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

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Republic ublic of Indon onesi esia Sta tability bility at t th the F e Forefr efront, ont, Synergized nergized Ref eforms orms Mo Move Februar bruary 2019 About t Invest estor or Relati lations ons Uni Unit t of the Repub

  1. Indone nesia sia Remai mains ns the Investmen stment t Dest stinati ination on of Choic ice The Econom omist: Indonesi esia rounds out the top five of Asian economies es that can look Indonesi esia Enjoys oys Large Invest estment ents Relative e to Peers within the Region on 2 forwar ward to increas eased ed invest estment ent spending. g. (January y 2019) 1 40 China 58,3 India 35 48,7 Indonesia 48,1 DP (%) 30 Vietnam 39,8 tment / GDP Singapore 39,2 25 Thailand 38,5 20 Japan 36,4 vestm Australia 36,4 Total Inve 15 Malaysia 34,2 10 Hong Kong 32,1 Philippines 31,9 30,63 31,46 31,56 33,45 33,42 33,65 25,56 24,33 24,66 25,13 27,50 28,49 22,84 23,40 24,12 26,58 27,48 28,37 5 South Korea 26,3 Taiwan 25,2 0 Myanmar 22,5 India Indonesia Malaysia Philippines Thailand Vietnam 2017 2018 2019e 0 10 20 30 40 50 60 70 UNCTAD: D: Indonesi esia is listed ed in the top 20 host economies es based ed on FDI inflo flows ws, 2016 JBIC: Among g ASEAN countries, es, Indonesi esia is one of the most preferred place e for business ess and 2017 (June 2018) 2018) 3 invest estment (Novemb ember 2018) 4 500 China 52,2 450 India 46,2 400 2016 2017 Thailand 37,1 350 Vietnam 33,9 Billion USD 300 Indonesia 30,4 250 US 28,8 200 Mexico 13,7 150 Philippines 10,0 (x) = 2016 ranking 100 Myanmar 8,6 50 Malaysia 8,4 0 Germany 5,8 Brazil 5,6 Korea 5,1 Taiwan 4,4 % of surveyed who consider each country has promising prospects Russia 3,7 0,0 10,0 20,0 30,0 40,0 50,0 60,0 1. Source: The Economist – Asia Business Outlook Survey 2018 3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2018 2. Source: IMF World Economic Outlook, Database October 2018 4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey) 8

  2. National ional Strat rategic egic Development lopment Plan n (Nawa Cita ta) The 3 Dimensions nsions on Econ onom omic ic Develop opme ment nt Priority Sector Human Development Equitable Development Development Food d Security urity Educatio ation Inter er- Income ome Grou oup Energy rgy & Electric ectrical al Securit rity Health alth Inter er-Regio ion: : Marit itim ime e & Marine ine (1) Rural al Area, ea, Housin ing (2) Periph ipher ery, , Touris urism & Indus ustr try (3) Outside side Java, a, Char arac acter er Water er Securit curity, y, Basic ic Infrastruc ucture ure (4) Easter ern Area ea. & Conne nnecti ctivity Necess ssar ary Co Condition dition Legal Certainty & Law Politic & Democracy Governance Security & Order Enforcement 9

  3. Econom omic ic Equality ality Polic licies ies to suppo pport sustai ustaina nable public welfa fare re.. ... • Build a fair land distribution scheme • Build a priority scale of Tanah Objek Reforma Agraria (TORA) recipient based on land gini ratio, poverty, & land Agrarian ian Reform orm Economi mic demand • Developing an agricultural industry by agglomeration or cluster method Equ quality y Polici cies es • Define Lahan Pertanian Pangan Berkelanjutan LP2B to prevent land usage for non-agriculture purposes • Land consolidation for agriculture Agric icult ultur ure e (Land ndless less Farmer mer) • Improve research on seeds and agriculture method, off-farm infrastructure, integrated logistic system, build seeds market, tools and machinery • Data collection & law enforcement on palm oil land area, including land bank data collection Land • Building a database and arranging policy on planting non-agriculture commodities Plantation ntation • Improve cooperative performance by encouraging SOEs and private sectors involvement • Research support, market synergies, off-takers, and supply chain on downstream business • Social Housing Urban n Poor & A Afford ordable le • House financing Housing ing • Land banks and affordable land prices • Law enforcement on spatial policies • Integrating fishing and seaweeds sectors Fisher erme men n & S Seaweed weed • Improve and support aquaculture industry and fishery sector value chain Cultiv ivation on • Encourage Private sector investment on seaweed sector (process and off-taker) • Develop and improve progressive tax, capital gain tax and tax on unutilized asset Fair Tax x System em • supporting fiscal spending • Developing natural resources industries and value chains Manufacture e and ICT Minimize interest gap between large companies and small companies • • Protect market share from integrated businesses and strong capital Opportu portunity ity • Regulate and build a database on traditional/modern market, traditional and modern shops • Regulate the distances, location, and zone of the market and modern stores Retail il and Market ket Compulsory mandates to maximize the usage of Local products • • Fair access to the logistic system Financ ncing ing & Gover ernme nment nt • Improving Kredit Usaha Rakyat (KUR) scheme to support non-bankable SME Bud udget get Improving procurement scheme to support SME accessibility to finance • • Identified and built priority scale on sectors, sub-sectors of leading industries and profession Improving link and match scheme between industries and vocation • Human Reso source rce Vocati ationa onal, , Entrepr epreneur eneursh ship ip • Early childhood education Capa pacity ity & & Labor or Market ket • Encourage education system to be more skill, collaborative, flexibility and impact oriented instead of degree consideration Source: Coordinating Ministry for Economic Affairs Priority 10

  4. The Economic omic Policy icy Pa Packages ages “To improve national industry competitiveness, export and investment to generate significant economic growth” Harmoni nizing ng Regul ulat ation ons Simplifying g Bureau eaucrat atic Proc oces ess Ensurin uring g Law Enfor nforceab eability Phase e I (9 (9 Sept pt ’15) Phase se IX (27 Jan ’16) Improving national industry competitiveness Accelerating electricity generation, stabilizing meat prices and Phase e II (29 Sept ’15) improving rural – urban logistics sector Easing permit requirement and simplifying export proceeds Phase e X (11 Feb ’16) requirement Revising the Negative investment List and improving protection Phase e III I (7 Oct t ’15) for SMEs Financial services facilitation, export financing and elimination of Phase se XI (29 29 Mar ’16) business unnecessary burden Stimulating national economy through facilitation to SMEs and Phase e IV (15 Oct t ’15) industries Social safety net and betterment of people welfare Phase e V (22 Oct t ’15) Phase e XII II (28 28 Apr ’16) Improving industry and investment climate through tax incentives and Improving Indonesia’s rank on Ease of Doing Business (EODB) deregulation on sharia banking Phase e XIII I (24 Aug ’1 6) Phase e VI (5 Nov ’15) Low Cost Housing for Low-Income Communities Stimulating economic activities in border areas and facilitating strategic commodities availability Phase e XI XI V (10 Nov ’1 6) Roadmap for E-commerce Phase se VII I (7 De Dec ’15) Stimulating business activities in labor-intensive industries nation-wide Phase e XV (15 Jun ’1 7) through incentives in the form of accelerating land certification process Improving logistics for individuals Phase e XVI (1 (16 Nov ’1 8) Phase se VIII II (21 De Dec ’15) Improving the competitiveness and domestic economy Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries In addit ition on to the 16 Policy icy Packages kages, , on Augus ust 31, 2017 7 the Gover ernment nment has issued sued a Presi sident ential ial Regulat ulation ion No.91/2017 1/2017 for enhanc ancing ing busines siness s license cense service ice stand ndard ard Source: Coordinating Ministry for Economic Affairs 11

  5. Improving ving the Compe peti titiv tiven eness ess and Domes esti tic c Econom omy th Econom The 16 th omic Policy y Pac Packa kage has been launched hed TAX HOLIDAY DAY EXPANSI SION EXPORT PROCEEDS DS (DHE) SCHEME Backgr groun ound In order to further increase investment value in Indonesia, there is a need for expansion of sector and standard classification of Indonesian Business Fields (KBLI) that are given tax holiday, complemented with a process simplification to receive the tax holiday according to the Online Single Submission (OSS). Objecti tives es and benefit its 1) Increasing investment and strengthening the industrial sectors from the downstream to the upstream through the expansion of the business sector, KBLI’s pioneer industries, and Special Economic Zones (SEZ) that can receive tax holiday facilities Tax Rates es on Deposit 2) Increasing the process of convenience of filing process and Tax Rates es on Deposit Inter eres est Incom ome Inter eres est Incom ome tax holiday facilities provision Source: Coordinating Ministry for Economic Affairs 12

  6. Progr gress ess of the Economic omic Policy icy Pa Packages ages* 233 33 I – XV Initially, there are 233 regulations which need to be I – XII TOTAL INITIA IAL REGULA ULATIO IONS NS deregulated 11 11 I – XV Based on the further assessment, 11 regulations has been I – XII REVOKE OKED REGULA ULATIO IONS revoked from deregulation process 222 22 I – XV I – XII Total regulation subject to be deregulated: 222 regulations TOTAL REGULA ULATIO IONS NS 220 20 99% 99% SET SET As of September 26 th , 2018, deregulation of 220 regulations PRES ESIDENTIAL AL LEVEL EL 98% 98% PRESIDE IDENTIA TIAL 52 are finished (99%), comprising 51 regulations at Presidential 51 51 47 47 42 42 TOTAL FINISH ISHED ED level and 169 regulations at Ministerial/Institutional level SELESAI AI MINISTERIAL/I AL/INSTITUTIONAL AL LEVEL EL 99% 99% 170 170 169 FINISH ISHED ED TOTAL Unfin inishe ished regu egula lation tions: Proposed Policy on Development of 1% 2 ON GOIN ING Business and competitiveness of National Logistics Service DISCUS CUSSION ION Providers *as of September 26, 2018 Source: Coordinating Ministry for Economic Affairs 13

  7. Other er Progress ogress on Econom omic ic Polic licy y Pa Packages ages Developme pment nt of Fair, , Simplified mplified & & Spesial Economi mic Zone (SEZ) Project ctable Wage Syst stem 29 Provinces have set 2016 Minimum Wage Investment commitments in SEZ up to 2017 System in accordance to the Government reach 41 T, with 3 hour licenses already Regulation (GR) No. 78/2015 applied in 4 SEZ’s Administrators in 2017 Indus ustrial trial Zone Deregul ulati ation n on Logist stics cs Sector or 52 Bonded Logistic Center has been • The Provinces of Central Java proposed 3 launched to support various industries IZ’s : Kendal, Demak, and Ungaran • Pharmaceutical IZ in Bitung (North Sulawesi) in 2017 14

  8. Investment estment Incentiv entives es to o Boo oost st Industr ustry y Sect ctor or BUSINESS INESS EXPAN ANSION ION INDUS USTR TRIA IAL ZONE NE Tax all llowa owance ce • • VAT exem emption ption on import or delivery of capital goods, Exem emption ption or relief ief of import port duty ty on capita pital l goods, , machine inery ry or equip ipmen ent • • Impo port t Duty ty exem emption ption on machineries/goods/materials, for production purposes that can not be produced domestically; • Tax Allow lowance ce and Tax Holi liday Exem emption ption or relief ief of import port duty ty on raw materi terials ls or auxil ilia iary ry materia terial l for • production purposes for a certain period of time and certain conditions; Exem emption ption or suspe spensio sion of VAT on the e import port of capita pital l goods or • machine inery ry or equipm ipmen ent for production purposes that have not been FREE EE TRAD ADE E ZONES NES AND D PORTS TS produced domestically for a certain period of time; Accelerate depreci reciation tion or amortiz ortization tion (part of tax allowance); and • Property perty tax reli lief ef, especially for certain business sectors in certain regions; Exem emption ption of: • Combine with Online Single Submission (OSS) • Impo port t Duty ty • • VAT • Luxury ry Goo oods s Sales les Tax (PPnBM BM) • Custo toms s duty ty MICRO, O, SMAL ALL, L, MEDIUM IUM ENT NTERPRISES ERPRISES (MSMES MES) PIONEER NEER INDUS USTR TRIE IES Decrea creasing ing MSMEs Es Tax from 1% to 0.5 .5% of gross revenue Tax holid oliday of corporate income tax in a certain amount and time SPECIA CIAL L ECONO ONOMIC MIC ZONE NE E-CO COMM MMERCE CE • No coll llec ection tion of VAT and Luxury ry Goods ods Sales les Tax (PPnBM BM), ), • Sales from customs areas for non non-small ll entrepren repreneu eurs rs through the • Custo toms s tax exem emption ption, market place will be subject to 0.5 .5% incom come e tax and 1% VAT • Tax Allow lowance ce and Tax Holi liday, • Sales from customs areas for small ll entrepren repreneurs rs through the market • Suspe spensio sion of Impo port t Duty ty, place will be subject to 0.5 .5% incom come e tax • 0% Import port Duty ty for goods produced using local components of a certain level Source: Coordinating Ministry for Economic Affairs 15

  9. New w Tax Hol olida iday y Pol olicy icy* to boost t indu dustr stry y sector BEFORE RE PROVIS VISIO ION AFTER ER Pioneer Industry with minimum investment value of 500bn Rupiah Pioneer Industry with minimum investment value of 1 trillion Rupiah (minimum investment value of 500bn Rupiah for telecommunication sector) Applied to 17 industry groups: (i) upstream base metal; (ii) oil and gas refinery; (iii) petrochemical (oil, gas, Applied to 8 industry groups: or coal based); (iv) non-organic base chemical; (v) organic base chemical; (i) upstream basic metal industry; (ii) oil and gas refinery (vi) pharmaceutical materials; (vii) semiconductor and other components; industry; (iii) organic basic chemicals industry; (iv) machinery (viii) communication devices components; (ix) medical devices industry; (v) plantation, forest, and fishery products Taxpa payer er components; (x) machine manufacturing for industry; (xi) machine main processing industry; (vi) telecommunication, information and components manufacturing; (xii) robotic components manufacturing; (xiii) communication industry; (vii) marine transportation; and (viii) ship components manufacturing; (xiv) airplane components manufacturing; economic infrastructure (xv) train components manufacturing; (xvi) power plants; and (xvii) economic infrastructure 10 – 100% 100% (single rate) Corporat ate Incom ome Tax (CIT) reduc uction ion rate 5 – 20 years depends on the investment value (in IDR): • 5 – 15 years; or 1. 500Bn – 1Tn : 5 years 4. 15Tn – 30Tn : 15 years • Can be extended to 20 years; subject to MoF 2. 1Tn – 5Tn : 7 years 5. ≥ 5Tn : 20 years Conces cession ion perio iod discretion 3. 5Tn – 15Tn : 10 years Not available 50% CIT reduction for the next 2 years Transiti ition on Tax allowance for business expansion can be provided Tax allowance not provided with terms and conditions applied After Tax Holid iday ay *) MoF has issued a new Tax Holiday policy through Regulation No. 35/PMK.010/2018 (PMK-35) dated 4 April 2018. Source: Coordinating Ministry for Economic Affairs 16

  10. Enhan ancing cing Busin ines ess s License nse Servic ice e Stand andar ard Presi side dent ntial al Regulati ation n to Ac Accelerat rate Ease of Doing ng Busi siness ness has been launche ched Improve efficient, streamlined, & Provide business licensing Overcome the barriers to integrated business license service process assurance in terms of doing business in standards the costs and lead times Indonesia cy Goals 2 4 6 3 5 1 Policy Accelerate the business Increase coordination & synergy Implement integrated licensing process (single licensing process between central & regional submission) government nd Phase st Phase 2 nd 1 st Forming a Task Force to identify & Business license overcome the end-to-end licensing regulatory reforms Main Policy cy barriers Implementing a licensing checklist for Implementation of the Special Economic Zones (KEK), Free Single Submission Trade Zones (FTZ), Industrial Zones & system Tourist Zones Utilizing data sharing Note: 1 st and 2 nd Phase are implemented in parallel Source: Coordinating Ministry for Economic Affairs 17

  11. Improving ing Invest estment ment Climat mate Online e Single le Submiss missio ion (OSS) Has Been en Launched hed.. ... OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Secto tors rs Lorem Ipsum Enviro ironment ment & Public lic Works & Electr tric icit ity Indus ustry ry Sector tor Health th Sector or Suitable for all Forest stry ry Secto tor Housing ng Sector tor Secto tor category, Infor ormation ation & Marine ne & Fishery ery Medic icine ine & Transporta ortation ion Trade e Sector tor Commun unic icati ation on Secto tor Food d Sector or Secto tor Secto tor Other r Sector or The Adva vanta tage ge of Using g OSS Business licenses can Standardized Ellectronically be secured in under an business licenses integrated hour are available The whole licensing Accessible at More practical process is monitored by anytime and the Task Force anywhere Source: Coordinating Ministry for Economic Affairs 18

  12. Improving ving Investmen stment t Clima imate …Bonded Logistic Center to Improve Indonesia’s Competitiveness Bonded Logistic Center To dat To ate, e, 52 Bond onded ed Log Logis istic tic Cen enter er has has be been en lau launche hed to to suppor ort var ario ious us industries stries. (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the Small ll and Food d & implementation of the 1 st Economic mediu ium m beverages verages indus ustry y indus ustry Policy Package. Personal Pe onal Oil il and care/ ga gas, s, and PLB facility aims to improve home care e mining ing Synthet thetic ic efficiency and reduce the cost of industry indus ustry textile le transportation and logistics in Auto- (chem emic ical al motive ive Indonesia; support the growth of the substanc ances) indus ustry ry industry. . domestic industry, including small Textile ile Heavy vy (cott otton on) and medium industries; increase Equip uipmen ent t indus ustry indus ustry investment; and to make Indonesia Aircraf raft t to become a logistics hub in Asia MRO RO Defen ence Pacific. indus ustry indus ustry 19

  13. Improving ving Investmen stment t Clima imate e …revising the Negative Investment List Introduc roduction tion of New Foreign reign Owners ership ip Regula lati tion on for Stra rategi tegic c Sectors ctors Sports Center, Pharmace ceutica ical l Raw Materia ials ls Cold storage ge Restaurants, s, Bars Film Proces essi sing g Lab, Crumb Rubber Manufact cturing After Before After Before After Before After Before 100% 100% 100% 100% 33% 85% 49% 51% Priva ivate e Museum, m, Caterin ing, g, apparel el Toll l Road Operator or, Distrib ibutio ion, Warehousi sing Key Reforms ms in Negative e Foreign ign Manufact cturing, g, Exhibit bitio ions s & Teleco comm mmunica icatio ion Testin ing g Company Investmen estment t List st Conventio ions Before After Before After Before After Revision ision of "Partn tnership ip" catego egory y to refer to partn tners ership p with Micro, o, Small and Medium m Ente terprises ses (MSMEs) s) 100% 67% 67% 95% 33% 51% Grandfath ther er Law: w: If a parti ticu cular sector tor is tightened tened in future, e, existi ting g foreign gn Profess essio ional l Train inin ing, g, Golf Course Management, Air Teleco comm mmunica icatio ion Provi vider er invest estor r does s not t need to compl ply y with Transp spor ort Support Service ices, s, Travel el Bureau Consult ltancy cy for Construct ctio ion 1 with Integrated ed Service ices tighter ter stake Before After Before After Before After Stren ength then en implementa mentati tion on of nega gati tive investmen estment t law throu ough active ive roles es from ministr strie ies, s, agen encie ies s and regiona ional 67% 67% 67% 49% 55% 65% gov overnments ments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) 20

  14. Investment estment Realization lization (Q4-2018) 8) Direct rect Inves estm tmen ents ts FDI I Realiz izati tion on by Sectors tors (yoy oy) IDR tn 200 FDI DDI TOTAL 185,9 180 Non Meta tall llic ic 160 Minera eral l Industry try 140 120 US$185.4 85.4 mn mn 100 Transporta portation tion, , 12.4% 80 60 Wareh rehouse se, , and Housi sing, g, Industria strial l Esta tate, te, 99,0 40 Teleco lecommunic ication tion and Offic ice e Build lding ing 20 US$1,063.9 ,063.9 mn mn US$773.9 73.9 mn mn 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 7.7% 3.5% 2013 2014 2015 2016 2017 2018 Pape per and Printing ting Industry try Textil tile e Industry stry Investme stment nt IDR185 85.9tn .9tn US$162.9 62.9 mn mn Rp159.4 9.4 T US$60.3 0.3 mn mn IDR179 79.6tn .6tn 434 434,463 463 37 375,982 ,982 Realizat zation Rp145.4 5.4 T 80.4% 53.1% * 3.5% 9.6% 15.6% .6% Food od Crops, ps, Planta tation tion, and Electrici ectricity ty Lives esto tock ck US$1,406.2 ,406.2 mn mn Q4-2017 Q4-2018 US$379.3 79.3 mn mn Q1-2016 Q1-2017 Q1-2016 Q1-2017 * * person 9.6% 11. 1.7% IDR86 86.9tn .9tn IDR67.6t 67.6tn IDR112.0tn 112.0tn Mining ing IDR99.0t 99.0tn US$807.6 07.6mn mn Decrea reasi sing 31. 1.0% -11. 1.6% 28.6% Q4-2017 Q4-2018 Q4-2017 Q4-2018 Source: Investment Coordinating Board (BKPM), compared to Q4-2017 period 21

  15. Se Sect ction ion 2 Econom onomic ic Factor: or: Strong ong and S d Stable Growth wth Prospect spects Rem emain in Intact ct

  16. Condu duciv cive e Envir ironmen onment t Und Under erpin pinning ning Stron ong g Growt wth Fundament amentals ls Tax base e to be 4th Most Populous us Budget et reform m as a a broadened ed from m part t of larger ger Larges gest Economy in count ntry in the one reduce e economi omic c reform South h East Asia World ld; 64% in dependen ency cy on initiative iative produc uctiv ive age commod moditi ties es Large e and Stable table Consis sisten tent Econ onomy omy Fuel subsi sidie ies s Budget et Refor form Rising ing Middle le Clas ass sign gnifican icantl tly y reduce ced Manag ageab eable le Pruden ent t debt and Afflue luent nt and spen ending Inflat flation ion Rate managem gemen ent redirec ected ted to more Customer ers prod oducti tive e alloca cati tion on Refo form rm-Or Orien iented ed Admin inis istra ration ion Three e main sources ces of financing ing for investm estmen ent t From commod odity ty-based sed to manufactu cturing needs: s: State te and region onal budget, et, State te Owned ed and service ce sectors tors via infrastr structu ture Ente terprises ises and PPP developme opment New w Economic onomic High Conti tinuing ing from 2015 15 polic icy, y, infrastr structu ture will Structure Infrastructu astructure From consu sumpti mption on-led to invest estme ment-led growth owth be high gher than fuel subsid sidy via a stron onge ger manufactu cturin ing sector tor and more Inve vest stme ments ts investmen estment t initiatives iatives Infra rastru tructure cture spend ending ing focuse sed on basic ic infrastru tructu cture e proj ojec ects ts Polici cies es to mainta tain in purch chasin sing g power er to stimu mulate te domesti estic c economy omy in the midst t of Fiscal and non on-fisca iscal incenti tives es to attra tract ct weaken ening ing macroe oecon conomic ic condit ition ons infrastru tructu cture e investmen estment t and promote mote PPP 23

  17. Indonesia’s Strong GDP Stron ong g GDP DP Growt owth 1 • Solid economic growth recorded in the final quarter of 2018 points to maintained economic momentum in Indonesia. Actual GDP growth was realised at 5.18% % QoQ YoY (yoy) in the fourth quarter of 2018, up slightly on the 5.17% (yoy) posted in the 7,0 previous period. Growth for the year, therefore, increased to 5.17% (yoy) in 2018 5,12 4,94 4,93 5,05 4,82 4,74 4,77 5,17 4,92 5,18 5,01 4,94 5,01 5,01 5,06 5,19 5,06 5,27 5,17 5,18 from 5.07% (yoy) in 2017, representing the fastest rate recorded in the past five 5,0 4,21 4,01 4,01 years. 3,83 3,74 3,31 3,27 3,19 3,09 3,14 3,0 • Domestic demand was the key driver of economic growth in the final three months of 2018, influenced primarily by household consumption as well as 1,0 consumption by non-profit institutions serving households (NPISH). Strong 0,04 domestic demand also stems from sound investment performance. In contrast, (0,16) (0,36) (0,30) (0,42) -1,0 exports declined in 2018 as a corollary of global moderation. (1,73) (1,81) (1,69) (1,70) • By sector, the main driver of growth was the tertiary sector, financial services in (2,07) -3,0 particular. While the secondary sector, manufacturing, grew at the slower pace in Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 the fourth quarter of 2018. 2014 2015 2016 2017 2018 Favou oura rabl ble GDP P Growt owth Compa pared red to Peers rs 2 Grow owth th Prospe spect % 9,0 Institution stitutions 2019 19 GDP P growth owth (%YoY oY) 8,0 7,4 7,0 5.3 2019 Budget 6,6 6,0 Bank Indonesia 5.0 – 5.4 5,1 5,0 4,0 IMF 5.1 3,6 3,1 3,0 5.2 World Bank 2,0 1,0 ADB 5.2 0,0 Consensus Forecast 2012 2013 2014 2015 2016 2017 2018* 2019* 5.1 (February 2019) Bulgaria Colombia India Indonesia Philippines 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption 2. Source: World Economic Outlook Database – October 2018; * indicates estimated figure 24

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

  19. Regio gional nal Growth th Remai mains ns Posit sitiv ive Economi mic Growth th has accelera rated ed in most t regions ns, , parti ticula ularl rly y in Java va and Kalimant mantan Aceh 5.43 Riau Islands 5.48 SULA LAWESI SI (6%) %) North Sumatra Bengkulu 4.76 KALIM IMANTA TAN (8%) %) SUMA MATR TRA (22% 2%) 5.30 Babel Islands3.70 North Sulawesi 6.10 West Kalimantan Riau 1.28 South Sumatra Gorontalo 7.25 5.07 West Sumatra 6.07 Central Sulawesi Central Kalimantan 5.50 Lampung5.38 5.37 6.12 Jambi 4.77 West Sulawesi 5.32 South Kalimantan South Sulawesi 5.78 6.47 East Kalimantan Southeast Sulawesi 5.14 6.23 North Kalimantan 7.69 RGDP ≥ 7.0% JAVA (58.5 8.5%) MA MALUK UKU-PA PAPUA UA (2.5%) .5%) Banten 5.98 6.0% ≤ RGDP < 7.0% Jakarta 6.41 BALI-NUS USA TENGGARA RA (3%) %) 5.0% ≤ RGDP < 6.0% West Java 5.50 Bali 7.59 Maluku 6.41 Central Java 5.28 4.0% ≤ RGDP < 5.0% West Nusa North Maluku 8.25 East Java 5.65 Tenggara - 0% ≤ RGDP < 4.0% Papua -17.79 Yogyakarta 7.39 1.43 West Papua 0.18 RGDP < 0% East Nusa Tenggara 5.32 Source: Central Bureau of Statistics of Indonesia (BPS) 26

  20. Se Sect ction ion 3 Exter ernal l Factor: r: Impr mproved ed Exter ernal Res esil ilie ience ce

  21. Ext xtern ernal al Balance nce under r Control ntrol Support ported ed by Adequate uate Reserves erves Balanc lance e of Payment nts Portrait ait Current ent Accoun unt Deficit within hin Safe Thresh eshold ld 2013: 2014: 2015: 2016: 2017: 2018: US$bn Current Account Capital and Financial Account US$bn CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit (US$29.1bn) n) (US$27.5bn) n) (US$17.5bn) n) (US$16.9b 9bn) n) (US$16.2bn) n) (US$31.1bn) n) Overall Balance Reserve Asset (rhs) US$bn 20 160 8 15,68 68 6 15 121 121 4 120 10 2 2,04 4 5,42 2 0 5 -2 80 (6,99) 99) 0 -4 -6 -5 (1,62) 62) 40 -8 (9,15 15) -10 -10 (2,58) 58) (9,15) 15) -12 -15 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3*Q4* Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1* Q2* Q3* Q4* 2013 2014 2015 2016 2017 2018* 2013 2014 2015 2016 2017 2018* Goods Services Primary Income Secondary Income Current Account Source: Bank Indonesia Source: Bank Indonesia Trade Balanc lance Defic icit it in line ne with h Improving ing Economic ic Activ ivit itie ies Substant antial al FX Reserves es to Mitiga igate Externa nal l Challe alleng nges es 2013: 2014: 2015: 2016: : 2017: 2018: FX Reserve ves as of January 2019: US$120.1 bn n US$bn Deficit Deficit Surplus Surplus Surplus Deficit (Equiv. to 6.5 month ths of imports ts + servicing of government debt) t) (US$ S$4.10bn) n) (US$ S$2.37bn) n) US$7.59bn US$8.83b 3bn US$11.83bn bn (US$ S$8.57bn) n) 3,00 US$bn Month FX Reserves (LHS) Month of Import & Debt Service (RHS) 130 15 14 2,00 120 13 12 1,00 110 11 10 100 9 0,00 8 90 7 -1,00 6 80 5 4 70 -2,00 OG Non-OG Total 3 2 60 1 -3,00 50 - 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 2013 2014 2015 2016 2017 2018 2019 2013 2014 2015 2016 2017 2018 2019 * Preliminary Figure ** Very Preliminary Figure Source: Bank Indonesia Source: BPS 28

  22. Exch change ange Rate e In Line e with h Fundame ament ntals als Movem emen ent t of Rupia iah IDR/US$ 15.500 The Ru Rupiah iah app appreciat eciated, ed, thus us sup uppor orting ing econ econom omic ic stabilit ility. Point 15.400 IDR/USD to point, the Rupiah gained 3.63% (ptp) in the fourth quarter of 15.176 15.300 Monthly Average 15.200 2018 compared with conditions at the end of the previous period, 15.100 Quarterly Average boosted by a positive balance of payments. The strong Rupiah 15.000 persisted into January 2019, appreciating another 2.92%, with the 14.900 14798 14.800 trend continuing into February 2019 on the back of non-resident 14.661 14798 14.700 capital inflows to domestic financial markets, drawn by solid 14.600 economic fundamentals as well as attractive on domestic financial 14.500 14.400 assets and less global economic uncertainty. Bank Indonesia 14.493 14040 14.300 14109 believes that the Rupiah will remain stable, in line with market 14.200 Data as of February 20 th , 2019 14.100 mechanisms. 14.000 14.031 13.900 1-Oct-18 17-Oct-18 2-Nov-18 18-Nov-18 4-Dec-18 20-Dec-18 5-Jan-19 21-Jan-19 6-Feb-19 Rupia iah Exch change ge Rate te Fared red Rela lative tively Well ll Compared red to Peers ers Rupia iah Exch change ge Rate te Volati latilt lty YTD 201 2019 vs vs 201 018 % 45 point-to-point average Dec-18 Jan-19 -1,93 40 INR -3,48 -1,13 KRW -1,89 35 -0,83 EUR -3,64 -0,67 JPY 30 0,93 -0,29 TRY -8,69 23,5 25 22,3 0,81 SGD -0,48 21,0 20,8 1,02 PHP 0,62 20 1,61 MYR 15,1 -1,62 13,1 1,97 15 13,0 ZAR -4,08 10,2 10,0 2,42 CNY 9,1 -2,30 10 7,8 7,9 7,5 7,6 2,42 IDR 5,9 5,8 5,6 0,97 5,0 4,7 4,14 3,6 THB 5 2,25 Data as of February 20 th , 2019 4,29 BRL % -1,88 - -10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Source: Bank Indonesia 29

  23. Bank Indonesia’s Pol olicy icy Direc ection ion To mainta ntain n Rupiah h stability ty and suppor pport t growth Measures ures To Suppor port Growth owth Measures ures To To Stabil biliz ize e Rupia iah Exchange ge Rate 1 1 A pre-emptive, front-loading Further easing of To stabilise the rupiah exchange To bolster the growth of the property and ahead-of-the-curve macroprudential policy rate, while consistently controlling sector which has positive impact to the policy response inflation within the 2018-2019 economy target range of 3.5±1% 2 2 Dual intervention in the Coordination with the Coordinating To stabilise the rupiah exchange foreign exchange market Ministry of Economic Affairs, the Ministry rate, adjust fair prices in the Policy coordination to and government securities of Finance, and the Financial Services financial markets and maintain accelerate financial (Surat Berharga Negara – Authority to accelerate financial market adequate liquidity in the money market deepening SBN) market in a deepening, particularly in private market measured way financing for infrastructure. 3 3 Strengthening the monetary Electronification to support social Payment system To maintain adequate liquidity in operations in the foreign assistance disbursement and financial development to support the rupiah money market and exchange and money transcation of the central and regional digital economy interbank swap market markets government 4 4 Sharia economy and finance Intensive communication, development to create halal value chain, To form rational expectations, thus Sharia economy and especially to market sharia financal sector development both helping to mitigate the rupiah finance development players, banks, businesses, for commercial and social purposes, overshooting its fundamental level. and economists including its education and communication Source: Bank Indonesia 30

  24. Ample le Line nes of De Defense nse Against nst Ext xtern ernal al Shocks ks Ampl ple e Reserv erves es Ample level of FX reserves to buffer against external shock  FX Reserve FX Reserves as of January 2019: US$120.1 billion  Swap p Arra range gemen ent Renewed a 3 year USD22.76 billion swap line with Japan on October 14 th , 2018  Japan The facility is available in USD and JPY  South Korea rea Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2017  eral ateral Australia ralia Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018  Bilat Singap gapore ore Established a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2018  Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in  China November 2018 Entitled to a maximum swap amount of USD600 million under ASA  ASEAN Swap p The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million  Arrangemen ngement (ASA) Doubled to USD2 billion in 2005 ional al  Region Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the  Chiang ng Mai i Initiativ iative e agreement Mult ltilater ilaterali liza zation ion Came into effect in 2010 with a pool of US$120 bn  (CMIM IM) ) Agreeme eement nt Doubled to US$240 bn effective July 2014  IMF Global al Financ ancial ial Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem  al Global Safety ety Net t - GSFN Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)  Source: Bank Indonesia 31

  25. Solid lid Polic licy y Coordination dination In Managing ging Financi ncial al Markets ts Volat atility ility The e enact ctmen ment of Law No. 9/2016 regarding g Prev even ention and Mitiga gation of Financi cial l Syst stem em Crise ses as a legal foundation Gov’t Securities Crisis is Managem agemen ent t Protoc ocol ol (CMP) for the government to serves at the time of financial crisis in  Indicato tors rs: the form of Financi cial l Syst stem em Stabil bility Commi mmittee ee (KSSK SK) - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities KSSK K member mbers: the Ministry of Finance, Bank Indonesia, the  Policie licies s to address the crisis at every level : Financial Services Authority, and the Deposit Insurance - Repurchase the government securities at secondary market Corporation - Postpone or stop the issuance Bond Stabil iliz izati ation on Framew ewor ork Swap facility arrangements based on international cooperation Firs rst t Line of Defense Buyback fund at DG of Budget Financing and Risk Management State’s Budget Investment fund at Public Service Agency Enhancing coordination between government institutions (BLU) (min. level Aware) and continuous dialogue with market participants State te Owned ed Enterp terprises ises Related SOEs (min. level Aware) (BUMN)’s Budget Social cial Secu curit ity y Orga ganizin izing g BPJS (min. level Aware) Agency (BPJS)’s Budget CMP Implementing Crisis Management Protocol (CMP) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget Accumulated cash surplus (SAL) (min. Level Crisis) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 32

  26. Stren rengt gthen ened d Priv ivat ate e Ext xter ernal al Debt t Risk sk Managem ement nt Encou coura ragi ging Corpora porates tes Compli pliance ce on Hedgi ging Ratio tio & Liquid quidity ity Ratio tio Debt Burden n Indic icat ator (Externa nal l Debt/GDP) Remains ains Compar arab able le to Peers Rating ing Hedgin ging Ratio io* Extern ernal Debt ebt/GDP (%) 62,7 131 ; Bulgaria 63,5 68,8 265 ; 4,8% 39,6 9,8% Colombia 40 39,6 21,5 India 19,5 ≤ 3 months 20,3 > 3 - 6 months hs 34,4 Indonesia 35,2 34,8 20,8 2.441 ; 90,2% 2.575 ; 95,2% Philippines 21,9 23,3 0 10 20 30 40 50 60 70 80 2019F 2018F 2017 Source: Moody’s Statistical Handbook, November 2018 Liquid uidit ity Ratio io* Regulat ulation n on Prudentia ential l Principle le in Manag aging ing External nal Debt 317 ; Phase 1 Phase 2 Phase 3 12% Regu gulati tion on Key Points ints Jan 1,2015 2015 – Jan 1,2016 2016 – Jan 1, 2017 17 & & Dec 31,20 2015 15 Dec 31,20 2016 16 beyond Object ect of Regul egulation on Governs all Foreign Currency Debt Hedgi dging g Ratio < 3 months 20%* 25%** > 3 – 6 months 20%* 25%** 2.389 ; 88% Liqu quidity y Ratio (< 3 months) 50% 70% Credi edit Rating Not applicable Minimum rating of BB- Must be done Comply Not Comply Hedgi dging g transaction on to meet eet not necessarily be done with a bank in with a bank in hedge ge ratio Indonesia Indonesia *Data as of Q3 2018, with total population 2.706 corporates Sanction on As of Q IV-2015 Applied Source: Bank Indonesia Source: Bank Indonesia 33

  27. Health althy Ext xternal ernal Debt t Composition osition Extern ernal l Debt bt Structure cture The e Structure cture of Extern ernal l Debt bt is Dom omin inated ted by Long-Term erm Debt bt Short Term External Debt Long Term External Debt Private Debt Government and Central Bank Debt 100% 100% 90% 90% 80% 80% 57,4 58,6 52,6 50,0 46,4 44,2 45,9 49,5 51,2 51,3 50,9 51,5 51,4 50,8 50,5 50,5 50,3 49,9 49,5 49,2 49,4 70% 70% 60% 81,7 78,8 79,3 78,3 78,8 79,8 82,1 82,9 84,4 83,8 84,0 83,9 83,3 83,2 84,0 83,2 83,2 83,0 83,7 83,7 84,2 60% 50% 50% 40% 40% 30% 30% 42,6 41,4 47,4 50,0 53,6 55,8 54,1 50,5 48,8 48,7 49,1 48,5 48,6 49,2 49,5 49,5 49,7 50,1 50,5 50,8 50,6 20% 20% 10% 18,3 21,2 20,7 21,7 21,2 20,2 17,9 17,1 15,6 16,2 16,0 16,1 16,7 16,8 16,0 16,8 16,8 17,0 16,3 16,3 15,8 10% 0% 0% Extern ernal l Debt bt Remains ins Managea geable le Extern ernal l Debt bt to GDP DP Ratio tio & Debt bt to Export rt Ratio tio Million USD External Debt External Debt Growth (rhs) % External Debt to Export Ratio External Debt / GDP Ratio (rhs) % % 400.000 20,0 200 40 36,1 36,2 17,1 34,7 34,8 18,0 34,4 34,3 34,1 350.000 32,9 31,8 35 16,0 180 29,1 300.000 27,4 30 26,5 14,0 12,0 176,1 25,0 11,5 11,3 160 250.000 168,4 168,0 166,4 12,0 25 10,2 10,1 163,8 159,9 157,1 8,9 200.000 10,0 140 20 6,9 8,0 139,5 150.000 5,9 5,7 15 5,4 120 6,0 4,2 123,1 100.000 121,8 10 3,0 4,0 114,9 113,8 100 50.000 5 2,0 101,0 0 0,0 80 0 *Provisional Figures **Very Provisional Figures Source: Bank Indonesia, External Debt Statistics of Indonesia, February 2019 34

  28. Managea geable ble Ext xtern ernal al Debt t Profile ile Shor ort term non-ban ank corp rpor orat ate e debt (non on affiliation) ) represe sents only ly 8.0% 0% of tot otal private externa nal l debt Public lic Long g Term 1 Privat ate Bank nk Af Affiliati tion on US$186.2bn US$144.3bn US$20.6bn or or or 49.4% 75.7% 10.8% US$10.5bn of Total Ext. of Private Ext. of Private or or Debt Debt Ext. Debt 5.5% External nal Debt of Private e Positio ion Ext. Debt US$1 $190 90.6b 6bn US$ US$46.3bn US$25 25.7bn or or or 50.6% 50 US$376 76.8bn bn 24.3% 13.5% 5% of total of Private of Private Ext. Debt Ext. Debt Ext. Debt Privat ate Non-Ba Bank nk US$15.2bn Short-Term 1 or or 8.0% Privat ate of Private e Ext. Debt External Debt Position as of December 2018 1 Based on remaining maturity Non Af Affiliati tion on Source ce: External Debt Statistics of Indonesia, February 2019 35

  29. Sect Se ction ion 4 Fiscal Per Fi erforma ormance nce and F d Flexib ibil ilit ity: More e Fi Fiscal al Stim imulus ulus wit ith Pr Prud uden ent t Fi Fiscal al Policy icy

  30. Integrat egrated ed Refor orm m to Provide ide Higher her Qualit lity y of Economi omic Growth wth Structura ructural reforms rms to enhanc nce pot otenti ential growth th and navigat ate through ugh challeng nges es • Fair State Budget that declines poverty and income inequality Fiscal Synergy ergy in reform rm to to boost t the more sustainab inable le and inclus lusiv ive e • Monetary policy to support Moneta tary & • Efficient, competitive, and grow owth th Real al Sec ector or macroeconomic stability Financi ancial al innovative real sectors • Price stability and sustainable Sec ector or • Job-creation current account deficit • Trade and investment policies • Efficient and credible that support growth, financial sector efficiency, and stability Source: Ministry of Finance 37

  31. Growt wth Momen entum tum is Expe pect cted d to Conti tinue nue Severa ral key driver ers s and strat rategies gies to accelera rate e growth th Strat rateg egies ies to Encou ourage rage Growth th Key Driv ivers • Maintainin aining g purchas asing ing power, r, boosting ting domestic tic • Consumpti tion on remains robust among others demand nd and supporti rting ng busines ess activi ivity ty. supported by benign inflation  Improve distribution channels  Increased shopping events, creative industries and • Inves estm tmen ent t grows stably supported by infrastructure festivals in tourism areas acceleration, business climate improvement, rating upgrades, economic packages  Incentives for manufacture  Developing e-commerce industry • Export t and Import t keeps improving driven by Encour ouraging aging privat vate sector's or's role e in inves estm tmen ent • increasing demand and improving prices  Strengthening and deepening financial markets  Making a stable investment climate through • Support from sever veral al impor ortant tant even vents ts such as political stability Asian Games, Regional Elections, and IMF-WB annual meeting • Expand nd servic ices es sector or, , especially ially touris ism  Increasing foreign tourists arrival through cooperation with other countries by increasing the Risks sks & Challe llenges es direct flight schedule  Encouraging national creative industry growth Global al econom nomic ic uncer ertai tainti ties es: China economic rebalancing and its financial vulnerability, advanced countries policy normalization, geopolitic, and climate change 38

  32. 2019 9 State Budge get (APBN BN 2019) 9) Healthie hier, More Equ quitable, , Self-Suf Sufficie ficient nt Mac acroec economic omic Health althie ier Assumption tion Grow owth th Infla lation tion Exchange ge Rate 3 months hs T-bills lls • Deficit 1.84% of GDP, the 5.3% 3.5% 15,000/US$ 5.3% lowest since 2013 • Towards positive primary balance Gas Liftin ting ICP Oil Lifting ting • Debt to GDP ratio below 30% 1,250 thousands barrel/day 70/barrel 775 thousands barrel/day of GDP More equ quitab itable le Developm lopment t Unemplo loyme ment Pover erty ty Gini ratio tio HDI • Strengthening Target 4.8% – 5.2% 8.5 – 9.5 0.38 – 0.39 71.98 decentralization (increasing fiscal transfer to regions) • Strengthening social EXPENDITU ENDITURE RE REVE VENUE NUE protection programs Rp2,461.1 T Rp2,165.1 T • Focusing on human capital  Centra tral l Gover ernmen ent  Tax quality improvement (inter- Rp1,634.3T Rp1,786.4 T generational fairness)  Tran ansf sfer er to Regio ion  Non Tax Rp756.8 T Self lf sufficien icient Rp378.3 T  Villa lage e Fund • Increasing tax revenue  Gran ant • Increasing the share of local Rp70.0 T Rp0.4T currency bond issuance • Domestic financial deepening Defic icit it Primar ary Balanc ance • Driving export Rp296.0 T (1.84% of GDP) (Rp20.1 T) Debt t Financ ancing ing Inves estm tmen ent Rp359.3 T Rp75.9T Source: Ministry of Finance 39

  33. Cred edible ible and Healthi althier er Budge get …providing more certainty to all stakeholders Macr croe oeco conomi omic c Assu sumpti mption on for 2018 8 & 2019 19 Budget et • 2018 Budget realization showed healthy and credible performances: 2017 2017 2017 2018 2018 2019 2019 Indicator - with tax revenues grew relatively high R-Budge dget Realization on Budge get Budge get - improving tax ratio Econom onomic grow rowth (%, yoy ) 5.2 5.1 5.4 5.3 - optimal level of expenditure Inflation on (%, yoy ) 4.3 3.6 3.5 3.5 • 2019 Budget is healthier, more equitable, and self-sufficient 3-Mont onth Trea easu sury ry Bill (SPN) N) (%) 5.2 5.0 5.2 5.3 - towards positive primary balance Excha hange Rate e (Avera verage ge, IDR/USD) 13,400 13,384 13,400 15,000 - strengthening decentralization ICP (USD SD/ba barr rrel) 48 51.2 48 70 - increasing tax revenue Oil Oil Prod oduction on (thou ousand barr rrel el/day) 815 804 800 775 Gas Produ duction on (millions ons barre rel/da day) 1.15 1.14 1.20 1.25 2018 18 2019 19 2016 16 2017 Descri cript ptio ion (IDR R Trillion) on) Audite ted Audite ted Realiza izati tion on % Realiza izati tion on Propo oposed sed Realiza izati tion on % Realiza izati tion on to Budget et Budget et Realiza izati tion on Realiza izati tion on (a.o. o. Dec 31) to Budget et Budget et (a.o. o. Jan 31) Budget et A. A. Reven enues es and Grants ts 1,555. 555.9 1,666. 666.4 1,894. 894.7 7 1,942. 942.3 102. 2.5 2,142. 142.5 2,165. 165.1 108. 8.1 5.0 5.0 I. Domestic Revenue 1,546.9 1,893.5 1,928.4 101.8 2,142.1 2,164.7 108.1 5.0 1,654.8 1. Tax Revenue 1,285.0 1,343.5 1,618.1 1,521.4 94.0 1,781.0 1,786.4 89.8 5.0 2. Non Tax Revenue 262.0 311.2 275.4 407.0 147.8 361.1 378.3 18.3 4.8 II. Grants 9.0 11.6 1.2 13.9 1161.4 0.4 0.4 0 0.0 B. Expe penditu ture 1,864. 864.3 2,007. 007.3 2,220. 220.7 7 2,202. 202.2 99.2 2,439. 439.7 2,461. 461.1 153. 3.8 6.3 6.3 I. Central Government Expenditure 1,154.0 1,454.5 1,444.4 99.3 1,607.3 1,634.3 76.1 4.7 1,265.3 1. Ministerial Spending 684.2 765.1 847.4 836.2 98.7 840.3 855.4 32.0 3.74 2. Non Ministerial Spending 469.8 500.2 607.1 608.2 100.2 767.1 778.9 44.1 5.7 II. Transfer to Region and Village Fund 710.3 766.2 757.8 98.9 832.3 826.8 77.7 9.4 742.0 C. C. Prima mary Balance ce -125. 25.6 -124. 24.4 -87. 7.3 -1.8 2.1 -21. 1.7 -20. 0.1 -22. 2.8 113. 3.2 D. Surpl plus s (Deficit it) -308. 08.3 -340. 40.9 -325. 25.9 -259. 59.9 -297. 97.2 -296. 96.0 -45. 5.8 % of GDP -2.49 -2.51 -2.19 -1.76 -1.84 -0.28 E. Finan anci cing 334.5 4.5 325.9 5.9 300.4 0.4 106.2 6.2 297.2 7.2 296.0 6.0 122.5 2.5 41.4 .4 366. 6.6 Source: Ministry of Finance 40

  34. Increasing easing Tax x Revenue nue Over The Years Tax revenue in 2019 is expected to grow by 15,4% from 2018’s outlook, supported by continuous tax reform rm Tax Revenue ue (in n IDR trill llion) n) 2019 TAXA XATION ION POLICY CY Stren ength then ening ing the taxati tion on servic ice Rati tio o to GDP P (%) - RHS a a. Simplifying registration and expanding number of service center 13,7% 7% 15% 2000 b. Expanding e-filling coverage, and 12,2% 1800 11,6% c. Simplifying refund system 11,6% 13% 10,8% 10,7% 1600 11% Law w enfor orcem emen ent 1400 a. Conducting fair law enforcement 9% b. Improving audit quality by reforming governance 1200 1.786,4 7% 1000 1.548,5 Tax compl plian iance ce supe pervision ision 1.343,5 800 1.285,0 1.240,4 a. Implementing the AEol and financial information access 5% 1.146,9 b. Extensification and enhancing supervision as a follow-up to tax 600 3% amnesty 400 c. Handling SMEs end-to-end by Business Development Services 1% (BDS) approach 200 d. Establishing DG Tax-DG Customs and Excise joint program 0 -1% e. Improving tax database f. Implementing the Compliance Risk Management (CRM) 2014 2015 2016 2017 2018 2019 Budget Outlook 2019 CUSTOM M AND EXCISE SE POLICY CY • The contribution of tax revenues to Improving ing the dwelling time: total revenue is increasing From 74%  Accelerating the service of Bonded Logistics Centre Continuing the contro trol of impor orte ters, expor orters, and in 2014 to 82.5% in 2019 (Pusat Logistik Berikat) high gh risk excise policy (PIBT, PEBT and PCBT)  Simplifying the import procedure  synergy with DG Tax, army, police, and public • Fiscal incentives (tax holiday, tax  Import duty and tax payment 24x7 (with MPN G2)  prosecutor allowance, etc) are provided to including customs service 24x7 maintain the sustainability of the investment climate and increase Developing/expanding Kemudahan Impor por Tujuan Continuing the preven enti tion on of smugg ggling ing and control trolling competitiveness Ekspor spor (KITE) E) facility for SMEs Es illegal excise e good oods s (cigarettes, alcohol) Adding new excise e good ods s (plasti tic pack ckaging) Efficien ency y of logisti istic c costs sts a Tax ratio derived from tax revenue + revenue from natural resources/GDP Source: Ministry of Finance 41

  35. Non-Tax ax Revenue enue Encoura urage ged d by r rising sing in oil price ces, s, increa reasing sing qu quality ty and volume me of servi vices, es, and impr mproving ving governa nance nce (non-ta tax x revenue ue in 2019) Non-Tax x Revenue ue (in IDR trillion) on) 450 400 398,6 378,3 350 349,2 300 311,2 250 262,0 255,9 200 150 100 50 0 2014 2015 2016 2017 2018 Outlook 2019 Budget Non-Tax Revenue ue General Policy Prod oduct uct Optimiza imization ion Use of Integra egrated ed Tech chnolog nology y with Non-tax income payment system. • Followed by cost efficiency effort, downstream industry expansion, environment sustainability, and business continuity. Follow lowing ing-up up the e amendmen dment of non tax x revenu enue e law • Simplifying non-tax revenue tariff, particularly related to service. Improving roving Services ervices and Adjus usting ing Tarif riffs fs • Executing non-tax revenue tariff policy up to Rp 0.0 (zero percent) • While still considering purchasing power, expanding business, and • Strengthening the non-tax revenue supervision and inspection optimizi imizing ng stat ate e proper operty y management agement. • Implementing objection, remission, and reimbursement option. Incr creas easing ing Stat ate-Owned ned Enter erpr pris ises es (BUMN) N) Dividend idend • While still considering BUMN cashf hflow low and financial ability by expanding business and executing government assignment. Source: Ministry of Finance 42

  36. Co Commitment ent to Co Contin inue ue Strengt ngthe heni ning g Product uctiv ive Spendi ding ng Allocati ting ng budget et to a m more productiv ductive spending nding Central tral Governmen ernment t Spendin ding Rp. 855 855,4 ,4 T Line e Ministries stries • Improving the quality of state apparatus by strengthening bureaucratic reform 2016 • Strengthening social assistance • Capital Expenditure optimization 2019 Rp1,154.0 T • Goods Expenditure management 2015 Rp1,634.3 T Rp1,183.3 T Rp.778 78,9 T T Non Line Ministries es 2018 18 Outlook ook 2017 Rp1,453.6 T Rp1,259.6 T Non Ener ergy gy Subsid idy Ener ergy Subsidy sidy Debt bt Inter erest st • Focused on more • Focused on • Maintain targeted subsidy policies accountability of subsidies. that are more • Supporting competitiveness improvement, exports debt management. • Towards non-cash targeted. and investment increase, followed by strengthening • Optimal choice of distribution. value for money. debt composition • Continuing the and utilization of limited subsidies hedging. • Accommodating strategic initiatives (i.e. natural of diesel. • Decreasing the disaster reconstruction rehabilitation, democratic • Increasing the use growth of debt agenda). of renewable financing. energy. Source: Ministry of Finance 43

  37. Investm estment nts s in n Huma uman n Capital ital Has s Been n Ramped ped Up 20% of national onal budget et is allocated d for educati tion n and anot other her 5% for health Budge get for Education tion Progra gram Budge get for Hea ealt lth Progra gram IDR tn IDR tn IDR 123,1 600 125 107,4 492,5 500 100 92,4 91,4 435,0 406,0 390,3 370,8 400 353,4 75 65,9 59,7 300 50 200 25 100 0 0 2014 Real 2015 Real 2016 Real 2017 Real 2018 2019 Budget 2014 Real 2015 Real 2016 Real 2017 Real 2018 Outlook 2019 Budget Outlook Some Improvem emen ents ts are made e for 2019 Educat ation ion Program ram Some Improvem emen ents ts are made e for 2019 Health th Program ram Quality and Access Improvement: Quality and Access Improvement: a. Increasing the effectiveness of BOS (School Operations Aid)  BOS a. Expansion of Contribution Aid Recipients (PBI) in the framework of is based on performance and affirmation. National Health Insurance (JKN) (2015: 86.4 million people; 2019: b. The continuity of Program Indonesia Pintar is followed by the 96.8 million people) followed by an increase in target accuracy. increasing of target accuracy. b. Improving services at first-level health facilities. c. Acceleration of the construction of school and university facilities c. Strengthening the stunting handling by specific and sensitive nutrition (part of which is carried out by the Ministry of Public Works and DAK intervention in 160 regencies/cities (2018: 100 regencies/cities). supervised by the Ministry of Public Works). d. Continuing the optimalization of BPJS health deficit handling policy: d. Expansion of the affirmation/Bidik Misi Scholarship program. • Cigarette tax policy e. Allocating the endowment research. • Improvement of referral system f. Enforcement fulfills the education budget by the Regional • Improvement of claim management. Government. g. Link and match vocational education. 44

  38. Subsidy sidy Policy icy is Direct ected ed to be Bet etter er Targe geted ed and d Toward Non-cash cash Distribution stribution throug ough h va various us polici cies es in energy gy and non-ener energy y subsidy sidy 224.3 Ener ergy Subsidy sidy increa eases ses, 2019 Subsidy sidy Budget (Tn IDR) Partly tly due to to the chan ange ge of of exchan hange rate assum umptio tion Tn IDR Oil and gas Energy Subsidy • Continuing diese sel limit ited ed subsidy idy 200,0 subsidy idy 3.5% 160,0 163,5 • Improvin ing the the ta target get of of gas gas benef beneficiar iciaries ies: 67.4% 150,0 100.7 119,1 households, micro businesses, and low- 10.3% 106,8 97,6 8.6% income fisherman 100,0 Elec ectr trici icity ty • Improvin ing th the targe arget subsidy bsidy ac accurac acy for subsidy sidy 50,0 450 and 900 VA users 59.3 • Increasing of electri trificat ication ion ratio io - 2015 2016 2017 2018 Outlook APBN 2019 BBM dan LPG 3 Kg Listrik Oil and Gas 3 Kg Electricity Non-en Non ener ergy su subsidy bsidy amou amount is is the the sam same wi with th government’s proposal sal in in RAPBN BN 2019 Fertili tilizer subsidy sidy 29.5 29 Housin sing inter erest est Supporting food security Non-energy Subsidy Tn IDR subsidy sidy 80,0 is fitted to the land d area 3.5 68,8 66,9 67,4 0.8% 64,7 64,3 6.0% 1.9% For or lo low-in income ome 0.5% 60,0 popu opulat ation ion with Business ess credit edit 100 thousand 40,0 12.0 12 (KUR UR) ) subsid sidy units publishing 20,0 KUR distribution target is Rp120 T with 7% interest rate for SMEs - and Indonesian workers 2015 2016 2017 2018 Outlook APBN 2019 Pupuk Pangan Benih PSO Bunga Kredit Program Pajak DTP Food Crops Credit interest Tax borne Fertilizer Source: Ministry of Finance 45

  39. Incr crea easing sing Transf nsfer er to Regions gions and d Villa llage ge Fund d (TKDD) KDD) to suppo pport public c servi vice ce in the region on % Increasing allocation of Transfer to Regions and Trilion IDR Village Fund (TKDD) Budget propor oportionally tionally (fits to 900 16 826.8 the region’s needs and capacity, and also state 14,0 763.6 financial capabilities) 800 742.0 14 710.3 11,8 Supporting the regions financing needs (to provide 700 12 services and developments) 623.1 573.7 600 Focus on dec ecrea easin sing service ice ineq equali ality between- 10 region 500 Synchr hroniz onizin ing planning and budgeting of TKDD 08 dengan belanja K/L 400 8,6 8,3 06 4,5 Maintaining the 5 years sustainability 300 development program (human resource 2,9 04 development, connectivity, tourism destination, 200 poverty reduction, village fund strengthening) 02 100 Encourage ef effecti tive, ef effici icient, , and and prod oducti tive use of region’s budget with value for money as its - - principle . 2014 2015 2016 2017 2018 2019 Outlook APBN DBH DAU DTK DID Otsus & DIY Dana Desa Growth (%) Village Fund Source: Ministry of Finance 46

  40. 2017 Achievemen ements ts of Stat ate e Budget Value creati tion n on va various us projec ojects ts and countr try y developme pment nt 15. 5.5% 101. 01.7% 7% 118 18.5% 7.4% 4% 23. 3.0% 27. 7.8% • Tax revenue growth vs. 2016 • Non-tax revenue over 2017 • Growth of transfer to • Revenue of customs and • Growth of realized • Capital expenditure (excluding Tax Amnesty and revised Budget, a growth of village vs. 2016, 99.6% excise over 2017 revised government spending vs. growth vs. 2016, a 92.8% Asset Revaluation) 17.7% vs 2016 2016 over 2017 revised Budget, a 7.4% increase over 2017 revised Budget vs. 2016 Budget. Local al Gover ernm nment ent Achiev hievemen ements Cent ntral al Gover ernment ent Mile lestone ones Infr nfrastructure: e: • 794 km roaddevelopment Bridges: es: 3,749 m bridge in • 9,072 m bridge development development, 291 m • 3 airports completed maintenance, and 2,916m • 618.3 km railways improvement Class ssroom: om: 1,351 new classrooms, 11,006 Roads: s: 1,033 km in rehabilitation, 11,758 rural development, 1,503 km library collection Educ ucat ation ion: maintenance, 9,789 km • Distributed Indonesian Smart Card to 19.8 improvement million students Tuit ition: Reduced tuition • School Operational Benefit for 8.0 million costs for 46.6 million • Scholarship for 364.4 students students and 5.6 million kindergarten-aged Welfare: e: Increased welfare and children work ethics of 1.7 million civil Medica cal: Improved teachers in rural areas and Healt althc hcare e and nd Social ial Secur urity: facilities in 347 hospitals compensated 41,000 teachers in • Distribution of Indonesian Health Card to 92.1 and 3,873 clinics special regions million people Rural: 107,9 village roads, 89,200 health clinics, 178,800 toilets, and 107,700 connected clean water and 25,903 Ha irrigated lands Source: Ministry of Finance 47

  41. Indonesia’s Tax Amnesty Program – A Suc uccess ess Stor ory With th more than 965, 965,900 00 taxpayers parti tici cipati pating ng in the progra gram Tax Amnesty sty Result lt (as s of the e end of March rch 31 st st , , 2017) Repatriation Preliminary Evidence 3% Payment SMEs 1% 2% Tax Arrears Companies ​Offshore Payment 147,1 12% 1,7 Declaration 14% 85,59 59 21% 18,8 594,99 1,036 36 Individual SMEs 18% 861,81 3.323, 23,36 36 ​Onshore 3,698 98 114,2 Declaration Individuals 76% Redemption 68% Money 85% Asset Declared Reven venue Com omposi osition on of Participants s IDR 4,881tn (~39.4% of GDP) IDR R 134.8tn (~1.1% GDP) Based ed on Asset et Declared red Redemption tion Money Asse sets ts Decla eclared red 39,3 1,10 % of GDP % of GDP 0,62 0,58 8,3 0,20 5,2 0,17 0,15 3,9 0,12 3,6 2,1 0,04 0,04 0,3 Germany Belgium Italy Chile Indonesia India South Spain Australia India Spain Chile Indonesia Italy South Australia (2004) (2004) (2009) (2015) (2016) (1997) Africa (2012) (2014) (1997) (2012) (2015) (2016) (2009) Africa (2014) (2003) (2003) Source: Ministry of Finance 48

  42. 2019 F Financ ancing ing Needs Fulfilled d from m Government nment Securi urities es IDR 771. 1.7 7 tn tn (92.5%) 5%) and Loan IDR62.2 .2 tn tn (7.5%) Financing Sources GS Loan Investment Other Lending Financing Financing IDR382,74 T IDR91,94 T IDR2,35 T IDR833,94 T IDR75,9 T (IDR15,0 T) 80,63% 19,37% Foreign Denominated Debt Domestic Debt Budget Non-Debt Financing (nett) Matured Debt Deficit IDR180,28 T (21,62%) IDR653,66 T (78,38%) IDR63,25 T IDR474,68 T IDR296,0 T Financing need Foreign Denominated Foreign Loan Domestic Loan Domestic GS Bonds IDR60,28 T (7,23%) IDR1,96 T (0,24%) IDR651,70 T (78,15%) IDR120,0 T (14,39%) IDR833,94 T Gross GS (Through auction & Debt to GDP ratio Projection 2019 Matured non-auction) IDR825,70 T T-Bills Issuance IDR54,0 T 2019 2018 30,3% 30,0% GDS Sukuk 70 – 75% 25 – 30% Source: Ministry of Finance 49

  43. Govern ernment ment Securi riti ties es Indi dicati ative Fina nanci ncing ng Plan for 2019 • Auction: • Conventional Securities – 24x • Islamic Securities – 24x Non-auction: • SBN Neto • ORI, Retail Sukuk, Online Retail Bonds; [388,96] • Private Placement – based on request. Auction SBN Rupia iah [74% – 76%] Domestic [83% - 86%] SBN Non-auction Issuance [9% - 10%] SBN Matures Issuance Need Composition [382,74] [825,70] Forei eign gn Deno nomina minated ed SBN International [14% - 17%] *in triliun IDR SBN Cash Management • Foreign denominated SBN as co comple plementer ter  Avo Avoid id • The issuance target for Semester I - 2019 = 50% [54,00] crowding ing out out in domestic market. -60% of the gross target of SBN; • The target rget amou ount can be be adjus juste ted to the potential of • Especially for financing in IDR, issuance in other financing sources and financing needs. Semester I = 52% of the IDR SBN gross target. Source: Ministry of Finance 50

  44. Government ernment Secur curit itie ies Reali alizati ation on As of End of Januar ary y 31, 1, 2019 – in Trillion n IDR Government Securities realization as of January 31, 2019 IDR146.66 6.66 T T or 17,76% from the target From om IDR146,66 ,66 T T consis sist t of: 1,41 146,66 (17.76%) 1% Isu Isuance ce Ne Need ed f for or 2019 18,65 13% 825,7 83,2 43,4 57% 29% 118,21 (30.39%) Govern Go rnment Se t Secu curit rities N ies Net et 388,96 IDR Government Debt Securities FX Government Debt Securities 0 200 400 600 800 1.000 IDR Sovereign Sharia Securities FX Sovereign Sharia Securities Realization as of Jan 31, 2019 Budget 2019 Source: Ministry of Finance 51

  45. 2018 F 18 Finan ancin cing g Needs Fulfilled d from m Government nment Securi urities es IDR 730.2 .2 tn tn (92%) %) and Loan IDR63.1 1 tn tn (8%) Domestic GS IDR591.0 tn Def eficit icit Domestic Debt Rp325,9 5,9 T IDR595.5 tn Debt matures ures (75%) Rp394,1 4,1 T (incl clud ude e Domestic Loan Rp10,1 0,1 T of IDR4.5 tn Private e Place cemen ment) Inves estmen ment Financing Lending g Financ ncing ing Rp6,7 ,7T Needs Rp65,7T 5,7T IDR793.3 tn Foreign Other er Denominated fina nanci ncing ng Bonds (JPY, EUR, USD) (Rp0,2T 0,2T) IDR139.3 tn Gover ernme nment nt Foreign Debt Guarant ntee ee IDR197.8 tn Obligati igation on (25%) Rp1,1T ,1T Foreign Loan (Program & Project) IDR58.5 tn Source: Ministry of Finance 52

  46. Disciplin ciplined ed and Sophistic histicat ated ed Debt t Portf tfolio olio Managemen gement Stabl ble Debt bt to GDP DP Ratio tio Over er Recen cent t Yea ears rs Defici icit t Productiv ctivity ity** US$ bn Government Debt / GDP (%) 9,0 350,0 35,0% 30,1% 5,6 29,8% 29,4% 4,8 28,3% 3,8 27,4% 3,3 3,3 300,0 30,0% 2,7 56,6 2,1 2,1 24,9% 24,7% 1,3 55,6 1,1 1,0 0,5 55,1 250,0 25,0% 54,7 -0,6 54,7 200,0 20,0% -1,1 -1,6 -2,1 54,5 -2,8 -3,1 -3,1 58,6 -4,3 150,0 15,0% -6,4 -6,7 -6,2 263,1 249,5 239,8 USA Japan UK Brazil Italy S Africa Australia Turkey Indonesia China Korea Saudi Arabia 207,0 100,0 10,0% 174,7 155,2 136,3 50,0 5,0% 0,0 0,0% 2013 2014 2015 2016 2017 2018 *) 2019**) Fiscal Deficit (% GDP) GDP Growth Bond Loan Debt/GDP Ratio Source: Ministry of Finance Source: MOF, World Economic Outlook Weig ighted ted Avera erage ge Debt bt Maturity turity of ~8. 8.4 Years rs Well ll Divers ersif ified ied Acros ross Differen erent t Curren rencie cies % of Yearl rly y Issuance ATM (in years) 3% 2% 2% 1% 1% 1% 100% 3% 3% 4% 4% 4% 3% 9,8 8% 7% 6% 6% 9% 12% 9,4 80% 30% 30% 31% 29% 32% 9,1 29% 60% 8,7 8,4 40% 8,4 59% 57% 59% 57% 55% 53% 20% 0% 2013 2014 2015 2016 2017 2018 2014 2015 2016 2017 2018 Jan 2019 IDR USD JPY EUR OTHER Source: Ministry of Finance Source: Ministry of Finance Note: using GDP assumption IDR14,735.85 (Outlook 2018) *Preliminary Data **GDP growth and fiscal deficit numbers are average of 2012-2016 (5 years) 53

  47. Well Bala lanced nced Maturity urity Profile ile Wi With h Strong ng Resilience silience Against nst Ext xtern ernal al Shocks ks Decl clinin ining g Interes erest t Rate te Risks sks Decl clinin ining g Exch change ge Rate te Risks ks Variable rate ratio [%] Refixing [%] FX Debt to GDP ratio (%) FX Debt to total debt ratio (%) 44,5 21,0 43,4 20,7 42,6 19,7 41,3 41,0 40,4 19,2 19,3 17,5 14,8 13,7 12,1 10,6 10,6 10,4 12,2 12,3 12,1 12,1 12,2 10,7 2014 2015 2016 2017 2018 Jan 2019 2014 2015 2016 2017 2018 Jan 2019 Debt bt Maturity turity Profil ile Upcom coming ing Maturities turities (Next t 5 Yea ears) rs) IDR tn tn in 1 year (%) in 3 year (%) in 5 year (%) 500 40,4 40,2 39,3 450 36,0 IDR Denominated Other Currencies 34,7 400 33,9 144 350 25,5 25,5 25,0 300 131 22,7 151 21,4 159 250 130 20,1 154 117 200 100 102 48 150 24 10,6 300 10,3 9,9 150 8,4 223 7,7 23 20 15 6,5 100 31 7 198 182 191 147 128 140 141 166 133 50 36 92 89 104 100 28 90 2 33 23 30 33 26 2 2 25 21 51 29 29 21 15 26 23 21 28 30 19 5 5 5 0 - - - 2014 2015 2016 2017 2018 Jan 2019 Note: using GDP assumption Source: Ministry of Finance 54

  48. Holder lders s of Trada adable ble Centr tral al Governm rnment nt Securities rities More Balance ce Ownership hip In Terms ms of Holders and Tenors Hold lders ers of Tradable Gov’t Domestic Debt Securities Forei eign gn Owners ership ip of Gov’t Domestic Debt Securit ritie ies s by Tenor or 100% 37,5% 36,0% 37,0% 38,1% 38,6% 37,7% 37,3% 80% 39,6% 38,2% 39,8% 42,8% 44,7% 60% 30,8% 39,8% 35,9% 38,2% 38,1% 37,8% 37,5% 37,7% 39,9% 37,3% 36,8% 42,0% 40% 35,6% 37,4% 36,8% 36,7% 33,6% 20% 39,0% 17,3% 17,8% 15,2% 31,0% 18,4% 18,1% 26,8% 23,9% 23,4% 22,5% 11,8% 20,3% 5,1% 3,7% 5,3% 1,9% 1,8% 1,3% 5,0% 4,3% 3,5% 3,8% 3,2% 4,6% 0% Dec 14 Dec 15 Dec-16 Dec-17 Dec-18 Jan-19 Dec-14 Dec-15 Dec-16 Dec-17 Dec-18 Jan-19 0-1 ≥1 -2 Foreign Holders Domestic Non-Banks Domestic Banks ≥2 -5 ≥5 -10 ≥10 %Foreign Ownership of Total Source: Ministry of Finance 55

  49. Ownership ership of IDR Trada dable ble Centr tral al Governmen rnment t Securitie urities (IDR tn) Desc script ription ion Dec-15 15 Dec-16 16 Dec-17 17 Dec-18 18 Jan-19 19 Banks ks* 350.07 23.95 95% 399.46 22.53 53% 491.61 23.41 41% 481.33 20.32 32% 652.81 26.78 78% Govt Institution stitutions (Bank k Indon ones esia ia**) 148.91 10.19 19% 134.25 7.57% 7% 141.83 6.75% 5% 253.47 10.70 70% 123.29 5.06% 6% Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 219.42 9.00% GS used for Monetary Operation 23.63 1.33% 38.01 1.81% (36.15) (1.52%) 96.13 3.94% Non Non-Ba Banks ks 962.86 65.87 87% 1,239 39.57 57 69.90 90% 1,466 66.33 33 69.83 83% 1,633 33.65 65 68.98 98 % 1,661 61.75 75 68.16 16% Mutual Funds 61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01 % 120.38 4.94% Insurance Company and Pension Fund 221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50 % 421.08 17.27% Forei eign gn Hold lders rs 558.52 38.21 21% 665.81 37.55 55% 836.15 39.82 82% 893.25 37.71 71 % 909.93 37.32 32% Foreign Govt's & Central Banks 110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91 % 166.74 6.84% Individual 42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09 % 73.06 3.00% Others 78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67 % 137.31 5.63% Tota tal 1,461.85 100.00% 1,773.28 100.00% 2,099 99.77 77 100.0 .00% 0% 2,368 68.45 45 100.00 100 .00% 2,437 37.86 86 100.0 .00% 0% 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance 56

  50. Se Sect ction ion 5 Monet etary y and d Fi Financia ial Factor: or: Cred edib ible e Monet etary y Polic icy y Track k Rec ecor ord d an and d Favoura urable ble Financial Sector or

  51. Bank Indonesia’s Policy Mix To Maint ntain in Macroeco oecono nomi mic c and Financi ncial System em Stabil bilit ity  Implementing Macro prudential  Pre-emptive, front loading and Intermediation Ratio (RIM) ahead-of-the-curve policy rate Implementing Macro prudential Liquidity response 2  Buffer (MLB) 1  Stabilize exchange rate consistent with fundamentals Macro- pruden enti tial al Monetar etary  Accelerate implementation of Po Polic icy reserve requirement averaging Polic Po icy  Electronification: Social program, e- 3 payment for Government Financial technology  Paymen ent Coordina dinati tion on  National Payment Gateway (NPG) System em with ot other Po Polic icy Authorit horities ies 4 Controlling inflation: TPIP, TPID  5  Structural reforms: Government Financ ncia ial l Market et  Financial deepening & stability: KSSK Deepening pening (Financial System Stability  Developing market instruments for financing Committee), OJK (Financial Services infrastructure Authority)  Developing financial market infrastructures Source: Bank Indonesia 58

  52. Bank k Indones esia ia Polic licy y Mix: : Februar ruary y 2019 th and 21 st st Febr The e BI Boar oard of Gove vernor ors agree eed on 20 20 th bruar ary 2019 to hold d the BI 7-Da Day Reve verse se Repo o Rate te at 6.00%, %, while le also so main inta tainin ing the Deposit osit Facili ility (DF) and Lending ding Facili ility ty (LF) rates tes at 5.25% % and 6.75% resp spec ectiv ively ly. Coordination with the Consistent with efforts to Undergo Government and other strengthen external stability, Institutes a monetary accommodative Holds the Bl 7- especially to control the relevant authorities are operations strategy to macroprudential policy increased in order to Day current account deficit increase liquidity, to and strengthen Reverse Repo within a manageable maintain economic boost financing in the payment system policy stability, to maintain Rate at 6.00%. threshold and maintain the banking sector. to expand economic economic growth attractiveness of domestic financing. financial assets. momentum. Source: Bank Indonesia 59

  53. Pri rinc ncipl iples s of Avera rage Reserv rve Requir irem ement nt Ratios os Impr provement vement Consid iderati erations ons for the Average rage Reserve ve Requir uirem emen ent Ratios ios Effectiv ective e Substance nce Old New Date Improve ovemen ent t a. Additional rupiah 16 th July • Improvement in average reserve requirement is a follow up average reserve Fixed RR: 5% Fixed RR: 4.5% to the monetary policy operational framework reform requirement for Average RR: 1.5% Average RR: 2% 2018 implemented by Bank Indonesia since 2016. conventional RR: 6.5% RR: 6.5% commercial banks • Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This 16 th July b. Annulment of was then strengthened in 1st July 2017, by the demand deposit 2.5% (from 1.5% RR) 0% 2018 implementation of the average reserve requirement in renumeration rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The c. Implementation of reformulation is also backed by various efforts in financial foreign exchange Fixed RR: 8% Fixed RR: 6% market deepening. average reserve 1 st October Average RR: 0% Average RR: 2% requirement for 2018 • The current improvement aims to elevate flexibility in RR: 8% RR: 8%* conventional banking liquidity management, enhance banking commercial banks intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve d. Implementation of the effectiveness of monetary policy transmission in Fixed RR: 5% Fixed RR: 3% 1 st October average reserve maintaining economic stability. Average RR: 0% Average RR: 2% 2018 requirement for RR: 5% RR: 5%* Islamic banks * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 60

  54. Princ inciples iples of Macroprud pruden entia tial Interm ermed ediation iation Rati tio o (MIR) R) and Macropruden prudenti tial al Liquid uidity ity Buffer er (MLB) B) Conside ideratio rations ns for r Mac acrop opru rude dential ntial Instru truments ments Mac acropr oprude udentia ntial Interme ermedia diatio tion n Rat atio io (MIR IR) and d Macropr prude udential ntial Liquidit uidity y Buffer er (MLB) B) 1 2 3 4 Striving to stimulate the bank The policy is expected to This The regulation is effective intermediation function and liquidity stimulate the bank macroprudential for conventional management, Bank Indonesia intermediation function to the policy instrument is commercial banks from 16 th July 2018 and for issued Bank Indonesia Regulation real sector congruent with countercyclical and (PBI) No. 20/4/PBI/2018 and Board sectoral capacity and the can be adjusted in sharia banks from 1 st of Governors Regulation (PADG) No. economic growth target in line with prevailing October 2018. 20/11/PADG/2018 concerning the compliance with prudential economic and Macroprudential Intermediation principles, while also overcoming financial dynamics. Ratio (MIR) and Macroprudential the issue of liquidity Liquidity Buffer (MLB) for procyclicality. Conventional Commercial Banks, Sharia Banks and Sharia Business Units. Source: Bank Indonesia 61

  55. Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Regulati lation on MIR (Con onventional tional Comm mmercial ial Bank) Units) Un s) 1 MIR Accounting Formula Credit + Owned Bond Financing + Owned Sharia Bond Deposit + Issued Bond Deposit + Issued Sharia Bond   2 Rate and Parameters Ceiling 92% Ceiling 92%   Floor 80% Floor 80%   Minimum Capital Adequacy Requirement 14% Minimum Capital Adequacy Requirement 14%   Upper disincentive parameter 0.2 For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent  Lower disincentive parameter 0.1 conventional commercial bank  Upper disincentive parameter 0.2  Lower disincentive parameter 0.1   3 Scope of credit/financing and Credit: rupiah and foreign currency Financing: rupiah and foreign currency deposits to calculate MIR / MIR   Deposits in rupiah and a foreign currency: (i) Deposits in rupiah and a foreign currency: (i) wadiah Sharia demand deposits, (ii) savings deposits; and (iii) savings; and (ii) unrestricted investment funds, excluding term deposits, excluding interbank funds interbank funds 4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports  5 Criteria for securities held Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution 62

  56. Principles inciples of Macroprud pruden ential tial Int nterm ermed ediation iation Ratio tio (MIR) Regulati lation on MIR (Con onventional tional Comm mmercial ial Bank) MIR Shar aria ia (Shar aria ia Banks and d Sharia ia Business ess Un Units) s) 6 Percentage of the securities 100% held Criteria for securities issued   7 medium-term notes (MTN), floating rate notes (FRN) sharia-compliant medium-term notes (MTN) and/or and/or bonds other than subordinated bonds sukuk other than subordinated sukuk  Issued by a nonbank corporation and by a resident  Offered to the public through a public offering  Equivalent to investment grade rating affirmed by a rating agency  Administrated by an authorised securities institution 8 Securities Reporting Offline delivery mechanism (email)   9 Scope of deposits to meet Average daily total deposits in rupiah at all branch Average daily total deposits in rupiah at all branch DD MIR /DD MIR Sharia offices in Indonesia offices and sharia business units in Indonesia   Including rupiah liabilities to a resident and non- Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) resident third-party nonbank, consisting of: (i) wadiah demand deposits, (ii) savings deposits; (iii) term savings; (ii) unrestricted investment funds, and (iii) deposits, and (iv) other liabilities other liabilities  10 Relaxation of DD Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement MIR/Sharia DD MIR and fund accumulation  The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK)  Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions 63

  57. Principles inciples of Macroprud pruden ential tial Liquidit uidity Buf uffer er (MLB) LB) Regulati lation on MLB (Conventional tional Comm mmercial ial Bank) MLB Shar aria ia (Shar aria ia Banks) 1 Rate 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits)   2 Components Securities denominated in rupiah held by a conventional Sharia-complaint securities denominated in rupiah commercial bank that may be used for monetary held by an Sharia bank that may be used for sharia- operations (including SBI/SDBI/SBN); and compliant monetary operations (including SBIS/SBSN)  Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia- compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities held by commercial bank to rupiah deposits an Sharia bank to rupiah deposits 4 Flexibility Under certain conditions, the securities used to meet the MLB Under certain conditions, the securities used to meet the may be used for repo transactions to Bank Indonesia for open sharia MLB may be used for repo transactions to Bank market operations, totalling no more than 2% of rupiah Indonesia for open market operations, totalling no more deposits than 2% of rupiah deposits   5 Sources of Data on Monthly Commercial Bank Reports Monthly Sharia Bank Reports Deposits   Rupiah deposits to calculate MLB are the average daily Rupiah deposits to calculate sharia MLB are the total deposits at all branches in Indonesia average daily total deposits at all branches in Indonesia  Rupiah deposits include: (i) demand deposits, (ii) savings  deposits; (iii) term deposits, and (iv) other liabilities Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 64

  58. Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios The e LTV/F V/FTV relaxa axation tion is cond nduct ucted while le taking aking into o account ount aspects spects of prude udential ntial and consu nsume mer r protect ectio ion 2. Relaxing the amount of loan/financing facility through indent 1. Increasing opportunities of first time buyers to fulfill their housing needs mechanism to a maximum of 5 facilities without taking account of through housing loan, specifically by adjusting the LTV ratio for property the orders loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV 3. Adjusting the arrangement of stages and amount of property ratio for property financing as shown in the table below. loan/financing disbursement of indent property: “ - “= The LTV rate depends on each bank’s risk management Source: Bank Indonesia 65

  59. Relaxing ing the Loan-to to-Value alue (LTV) and d Financi nancing-to to-Value alue (FTV) Ratio ios Prude denti ntial aspects cts of Relaxing xing the Loan-to to-Value ue (LTV) and Fina nanci ncing ng-to to-Value ue (FTV) Ratios os 1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank’s risk management policy (e.g.the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debitor and developer/seller’s bank account. LTV / F FTV Exempt mptions ons Central government or local government loan / financing programs are exempt from this regulation. Source: Bank Indonesia 66

  60. Princ inciples iples of Domest estic ic Non Deliv iver erable ble Forwar ard (DNDF NDF) ) Transa ansaction ction Purposes ses Genera eral Provisi sions ons  Domes estic tic Non-De Deliv livera rable ble Forwar ard d Tran ransaction tion (DNDF Tran ansac actio ion) 1. To support the effort of stabilizing Plain vanilla derivatif transaction of foreign exchange against rupiah in the form of the Rupiah exchange rate through forward transaction with fixing mechanism in the domestic market the additional of alternative hedging instruments  Forward Trans ansac actio ions Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date 2. To support the development and deepening of the domestic  Fixing Mec echan hanism sm financial market Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a 3. To increase the confidence of specified future time agreed in the contract (fixing date) exporters, importers, and investors in conducting economic and  Other er Definit initio ions investment activities through the The definition of derivative transaction of foreign exchange againts rupiah, Forward flexibility of hedging transactions Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia against Rupiah currency risk regulations regarding foreign exchange transaction againts rupiah Source: Bank Indonesia 67

  61. Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction Bank can perform orm DNDF Transa nsacti ctions ns as follows: ws: 1. Must have Underly lyin ing Transac sactions tions: Tran ansac saction tion bet etween en: Includ cluding ing all foll llow owing ing activ ivit ities ies : a. Trade of goods and services b. Investments, loans, capital, and other investements. c. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Can only be performed to Bank – Customer Excludi luding g foll llowi wing g activ ivit ities ies: hedge rupiah a. Bank Indonesia certificates; b. Placement of funds with bank; exchange rate c. Unwithdrawn credit facilities; risk. d. Documents of foreign currencies sales againts rupiah; e. Money transfer by fund transfer companies f. Intercompany loan g. Money changer activities. Bank – Foreign Party 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank – Bank Source: Bank Indonesia 68

  62. Princ inciples iples of Domestic estic Non Deliv iver erable ble Forwar ard (DNDF NDF) Transa ansaction ction Transac nsacti tion on Set ettl tlement ent • Use Fixing mechanism • Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR • Settlement currency : IDR • Roll over and early termination are not allowed ly termi mina nati tion for DNDF is proh Roll ll over er and d early ohib ibit ited ed However, unwind can be done by opening the reverse DNDF transactions Cover He Hedging ng Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. • Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging • Overseas seas Custom omer er / / Cover Bank Hedging Foreign eign Party ty Bank Hedging Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. Source: Bank Indonesia 69

  63. Overn rnig ight ht Index x Swaps ps (OIS) IS) & I Interest erest Rate e Swaps ps (IRS RS) As hedg dging ing instr trume ments ts agains ainst t Rupiah ah inter erest est rate te chang anges es IRS is a contract between two parties to IR periodically exchange rupiah interest rate flows 4 during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. 3 OIS IS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) Improvement of IRS transaction 2 liquidity Alignment between JIBOR Encourage price transparency in the rupiah  and OIS interest money market rate OIS transaction 1  Strengthen monetary policy transmission with IndoNIA as  Provide alternative hedging instruments benchmark rate against rupiah interest rate changes Support securities market deepening in  IndoNIA & JIBOR Indonesia Strengthening reference rate based on real transactions Source: Bank Indonesia 70

  64. OIS and IRS Transa ansactions: ctions: General eral Provisi visions ons Mar arket Pl Player ers. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions Trans ransacti tion on Nee Needs ds Analys nalysis is. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is Calculat lation ion Interest rest Payment OIS Quot otation ion rates s required to have an analysis on the need of rupiah Base ACT/360 based d on Net etting ing based d on 2 d decim imals als interest rate derivative transactions. IndONIA ONIA Index x Not otion onal al of Net et Mar arket Con onventio entions ns. When performing IRS and OIS Quot otation tion : 1W, 2W, inter erest st paymen ent in with 5 5 1M, 2M, 3M, 4M, transactions, the respective bank is bound by market decimals mals IDR with 0 d decim imals als 5M, 6M conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. At the 1st phase, e, OIS Comp mpou ound d Set ettlem emen ent Date e = 1 set ettle lement ment will l only ly Sett Se ttlem ement ent. Settlement can be performed as a netting Floatin ting Rates s be done at the end busin ines ess s days s after payment and every transaction has to be settled in (CFR) based d of the OIS tenor or Maturity ity Date (MD) on 5 decima mals ls Rupiah. Close lose-out out nett ne tting ing can be applied under (MD+1bd) bd). predetermined conditions. Source: Bank Indonesia 71

  65. Bank nk Indo donesi nesia a Policy icy Mix: 2015 5 – 2017 2017 2017 2015 2015 2016 2016 • BI Rate cut of 25bps (Feb)  Policy Rate cuts of 150bps • BI 7-day RR Rate cut of 25bps 1. 1. Monetar ary Policy  Moving from BI Rate (12 month) to 4.50% (Aug) to BI 7-day Reverse Repo Rate • Further BI 7-day RR Rate cut Policy Rate (Aug) of 25 bps to 4.25% (Sept) Reserve e • Further lowering RR by 100bps to • Lowering RR by 50bps to 7.5% • Implementation of RR Requir irement ent 6.5% (Feb) (Nov) Averaging (Aug): RR fixed 5%; RR Averaging 1.5%  Market-based exchange rate stability consistent with fundamental 2. 2. Excha hang nge e Rate  Dual intervention in the FX market and purchases of government bonds from secondary market in time of distress Policy (capital reversal) or large mis-alignment  Further relaxation of LTV for • Relaxation of LTV for property  Initiative to issue property loans (Sept) and automotive loans (June) macroprudential regulation on 3. 3. Macroprudent ntia ial l  Strengthening systemic Financing to Funding Ratio Policy surveillance & Crisis (FFR) Management Protocol (April)  Obligation to use IDR in  National Payment Gateway  E-money for social transfer (Nov) 4. 4. Payment ent System em domestic transaction (March) (June)  Financial Technology (FinTech) Policy  Non-cash movement (GNNT)  Modernized cash Office (Nov) management underway  New Rupiah issuance (Dec) Source: Bank Indonesia 72

  66. Stable able Monetar tary y Envir ironmen onment t Despit pite Chall lleng nges es Well ll Maint intaine ined Infla lation tion Ensu sured red Price ice Stabi bility ity Stren engt gthened ed Moneta etary ry Poli licy cy Framew ework ork (%) 19 Augu gust 2016 (%) 20 9,00 8,38 8,36 8,00 The New CPI (%, yoy) - rhs 18 8,00 Moneta tary ry LF Rate: e: 7.00 Volatile Food (%, yoy) - lhs Opera ratio tion 16 LF Rate: e: 6.75 75 7,00 7,00 Administered (%, yoy) - lhs Framewor ork 14 Core (%, yoy) - lhs 6,00 BI Rate: e: 6.50 BI 7Day RR Rate: e: 6.00 12 6,00 5,00 10 DF Rate: e: 5.25 3,61 8 4,00 3,35 3,13 3,02 5,00 2,82 6 3,00 4 2,00 4,00 2 1,00 0 -2 0,00 3,00 2013 2014 2015 2016 2017 2018 Jan-19 Rupia iah Exch change ge Rate te Remains ins Compa para rable le to Peers ers Pick ck Up in Credit it Grow owth th YTD 201 2019 vs vs 201 018 %,yoy oy 20 Total Growth Working Capital Loans point-to-point average 18 Investment Loans Consumption Loans -1,93 INR -3,48 16 -1,13 KRW -1,89 14 -0,83 13,0 EUR -3,64 11,8 -0,67 JPY 12 0,93 10,9 -0,29 TRY 10,4 -8,69 10 0,81 SGD -0,48 8 1,02 PHP 0,62 1,61 6 MYR -1,62 1,97 ZAR 4 -4,08 2,42 CNY -2,30 2 2,42 IDR 0,97 0 4,14 THB 2,25 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 Data as of February 20 th , 2019 4,29 % BRL -1,88 2015 2016 2017 2018 -10,0 -8,0 -6,0 -4,0 -2,0 0,0 2,0 4,0 6,0 Source: Bank Indonesia 73

  67. Regio gional nal Inflation ation under er Contr trol ol On January ary 2019, , almos ost all provinc vinces es recor orded ded inflati lation n (yoy oy) within in national ional inflati ation on target et corridor. idor. Lowest t inflat lation ion was recorded orded in Sumatra tra (1.8 .83%, %, yoy), , Bali-Nus usa a Tengga ggara ra (2.8 .84%, %, yoy), , and Java (2.9 .92%, %, yoy). . Some region ions recorded rded higher her infla lati tion on rate, , as in Papua ua, , Central ral Sulawes esi, i, North h Kalim limantan, ntan, and West Papua, a, due to higher her prices es of airfa fares res and fish.. Source: Bank Indonesia 74

  68. 4 Strat ategies gies to o Achie hieve e the he Inflat ation ion Targe get 2018-2019 Target 2020 20 20-20 2021 Targe get Achieving inflation at 3,5%±1% Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining core inflation • • • Maintaining volatile food stability at 4-5% • Maintaining volatile food inflation less than 4% • Controlling administered price inflation • Controlling administered price inflation 4 Strat ateg egies ies 1. Price e Affordabil dabilit ity 2. Supply ly Availabi lability lity 3. Well l Managed ged Distr trib ibution ion 4. Effec ectiv ive e Communic ication ation Strengthening production, Encouraging Government Strengthening Stabilizing the Managing Strengthening trade Improving trade Improving data food reserves central-regional price demand side institution cooperation infrastructure quality and food export- coordination between regions import management Source: Bank Indonesia 75

  69. Improving ving the Effecti ctiveness eness of Monetar etary y Policy icy Transmi ansmissi ssion on Bank nk Indon ones esia ia has instit ituted uted a Reformulation ormulation of Monetary netary Policy icy Operations ions Framewo mework k which ich consists of 3 pill llars; ; (1) (1) impleme lement ntation on of BI 7day Reverse Repo o Rate; e; (2) impleme (2) lement ntation on of reser erve e requir uiremen ement averaging ging; ; and (3) continue (3) inue to impl plemen ement money ey market ket deepening epening progr ogram. Reform rmula ulati tion on of Moneta etary Po Polic icy Operat ational ional Framewor ork Implem lemen entat tation ion of Money Implem lemen entat tation ion of Reserve e Implem lemen entat tation ion of BI 7 Day Market et Deepen ening ing Program ram Requiremen quirement t (RR) Aver veragin aging Rever verse e Repo Rate Enhancement of monetary policy Enhancement of banking liquidity Enhancement of instruments signal management and transactions Source: Bank Indonesia 76

  70. Enhan ancemen cement t of Monetar tary y Operation ations s Frame mewor ork PREVIOU VIOUS JIBOR OR • Can be traded among contributor banks for 10 minutes. • Up to the amount of Rp10 billion. • Up to 1-month tenor. CURR RRENT ENT JIBOR OR (as per June 1 st , 2016) • Can be traded among contributor banks for 20 minutes. • Up to a total of Rp20 billion. • Up to 3-month tenor. Source: Bank Indonesia 77

  71. Finan ancial cial Interm ermed ediation iation Perform ormance nce Remai mains ns Posit sitiv ive Banking nking inter interme mediation iation by by the end end of of 2018 2018 gr grew ew hig igher er than pr prev evious ious year year. In In the domestic ic ca capit pital ma market kets, ca capit pital raising ing by by co corpor porations ions (part (particula icularly ly right ight issues ues and corpor porate bond nd issua uance nce) remains ins stable le. Financin cing distri ribu buted ted by mult ltif ifinance ce companies ies grew by 5.1 .17 (yoy oy) ) The e growth th of bank lending g was s 11.7 .75% (yoy oy) ) as s of Dec-18 18 IDR tn % yoy yoy IDR tn 5.500 16% Financing Growth (rhs) Bank Loans YoY Growth (rhs) 5295 450 10% 436 14% 8% 5.000 12% 425 11,75% 10% 6% 4.500 8% 400 5,17% 6% 4% 4.000 4% 375 2% 2% 3.500 0% 350 0% Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Capit pital l raisi ising g throu rough righ ghts ts issu sues es and corpo pora rate te bond issu suance ce rem emains ins sta tabl ble The e growth th of gros oss s prem emium ium reven enues es in the e dom omes estic tic insu sura rance ce industry stry have e also lso been en positive sitive IDR Tn 180 IDR Tn 500 IPO Saham Rights Issue Surat Utang Korporasi & Sukuk IPO equity 433 160 450 140 400 114,18 120 350 100 300 250 80 200 60 35,45 150 40 16,43 100 5,29 20 0,88 0,30 50 0 0 2012 2013 2014 2015 2016 2017 2018 25 Jan'19 2012 2013 2014 2015 2016 2017 2018 Source: Financial Service Authority (OJK) 78

  72. Finan ancial cial Insti titu tuti tions ons Remai main Robust ust Domes mestic ic fina nancia ncial l instit itutions utions exhib ibit it a gener nerally ly robus ust cond ndit ition. ion. Capit ital adequac equacy y is maintai ntained ned well ll above e the minimum imum requir irem emen ents. . Profit itabil bilit ity and lever erage ge are maintained ntained at a suf ufficient icient level. el. Risk-based ed capit ital al (RBC) of the insur uranc ance indus ustry also remain ains high gh, well above CAR of the bank nking ng sector remains ains at a high gh level. As of Dec-18 18, CAR & Tier-1 Capit ital al the minim nimum um threshold ld (120%) was 22.97% % & & 21.29%, respectively ely CAR Tier 1 550% 350% Life Insurance General Insurance (rhs) 26,0 332% 22,97 21,29 24,0 320% 500% 22,0 290% 441% 20,0 450% 18,0 260% 16,0 400% 14,0 230% 12,0 350% 200% 10,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-17 Feb-17 Apr-17 May-17 Sep-17 Oct-17 Dec-17 Jan-18 Feb-18 Apr-18 May-18 Sep-18 Oct-18 Dec-18 Mar-17 Jun-17 Jul-17 Aug-17 Nov-17 Mar-18 Jun-18 Jul-18 Aug-18 Nov-18 Profit itab abili ility of the bank nking ng sector has been relat ativ ivel ely stab able le despit ite the increas ease e Gearing ing ratio io of multifi ltifina nanc nce companie anies is 2.99 9 times, , providin ding g ample le room for of interest est rates es within hin the last six x months hs futur ure e growth % 4,0 Net Interest Margin Return on Assets 6,0 5,14 3,5 5,0 2,99 3,0 4,0 2,5 3,0 2,55 2,0 2,0 1,5 1,0 1,0 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Source: Financial Service Authority (OJK) 79

  73. Adequat uate e Liquid uidit ity; ; Managea geable ble Credit dit Risks ks Banks anks are are eq equip uippe ped wi with suf sufficient cient li liqui uid asset ets. In Insurance surance in industr ustry also also demonstr monstrates ates an an enha enhance nced lev level el of of inv investme estment nt adeq equacy acy rati atio. The The non non-per perfor orming ming loan ratio io and non non-per perfor ormi ming ng fina nancin ncing ratio io are well ll maintained ntained below low the thres eshold old. The ratio io of liquid uid assets to deposit its in the bank nking ing sector has been manag nageab able le Invest estment nt adequac uacy ratio io in the insur uran ance indus ustry is maint intai aine ned above 100% % Life Insurance General Insurance * 210 186 190 170 150 123 130 110 90 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 As of Dec-18 18, the gross & net NPL ratios ios of the bank nking ing sector were 2.37% % & 1% *The spike in this ratio was due a change in calculation methods. respect ectiv ivel ely, well maint intained ined below the thresh eshol old NPF ratio io of the mult ltifin ifinanc ance indus ustry is 2.71% % as of Dec-18 18 4,0% 3,5 % NPL Net NPL Gross 3,5% 3,0 3,0% 2,71% 2,37 2,5 2,5% 2,0 2,0% 1,5 1 1,5% 1,0 1,0% 0,5 0,5% 0,0 0,0% Jan-17 May-17 Oct-17 Dec-17 Jan-18 May-18 Oct-18 Dec-18 Feb-17 Mar-17 Apr-17 Jun-17 Jul-17 Aug-17 Sep-17 Nov-17 Feb-18 Mar-18 Apr-18 Jun-18 Jul-18 Aug-18 Sep-18 Nov-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Source: Financial Service Authority (OJK) 80

  74. Managea geable ble Mark rket t Risks sks Amid midst st the he incr increas easin ing ma market ket volat olatil ilit ity, y, the he risk isk pr prof ofil ile of of financia inancial insti institut utio ions ns remain emain mana manage geab able le. Net et open open pos posit ition ion of of the he banking anking sector sector has has been een ma maintained intained at at a lo low level, level, while while the inv inves estmen ment value lue of of dome omestic ins instit itutiona utional in inves estors ors (mu (mutua ual fun unds, ins nsurer urers, and nd pen pension ion fun unds) has has been een still ill rela elatively ively stable le. Mutua utual funds’ net net asset et value (NAV (NAV) co continue ntinues to to grow row wit ith a low ow lev evel el of of Net Net ope open po position sition in in th the ban banking king secto ector is is kept kept far be below low th the maximum li limit it vola latil tility ty (20 20%) IDR Tn 6.800 % NAV Mutual Funds IDX (rhs) 5 530 6.600 500 6.400 4 470 6.200 440 3 6.000 410 5.800 1,73 380 2 5.600 350 5.400 1 320 5.200 290 0 260 5.000 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Multi tifina inance ce companies’ exposures to foreign debt has generally been mitigated The e inves estm tmen ent t value lue of insurers rers & pensi sion on funds is rela lative tively sta tabl ble throu rough hedgi ging g mea easu sures res IDR tn 181 IDR Tn IDR Tn 1.100 300 Insurance Pension Funds (rhs) 1073,6 180 1.050 160 275 1.000 140 950 250 Domestic Debt Foreign Debt 120 105 260,9 900 100 225 850 80 800 200 60 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Source: Financial Service Authority (OJK) 81

  75. Domest estic ic Capital ital Mark rkets ts Improved ed due to Nonreside resident nt Inflow w In In the mi midst of of slo lower wer gl global obal pr pros ospect pect co couple upled wi with tighter ighter gl global obal fina inancia ncial co condit ition, ion, dome omestic ic ca capi pital ma market kets rema emain in stable. Since ince ea early ly 2019 2019, ca capi pital market kets has has been posit itiv ive due to to nonres esid ident ent inflow lows. The IDX Stoc ock Composit ite Index has demon onstr trated ated a posit itiv ive growth owth in early ly 2019 Dom omes esti tic c capi pita tal mark rkets ets perform ormance nce tends s to incre rease se recentl cently Stock ock Index ex Perf rfor ormance 28 December r 2018 vs vs 15 15 Febru bruari ri 201 2019 Comp Bond Index Comp Stock Index (rhs) 260 7.000 WORLD 9,34 THAI 4,67 KOREA 7,60 240 6.500 INDO 3,14 HKN 9,40 SIN 6,10 220 6.000 PHIL 5,93 CHIN 7,56 MAL -0,19 JPN 4,43 200 5.500 EURO 9,05 AS 12,23 RUS 5,58 180 5.000 BRAZ 10,97 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 TURK 13,58 -1 2 4 6 8 10 12 14 % Nonres residen ents ts have e sta tarted rted to re-en enter ter our financia ial l market rket amidst st tigh ghter ter Hence ce, , govern ernmen ent t bond yield elds s tends s to decrea rease financia cial l condition tions Rp Triliun SBN Saham 15.500 Yield (%) 50 5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs) 10 40 15.000 30 9 14.500 20 10 14.000 8 0 13.500 -10 7 -20 13.000 -30 6 12.500 -40 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 15Feb'19 5 12.000 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 *as data 25 February 2019 Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance 82

  76. Strat rategic egic Polic licies ies in Finan ancial cial Sector or Suppor upporting inf nfrast astruct uctur ure e fina nanci ncing ng and Supp uppor orting inn nnovati tion ons in digital l finance nce deepen pening ng the capi pital ma market Enhanci ancing va varia iabi bilit lity of financi ancing instrume ments ts  Perpetual bonds, green bonds, municipal bonds Issuing the guiding principles for the providers of  Investment products for mortgage digital financial services, including for registering, licensing, and the crowdfunding scheme Simplif lification ication of issuance ance proc ocess s in the capital ital market  Simplifying issuance process of debt securities and sukuk for professional investors Directing financial institutions to synergize with the fintech sector or to establish a fintech business line Expan anding ding the invest estor or base se  Expanding the access of domestic retail investors to the capital market  Promoting the participation of local financial Promoting the role of fintech lending in institutions through the establishment of local supporting government programs, including in securities companies online retail sales of government debt securities Stren rength then enin ing the role ole of NBFIs in infrastructure astructure developm lopmen ent  The provision of credit guarantee products by credit guarantee companies & insurers Source: Financial Service Authority (OJK) 83

  77. Strat rategic egic Polic licies ies in Finan ancial cial Sector or Enhancing Enhan g fina nanci ncial al litera eracy cy & incl nclusion OJ OJK has s also so built ilt a str stron ong foun oundati tion for or finan inancial incl inclusion prog ograms, to o en ensu sure access ss to o f fina inancial products ts & & servic ices es by In Indo donesians of all ll soc ocial l cla lasses. . Such h in initia itiatives also in include th the e en enhan hancement of fin inan ancial liter eracy and d finan inancial cons onsumer protection. Developing Promoting the Strengthening Developing micro-credit Enhancing the establishment the role of financial education role of the products with of Islamic Financial Access models utilizing additional business “Investment microfinance Acceleration various delivery support (“ KUR Alert Taskforce ” institutions (“ Bank Taskforce (TPAKD) in channels Klaster ”) Wakaf Mikro ”) local areas The he resu esult t of of OJK’s 2016 natio ional al survey demo emonstr strated an imp mprovement t in financia ial literacy & & inclus lusio ion amo mong g Indo donesian ans com ompared ed to that at of of 2013, 3, but ther ere is still ill room oom for further herimprovement. t. 21. 1.8% 29.7% 59.7% 67.8% Fina inanc ncial Fina inanc ncial 2013 13 2016 16 2013 13 2016 16 Lit iter eracy cy Inclu clusio ion Source: Financial Service Authority (OJK), June 2017 84

  78. A A Comprehen prehensiv sive e Financ ncia ial l Deepe pening ning Program ogram … strat trategy gy to tackle challenges in deepening Indonesia’s financial markets In Apr-2016 2016, the Minis nister er of Fina nance nce, , the Gover erno nor of Bank nk Indon ones esia, ia, and the Chair irma man n of the Board of Commi missione ioners of the Financi ncial l Service ices Authorit ority launc nched ed a Coordina ination ion Forum um for Developme elopment nt Financin ncing throug ugh Financia ncial Market ket (FK-PPPK). K). The e three ee authorit orities ies have e agreed eed to formula mulate e “The Natio ional l Strategy egy of Fina nancia ncial l Market ket Development elopment ” Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN 1 2 3 POLICY COORDINATION, ECONOMIC FUNDING & RISK MARKET INFRASTRUCTURE 3 Pilars HARMONIZATION & MANAGEMENT DEVELOPMENT EDUCATION Money Bond Stock Syariah Structure Product FX Market 6 Markets Market Market Market Market Market Fund Regulatory 7 Elements Market Infrastructure Framework of Financial Instrument Market Benchmark Rate & Coordination & Ecosystem Education Standardization Intermediaries 85 Source: Bank Indonesia

  79. Continuou tinuous s Progr gram am on Capital ital Mark rket t Deepen ening ing …continuously strengthened, including through capital market deepening ini niti tiativ atives es Enhanci ancing the supply-side side Stren engthen thening ing market t infras astr tructure  Simplification of public-offering requirements and  Expansion of Single Investor Identification (SID) coverage procedures  Development of electronic trading platform (ETP) in the debt  Development of debt market market  Development of mutual fund industry  Development of Integrated Investment Management System  Development of other products, including those to support (S-INVEST) infrastructure development (private equity funds, REITs,  Enhancing the clearing and settlement process ABS)  Enhancement of capital market data warehouse  Development of Islamic capital market  Development of Extensible Business Reporting Language  Development of municipal bonds (XBRL) for issuers Enhan ancin ing the deman and-side ide Stren rength then enin ing governan rnance  Enhancing the role of the domestic institutional investors  Development of market players’ capacity (insurers & pension funds) in capital markets  Enhancement of GCG for publicly-listed companies  Development of the domestic investor base (conducting  Development of repo regulations and infrastructure investor education programs)  Expansion of distribution channels of market products Source: Financial Service Authority (OJK) 86

  80. BI’s Roles in Supporting Distribution of Non -Cash Cash Soc ocial ial Assistance stance (NCS CSA) A) BI suppor orts ts gover ernme ment ’s progra ogram m of shiftin ing socia ial l assista istanc nce to targeted ed non cash sh soc ocial ial assistan istance disbu sburse seme ment t throu ough h the elec ectr tronic ic paymen ent system em. In the future, re, elec ectr tronic ic mechan hanism ism disbu bursem rsement t will l be also o applie ied d to LPG subsidy sidy. . NCSA A Programs ams Pilot Proj ojec ect Family ily Hope Program ram Smart Indone onesia ia (Program gram Keluarga uarga Program ram (Program gram Harapan an -PKH KH) Indon ones esia ia Pintar tar-PIP PIP) Gradu adual al Impl mpleme ementatio tation 2016-20 9876543210 XXYYZZ 2020 1234567 678 Full Non Cash 20 Imp mpleme lementati tation Food d Assistan tance e (Bantuan tuan Pangan gan Non Tunai ai – BPNT) LPG Subsidy idy Inter erconne onnected ed & inter eroperable operable paymen ent t syst stem em Source: Bank Indonesia 87

  81. Prog ogres ress of of NCSA A Prog ograms ms Family ly Hope e Program ogram Non on Cash Food od Assistance istance (Program ram Kelu luarga rga Harap rapan an - PKH) (Ban antuan Pangan gan Non on Tunai - BPNT) • BPNT is a poverty alleviation and social protection • The Family Hope Program (PKH) is a program that program that is managed by the central provides cash to very poor households. government. It provides subsidized rice and eggs Rp 1,89 million /year will be granted for each to low-income households. Rp 110 household. PKH will be granted every February, thousand/month will be granted for each May, August, and November. household as BPNT that can be used in certain stores which called e-warong. • As of December 2017, PKH has been distributed to 6,0 million households on non-cash basis. • As of December 2017, BPNT was distributed to 1,2 million households in 44 cities. • In 2018, PKH has been distributed to 10 million households on non-cash basis. • In 2018, BPNT has been distributed to 10.1 million households (65.1% of the target of 15.5 million households target). Source: Bank Indonesia 88

  82. Strong onger er Fundamentals amentals Facing ng the Headwi dwind nds Inflation tion Rate te (%) IDR R Movem emen ent t (%) Forei eign gn Reserv rves (USD D bn) Significan antl tly y highe her than n 1998 & 2008, ample to cover 6.5 Inflat ation contro trolled d withi thin the target t range IDR apreciat ated year-to to-date te in February ary 2019 months ths of import t and exte ternal al debt t repaym yment 1998 -197 1998 82,4 1998 17,4 2008 -35 2008 12,1 2008 50,2 20-Feb-18 2,42 (ytd) 120.1 Sep-15 2.82 6,8 82 (yoy) Sep-15 Jan ‘ 19 Jan ‘ 19 More e Liquid quid Market rket (%) Non Non-Perf Perform ormin ing g Loa oan/NPL PL (% (%) Overnight ht interbank k money y market t rate is NPL NPL level (gross) is below w the maximum um thresho hold of 5% relati tively y lower 62 62 1998 30 30 2008 3.8 10,5 5.8 5,7 Dec ‘18 Aug-15 2,8 2.4 1998 2008 Dec 2018 Jul-15 Extern ernal l Debt bt (Publ blic ic & Priva ivate) te) to Extern ernal l Debt bt/G /GDP Government ent Debt/G t/GDP FX Reserv erve e Ratio tio Slightl tly higher than n 2008, but significan antl tly y Consiste tentl tly y well-mai ainta tained Significan antl tly y lower than n 1998 crisis lower than 1998 8.6x 3.1x 27.4% 100.0% 116.8% 3.3x 33.2% 30.0% 1998 98 2008 08 36.2% 2008 08 1998 98 1998 98 2008 08 Q4 - 201 2018 Q4 - 201 2018 Q4 - 201 018 89

  83. Outlook look of Domest mestic ic Econom omy y Remai mains ns Robust st ...d ...dome mestic stic economic mic growth th is predi dict cted ed to be h highe her r in 2019 2019 Economic onomic Outloo ook  Bank Indonesia projects national economic growth in the 5.0-5.4% range in 2019, buoyed by domestic demand and improvements in terms of net exports.  Bank Indonesia will consistently maintain price stability and strengthen policy coordination with the Central Government and Local Administrations to maintain low and stable inflation, which is projected within the inflation target of 3.5 ± 1% in 2019.  Bank Indonesia projects credit growth in 2019 at 10-12% (yoy), while predicting deposit growth in the 8-10% (yoy) range. Bank Indonesia will continue to monitor liquidity adequacy and distribution in the banking system in conjunction with the other relevant authorities consistent with efforts to help maintain financial system stability. Economic onomic Grow owth Inflat lation ion CAD D (% (% of of GDP) DP) Cred edit it Grow owth 2018 5.17% 3.13% 2.98% 11.75 .75% Real aliza izatio ion 201 2019 5.0 – 5. 5.4 % 10 10.0 .0-12 12.0% .0% 3.5 ± 1% ± 2.5% .5% Source : Bank Indonesia 90

  84. Sect Se ction ion 6 Progres Pr gressiv sive e Inf nfras astruc tructure ture Devel elopmen pment: Strong ong Commi mmitme tment t on Accel celer eration ation of Infrastructure structure Provi vision ion

  85. The Governmen rnment t has Enact cted ed Various ious Reform rms s to Accelerat erate e Inf nfrastructur rastructure e Provis ision ion Regulat lator ory Refor orms ms Fiscal l Refor orms ms Instit itutio ional al Refor orms Viabil ilit ity Gap p Fund nding ing (VGF) F) KPPIP IP Direct ect Lend nding ing Increase project financial feasibility by KPPIP is actively involved in accelerating delivery Allow guarantee for direct lending to SOE to contributing up to 49% of the construction cost of priority infrastructure projects accelerate financial close process for (MoF Reg. No. 223/2012) infrastructure projects (Presidential Reg. No. PT. Sarana na Mult lti Infrastruk uktur ur 82/2015) Avail ilab abil ilit ity y Payment ent Merging between PT. SMI and Gov’t Investment Land nd Acquis uisit itio ion Issuance of regulatory framework to allow annuity Center (PIP) to become an infrastructure funding payment by the Government during concession company Stipulate land acquisition acceleration based on period to concessionaire since project operation Law No. 2/2012 (Presidential Reg. No. based on infrastructure service availability (MoF Indon ones esia ia Infras. . Guarantee ntee Fund nd (IIG IGF) F) 148/2015) and land acquisition fee payment for Reg. No. 190/2015 for Central Gov’r and MoHA impacted community (Presidential Reg. IIGF has the potential to provide project guarantee Reg. No. 96/2016 for Regional Gov’t.) No.56/2017) for non-PPP projects Econo nomy my Packa kages ges PPP Unit it Land nd Revolv olving ing Fund nd Conduct deregulation for issues hindering Provide facilities to help GCA on preparing PPP A revolving-fund sourced from State Budget, to infrastructure delivery and develop a task force project (PDF/TA) accelerate land acquisition (MoF Reg. No. under CMEA to ensure the effectiveness of 220/2010) BLU LU LMAN economic packages implementation Risk-sha haring ing Guid ideli elines nes The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National IIGF has issued risk allocation and mitigation Strategic Projects to ensure timely land acquisition guidelines for PPP project process Tax x Incent entiv ives es (Tax ax Holid iday ay) Indon ones esia ia Infrastructur ucture e Guarantee ntee Fund nd (IIGF) F) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 – 20 years IIGF has the potential to provide project guarantee depending on the investment value for non-PPP projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 92

  86. Some me of Most t Recen ent t Reforms orms Policy y reforms rms are aiming ming to create a more conduci ducive e invest stment ent climat mate e for infrast frastructure ructure deliver ery Presid ident entia ial l Reg. No. 20/2 /2018 on Use of Foreig eign Labor or – released on March 2018 This regulation aims at t simp mplif ifying ng the e perm rmit it appl plic icati tion on proce cess ss for foreig eign n workers kers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia Presid ident entia ial l Reg. No. 56/2 /2017 on Socia ial l Imp mpact t Handling ling in Land Acquis uisit itio ion n Proces ess for PSN – released on June 2017 This Presidential Reg. allows the Execu cuting ting Agency cy to pay land d acqu cquisi isition tion compe pensation tion to the impac pacted ted community ity who does not have officia icial l righ ghts ts over r the land d required ired for PSN. . This regulation helps to solve the land acquisition problem due to community objection over the land use. MoF MoF No. 60/20 2017 on Proced edures res for the Provis isio ion of Central ral Govern rnmen ent t Guaran rantee ee for the Ac Accele elerat ration ion of the Nation ional al Strateg egic ic Projec ects ts Imp mplem lement entati tion on – released on May 2017 The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This is regula gulation tion regulates tes the scope pe and d genera ral l requirem irements ts and d proce cedu dure res to propo pose and d gra rant t guara rante tees, , as well l as all llocate cate state te budget dgetob obli liga gatio tion on govern rnment t guara rantee tees to all ll PSN. . The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Gover ernment nment Reg. . No. 13/2 /2017 on Natio iona nal l Spatia ial l Plan n (RT RTRW RWN) – released on April 2017 The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister ister of Agra raria rian and Spatia tial can issu sue e a recom commen endation tion of spa patia tial l util iliz ization tion; ; so that t the proce cess of obta tain inin ing g projec ject t perm rmiss issio ion can be done. MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset t Managem agemen ent t of Land d Acquis uisit ition ion by State e Asset t Management gement Agenc ncy – released on February 2017 The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 93

  87. Reforms Along the Project’s Life Cycle ...to o encoura urage and accelerat rate infrastructur nfrastructure project ect usi sing ng PPP sche heme me Government nment of Indonesi nesia Proj ojec ect Viabi ability lity Guarantee e Avail ailab abili ility Develop lopment t Fundin ing Tax x Facili ilitie ies Land d Ac Acquisition ition Fund Paymen ment Facili ility ty (PDF) Gap (VGF) Preparation Bidding Process Construction A scheme in which Guaranteeing A facility with MoF Reg. No. concessionaires A facility to support Govt. contractual contribution to land acquisition for 159/PMK. 010/2015 receive sum of obligations under construction cost infrastructure projects re: tax holiday for money periodically infrastructure to increase Project development pioneer sector, such from central or particularly projects concession facility contributing project financial that involve private as base metal, oil regional government agreements and to assist GCA on PPP viability refinery, basic after the completion sector Mof Regulation No project preparation 130/PMK. petrochemical, of an asset. (PDF&TA) Managing Entitiy: 08/2016 re: Govt machinery, renewable Managing enitiy: MoF Regulation, and Ministry of guarantee for energy, & telco MoHA Regulation on Ministry of Finance, Managing entity: Finance based electricity project Ministry of Agrarian equipment industries. Availability Payment KPPIP, PT SMI PT IIF, on GCA proposal acceleration Sector will be further has been ratified. and Land Spatial/BPN and Ministry of and BLU-LMAN expanded Managing entity: Finance Gov ’ t. Managing entity: IIGF and MoF commitment: Managing entitiy: Ministry of Finance & Gov ’ t. commitment: 49% max. Per Govt’s comitment: US$ 12 mn (2016) Ministry of Finance Ministry of Home project cost US$ 450 mn Affairs Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 94

  88. Effor orts ts to Accelerat erate e Infrastru astructure cture Provisi vision on Regulat ation ion imp mprovem emen ent to to accele elerat ate land procurem emen ent proces ess The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land  acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process.  For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation Law No No. 2/201 012 was succe ccessfully ully applied lied in in: No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the 1. Palemb 1. lembang ng – Ind Indralaya laya section ection of of the Trans ns Regulation allows a Business Entity to allocate funding for a land acquisition which can be Sumater era Toll Road Project ject reimbursed by the Government following the completion of land acquisition process. With this 2. 2. Java North Line Doub uble le Track ck Rail Projec ject Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement. Land nd Procurem ocurement t Process as Stipul ulate ated d in Law No. 2 of 2012 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 95

  89. Effor orts ts to Accelerat erate e Infrastru astructure cture Provisi vision on …the establishment of I ndone onesia sia Asset et Management ent Agency (LMAN) Government nment has establish shed ed Stat ate Asset set Management nt Unit t (LMAN) as a s soluti ution n to accelera rate e the land acqu quisiti tion n through ugh the provisi vision n of land d acqu quisiti tion n fund Land Ac Acqui quisitio tion n Budgeting ting Scheme LMAN at a Glance 1. LMAN was established in December 2015 1. Unutilized fund can be allocated for the through the issuance of MoF Reg. 219/2015 following year concerning State Assets Management 2. Non-project-specific land acquisition 2. In 2016, BLU LMAN was mandated to provide fund allocation. Unused allocated fund land acquisition fund as a support to Ministry can flexibly be made available for the of Public Works due to US$ 1,081 Mio other project shortage of fund to acquire land for priority toll roads 3. Land acquisition fund for PSN projects is 3. The scope of support is broaden for all managed under one agency National Strategic Projects through the issuance of MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN This LMAN initiativ nitiative provi vides des bet etter r 4. In January 2018, LMAN has disbursed up to flexibil xibility ty, coordi dina nati tion n and US$ 881.48 Million (IDR 11.9 Trillion) through management ent of land acqu quisit sition on fund nd bridging finance scheme for 27 toll road projects, and planned to start the provisi vision n for National onal Strat rategic gic implementation of direct payment scheme Projects cts (PSN) Source: Ministry of Finance 96

  90. New ew Fundame ament ntal al Regulations ulations Have Been een Initiat tiated ed in 2017 to accelerat rate infrastru frastructu ture re projects cts deliver ery Gover ernm nmen ent Reg. . No. 13/2017 on National ional Spatial ial Plan n (RT RTRWN RWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed 1 in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF No. 60/2017 on Proced MoF edure ures for the Provisio ision n of Central ral Governm rnmen ent t Guarant rantee ee for the Accele Ac elera ration tion of the Nation ional al Strateg egic Projects ects Implem emen enta tation tion 2 The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Presid iden enti tial al Reg. No. 56/2017 on Social ial Impact t Handling ling in Land d Acquis uisit ition ion Proces ess for PSN PSN 3 This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. MoF MoF No. 21/2017 on Procedur edures es for Land d Acquis uisit ition ion for National ional Strategic egic Projec ects and Asset Managem gemen ent t of Land d Acquisit isition ion by State e Asset t Managem gemen ent Agen ency 4 The implementing regulation of Presidential Reg. No.102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 97

  91. Und Under er Preside esident ntial ial Reg. . No.56/2 6/2018 18, , PSN N list st has been revised ised int nto o 223 Proje ojects cts and nd 3 P Progr grams ams 26 26 53 53 Projects 18 18 12 12 Projects Projects Projects Sulawe awesi Kalim limant ntan Sumat atra US$22. 22.8 B Maluk luku & Papua ua US$35 35.6 6 B US$40. 40.4 B US$34. 34.4 B 89 89 3 Programs Projects National ional projects Projects 1 2 Projects Java US$99. 99.7 B 13 13 US$73 73.8 8 B Projects Bali & Nusa sa Tengga ggara ra Exchange rate: US$ 1 = IDR 13,500 US$0. 0.7 7 B PSN incl clud udes s 15 sector ors s at project ct level and 3 sector ors at progra gram m level Projec ect Program ram Electricity 1 Program SEZs & IEs Clean Water & Dams Railway Road Ports Airports Energy 29 Projects Sanitation 51 Projects 16 Projects 69 Projects 10 Projects 7 Projects 11 Projects Aeroplane Industry 8 Projects 1 Program Economic Equality Sea Dike Irigation Fisheries/Farming Smelter Technology Housing Education 1 Program 1 Projects 6 Projects 6 Projects 4 Projects 3 Projects 1 Projects 1 Projects 98 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

  92. PSN may y rece ceiv ive e privil vileges eges as s stipulat ipulated ed in the e Presidential sidential Reg. g. No. . 3/20 2016 j.o j.o. . the e Pr Presid sidential ential Reg. g. No. 58/20 /2017 Determination of National Acceleration of Non- Strategic Projects State Budget Projects Settlement of Legal Permit & Non-permit Issues Completion 12 01 01 02 11 Accelerate Goods and Spatial Planning Service Procurement 03 10 10 09 04 Problems and Hindrance Land clearing Completion acceleration 08 05 07 06 Local Content SOE’s Assignment Utilization Projects Monitoring via Government Additional Facilities KPPIP IT System Guarantee Provision Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 99

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