The Republic of Indonesia The Republic of Indonesia Accelerating Momentum January 2008
Disclaimer Disclaimer The presentation is being made to you on the basis that you have confirmed your representation to each of Barclays Capital, HSBC and Lehman Brothers (the Joint Bookrunners ) that (i) you are not resident in the United States nor a U.S. Person, as defined in Regulation S under the U.S. Securities Act of 1933, a s amended (the Securities Act ), nor acting on behalf of a U.S. Person and, to the extent you purchase the securities described herein you will be doing so pursuant to Regulation S under the Securities Act OR (ii) you are acting on behalf of, or you are, a qualified institutional buyer, as defined in Rule 144A under t he Securities Act. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN RE GULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SU BJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE OR L OCAL SECURITIES LAWS. ANY INVESTMENT DECISION SHOULD BE MADE ON THE BASIS OF THE FINAL TERMS AND CONDITIONS OF THE SECURITIES AND THE INFORMATION CONTAINED IN AN OFFERING MEMORANDUM AND/OR O THER MATERIALS THAT WILL BE DISTRIBUTED TO YOU PRIOR TO THE CLOSING DATE AND NOT ON THE BASIS OF THIS PRESENTATION. This presentation is confidential and has been prepared by the R epublic of Indonesia ( RoI ) for information purposes only. Neither the Joint Bookrunners , their respective affiliates, nor their respective officers, em ployees or representatives make any representation or warranty, express or implied, as to the comple teness or accuracy of the information contained herein, nor have they independently verified such information. Opinions and estimates contained herein constitute the sole judgment of the RoI as of the date of this material and are subject to change withou t notice. The Joint Bookrunners , their respective affiliates and their respective officers, employees and representatives expressly dis claim any and all liability (whether direct or indirect, in cont ract, tort or otherwise) relating to or resulting from the use of the information contained herein by a prospective investor or any of its affiliates or representatives. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates or statements about the future pro spect or performance of RoI . Past performance is not indicative of future results. Any securities, financial instruments or stra tegies mentioned herein may not be suitable for all investors. A prospective investor must make its own independent decision rega rding any securities of financial instruments. The Joint Bookrunners may act as market maker or trade on a principal basis, or have undertaken or may undertake to trade for their own account, transactions in the financial instruments or related in struments of any issuer discussed herein and may act as underwriter, placement agent, advisor or lender to such issuer. The Joint Bookrunners and/or their employees may hold a position in any securities or financial instruments mentioned he rein.
Summary Terms of the Offering Summary Terms of the Offering Issuer The Republic of Indonesia Moody s: Ba3 (stable) Ratings S&P: BB - (stable) Fitch: BB - (positive) Format Reg S / 144A Offering Size US$ benchmark Instrument Fixed Rate Senior Unsecured Notes Maturity 10 years and / or 30 years Use of Proceeds General funding purposes Listing Singapore Stock Exchange Governing Law New York Bookrunners Barclays Capital, HSBC, Lehman Brothers 1
Table of Contents Table of Contents Section 1 Economic Performance Monetary Policy Section 2 Fiscal Policy Section 3 Government Debt Profile Section 4
Section 1 Economic Performance
Accelerating Economic Growth Accelerating Economic Growth Economic growth is powered by non - oil & gas sectors and is expected to exceed growth projections for ASEAN - 4 (1) , newly industrialized Asia (2) , and the world average Indonesia: Real GDP Growth GDP Growth Non Oil & Gas Growth 8% 7.0% 7.0% 6.9% 6.8% 6.7% 6.6% 6.6% 7% 6.5% 5.8% 6.5% 5.7% 6.4% 6% 6.3% 6.3% 5.4% 6.1% ASEAN - 4: 6.1% 6.0% 5.9% 5.9% 5.8% 5.6% World: 5.2% 5% Newly 5.0% 5.0% 5.0% Industrialized Asia: 4.9% 4% 3% 2% 1% 0% (4) (5) 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07E 2007E 9 Months 2007 (3) : 6.3% 200 5 FY: 5.68% 200 6 FY: 5.48% Source: Ministry of Finance, IMF World Outlook Oct 2007 1. Newly Industrialized Asian Economies is composed of 4 areas: Hon g Kong SAR, Korea, Singapore, Taiwan Province of China 2. ASEAN - 4 consists of Indonesia, Malaysia, Philippines and Thailand 3. Real GDP growth for the first nine months of 2007 compared to th e first nine months of 2006 2 4. Ministry of Finance estimates 5. Assumed GDP growth based on Revised 2007 Budget
Solid Growth Supported by Strength in Consumption, Exports and Investment Private consumption growth has exceeded pre - crisis levels while investment growth is supported by favorable climate Sources of Economic Growth Growth 16.4% 17.1% 18% 15% 10.8% 12% 9.2% 9.6% 8.8% 7.6% 8.0% 7.9% 9% 6.6% 4.7% 4.9% 6% 4.0% 3.2% 2.9% 3% 0% Private Consumption Government Consumption Investment Exports Imports (1) (2) (1) 2005 2006 2007 Investment climate has been enhanced by the New Investment Law, which key features are: Equal treatment for both domestic and foreign investors Abolishment of requirement for gradual divestment by foreign inv estors Extension of validity of land titles Right to appoint foreign management Prohibition of nationalization without indemnification at market value Unrestricted repatriation of profits and capital Source: Ministry of Finance 1. Preliminary 2. Real growth for the first nine months of 2007 compared to the fi rst nine months of 2006 3
Growth Driven by Non-oil & Gas Sectors Growth is broad based but highlighted by strengths in infrastruc ture and telecom Economic Growth by Major Sectors (1) (1) (2) 2005 2006 2007 15% 12.2% 12% 7.9% 9% 7.4% 5.0% 6% 4.3% 3.7% 3% 0% Agriculture Mining & Quarrying Manufacturing Trading, Hotel, Transportation & Finance Restaurant Communications Sector as a 14.5% 8.8% 27.3% 17.0% 7.0% 9.3% % of GDP (3) Manufacturing is the single largest sector and growth outlook is supported by Infrastructure spending Pro - industry policies Double - digit growth in transportation and telecommunication supported b y infrastructure development and consumption Source: Ministry of Finance 1. Preliminary 2. Real growth for the first nine months of 2007 compared to the fi rst nine months of 2006 4 3. Sector composition of GDP (at constant market prices) for the fi rst nine months of 2007
Continued Growth in Investment Continued Growth in Investment Recovery in imported capital goods and steady increase in invest ment credit reflect increasing investment Quarterly Imports of Capital Goods % Growth US$ mn 3,000 60% 2,500 50% 2,000 40% 1,500 30% 1,000 20% 500 10% 0 0% 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 Value of Imports % Growth (y-o-y) Investment and Working Capital Credit Growth Realized Government Capital Expenditure Growth ( y-o-y) % Realization 35% 100% 30% 80% 25% 20% 60% 15% 90.2% 84.5% 40% 64.5% 10% 20% 5% 0% 0% (1) 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 2005 2006 2007 Investment Credit Working Capital Credit Source: Ministry of Finance, Bank Indonesia 1. Preliminary 5
Increasing Foreign Investment Significant foreign portfolio inflows demonstrate resilience aga inst the subprime mortgage crisis Foreign Portfolio Investment Foreign Direct Investment US$mn US$mn 9,000 12,000 8,000 8,336 10,000 10,521 7,000 6,000 8,000 5,000 5,580 6,000 4,000 6,058 4,429 5,270 3,000 4,000 4,056 2,000 2,000 1,896 1,000 0 0 (1) (2) (1) (2) 2004 2005 2006 2007 2004 2005 2006 2007 19% growth in net FDI inflow in the first nine months of 2007 su pported by: Increase in reinvested earnings Establishment of the Batam, Bintan and Karimun SEZs Increase in approvals for foreign investment applications Creation of tax incentives Significant growth of over 160% in foreign portfolio investment Key components of FPI include purchases of government bonds and Bank Indonesia certificates Inflows dropped substantially in the 3 rd quarter following the subprime crisis but inflows in September recovered to levels consistent with the early part of the year Source: Bank Indonesia 1. Preliminary 2. For the first nine months of 2007 6
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