sep-08 15-Jul-38 10.50% - 509,000 - 16-Sep-08 p SPN20090731 18-Sep-08 p 31-Jul-09 - - 3,670,000 , , - FR0026 (Reopening 6) 18-Sep-08 15-Oct-14 11.00% - 2,000,000 170,000 - FR0048 (Reopening 4) 18-Sep-08 14-Sep-15 9.00% - 2,340,000 - Total 2008 54 000 000 158 483 440 86 931 640 1 8 Source: Ministry of Finance. 62

  49. International Issuance 63 Source: Bloomberg, modified. 63

  50. Maturity Profile of Tradable Government Securities (As of Nov. 10, 2008) 64 60 60 50 40 n rupiah 30 trillio 20 10 0 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 … 2034 2035 2036 2037 2038 Total 15.64 39.05 37.12 39.98 42.68 43.00 39.47 44.41 33.64 38.02 51.35 29.23 36.79 16.73 23.68 21.03 5.59 12.91 2.45 14.43 13.84 - - 17.76 - 23.05 24.15 666.0 - - - - - - - 2.71 - - 1.99 - - - - - - - - - - - - - - - - 4.70 IFR ZC 5.78 2.71 5.89 - 1.50 1.40 - - - - - - - - - - - - - - - - - - - - - 17.27 - 10.01 - - - - - - - - - - - - - - - - - - - - - - - - - 10.01 SPN - - - - - - 14.43 11.10 9.99 11.10 21.09 - - - - - - - - - - - - 17.76 - 16.65 22.20 124.3 IB - 2.93 6.23 9.36 13.46 2.71 - - - - - - - - - - - - - - - - - - - - - 34.70 ORI VR VR 8.76 8.56 8 76 8 56 - 7.12 0.39 7 12 0 39 - 11.41 17.45 18.32 16.82 17.92 22.72 25.32 11 41 17 45 18 32 16 82 17 92 22 72 25 32 - - - - - - - - - - - - - - 154 7 154.7 1.10 14.84 25.00 23.50 27.34 38.89 13.63 13.15 5.33 10.10 10.35 6.51 11.47 16.73 23.68 21.03 5.59 12.91 2.45 14.43 13.84 - - - - 6.40 1.95 320.2 FR Source: Ministry of Finance. 64

  51. Debt Switching Program 65 In 2006 GOI has successfully switched Rp31.2 trillion of bonds consist of Rp9.9 trillion which matured in 2007, Rp11.4 trillion � matured in 2008, Rp6.1 trillion matured in 2009, Rp1.5 trillion matured in 2010 and Rp2.3 trillion matured in 2011 In 2007 GOI has successfully switched Rp15,8 trillion bond maturing between 2007–2012 into long dated bonds maturing 2022–2027 � � Up to August 2008 GOI has successfully switched Rp4,6 trillion bond maturing between 2009–2013 into long dated bonds maturing p g y p , g g g 2022–2023 Source Bonds Destination Bonds Settlement Auction Date Offer Received Offer Awarded Maturity Date Series Maturity Date y Series WAY 1) 1) 1) 1) Date Date 8-Dec-05 13-Dec-05 Total 2006 - 2009 7,721 5,673 FR0031 15-Nov-20 14.46523% Total 2006 13 Auction 54,177 31,179 Total 2007 9 Auctions 30,681 15,782 5-Feb-08 11-Feb-08 14 Series 2009 - 2013 1,355 146 FR0046 15-Jul-23 10.59525% 25-Jul-08 14 Series 2009 - 2013 6,135 , 4,425 , FR0035 15-Jun-22 12.90247% Total 2008 2 Auctions 7,490 4,571 Source: Ministry of Finance. (1) Volume in billion rupiah. (2) WAY = Weighted Average Yield. 65

  52. Daily Transaction and Diversified bondholders 66 Investor base is getting more diversified with the increased ownership by foreign investors. This depicts investor confidence on Indonesia. Ever-increasing daily transaction Diversified bondholders 9,000 360 100.00% 8,091 7,864 8,000 320 80 00% 80.00% 6,865 7,000 7 000 280 280 6,382 5,791 6,000 240 5,608 5,4345,584 5,462 60.00% 5,163 4,940 4,6054,6944,844 5,000 200 4,6294,731 4,728 4,561 4,225 4,136 3,999 , 3 918 3,918 40.00% 40 00% 4,000 160 3,307 3,271 3,000 120 2,549 20.00% 2,122 2,000 80 1,395 0.00% 1,000 40 522 Dec-04 Dec-05 Des'06 Dec-07 Oct-08 10-Nov- - - 08 2 3 4 5 6 b r r i n l s t t v b r r i i i s p t 7 p e u k 8 p e n l k e a g p o 7 e a u g 0 0 0 0 0 M u J M e p 0 M A e O 0 0 M A u O 0 0 0 0 0 F J A N F J A S o ' S ' ' J 2 2 2 2 2 N n s n a e a 7 J D J d BANK NON BANK ASING . s Volume (miliar rupiah) LHS Volume (miliar rupiah) - LHS Frekuensi RHS Frekuensi - RHS Source: Ministry of Finance. Note: Offshore include banks, financial institutions, etc. 66

  53. Ownership of IDR Tradable Government Securities (Nominal) 67 Dec'04 Dec'05 Des'06 Dec'07 Jan'08 Mar-08 May-08 Jun-08 Aug-08 Sep-08 Oct-08 10-Nov-08 BANKS 269.11 268.65 266.74 273.12 271.16 272.18 263.00 261.04 274.13 273.54 287.56 289.65 State Banks - Recap 158.84 154.50 152.76 154.67 152.13 155.22 148.59 153.69 145.07 146.08 144.90 Private Banks - Recap 95.14 85.38 80.79 72.63 70.15 73.15 73.21 73.00 67.73 65.58 67.84 Non Recap Banks p 3 32.40 0 45.79 5 9 3 32.78 8 35 3 35.37 38 65 38.65 38 0 38.40 42.79 9 38.63 38 63 43.09 3 09 42.02 0 53 09 53.09 Regional Banks - Recap 1.18 3.96 2.78 5.97 5.80 6.34 6.57 6.85 7.11 6.64 7.57 Syariah Banks 0.73 0.73 0.73 Government Institutions 7.54 14.86 14.86 14.87 15.30 16.04 17.75 21.93 18.08 20.08 0.00 10.52 Bank Indonesia - 10.52 7.54 14.86 14.86 14.87 15.30 16.04 17.75 21.93 18.08 20.08 NON-BANKS NON BANKS 249.49 249 49 248 05 248.05 111 74 111.74 99.67 99 67 142 10 142.10 194 24 194.24 194 46 194.46 210 41 210.41 225 22 225.22 232.01 232 01 253.54 253 54 258 72 258.72 Mutual Funds 53.98 9.12 21.43 26.33 25.69 27.69 29.91 30.98 35.63 35.18 34.64 34.68 Insurance Company 27.08 32.30 35.04 43.47 43.44 44.47 45.58 47.40 50.37 53.09 54.41 54.64 Foreign Holders 10.74 31.09 54.92 78.16 79.07 80.74 91.66 94.10 106.66 105.49 92.81 90.66 Pension Fund 16.42 22.02 23.08 25.50 25.68 26.41 27.62 28.55 29.68 30.40 32.49 32.74 Securities Company 0.43 0.46 1.00 0.28 0.57 0.64 1.07 0.78 0.52 0.71 0.60 0.77 Oth Others 3 08 3.08 4 68 4.68 6 63 6.63 20.50 20 50 20.01 20 01 30.47 30 47 29.39 29 39 30.21 30 21 30 67 30.67 33 86 33.86 34.54 34 54 34 56 34.56 TOTAL 399.30 399.84 418.75 477.75 476.05 498.40 511.68 520.23 534.29 541.70 541.70 541.66 Source: Ministry of Finance. 67

  54. Ownership of Foreign Holder 68 No sudden reversal of foreign ownership in domestic government securities � � Long-term bonds preferred [Rp miliar] 100,000 80,000 47.13% 48.41% 60,000 40,000 , 18.59% 20.13% 20,000 23.45% 23.67 % 9 33% 9.33% 9.28% 0 Nov-07 Dec-07 Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 10-Nov-08 76,683 78,156 79,074 83,382 80,742 86,192 91,656 94,099 100,010 106,656 105,488 92,809 90,655 Total 32,117 32,451 31,039 29,528 27,323 27,987 34,182 37,642 45,178 49,007 46,833 43,741 43,887 >10 21,132 19,843 20,424 19,996 20,362 18,600 20,635 18,133 18,882 23,075 20,995 18,685 16,852 5-10 14,144 14 144 17 243 17,243 19,623 19 623 22 045 22,045 21 902 21,902 25 862 25,862 24 102 24,102 26 508 26,508 23 633 23,633 22,483 22 483 24,693 24 693 21,767 21 767 21,461 21 461 2-5 2 5 9,290 8,619 7,989 11,814 11,155 13,743 12,738 11,815 12,317 12,091 12,966 8,616 8,456 0-2 Source: Ministry of Finance. 68

  55. IDR Government Bonds: Yield Curve (IDMA) 69 [in percentage] 22,00 29 Okt'08 20 00 20,00 30 Okt'08 18,00 16,00 Tenor 11-Nop-08 03-Nop-08 31-Okt-08 30-Okt-08 29-Okt-08 07-Okt-08 14,00 1Y 13,54 14,80 16,63 16,59 18,73 12,45 11 Nop '08 3 Nop '08 2Y 13,55 16,34 16,36 16,71 20,07 13,22 3Y 14,53 16,43 17,43 17,49 20,05 13,73 4Y 14,59 16,63 17,38 17,44 19,99 14,06 5Y 14,69 , 16,65 , 16,61 , 16,53 , 19,95 , 14,43 , 31-Okt-08 31 Okt 08 30 Okt '08 30 Okt '08 6Y 14,75 16,86 17,05 16,59 20,47 14,38 12,00 7Y 14,84 16,35 16,87 16,55 17,10 14,41 10Y 15,01 17,21 17,26 18,99 19,30 12,95 15Y 14,91 16,28 16,56 16,59 19,45 15,12 29 Okt '08 7 Okt '08 20Y 14,96 16,76 16,76 16,80 20,14 14,90 30Y 15,71 17,86 18,60 18,61 20,32 15,40 10 00 10,00 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 30Y Sumber: IDMA, Bloomberg. 69

  56. Cash Buyback Program 70 � In 2006, the government did not use cash to purchase or redeem any government bonds � In 2007, the government resumed the purchase of government bonds, purchasing Rp1.7 trillion in August and Rp. 1.2 trillion in December � In 2008, the government resumed the purchase of government bonds, purchasing Rp2.0 trillion in April and Rp. 41 bn in October and Rp. 327 bn In November YEAR AUCTIONS VOLUME TOTAL 2003 2 Auctions 8,127,000 TOTAL TOTAL 2004 2004 1 A 1 Auction ti 1 962 000 1,962,000 TOTAL 2005 4 Auctions 5,158,000 TOTAL 2007 2 Auctions 2,859,000 2008 07 April 2,007,000 30 Oct. 41,000 12 Nov. 12 Nov 327 000 327,000 TOTAL 2008 3 Auctions 2,375,000 GRAND TOTAL 20,481,000 Source: Ministry of Finance. 70

  57. Outstanding Public External Debt (incl. Bank Indonesia) 71 CENTRAL GOVERNMENT DEBT AND CENTRAL BANK EXTERNAL DEBT BY CREDITOR TYPE AND COUNTRY Thousand of USD rate at end of period 31-Sep-08 (1) ITEMS 2000 2001 2002 2003 2004 2005 2006 2007 31-Mar-08 31-Jun-08 1.Outstanding External Debt of Central Government a. Bilateral 24,638,224 22,712,737 26,067,339 29,876,838 30,333,174 66,109,494 28,101,458 28,603,434 31,924,210 29,714,580 29,458,395 Japan 18,144,085 16,269,301 18,901,835 21,646,164 22,060,685 20,954,829 20,347,552 20,833,056 23,766,579 21,752,429 22,000,513 France 1,227,209 1,142,311 1,377,045 1,656,530 1,697,788 1,494,557 1,557,988 1,585,814 1,708,840 1,646,485 1,524,924 United States 1,546,305 1,547,201 1,583,891 1,603,714 1,521,462 1,573,227 1,470,145 1,345,441 1,335,106 1,297,080 1,280,989 Germany, Fed.Rep. Of 861,180 911,167 1,083,451 1,384,151 1,425,003 1,350,004 1,433,441 1,493,315 1,652,309 1,589,880 1,476,147 Other 2,859,445 2,842,757 3,121,117 3,586,279 3,628,236 40,736,877 3,292,332 3,345,808 3,461,376 3,428,706 3,175,822 b. Multilateral 20,524,383 19,924,626 20,282,873 19,738,670 19,250,788 18,779,410 18,836,735 19,054,556 19,102,073 18,846,958 18,425,935 International Organization - IMF International Organization - I.B.R.D. 11,773,717 11,577,025 10,802,360 9,776,102 8,942,985 8,106,523 7,420,807 6,821,789 6,519,681 6,444,384 6,255,773 International Organization A.D.B. International Organization - A D B 7,543,701 7 543 701 7 179 379 7,179,379 8 309 718 8,309,718 8 582 146 8,582,146 8 868 914 8,868,914 9,157,712 9 157 712 9 409 209 9,409,209 10 177 028 10,177,028 10 369 494 10,369,494 10 098 445 10,098,445 9 928 703 9,928,703 Other 1,206,965 1,168,222 1,170,795 1,380,422 1,438,889 1,515,175 2,006,719 2,055,739 2,212,898 2,304,129 2,241,459 c. Export Credit Facilities 15,740,675 14,887,888 16,605,092 18,397,278 18,022,489 15,327,146 14,938,846 14,512,572 15,292,760 14,513,727 13,844,114 d. Leasing 601,543 439,235 368,740 301,906 224,873 135,216 69,521 15,754 14,466 3,438 3,450 e. Commercial 77,952 95,880 98,525 102,528 85,482 79,178 74,702 66,199 63,881 61,454 55,801 f. Bond 167,196 167,196 167,196 167,196 1,087,196 3,182,196 4,945,000 6,370,000 8,321,500 10,450,000 10,450,000 g. Total ( a + b + c + d + e + f ) 61,749,973 58,227,562 63,589,765 68,584,416 69,004,002 103,612,640 66,966,262 68,622,515 74,718,890 73,590,157 72,237,695 2.Outstanding External Debt of Bank Indonesia a a. Bilateral Bilateral 6 477 6,477 6 477 6,477 6,706 6 706 6,117 6 117 5 757 5,757 5 397 5,397 5 037 5,037 4 678 4,678 4 678 4,678 4 498 4,498 4,498 4 498 Japan France United States Germany, Fed.Rep. Of Other 6,477 6,477 6,706 6,117 5,757 5,397 5,037 4,678 4,678 4,498 4,498 b. Multilateral 10,982,544 9,105,256 8,829,290 10,238,606 9,653,885 7,806,028 – – – – – International Organization - IMF 10,982,544 9,105,256 8,829,290 10,238,606 9,653,885 7,806,028 – – – International Organization - I.B.R.D. International Organization - A.D.B. Other c. Syndicated Credit 1,918,926 1,831,446 1,838,497 1,847,839 1,837,368 1,280,001 750,477 712,814 705,269 693,230 658,310 d. Bond 232,804 232,804 232,804 232,804 232,804 232,804 – e. Total ( a + b + c + d ) 13,140,751 11,175,983 10,907,297 12,325,366 11,729,814 9,324,230 755,514 717,492 709,947 697,728 662,808 Source: Bank Indonesia. (1) Preliminary. 71

  58. External Debt Service Principal Payment Paid 72 (In millions of U. S. dollars) Period Government Debt Private Debt Total 2002 5,009 11,941 16,950 2003 4,000 11,669 15,669 2004 6,197 12,571 18,768 2005 5,448 15,722 21,170 2006 14,091 21,271 35,362 2007 6,367 , 25,082 , 31,450 , Q1 1,081 6,048 7,129 Q2 2,059 5,204 7,263 Q3 1,012 5,744 6,757 Q4 Q4 2,215 2 215 8 086 8,086 10 302 10,302 2008 4,132 24,762 28,894 Q1 1,012 8,030 9,043 Q2 2,088 8,419 10,507 Q3 (1) 1,031 8,313 9,344 (1) Source: Bank Indonesia. (1) Preliminary Figures. 72

  59. Stock of Private External Debt 73 ( in Million USD ) 2008 2000 2001 2002 2003 2004 2005 2006 2007 Jul (1) Aug (1) Sep (1) Jan Feb Mar Apr May Jun B. Private 64,606 60,058 55,212 51,942 52,929 48,601 50,983 53,909 54,552 54,890 55,801 55,497 55,520 56,020 56,785 58,379 58,796 1. Financial Institution 8,867 7,713 7,642 7,537 8,211 6,371 6,560 7,465 7,611 7,699 8,136 8,191 7,529 7,947 8,032 8,709 9,097 1.1. Bank 7,718 6,649 4,870 4,316 3,906 4,042 4,544 5,351 5,509 5,542 5,969 5,987 5,174 5,516 5,502 6,101 6,029 State owned – bank 4,150 3,695 2,767 2,874 2,356 1,665 1,859 479 2,076 1,852 1,948 1,797 1,078 1,113 1,131 1,254 1,117 – Domestic prvt. Bank 2,326 2,268 1,537 779 810 491 904 2,369 894 937 656 640 692 693 591 608 790 – Joint venture – b bank k 944 944 656 656 534 534 630 630 702 702 1,419 1,226 1,380 1,383 1 419 1 226 1 380 1 383 1 477 1,477 1,926 1,954 1,845 1,913 1,966 2,081 2,167 1 926 1 954 1 845 1 913 1 966 2 081 2 167 – Foreign bank 298 30 31 32 38 467 554 1,123 1,155 1,276 1,439 1,595 1,559 1,797 1,813 2,157 1,955 1,150 1,064 2,772 3,221 4,306 2,329 2,017 2,114 2,103 2,158 2,167 2,204 2,355 2,431 2,531 2,608 3,068 1.2. Non Bank Financial Institution 2. 55,738 52,345 47,570 44,405 44,718 42,229 44,423 46,444 46,941 47,191 47,665 47,306 47,991 48,073 48,753 49,670 49,699 Non Financial Institution C. Others 2,197 3,624 1,634 2,550 3,361 6,646 10,031 13,391 13,514 16,692 14,290 14,559 13,770 15,918 19,812 19,153 15,374 Domestic securities owned by 2,197 3,624 1,634 2,550 3,361 6,646 10,031 13,391 13,514 16,692 14,290 14,559 13,770 15,918 19,812 19,153 15,374 non-resident Government 26 1,972 164 756 1,991 4,666 8,087 11,269 11,321 14,467 12,090 12,387 11,620 13,843 17,762 16,986 13,194 � � B Bank k 2 2 - - 1 1 4 4 15 15 30 30 50 50 50 50 52 52 48 48 48 48 83 83 46 46 28 28 12 12 35 35 � Non-bank Financial Institution 2,169 1,651 1,470 1,793 1,367 1,965 1,914 2,073 2,143 2,173 2,152 2,124 2,067 2,029 2,022 2,155 2,144 Source: Bank Indonesia. Note: Year 2000 in DEM, year 2001 onward original currencies (DEM,ATS,FRF,NLG,ESP,ITL,FNM) had been converted into EUR. Including loan from IMF. Consist of SBIs USD3.052,35 milion and Government Bonds USD9.334,22 million. (1) Preliminary Figures. 73

  60. A Annex 2: Sovereign Credit Rating 2 S i C dit R ti

  61. Credit Rating History 75 Solid economic fundamentals helped the improvement of Indonesia’s sovereign credit rating since 2001 BBB+ Baa1 BBB Baa2 Sound record of fiscal Continuous fiscal adjustment, Economic Crisis Banks management on the success of BBB- Baa3 improving liquidity and structural in 1998 Recapitalization Government efforts to improve improvements in real economy the investment climate Ba1 BB+ BB Ba2 BB- Ba3 B1 B+ B B2 B3 B- Dec 08: Moody’s y Feb 08: affirms ratings Caa1 CCC+ Fitch upgrade Gradually improving external CCC Caa2 to BB liquidity, macroeconomic (stable) Nov 08: S&P stability and improved political Caa3 CCC- Diminished likelihood that the affirms ratings conditions Current Ratings: Government will seek additional Moody’s: Ba3 M d ’ B 3 C Ca CC CC debt rescheduling S&P: BB- R/C C Fitch BB SD/DDD Source: Ministry of Finance. 75

  62. Annex 3: Infrastructure Development A 3 I f t t D l t

  63. Infrastructure Road Map 2004–2009 77 2004 2005 2006 2007 2008 2009 Scale Up Government Budget for Infrastructure Development Good Governance Infrastructure Infrastructure Indonesia Infrastructure Pre Summit Summit Conference & Exhibition 22 Desember 2004 17 Januari 2005 November 2006 Improvement Of Cross-sectoral Coordination Private Sector Participation Regulatory Framework Regulatory Framework Regulatory Reform (crosssectoral & sectoral) ; Risk allocation, Government Support, Land Procurement, Asset Management, Tariff & Subsidy Policy, etc Sectoral Blue Print Sectoral Restructuring Assessment of Model Project Execution of Model Projects O Operation, Rehabilitation & Development (INVESTMENT) ti R h bilit ti & D l t (INVESTMENT) Source: Coordinating Ministry of Economic Affairs. 77

  64. Infrastructure Sector Policy Highlight 78 Road & Toll Road Water & Sanitation Telecommunication New Road Law Law Law on Water Law No.7/2004 Interconnection MCI Resources Regulation regulation No. No. 38/2004 8/2006 8/2006 Regulation on Non- GR Tax State Revenue No. 28/2005 GR on Toll Road GR GR on Supply GR No.16/2005 No.15/2005 Law on ITE Law No. 11/2008 Land & Government Energy & Power Transportation Investment New Rail Law GR on Electricity GR New Land Acquisition Presidential Procurement No.3/2005 Transport Law No 23/2007 Regulation Regulation No.36/2005 & and Utilization New Sea Law No.65/2006, Transport Law No 17/2008 Head of Establishment New Submitted to National Land Electricity Law parliament Agency Regulation New Energy Law Law 3/2007 Draft New Laws Submitted to No. 30/2007 on Air and parliament New Government GR Land Transport Land Transport Investment Regulation Investment Regulation No 1/2008 No.1/2008 Source: Coordinating Ministry of Economic Affairs. 78

  65. Actions Completed in 2007 and 2008 79 2007 Law on Railways No 23/2007 � Law on Energy No. 30/2007 � Government Regulation No. 38/2007 on the Authority of the Government and Provinces as Autonomous Regions � Government Regulation No. 66/2007 on the Establishment of Indonesia Infrastructure Fund � Regulation of State Minister for Housing No. 14/2007 on Multi Stories-Housing (Rusunawa) Management � Regulation of Head of National Land Agency No 3/2007 on Land Acquisition Guidelines Regulation of Head of National Land Agency No. 3/2007 on Land Acquisition Guidelines � 2008 Law on Information & Electronic Transaction (Law No. 11/2008) Approved by the President on 21st of April 2008, consists of 13 Chapter and 54 Article; To guarantee the security, fairness and legal aspect for � the users of information technology Law No. 17/2008 on Shipping Approved by the President on 7th of May 2008, consists of 22 Chapter and 355 Article � – Reduce the monopoly paradigm in sea transport sector – Describe the multi operator for ports in Indonesia – Describe the scope of services for ports in Indonesia Source: Coordinating Ministry of Economic Affairs. 79

  66. Railway 80 Law no 23/2007 on Railway Sector Covers � The development of railways infrastructure can be executed by – business entities. It can be done individually or by joint venture – IN the case of none business entities will execute the railway development, the Central Government or Local Governments will be responsible The Business Entities in railways infrastructure provision must have � – Business license – Development license – Operational license Operational license � Development and Operational Licenses are given by – Central Government for the railways that go across more than 1 province – Provincial Government for the railways that go across the border of districts within a province after receiving approval from the Central Government – District/Municipal Government for the railways that go within the district/city after receiving a recommendation from its Provincial Government and approval from the Central Government New paradigm in railway development il d l t which is more competitive and revoke the monopoly the monopoly Source: Coordinating Ministry of Economic Affairs. 80

  67. Land Acquisition 81 Land Acquisition Fund An entity has been established in the Ministry of Public Works (MPW) as the agency to implement � land acquisition (BLU Tanah) Government has allocated Land Acquisition Fund for about Rp. 600 billion (2006) which is mostly Government has allocated Land Acquisition Fund for about Rp. 600 billion (2006) which is mostly � disbursed in 2007 In 2008, the Government has been allocated ± Rp. 1 Trillion through Ministry of Public Works � (MPW) budget � BLU on Land Acquisition is processing the additional fund for total about Rp. 5.3 Trillion which will be disbursed up to 2009 Land Capping The Government agreed to allocate APBN budget (Rp 4.89 Trillion) to support a national policy on � land capping for 28 toll roads The Government will be able to allocate that such required fund in APBNP 2008, APBN 2009, and � APBN 2010 Land Working Group The policies & Consists of 2 Technical Teams: Land Acquisition and Land Banking Team Consists of 2 Technical Teams: Land Acquisition and Land Banking Team � instruments facilitate to Each team will produce clear Standard Operation Procedure (SOP) on Land Acquisition and � ensure the availability Land Banking of land for infrastructure project j t Source: Coordinating Ministry of Economic Affairs. 81

  68. Land Acquisition Guidelines 82 The National Land Agency (BPN), has issued the Implementation Guidelines Under Regulation of Head of National Land Agency No. 3 year 2007 on Acquisition Guidelines q Land Acquisition committee in local level and national level � Clear mechanism of negotiation in land acquiring with clear time duration in each stage � Independent institution for land price assessment should have a license that issued by BPN p p y � The construction can be started in the land that have been given compensation or the right has been revoked � � Freezing policy can be applied once the government has been decided the development of infrastructure that needs a certain land Source: Coordinating Ministry of Economic Affairs. 82

  69. Project Development Facility, Guarantee Fund, Infrastructure Fund 83 To support project preparation and transaction execution � Project Development Facility NPDF for 16 national projects (US$ 17.6 Mio) and RPDF for 40 projects � (US$ 14 Mio) in various infrastructure sectors Project � Executing agency: BAPPENAS g g y Preparation Preparation Follow Perpres 67/2005 and need local government contribution � The PDF fund will be planned as a revolving fund � To reduce the cost of finance to infrastructure projects in Indonesia To reduce the cost of finance to infrastructure projects in Indonesia Guarantee Fund Guarantee Fund � � � A commercially-managed fund to be able more flexible and responsive, while Project following best commercial practice Biddings The RMU is in charge in designing the concept, including setting up the legal � vehicle, identification of assets, obtaining technical assistance, and procuring hi l id tifi ti f t bt i i t h i l i t d i management fund The Government of Indonesia will establish a company for Infrastructure fund � Infrastructure Fund Construction Construction (b (based on Government Regulation 66/2007) d G t R l ti 66/2007) Main Task : Accelerate Infrastructure Funding through partnership with the private � sector or multilateral financial institution Operation The source of fund is from the national asset that separated from the APBN � � Minister of Finance will act as the stakeholder in the company Source: Coordinating Ministry of Economic Affairs. 83

  70. Status of Project Development Facility, Guarantee Fund, and Infrastructure Fund 84 BAPPENAS agreed to support the preparation for NPDF Project and RPDFprojects as follows � Project Development Facility National Project (NPDF): Margagiri-Ketapang Ferry Terminal, Bandung Water Supply, Pasuruan � Power Plant Regional Project (RPDF): Klungkung Water Supply, Bali Ferry Terminal, GedeBage Terminal, Bandung g j ( ) g g pp y y g g � Commuter Railway, Kertajati Airport, Sleman Water Supply, Sleman Terminal � Study on PDF policy and institution is under preparation The policy paper on establishing Guarantee Fund has been finalized The policy paper on establishing Guarantee Fund has been finalized � � Guarantee Fund Guarantee Fund The establishment of Guarantee Fund institution will be implemented in 2009 � Government regulation on Infrastructure Fund has been issued (Government regulation No. 66/2007); Infrastructure Fund � Ministry of Finance will put seed capital at Rp 1 Trillion � Ministry of Finance is now preparing the Infrastructure Fund institution which is planned to be effectively � operated by end of 2008 Source: Coordinating Ministry of Economic Affairs. 84

  71. Infrastructure Budget 2005-2009 85 Significant increase in state budget allocation for infrastructure development in Indonesia. In million rupiah 2009 (1) Sector 2005 2006 2007 2008 Energy 3.117 4.657 5.826 5.508,1 6.994,6 Transportation 3.978 6.769 9.899 15.298,9 16.077,7 Public Works 13.328 19.186 25.266 32.809,9 35.663,5 Communication 429 1.235 2.320 2.128,9 2.144,6 Housing 84 369 482 674,5 1.003,2 Total 20.936 32.216 43.793 56.420,3 , 61.883,6 , In percent (%) 54 36 46.86 9.68 Source: Nota Keuangan dan APBN 2008. (1) Nota Keuangan dan RAPBN 2009. 85

  72. Infrastructure Strategic Output for 2008–2009 86 1. Finalization of 4 lanes highway development Jakarta-Surabaya, development of Trans Sumatera, Trans Kalimantan, Trans Sulawesi 2. Development of 641 km toll road in Java and South Sulawesi 3. Finalization of Suramadu (Surabaya to Madura) bridge development 4. Spin off railway management for JABODETABEK and South Sumatera p y g 5. Finalization of airport development in Makassar (Hassanuddin airport) 6. New Law on Sea Transportation 7. Finalization of expansion of port facility Tanjung Priok 8 8. Flagship program of DeTIKNas (e education e procurement Palapa Ring free internet services for SMU student Telecommunication and Flagship program of DeTIKNas (e-education, e-procurement, Palapa Ring, free internet services for SMU student, Telecommunication and Informatics Blue Print) 9. Development of rural telephone for the agenda of Desa Berdering and Desa Pintar 10. Development of Regional Solid Waste Disposal (TPA) 11 11. Improvement of Management Performance of Local Water Enterprises (PDAMs) Improvement of Management Performance of Local Water Enterprises (PDAMs) 12. Development of East Canal Floodways and improvement of West Canal Floodways 13. Development of Waste Water Infrastructure 14. Development of multi-stories housing in big cities 15. Compilation and issuance of PPP book 15 C il ti d i f PPP b k 16. Establishment of Infrastructure Fund and Guarantee Fund 17. Revision of Perpres 67/2005 on Public Private Participation 18. Development of PPP project (prepared by using Project Development Facilities) 19. Policy on Public Service Obligation ( PSO) Source: Coordinating Ministry of Economic Affairs. 86

  73. Status on 10.000 MW Project (Java-Bali) 87 Project Name/Location Capacity/COD Status PLTU 1 Banten, Suralaya 1 x 600 MW (03/2010) Kons CNTIC Zhejiang Electr, Rekayasa Industry Kons Chengda, Truba Jurong PLTU 2 Banten, Pandeglang , g g 2 x 300 MW (06/2009) ( ) Kons Dongfang Electr, Dalle Energy g g , gy PLTU 3 Banten, Tangerang 3 x 300 MW (02/2010) Kons Sinomach, CNEEC, Penta Adi Samudra PLTU 1 Jabar, Indramayu 3 x 300 MW (09/2009) Kons Shanghay Electr, Maxima Infrastructure Kons Zelan, Tronoh, Priamanaya PLTU 2 Jabar Sukabumi PLTU 2 Jabar, Sukabumi 3 x 300 MW (02/2010) 3 x 300 MW (02/2010) Tender process Tender process Kons Dongfang Electr, Dalle Energy PLTU 1 Jateng, Rembang 2 x 300 MW (09/2009) Kons Harbin Power, Mitra Selaras Hutama Energy PLTU 2 Jateng, Cilacap 1 x 600 MW ( ) Kons Sinomach, CNEEC, Penta Adi Samudra PLTU 1 Jatim, Pacitan 2 x 300 MW (02/2010) PLTU 2 Jatim, Probolinggo 1 x 600 MW (03/2010) PLTU 3 Jatim, Tuban 2 x 300 MW ( ) Source: Coordinating Ministry of Economic Affairs. 87

  74. Status on 10.000 MW Project (Outside Java-Bali) 88 Project Name/Location Capacity/COD Status PLTU NAD 2 x 100 -150 MW – PLTU 2 Sumut 2 x 200 MW (04/2010) Kons Guangdong Power, Bagus Karya PLTU Sumbar 2 x 100 -150 MW – PLTU 1 Riau PLTU 1 Riau 2 x 10 MW 2 x 10 MW – – PLTU 2 Riau 2 x 7 MW – PLTU Kep. Riau 2 x 7 MW (01/2010) Kons Shangdong Mach, Rekadaya Elektrika PLTU 3 Bangka Belitung 2 x 25 MW – PLTU 4 Bangka Belitung 2 x 15 MW – PLTU Lampung PLTU Lampung 2 x 100 150 MW (04/2010) 2 x 100 -150 MW (04/2010) Adhi Karya, Jiangxi Electrical Power Adhi Karya, Jiangxi Electrical Power PLTU 1 Kalbar 2 x 50 MW (01/2010) Shanghai Golden Concord, Truba Alam Manunggal Eng. PLTU 2 Kalbar 2 x 25 MW – PLTU 1 Kalteng 2 x 60 MW (01/2010) China Nat Heavy Mach, Shangdong, Mega Pwr PLTU Kalsel 2 x 65 MW Mandiri PLTU Sulsel 2 x 50 MW – PLTU Sultra 2 x 10 MW (01/2010) – PLTU 2 Sulut 2 x 25 MW (10/2009) Kons Shangdong Mach, Rekadaya Elektrika PLTU Gorontalo 2 x 25 MW (10/2009) Wijaya Karya PLTU 1 NTB 2 x 10 MW Meta Epsi PLTU 2 NTB 2 x 25 MW (10/2009) – PLTU 1 NTT 2 x 7 MW (02/2010) Barata Indonesia PLTU 2 NTT 2 x 15 MW Kons Shangdong Mach, Rekadaya Elektrika PLTU Maluku 2 x 15 MW – PLTU Maluku Utara 2 x 7 MW – PLTU 1 Papua 2 x 7 MW – – PLTU 2 Papua 2 x 10 MW Source: Coordinating Ministry of Economic Affairs. 88

  75. Status of 91 Projects Offered in IIS 2005 89 Request for PQ, Award & Preparation to PQ & Request Concession Sector Planning Prequalification for Proposal Agreement Construction Operation Total Electricity/Power Plant 1 5 4 2 – – 12 Gas Pipeline Gas Pipeline – 3 3 – 3 3 – – 6 6 Transportation 2 3 – 2 3 – 10 Drinking Water 17 2 1 1 1 2 24 Toll Road 4 3 7 20 4 – 38 Telecommunication 1 – – – – – 1 Total 25 16 12 28 8 2 91 89

  76. List of PPP Projects 90 Specification Time Frame Value Project (Length/Capacity) Location (Progress/Concession Period Granted) (Million USD) Medan-Binjai Toll Road 15.80 km North PQ starts at end of May’08; Cons. 35 yrs 118,81 Sumatera Palembang-Indralaya Toll Road 22.00 km South PQ starts at end of May’08; Cons. 35 yrs 114,45 Sumatera Sumatera Tegineneng-Babatan Toll Road 50.00 km Lampung - PQ starts at end of May’08; Cons. 35 yrs 296,39 South Sumatera Pandaan-Malang Toll Road 37.00 km East Java PQ starts at end of May’08; Cons. 35 yrs 279,97 Cileunyi-Sumedang-Dawuan Toll Road Cileunyi Sumedang Dawuan Toll Road 58 50 km 58.50 km Sumedang, Sumedang Under tender preparation; Cons. 35 yrs Under tender preparation; Cons 35 yrs 428 86 428,86 West Java Medan-Kualanamu-Tebing Tinggi Toll Road 60.00 km North Under tender preparation; Cons. 35 yrs 477,37 Sumatera Pasirkoja-Soreang Toll Road 8.30 km South Under tender preparation; Cons. 35 yrs 111,03 Bandung, West Java West Java Sukabumi-Ciranjang Toll Road 31.00 km West Java Under tender preparation; Cons. 35 yrs 201,72 Menado-Bitung Toll Road 53.80 km North Under tender preparation; Cons. 35 yrs 610,01 Sulawesi Pekanbaru-Dumai Toll Road 135.00 km Riau Under tender preparation; Cons. 35 yrs 918,06 Serangan-Tanjung Benoa Toll Road 9.10 km Bali Under tender preparation; Cons. 35 yrs 161,89 Central Java Coal-Fired Power Plant 2 x 600 MW Central Java Tender expected to start by end of Nov 2008; 1.200 Concession 30 yrs Bandung Bulk Water Supply 1100 lt/sec Bandung, Tender expected to start on Jan 2009; Concession 18 West Java 20 - 25 yrs Total 4.817,75 Source: Coordinating Ministry of Economic Affairs. 90

  77. Annex 4: Progress Achieved Under Presidential Instruction Number 5 of 2008 as of end September 2008

  78. Further Improvement in the Investment Climate 92 This category envisages 67 outputs. At end-September 2008, 37 outputs were slated for completion . In the July-September 2008 period, 9 outputs reached completion: 1. Regulation of the Minister of Law and Human Rights No. M.HH.01.GR.01.06 of 2008 dated 9 July 2008 concerning Third Amendment to Decree of the Minister of Justice Number M.02-IZ.01.10 of 1995 concerning Transit Visas, Visitor Visas, Limited Residence Visas, Entry Permits and Immigration Permits (July 2008). 2. Government Regulation No. 62 of 2008 concerning Amendment to Government Regulation No. 1 of 2008 concerning Income Tax Relief for Investment in Designated Business Lines and/or Designated Regions (June 2008). 3 3. Draft Law concerning Special Economic Zones tabled with the Indonesian Parliament in Letter of the President of Indonesia No R 54/Pres/8/2008 dated 29 August 2008 Draft Law concerning Special Economic Zones tabled with the Indonesian Parliament in Letter of the President of Indonesia No. R-54/Pres/8/2008 dated 29 August 2008 (June 2008). 4. Initial investment database set up by the Investment Coordinating Board, to be upgraded (June 2008 and ongoing). 5. Importer Profile available on-line in import services system (July 2008). 6. 6. Upgrading and widening of 2 kilometres of Jalan Raya Cibarusah (Lemahabang-Mekamukti) completed, road in operation (December 2008). Upgrading and widening of 2 kilometres of Jalan Raya Cibarusah (Lemahabang Mekamukti) completed, road in operation (December 2008). 7. Construction of 248.5 metre Cikarang Flyover with road length 283 metres completed and in operation (December 2008) 8. Technical design and system model for Export National Single Window (NSW) completed (June 2008). 9. Trial integration of Seaport NSW System into NSW portal at Tanjung Priok completed in August 2008 (June 2008). Source: Coordinating Ministry of Economic Affairs. 92

  79. Macroeconomic and Financial Policies 93 This category targets 41 outputs for completion. Of these, 19 outputs were due by end-September 2008, while 12 outputs reached completion. During the July-September 2008 period, 10 outputs reached completion (1 output ongoing) as follows: 1. Government Regulation in Lieu of Parliamentary Act No. 4 of 2008 dated 15 October 2008 concerning the Financial Sector Safety Net (August 2008). 2. Initial draft of the Crisis Management Protocol (CMP) completed under FSSK coordination at financial sub-sector level in July 2008. The FSSK, assisted by a consultant team (Crisis Management Analytics), is conducting a crisis simulation (fire drill), for which preparations commenced in September 2008. Testing of simulation results is planned for 16 December 2008 (July 2008). 3. Issuance of Capital Market and Financial Institutions Supervisory Agency (Bapepam-LK) Regulation Number PER-04/BL/2008 dated 7 August 2008 concerning Oversight of Risk-Based Pension Funds (September 2008). f Ri k B d P i F d (S t b 2008) 4. Review completed by State Ministry for SOEs, recommending application of policy bank concept by the Indonesian Export Financing Agency (LPEI) (December 2008). 5. Main Dealer Quotation System application in operation with progressive upgrading (October 2008). 6. Government Regulation Number 27 of 2008 dated 4 April 2008 concerning Income Tax on Discount on Treasury Notes, one form of debt securities. Bilateral meeting held between the Bureau of Securities Transactions and Institutions and Directorate General of Taxation on 8 August 2008. Study conducted on implementation of Government Regulation No 6 of 2002 concerning Income Tax on Interest and Discounts from Bonds Traded on Stock Exchanges (August 2008) Government Regulation No. 6 of 2002 concerning Income Tax on Interest and Discounts from Bonds Traded on Stock Exchanges (August 2008). 7. Minister of Finance Regulation No. 118/PMK08/2008 dated 28 August 2008 concerning Issuance of Sharia Government Securities on Domestic Primary Market by Bookbuilding (July 2008). 8. IFR_0001 issued in Rp 2.7 trillion sale at 11.8% fixed coupon rate, 7-year tenor and IFR_0002 in Rp 1.9 trillion sale at 11.95% fixed coupon rate, 10-year tenor (July 2008). 9 9. Four fatwas issued by National Sharia Council Indonesian Council of Islamic Scholars (DSN-MUI) 26 June 2008: (1) Fatwa No 69 of 2008 concerning Sharia Four fatwas issued by National Sharia Council, Indonesian Council of Islamic Scholars (DSN-MUI), 26 June 2008: (1) Fatwa No. 69 of 2008 concerning Sharia Government Securities; (2) Fatwa No. 70 of 2008 concerning Method for Issuance of Sharia Government Securities; (3) Fatwa No. 71 concerning the Ijarah-Sale & Lease Back Agreement; and (4) Fatwa No. 72 of 2008 concerning Sharia Government Securities - Sale and Lease Back (June 2008). 10. Training and dissemination for the banking community in Pekanbaru, 4-6 June 2008, and Solo, 19-21 July 2008. Training activities will continued in other cities. Source: Coordinating Ministry of Economic Affairs. 93

  80. Energy Resilience 94 The Energy Resilience Policy category lists 15 outputs. Two outputs were slated for completion by end-September 2008, but work continues as explained in the attached matrix. Nevertheless, 4 outputs targeted for December 2008 and September 2008 reached completion: Source: Coordinating Ministry of Economic Affairs. 94

  81. Natural Resources, Environment and Agriculture 95 The Natural Resources, Environment and Agriculture category lists 13 outputs. At end-September 2008, 2 outputs were due and one output had been completed as follows: Source: Coordinating Ministry of Economic Affairs. 95

  82. Micro, Small and Medium Enterprises (MSMEs) 96 The Micro, Small and Medium Enterprises category lists 34 outputs. Of these, 25 outputs were slated for completion by end-September 2008 and 11 reached completion. The July-September 2008 period saw completion of the following 5 outputs: Source: Coordinating Ministry of Economic Affairs. 96

  83. Implementation of Commitments for the ASEAN Economic Community (AEC) 97 Twenty-five outputs are listed under Implementation of Commitments for the ASEAN Economic Community (AEC). Work reached completion on 2 outputs: Source: Coordinating Ministry of Economic Affairs. 97

  84. Infrastructure & Labor and Transmigration 98 Infrastructure The Infrastructure Policy category lists 73 outputs. At end-September 2008, 5 outputs were due and one output reached completion as follows: Labor And Transmigration This category targets 12 outputs. As at end-September 2008, only one output was due, with work ongoing. Source: Coordinating Ministry of Economic Affairs. 98

  85. Annex 5: Energy and Mineral Resources – Profile and Policy

  86. Early Production (November 2008) 100 Source: Department of Energy and Mineral Resources. 100

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