April 2020

Republic of Indonesia

Maintaining Stability and Supporting Growth,

Mitigating Covid-19 Risk

1

About Investor Relations Unit of the Republic of Indonesia

Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of

Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of

investors, especially financial market investors.

As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by

International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank

Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned

Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority.

IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial

institutions to Bank Indonesia and other relevant government offices.

Published by Investor Relations Unit – Republic of Indonesia

Website: http://www.bi.go.id/en/iru/default.aspx

Contact: Wiwit Widyastuti (International Department - Bank Indonesia, Phone: +6221 2981 8279)

Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012)

Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +62213510714)

Phone: +62213510714)

E-mail: contactIRU-DL@bi.go.id

This Presentation Book also can be downloaded from: http://www.bi.go.id/en/iru/presentation/red/Default.aspx

2

What’s New in This Edition

S&P Affirm Sovereign Credit Rating Indonesia at BBB and Revise

Outlook to Negative

…page 7

Authorities’ Concerted Effortstoward Covid-19

…page 11-18

Bank Indonesia maintained BI 7-Day Reverse Repo Rate by 25 bps to

4.50% and lowered Reserve Requirement by 200 bps

…page 67-68

Outlook of Domestic Economy

…page 112

Fiscal Policy Updates

…page 46-56

3

Overview

1

2

3

4

5

6

Institutional and Governance Effectiveness:

Accelerated Reforms Agenda with

Institutional Improvement

Economic Factor:

Strong and Stable Growth Prospects Remain

Intact

External Factor:

Improved External Resilience

Fiscal Performance and Flexibility:

Prudent Fiscal Policy to Combat the COVID-19

Pandemic and Maintaining Economic

Sustainability

Monetary and Financial Factor:

Credible Monetary Policy Track Record

and Favourable Financial Sector

Progressive Infrastructure Development:

Strong Commitment on Acceleration

of Infrastructure Provision

Institutional and Government Effectiveness:Accelerated Reforms Agenda with Institutional Improvement

Section 1

5

Improving Global Perception…with recent improvements on corruption perception index and governance indicator

1. Source: World Economic Forum – The Global Competitiveness Report 2019;

2. Source: World Bank – Doing Business 2020 Report;

3. Source: World Bank – The Worldwide Governance Indicators 2019 Update;

4. Source: Transparency International – Corruption Perceptions Index 2019 Report

Worldwide Governance Indicators3

Ease of Doing Business2Global Competitiveness Index1

Corruption Perception Index4

Higher rank is better

Higher score is better

Higher rank is better (rankings at the time of annual report publication)

Higher rank is better41

36

4550

20

30

40

50

60

70

80

90

Rank

India Indonesia Philippines Bulgaria Colombia

91

72

73

73

0

20

40

60

80

100

120

140

160

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Indonesia India Philippines Bulgaria Colombia

*New Concepts by using the Global

Competitiveness index 4.0 which captures

the determinants of long-term growth.

52

28

59

51

4346

15

30

45

60

2010 2011 2012 2013 2014 2015 2016 2017 2018

Voice and Accountability Political Stability/Absence of Violence

Government Effectiveness Regulatory Quality

Rule of Law Control of Corruption

38

4041

41

36

34

42

43

36

37

30

32

34

36

38

40

42

44

2012 2013 2014 2015 2016 2017 2018 2019

Indonesia India Philippines Bulgaria Colombia

6

Continuous Improvement of Investment Climate …another leap on Indonesia’s Rank on Ease of Doing Business (EODB)*

EoDB 2020

Rank

EoDB 2019

Rank

Change in

Rank

EoDB 2020

Points

EoDB 2019

Points

Change in

Points

Overall 73 73 0 69.6 68.0 1.6

Starting a business 140 134 6 81.2 81.2 0.0

Dealing with Construction Permits 110 112 2 66.8 66.6 0.2

Getting Electricity 33 33 0 87.3 86.4 0.9

Registering Property 106 100 6 60.0 61.7 1.7

Getting Credit 48 44 4 70.0 70.0 0.0

Protecting Minority Investors 37 51 14 70.0 63.3 6.7

Paying Taxes 81 112 31 75.8 68.0 7.8

Trading Across Borders 116 116 0 67.5 67.3 0.2

Enforcing Contracts 139 146 7 49.1 47.2 1.9

Resolving Insolvency 38 36 2 68.1 67.9 0.2

- Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB

- Structural reforms will continue including in the budget and real sectors

Source: World Bank

* Higher rank is better, EoDB 2020 was published in October 2019

7

BBB / Stable

Baa2 / Stable

BBB / Negative

Feb 2020, Rating Affirmed at Baa2/Stable

“The affirmation of the ratings is underpinned by a number of credit

strengths – including Indonesia’s robust and stable growth rates and

a low government debt burden, preserved by consistent fiscal

discipline and emphasis on macroeconomic stability – as well as

persistent credit challenges.”

April 2020, Rating Affirmed at BBB, Outlook Revised from Stable to

Negative

“The affirmation reflects Indonesia’s stable institutional settings, strong

growth prospects, and historically prudent fiscal policy settings. The

negative outlook reflects S&P expectation that Indonesia faces additional

fiscal and external risks related to the COVID-19 pandemic in the next 24

months .”

January 2020, Rating Affirmed at BBB/Stable

Indonesia's rating balances a favourable medium-term growth outlook

and a small government debt burden compared with 'BBB’ category

peers against challenges that include a strong dependence on

external financing, low government revenue, and lagging structural

indicators such as governance indicators and GDP per capita.

BBB+ / StableJanuary 2020, Rating Upgraded at BBB+/Stable

“The ratings mainly reflect the country’s solid domestic consumption-led economic growth, restrained budget deficit

and public debt, and resilience to external shocks supported by flexible exchange rate and credible monetary

policies and accumulation of foreign exchange reserves. Since its previous rating review, JCR has been paying

particular attention to the continuing reform initiatives pushed by the administration of President Joko Widodo and

the content and progress of the economic policy taken by his second administration which took office in October

2019. Among the reform agenda, infrastructure development has continued to progress faster than JCR had

expected.”.

Indonesia Has Been Rated as Investment Grade Countrysince 2017

BBB+ / StableMarch 2020, Rating Upgraded at BBB+/Stable

“Indonesia's President Joko Widodo is firmly implementing policies to strengthen economic

growth potential, on the back of a political foundation solidified in his second term.

Supported by such policy efforts, the economy is expected to continue stable growth over the

medium term. Keeping fiscal deficits in check, the government maintains its debt ratio at a

low level. Foreign reserves are ample relative to short-term external debts. The country's

economic resilience to external shocks is retained under a policy stance that emphasizes

macroeconomic stability and fiscal discipline.”

8

Concerted Efforts to Mitigate Covid-19 RiskGeneral Measures

Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling

Extension of the emergency status for COVID-19 until 29th

May 2020

Permission for civil servants to work from home, while maintaining the continuity of public services

Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols..

5

3

2

1

Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities.

6

Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds.

4

Conducting Rapid Test in 17 provinces with positive patients of Covid-19.

7

Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia.

Providing Designated Hospitals, including additional designated hospital in Galang Island.

Utilization of four (4) of ten (10) Wisma Atlet KemayoranTowers (former Athletes Hotel) as emergency hospital.

Establishment of Contingency Plans in the regions level.12

10

9

8

Preparation of drugs that have been used for Covid-19patients in China according to doctor's prescription. Thedrug has been distributed to designated facilities and itsstock is continuously being augmented with domesticpharmaceutical production..

13

Preparation of 606 health workers and 192 non-healthworkers in Wisma Atlet Kemayoran and recruitment of 328medical volunteers and 2590 non-medical personnel in thefield of logistics and operations.

11

Speed up the procurement and distribution of personalprotective equipment for designated hospitals and theprovision of incentives for medical personnel.

14

9

Government Measures to Mitigate Covid-19 RiskFiscal and Non Fiscal Stimuli

Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands

Increased disbursements of the Noncash Food Assistance Program (BPNT) from Rp150,000 to Rp200,000 for a six-month period commencing March 2020

Provided incentives for domestic and international travellers

Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020

6

4

2

1

Reduced the air passenger service fee (PSF) by 20% for March-May 2020

5

Subsidised or provided grants totalling Rp3.3 trillion to local governments affected by lower tax revenues food service activities

7

Provided a stimulus package for housing in the form of an Rp800 billion subsidy as well as a subsidy on down payments totalling Rp700 billion

3

Non-Fiscal Stimuli

Relaxation of Income Tax (PPh Article 21)

Relaxation of Income Tax on Imports (PPh Article 22)

Relaxation of Value Added Tax (VAT) Restitution4

2

1

Relaxation of Income Tax (PPh Article 25)3

Reduce and simplify restrictions on export activities to maintain export performance and competitiveness

1

Reduce and simplify restrictions on import activities to ensure the availability of raw materials

2

Fiscal Stimuli Phase 2Fiscal Stimuli Phase 1

10

Bank Indonesia’s Measures to Mitigate Covid-19 RiskTo maintain Monetary and Financial Market Stability

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms

Reducing the foreign currency reserve requirement ratio for conventional commercial banks from 8% to 4%, effective 16th March 2020.

Reducing the rupiah reserve requirement ratio by 50bps for banks engaged in export-import financing activity in coordination with the Government.

Expanding the types of underlying transactions available to foreign investors as hedging alternatives against rupiah holdings in Indonesia.

4

3

2

Measures Launched on March 2, 2020 Measures Launched on March 18-19, 2020

1

Source: Bank Indonesia

Global investors may utilise global and domestic custodian banks for investment activity in Indonesia.

5

Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms.

Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry.

Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate liquidity.

Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings.

5

3

2

1

Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors.

6

Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market.

4

Strengthening payment system policy to support COVID-19 mitigation efforts .

7

11

Government Measures to Mitigate Covid-19 RiskUpdates on Stimuli 1 and 2

No StimuliPolicy Update

STIMULI 1

1 Front-loading of Government

Spending

Accelerating the process of disbursing Capital Expenditure, accelerating the

appointment of treasury officials, accelerating the implementation of tenders, etc.

Accelerating disbursement of social assistance spending.

Transfer to Regional and Village Funds.

2 Expansion of Staple Food Cards to

increase the benefits (IDR 150

thousand / month → IDR 200

thousand / month)

Has been carried out by the Ministry of Social Affairs as of March 2020.

3 Expansion of the target for housing interest

subsidies with an additional house volume

of around 175 thousand housing units

Currently in the process of drafting the implementing regulations The revision of DIPA is

still in the process based on the proposal of the Ministry of Public Works and Public

Works

The contract with the Implementing Bank is planned for April 2020

STIMULI 2

1 Relaxation of Income Tax Article 21 Income Tax Borne by the Government (DTP), exemption of Article 22 Income Tax

Import, Reduction of Income Tax Article 25, VAT refunds are accelerated

2 Simplification and Acceleration of the

Exim Process

Simplification and reduction of export and import restrictions (manufacturing, food

and medical support), acceleration of the export-import process for reputable traders,

and export-import services through the National Logistic Ecosystem.

Source: Coordinating Ministry for Economic Affairs

12

Economic Policies Taken in Response to Covid-19 Pandemic as of April 2020

Source: Coordinating Ministry for Economic Affairs

• Government’s policy related to COVID-19 pandemic comprises of four safety nets.

• Latest Update 22/4: Expansion of business classification coverage for Fiscal Incentives.

• The economic safety net and national economic recovery measures, along with other economic stimulus that focus on maintaining purchasing power and ensuring

business continuity (minimizing layoffs), will minimize the spill-over effect of the COVID-19 pandemic hence limiting the impact to the banking system.

Health Safety Net Social Safety Net Economic Safety NetNational Economic Recovery

Measures

Budget Support: Rp75 T Budget Support: Rp110 T Budget Support: Rp70,1 T Budget Support: Rp150 T

• BPJS contribution subsidies

• Medical Personnel Incentives

• Death Compensation for

Health Workers

• Purchase of Medical

Equipment (PPE, ventilators,

masks, etc.)

• Referral Hospitals

• Program Keluarga Harapan

• Staple Products

• Pre-employment Card

• Labor Intensive Program

• Electricity tariff discount for

450 VA and 900 VA

• Housing Incentives for MBR

• Religious Holiday Bonus

• Price Stabilization/Market

Operations

• Ministry/Agency Budget

Adjustment

• Government Regulation in Lieu of

Law No. 1 Tahun 2020

• Local Currency Settlement (LCS)

• Recovery Bond

• Fiscal Incentives (Elimination

of Income Taxes & Imported

Goods Taxes, Corporate Tax

Reduction and the

Acceleration of VAT Restitution

• Non-Fiscal Incentives

(Simplification and

Acceleration of the Exim

Process)

• Relaxation of Community

Credit (KUR)

• Bank Indonesia Policy

• OJK and Capital Market

Policies

Rp405,1 trillion

(USD24.6 billion)

Total Budget Allocation

13

Government Measures to Mitigate Covid-19 RiskProvision of Economic Stimulus for the Real Sector Safety Net

Source: Coordinating Ministry for Economic Affairs

Social Safety

Net

Real Sector Safety

Net

Financial Sector

Safety Net

IMPACTED GROUPS COVID-19 IMPACT POLICY MAIN POLICIES

* : Expansion of the Policy in the 2nd Stimulus

1

* : Expansion of Fiscal Incentives in PMK-23/2020

•Fatal threats, health problems

•Job Loss, Decreased Income

•Declining purchasing power, bad credit

INDIVIDUAL/ HOUSEHOLD

•Decreased activities, business difficulties

•Lack of sales, business closures

•Bad Credit, unable to pay obligations

MSMEs

•Declining Demand, Shrinking sales

•Reduced production, employee layoffs

•Loss / Bankruptcy / Closing, Bad Credit

CORPORATIONS

•Raw material supply disruption, production decline

•Declining demand, business closure, layoffs

•Cash-Flow Difficulties, Credit Restructuring

REAL SECTOR

•Liquidity issues, Decreasing solvency

•Pressure on the money market, capital markets, exchange rates

•Threats to financial sector stability

FINANCIAL SECTOR

Allowance / Postponement /

Withholding Tax (Article 21/22/25

Income Tax, VAT)

Loan Allowance / Delay Payment,

Credit Restructuring

Relaxation of Rules and Licensing,

Ease of Doing Business and

Investment

Process and Service Acceleration,

Administrative Reduction and Costs

Special Credit Facilitation for

Increasing Working Capital and

Maintaining Business

**

*

*

*

2

3

4

5

14

Economic Stimulus Programs for MSMEs and Cooperatives

Source: Coordinating Ministry for Economic Affairs

1. Interest subsidy and recap guarantee relief programs (KUR, PMN, Pegadaian)

Inclusive part of the Economic Safety Net (Rp. 70.1 T – Cluster III)

Interest subsidy and installment payment following the KUR scheme

Facilitating Fintech to become chanelling agent to access KUR and PIP

The fiscal impact for the Payment of Interest Subsidies and Principal Delays :

o KUR = Rp 6.1 T (19.5 million Customers);

o PNM = Rp 2.8 T (6.5 million Customers);

o Pegadaian = Rp 5.3 T (10 million Customers).

2. The Saving and Loan Cooperatives (KSP) is facilitated through LPDB, where the amount and total is taken from the budget reallocation and refocussing of the Ministry of Cooperatives and SMEs.

3. Financing for rural banks, PNM, Pegadaian (pawnshops) is accessed through the Financial Safety Net that is being prepared (draft of Cluster IV GR is under process)

4. Exemption of MSME income tax (to 0%) for a period of 6 months:

Tariff decrease in MSME's Final Income Tax from 0.5% 0% (fiscal impact: Rp. 2.4 T)

5. The use of Warung (stalls) for food distribution is coordinated by Ministry of Social Affairs and OJK through the Laku Pandai program.

15

Economic Stimuli for the Manufacturing Industry Sector (Stimuli 2)Tax Incentives: Article 21 Income Tax, Article 22 Import Income Tax, Article 25 Income Tax, VAT

Source: Coordinating Ministry for Economic Affairs

PMK-23Finance Ministerial Regulation 23/PMK.03/2020 on March 21, 2020 concerning

Tax Incentives for Taxpayers Affected by Corona Virus Outbreak, effective on April 1, 2020

Policy Related Sector Impact

1. Article 21 Income Tax will be Borne by

the Government for 6 months for

workers with a gross income of not

more than 200 million rupiah

• Specific manufacturing sectors (440 KLU)

• KITE Taxpayers

• KITE IKM Taxpayers

Provide additional income for workers in the

manufacturing sector to maintain

purchasing power.

2. Exemption from Income Tax Article 22

Import for 6 months

• Specific manufacturing sector (102 KLU)

• KITE Taxpayers

• KITE IKM Taxpayers

The stimulus for the industry is to maintain

the pace of imports.

3. Reduction of Income Tax Article 25 by

30% for 6 months

• Specific manufacturing sector (102 KLU)

• KITE Taxpayers

• KITE IKM Taxpayers

Domestic economic stability can be

maintained and exports are expected to

increase.

4. VAT refunds are accelerated for 6

months for:

- Exporters (without restrictions)

- Non-Exporters (maximum refund value of

5 billion)

• Specific manufacturing sector (102 KLU)

• KITE Taxpayers

• KITE IKM Taxpayers

Through the accelerated refunds, Taxpayers

can optimize cash management.

16

Proposed Expansion of Fiscal Incentives for the Real SectorExpansion of PMK-23: Addition of Sectors Other than Manufacturing Industries in PMK-23/2020

Source: Coordinating Ministry for Economic Affairs

No KBLI Category

Number of

proposed

KBLI

1 Agriculture, Forestry, and Fisheries 100

2 Mining and excavation 17

3 Processing Industry 127

4 Procurement of electricity, gas, steam / hot water, and cold air 3

5 Water Management, Waste Water Management, Waste Management and

Recycling, and Remediation Activities

1

6 Construction 60

7 Wholesale and retail trade; Car and Motorcycle Repair and Maintenance 193

8 Transportation and Warehousing 85

9 Provision of Accommodation and Provision of Food and Beverages 27

10 Information and communication 36

11 Financial and Insurance Activities 3

12 Real Estate 3

13 Professional, Scientific and Technical Activities 22

14 Rental and Leasing Activities without Option Rights, Employment, Travel

Agencies and Other Business Supports

19

15 Education 5

16 Health and Social Activities 5

17 Arts, Entertainment and Recreation 52

18 Other Services 3

Total 761

19 Companies at Bonded Zone V Addition of “Companies at Bonded Zone” in PMK-23.

NOTE:

Total number of KBLI in PMK-23: 440 KBLI

Number of additional proposal: 761 KBLI

(including proposed 118 KBLI for incentives

expansion

Total combined KBLI: 1.083 KBLI

17

Government Measures to Mitigate Covid-19 RiskGovernment Regulation In Lieu of Law No.1 2020

Source: Coordinating Ministry for Economic Affairs

Regulates two topics: (1) National Budget (APBN) and (2) Financial Sector Policy

National Budget (APBN)

1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns

to the maximum level of 3%.

2. Relaxation is related to the allocation/reallocation of

expenditure between institutions, between functions, and

between programs and mandatory spending.

3. Relaxation of allocation / reallocation of Regional Government

Expenditures.

4. Lending to LPS.

5. Issuance of SUN and SBSN can be purchased by BI, BUMN,

corporate investors and / or retail investors.

6. Use of alternative budget sources for example SAL, education

endowment funds, and funds managed by the Public Service

Agency.

7. Taxation Policy: a) Decrease in Corporate Income Tax Rates

gradually to 20% starting in 2022; b) Taxation Incentives in the

Capital Market for public ownership <40%; c) Taxation of

Electronic Transactions; d) Extension of tax administration

time; e) Customs facilities in the context of COVID-19.

Financial Sector Policy

1. Improved Coordination among KSSK members

2. Provide the necessary authority to 4 institutions to prevent a

crisis (forward looking) in the KSSK forum for example to

issue instruments, BI buys SUN on the primary market,

lending to LPS and OJK may request a merger or

consolidation of Financial Services Institutions.

3. Foreign exchange management (LLD) management for

residents

4. Increase public confidence without causing moral hazard.

18

Government Measures to Mitigate Covid-19 RiskBudget Refocusing Policy

Source: Coordinating Ministry for Economic Affairs

I. Presidential Regulation (Perpres) No 7/2020 on Taskforce to Manage COVID-19 Outbreak → Renewed through Presidential Regulation

(Perpres) No 9/2020

1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian

National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and

government

2. Funding comes from the state budget, regional budget, and other legal sources

II. Presidential Instruction (Inpres) No 4/2020 concerning Refocusing of Activities, Reallocation of Ministry/Agency Budget, and

Procurement of Goods and Services in the Framework of Mitigating COVID-19 Outbreak and Ministry of Finance Circular (SE) No

6/2020 on Refocusing Activity and Reallocation of Ministry/Agency Budget in the Framework of Mitigating COVID-19 Outbreak

1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak in

accordance with COVID-19 Handling Protocol

2. Done through a budget revision mechanism (done quickly, simply and accountably)

III. Policy to support efforts to adjust regional allocations and relax transfers for handling Covid-19

1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of DBH, DAU, and DID TA 2020 in the context of COVID-

19 Countermeasures;

2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical DAK on Health and BOK in the framework of

Prevention and/or Handling of COVID-19

3. Permendagri 20/2020 on acceleration of COVID-19 Mitigation in the Scope of Regional Government

19

3.2

3.5

3.7

3.7

4.5

10.1

10.1

11.6

11.9

23.0

25.2

32.9

36.4

44.6

47.8

0.0 10.0 20.0 30.0 40.0 50.0 60.0

Australia

Germany

Singapore

Korea

Taiwan

Malaysia

Myanmar

Mexico

Philippines

US

Indonesia

Thailand

Vietnam

China

India

31

.31

34

.47

23

.61

26

.94

24

.99

26

.57

31

.27

34

.52

22

.48

27

.21

24

.95

26

.34

31

.78

34

.55

23

.14

29

.56

25

.31

26

.26

0

5

10

15

20

25

30

35

40

India Indonesia Malaysia Philippines Thailand Vietnam

2018 2019e 2020e

0

50

100

150

200

250

300

Billio

n U

SD

2018 2017

22.5

25.2

26.3

31.9

32.1

34.2

36.4

36.4

38.5

39.2

39.8

48.1

48.7

58.3

0 10 20 30 40 50 60 70

Myanmar

Taiwan

South Korea

Philippines

Hong Kong

Malaysia

Australia

Japan

Thailand

Singapore

Vietnam

Indonesia

India

China

Indonesia Remains the Investment Destination of Choice

1. Source: The Economist – Asia Business Outlook Survey 2019

2. Source: IMF World Economic Outlook, Database October 2019

3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 2019

4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (30th Annual Survey)

To

tal I

nve

stm

en

t / G

DP

(%

)

Indonesia Enjoys Large Investments Relative to Peers within the Region2

JBIC: Among ASEAN countries, Indonesia is one of the most preferred place for business

investment (December 2019)4

The Economist: Indonesia rounds out the top five of Asian economies that can look

forward to increased investment spending. (January 2019)1

% of surveyed who consider each country has promising prospects

UNCTAD: Indonesia is listed in the top 20 host economies based on FDI inflows, 2017

and 2018 (June 2019)3

(x) = 2017 ranking

20

Medium-Term National Development Plan (RPJMN) 2020-2024President’s Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation".

Source: Coordinating Ministry for Economic Affairs

1Improving the Quality of the Indonesian Labour

Force

2 Achieving Productive, Independent and

Competitive Economic Structure

3 Attaining Equitable and Prosperous National

Development

4Achieving Sustainable Environmental

Climate

5 Developing Cultural Progress

Reflecting the Nation's Personality

6 Developing a Dignified and Trustworthy Legal

System Free from Corruption

7Protection of All Nations and

Provision of Security to All Citizens

8 Attaining Good, Effective, and

Reliable Governance

9Achieving Synergy of Governmental

Framework with the Regional Government

Strengthening Economic Resilience to

Achieve Superior Economic Growth

Developing More Remote Regions to Reduce

Economic Gaps and Improve Equality

Improvement of Quality and

Competitiveness of the Labour Force

Engaging in Mental Revolution

and Culture Development

Strengthening Infrastructure to

Support Economic Development

and Improve Basic Services

Conservation of Environment,

Supporting Climate Change, and

Enhancing Disaster Resilience

Enhancing Political, Legal, Defense and

Stability and Transforming Public Services

1 HR

Development

2 Infrastructure

Development

3Regulation

Simplification

5 Economic

Transformation

4 Simplification of

Bureaucracy

President‘s Missions Top 5 Presidential Priorities 7 RPJMN Development Agenda

21

Simplifying Regulations through Omnibus LawsOmnibus Laws Group a Diverse Range of Issues into Legislation, Aimed at Creating Jobs and Empowering SMEs.

1Under discussion

Source: Coordinating Ministry for Economic Affairs

Financial

Sector1Taxes

Investment

Labour

Omnibus Law Priority Sectors

1) Simplification of Licensing

2) Investment Requirements

3) Employment

4) Ease, Empowerment and Protection of MSMEs

5) Ease of Doing Business

6) Research and Innovation Support

7) Government Administration

8) Imposition of Sanctions

9) Land Acquisition

10) Government Investment and

Projects

11) Economic Zone

11 Clusters of Omnibus Law Cipta Lapangan Kerja (Job Creation)

6 Pillars of Omnibus Law Perpajakan (Taxation)

1) Investment Funding2) Territorial System

3) Personal Taxpayer

4) Taxpayer Compliance

5) Equity of Business

6) Taxation Facility

Following the inauguration of his second presidential term in October 2019, President Joko Widodo announced his administration’s plans to continue regulatory reform by focusing on

initiatives such as developing a dynamic and qualified workforce, promoting industry cooperation through technology, further enhancing infrastructure development and economic

reform as well as simplifying regulations and bureaucracy.

To achieve such ends, President Widodo’s Government subsequently prepared three bills of omnibus laws, namely an omnibus bill on job creation, an omnibus bill on development

and strengthening the financial sector and an omnibus bill on tax provision.

Omnibus laws refer to laws that group diverse and unrelated issues which are drawn into a bill which is accepted in a single vote by a legislature.

22

The Economic Policy Packages

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

Phase III (7 Oct ’15)Financial services facilitation, export financing and elimination of business unnecessary burden

Phase IV (15 Oct ’15)Social safety net and betterment of people welfare

Phase V (22 Oct ’15)Improving industry and investment climate through tax incentives and deregulation on sharia banking

Harmonizing Regulations Simplifying Bureaucratic Process Ensuring Law Enforceability

Phase VI (5 Nov ’15)Stimulating economic activities in border areas and facilitating strategic commodities availability

Phase I (9 Sept ’15)Improving national industry competitiveness

Phase II (29 Sept ’15)Easing permit requirement and simplifying export proceeds requirement

Phase VII (7 Dec ’15)Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals

Phase VIII (21 Dec ’15)Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries

Phase IX (27 Jan ’16)Accelerating electricity generation, stabilizing meat prices and

improving rural–urban logistics sector

Phase X (11 Feb ’16)Revising the Negative investment List and improving protection

for SMEs

Phase XI (29 Mar ’16)Stimulating national economy through facilitation to SMEs and

industries

Phase XII (28 Apr’16)Improving Indonesia’s rank on Ease of Doing Business (EODB)

Phase XIII (24 Aug ’16)Low Cost Housing for Low-Income Communities

Phase XIV (10 Nov ’16)Roadmap for E-commerce

Source: Coordinating Ministry for Economic Affairs

Phase XV (15 Jun ’17)Improving logistics

In addition to the 16 Policy Packages, on August 31, 2017 the Government has issued a Presidential Regulation No.91/2017 for enhancing business license service standard

Phase XVI (16 Nov ’18)Improving the competitiveness and domestic economy

23

Improving the Competitiveness and Domestic EconomyThe 16th Economic Policy Package has been launched

Source: Coordinating Ministry for Economic Affairs

TAX HOLIDAY EXPANSION

Background

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).

Objectives and benefits

1) Increasing investment and strengthening the industrial

sectors from the downstream to the upstream through the

expansion of the business sector, KBLI’s pioneer industries,

and Special Economic Zones (SEZ) that can receive tax

holiday facilities

2) Increasing the process of convenience of filing process and

tax holiday facilities provision

EXPORT PROCEEDS (DHE) SCHEME

Tax Rates on Deposit

Interest IncomeTax Rates on Deposit Interest Income

24

Other Progress on Economic Policy Packages

29 Provinces have set 2016 Minimum Wage

System in accordance to the Government

Regulation (GR) No. 78/2015

Fair, Simplified &

Projectable Wage System

• The Provinces of Central Java proposed 3

IZ’s: Kendal, Demak, and Ungaran

• Pharmaceutical IZ in Bitung (North Sulawesi)

in 2017

Industrial Zone

Development of

Spesial Economic Zone (SEZ)

Investment commitments in SEZ up to 2017

reach 41 T, with 3 hour licenses already

applied in 4 SEZ’s Administrators in 2017

52 Bonded Logistic Center has been

launched to support various industries

Deregulation on

Logistics Sector

25

Investment Incentives to Boost Industry Sector

BUSINESS EXPANSION

• Tax allowance

• Exemption or relief of import duty on capital goods, machinery or equipment

for production purposes that can not be produced domestically;

• Exemption or relief of import duty on raw materials or auxiliary material for

production purposes for a certain period of time and certain conditions;

• Exemption or suspension of VAT on the import of capital goods or

machinery or equipment for production purposes that have not been

produced domestically for a certain period of time;

• Accelerate depreciation or amortization (part of tax allowance); and

• Property tax relief, especially for certain business sectors in certain regions;

• Combine with Online Single Submission (OSS)

Tax holiday of corporate income tax in a certain amount and time

PIONEER INDUSTRIES

SPECIAL ECONOMIC ZONE

• No collection of VAT and Luxury Goods Sales Tax (PPnBM),

• Customs tax exemption,

• Tax Allowance and Tax Holiday,

• Suspension of Import Duty,

• 0% Import Duty for goods produced using local components of a certain

level

INDUSTRIAL ZONE

FREE TRADE ZONES AND PORTS

MICRO, SMALL, MEDIUM ENTERPRISES (MSMES)

E-COMMERCE

• VAT exemption on import or delivery of capital goods,

• Import Duty exemption on machineries/goods/materials,

• Tax Allowance and Tax Holiday

Exemption of:

• Import Duty

• VAT

• Luxury Goods Sales Tax (PPnBM)

• Customs duty

Decreasing MSMEs Tax from 1% to 0.5% of gross revenue

• Sales from customs areas for non-small entrepreneurs through the

market place will be subject to 0.5% income tax and 1% VAT

• Sales from customs areas for small entrepreneurs through the market

place will be subject to 0.5% income tax

Source: Coordinating Ministry for Economic Affairs

26

New Tax Holiday Policy*to boost industry sector

Taxpayer

Pioneer Industry with minimum investment value of 1 trillion

Rupiah (minimum investment value of 500bn Rupiah for

telecommunication sector)

Corporate Income Tax (CIT)

reduction rate

Concession period

Transition

After Tax Holiday

Not available

100% (single rate)

• 5 – 15 years; or

• Can be extended to 20 years; subject to MoF

discretion

1. 500Bn – 1Tn : 5 years

2. 1Tn – 5Tn : 7 years

3. 5Tn – 15Tn : 10 years

Pioneer Industry with minimum investment value of 500bn Rupiah

Applied to 8 industry groups:

(i) upstream basic metal industry; (ii) oil and gas refinery

industry; (iii) organic basic chemicals industry; (iv) machinery

industry; (v) plantation, forest, and fishery products

processing industry; (vi) telecommunication, information and

communication industry; (vii) marine transportation; and (viii)

economic infrastructure

Applied to 17 industry groups:

(i) upstream base metal; (ii) oil and gas refinery; (iii) petrochemical (oil, gas,

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

(vi) pharmaceutical materials; (vii) semiconductor and other components;

(viii) communication devices components; (ix) medical devices

components; (x) machine manufacturing for industry; (xi) machine main

components manufacturing; (xii) robotic components manufacturing; (xiii)

ship components manufacturing; (xiv) airplane components manufacturing;

(xv) train components manufacturing; (xvi) power plants; and (xvii)

economic infrastructure

PROVISION BEFORE AFTER

5 – 20 years depends on the investment value (in IDR):

4. 15Tn – 30Tn : 15 years

5. ≥ 5Tn : 20 years

50% CIT reduction for the next 2 years

10 – 100%

Tax allowance not providedTax allowance for business expansion can be provided

with terms and conditions applied

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

27

Enhancing Business License Service StandardPresidential Regulation to Accelerate Ease of Doing Business has been launched

Source: Coordinating Ministry for Economic Affairs

Po

licy

Go

als

12

34

56

Improve efficient, streamlined, &

integrated business license service

standards

Accelerate the business

licensing process

Provide business licensing

process assurance in terms of

the costs and lead times

Increase coordination & synergy

between central & regional

government

Overcome the barriers to

doing business in

Indonesia

Implement integrated

licensing process (single

submission)

Ma

in P

olicy

Forming a Task Force to identify &

overcome the end-to-end licensing

barriers

Implementing a licensing checklist for

Special Economic Zones (KEK), Free

Trade Zones (FTZ), Industrial Zones &

Tourist Zones

Utilizing data sharing

Business license

regulatory reforms

Implementation of the

Single Submission

system

1st Phase 2nd Phase

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

28

Improving Investment ClimateOnline Single Submission (OSS) Has Been Launched...

Source: Coordinating Ministry for Economic Affairs

OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business

permits and integrated between the central government and regional administrations

Lorem Ipsum

Suitable for all

category,

Environment &

Forestry SectorElectricity

Sector

Public Works &

Housing SectorHealth Sector Industry Sector

Marine & Fishery

Sector

Medicine &

Food Sector

Transportation

SectorTrade Sector

Information &

Communication

Sector

Other Sector

Sectors

The Advantage of Using OSS

Business licenses can

be secured in under an

hour

Standardized

business licenses

are available

Ellectronically

integrated

The whole licensing

process is monitored by

the Task Force

More practicalAccessible at

anytime and

anywhere

29

(Pusat Logistik Berikat/PLB) is a

facility provided by Ministry of

Finance as part of the

implementation of the 1st Economic

Policy Package.

PLB facility aims to improve

efficiency and reduce the cost of

transportation and logistics in

Indonesia; support the growth of the

domestic industry, including small

and medium industries; increase

investment; and to make Indonesia

to become a logistics hub in Asia

Pacific.

To date, 52 Bonded Logistic Center has been launched to

support various industries.

Improving Investment Climate…Bonded Logistic Center to Improve Indonesia’s Competitiveness

Oil and

gas, and

mining

industry

Food &

beverages

industry

Auto-

motive

industry

Personal

care/

home care

industry

Textile

(cotton)

industry

Small and

medium

industry

Synthetic

textile

(chemical

substances)

industry.

Bonded Logistic Center

Heavy

Equipment

industry

Defence

industry

Aircraft

MRO

industry

30

Improving Investment Climate …revising the Negative Investment List

1 For total project value of IDR10bn and above

Before

Cold storage Restaurants, Bars Pharmaceutical Raw Materials

Manufacturing

Sports Center,

Film Processing Lab, Crumb Rubber

Revision of "Partnership" category to refer to partnership with Micro, Small and

Medium Enterprises (MSMEs)

Grandfather Law: If a particular sector is tightened in future, existing foreign

investor does not need to comply with tighter stake

Key Reforms in Negative Foreign

Investment List

Strengthen implementation of negative investment law through active roles from

ministries, agencies and regional governments

100%49%

100%51%

100% 85% 100%

95%100%

33%67%

51%67%

67%55%

67%65%

67%

Distribution, Warehousing Private Museum, Catering, apparel

Manufacturing, Exhibitions &

Conventions

Toll Road Operator,

Telecommunication Testing Company

Consultancy for Construction1

Telecommunication Provider

with Integrated Services

Professional Training, Golf Course Management, Air

Transport Support Services, Travel Bureau

After Before After Before After Before After

Before After Before After Before After

Before After Before After Before After

33%

49%

Introduction of New Foreign Ownership Regulation for Strategic Sectors

Source: Investment Coordinating Board (BKPM)

31

Investment Realization (Q1-2020)

IDR tn

2013 2014 2015

Direct Investments

2016 Mining

Housing, Industrial Estate,

and Office Building

Food Industry

Electricity, Gas, and

Water Supply

US$602.9 mn

US$1,523.8 mn

US$298.4 mn US$482.7 mn

US$868.6 mn

US$806.9 mn

Transportation, Warehouse,

and Telecommunication

50.9%

US$569.4 mn

81.3%

43.1%

21.5%22.1%

36.5%

149.1%

Investment

Realization

Top 8 FDI Realization by Sectors (Q1-2020 vs Q1-2019)

Source: Investment Coordinating Board (BKPM), compared to Q1-2019 period

2017

Rp145.4 T

Rp159.4 T

IDR98tn

434,463

9.6% 15.6%

9.2% 29.3%

Q1-2016 Q1-2017

Q1-2019 Q1-2020

Q1-2016 Q1-2017

Q1-2019 Q1-2020

*

* person

375,982

IDR210.7tn

8.0%

Q1-2019 Q1-2020

IDR195.1tn

IDR87.2tnIDR107.9tn IDR112.7tn

Chemical and

Pharmaceutical Industry

Metal, Except Machinery,

and Equipment Industry

2018 2019

Food Crops,

Plantations, and

Livestock

US$478.8 mn

120.5%98.0

112.7

210.7

0

20

4060

80

100120

140

160180

200220

240

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

FDI DDI TOTAL

2020

decreasing

Economic Factor:Strong and Stable Growth Prospects Remain Intact

Section 2

33

Conducive Environment Underpinning Strong Growth Fundamentals

Largest Economy in

South East Asia

4th Most Populous

country in the

World; 64% in

productive age

Manageable

Inflation Rate

Rising Middle Class

and Affluent

Customers

From commodity-based to manufacturing

and service sectors via infrastructure

development

From consumption-led to investment-led growth

via a stronger manufacturing sector and more

investment initiatives

Policies to maintain purchasing power to

stimulate domestic economy in the midst of

weakening macroeconomic conditions

Budget reform as a

part of larger

economic reform

initiative

Tax base to be

broadened from

one reduce

dependency on

commodities

Fuel subsidies

significantly reduced

and spending

redirected to more

productive allocation

Prudent debt

management

Reform-Oriented

Administration

Three main sources of financing for investment

needs: State and regional budget, State Owned

Enterprises and PPP

Continuing from 2015 policy, infrastructure will

be higher than fuel subsidy

Fiscal and non-fiscal incentives to attract

infrastructure investment and promote PPP

Infrastructure spending focused on basic

infrastructure projects

Large and Stable

EconomyConsistent

Budget Reform

New Economic

Structure

High

Infrastructure

Investments

34

Indonesia’s Strong GDP

Growth Prospect

Strong GDP Growth1

%

Institutions2020 GDP growth

(%YoY)

2020 Budget 5.3

Bank Indonesia around 2,3

IMF (WEO April 2020) 0.5

World Bank (GEP April 2020) 2.1

ADB (ADO April 2020) 2.5

Consensus Forecast (April 2020) 2.1

Favourable GDP Growth Compared to Peers2

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption

2. Source: World Economic Outlook Database – October 2019; * indicates estimated figure

%

• Despite global economic moderation, resilient national economic growth has been

maintained in Indonesia. For the year 2019, solid economic growth was recorded at 5.02%

in 2019, albeit down slightly from 5.17% in 2018. The main driver of economic growth in

2019 was domestic demand, as export performance declined. In the fourth quarter of

2019, economic growth stood at 4.97% (yoy), down slightly from 5.02% (yoy) in the

previous period.

• Solid domestic demand was a key contributor to economic growth momentum in 2019 as

exports languished on dwindling global demand and sliding international commodity prices.

Domestic demand was influenced by stable household consumption, which grew 5.04% in

2019, relatively unchanged from the 5.05% posted in 2018. Household consumption was

maintained in line with controlled inflation and upbeat consumer confidence.

• Furthermore, the general election held in 2019 edged up consumption by non-profit

institutions serving households (NPISH) to 10.62% from 9.10% in 2018. Domestic demand

was also buoyed by strong investment performance, building investment in particular which

grew 5.37% in the reporting period, similar to the 5.41% recorded in 2018. Services in the

tertiary sector were the main locomotive of economic growth in 2019, led by

communications and information, financial services and insurance as well as other

services.

0.04

3.83 3.27

(2.07)

(0.16)

3.74 3.31

(1.73)

(0.36)

4.01

3.14

(1.81)

(0.30)

4.01

3.19

(1.70)

(0.41)

4.21

3.09

(1.69)

(0.52)

4.20

3.06

(1.74)

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 5.065.275.17 5.185.075.055.024.97

-3.0

-1.0

1.0

3.0

5.0

7.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2014 2015 2016 2017 2018 2019

QoQ YoY

3.7

3.23.4

3.6

6.17.0

5.05.1

5.7

6.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2012 2013 2014 2015 2016 2017 2018 2019* 2020*

Bulgaria Colombia India Indonesia Philippines

35

GDP Growth Breakdown

GDP Growth by Sector (%, YoY)

By sectors2015 2016 2017 2018 2019

Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot

Agriculture, forestry, and

fishery3.7 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 3.4 4.7 3.6 3.8 3.9 1.8 5.3 3.1 4.3 3.6

Mining and Quarrying 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 2.3 (0.7) 2.3 0.9 1.2

Manufacturing 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 3.9 3.5 4.1 3.7 3.8

Construction 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 5.9 5.7 5.6 5.8 5.8

Wholesale and Retail Trade,

Repair of Car and Motorcycle3.8 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 5.2 4.6 4.4 4.2 4.6

Transportation and Storage 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 8.5 8.7 5.7 5.5 7.1 5.5 5.9 6.7 7.6 6.4

Information and

communication9.7 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 7.1 7.0 9.1 9.6 9.2 9.7 9.4

Financial service 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 4.3 3.1 3.1 6.2 4.2 7.2 4.5 6.1 8.5 6.6

Other Services* 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 6.8 7.3 6.4 6.2 6.7

GDP 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 5.1 5.1 5.0 5.0 5.0

Source: Central Bureau of Statistics of Indonesia (BPS)

*Other services consist of 10 sectors (according to Standard National 2008)

GDP Growth Based on Expenditures (%, YoY)1

By expenditure2015 2016 2017 2018 2019

Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot

HH. Consumption 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 5.0 5.2 5.0 5.1 5.1 5.0 5.2 5.0 5.0 5.0

Non profit HH.

consumption(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 17.0 15.3 7.4 3.5 10.6

Government

consumption2.9 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 5.2 8.2 1.0 0.5 3.2

Gross Fixed Cap.

Formation4.6 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 5.8 6.9 6.0 6.6 5.0 4.6 4.2 4.1 4.4

Exports (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (1.7) 8.4 2.7 16.5 8.4 8.9 5.8 7.5 8.3 4.6 6.5 (1.6) (1.7) 0.1 (0.4) (0.9)

Imports (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 (2.4) 4.8 0.2 15.4 11.9 8.1 12.5 14.9 13.8 7.1 11.9 (7.5) (6.8) (8.3) (8.0) (7.7)

GDP 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 5.1 5.1 5.0 5.0 5.0

1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption

36

Regional Economic Growth

Source: Central Bureau of Statistics of Indonesia (BPS)

Solid domestic demand is supported by increasing income from inter-regional trade, such as in Sumatra. Meanwhile, economic growth

in Kalimantan and Bali-Nusa Tenggara has been maintained as exports of primary commodities improved.

External Factor:Improved External Resilience

Section 3

38

1.97

(8.35)

(2.06)

0.31

-2.84

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

-12

-10

-8

-6

-4

-2

0

2

4

6

8

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3*Q4**

2013 2014 2015 2016 2017 2018 2019**

Goods Services Primary Income Secondary Income Current Account (%GDP) (rhs)

US$bn

External Balance under Control Supported by Adequate Reserves

Current Account Deficit within Safe ThresholdBalance of Payments Portrait

Substantial FX Reserves to Mitigate External ChallengesTrade Balance Portrait

Source: Bank IndonesiaSource: Bank Indonesia

Source: BPS

* Preliminary Figure ** Very Preliminary Figure

2015:

Surplus

US$7.59bn

2013:

Deficit

(US$4.10bn)

2014:

Deficit

(US$2.37bn)

2016:

Surplus

US$8.83bn

2017:

Surplus

US$11.83bn

Source: Bank Indonesia

FX Reserves as of March 2020: US$121.0 bn

(Equiv. to 7.0 months of imports + servicing of government debt)US$bn

2015:CA Deficit

(US$17.5bn)

2013:CA Deficit

(US$29.1bn)

2014:CA Deficit

(US$27.5bn)

2016:CA Deficit

(US$17.0bn)

2017:CA Deficit

(US$16.2bn)

2018:

Deficit

(US$8.7bn)

2018:CA Deficit

(US$30.6bn)

2019:

Deficit

(US$3.2bn)

(8.12)

12.38

4.28

129.18

0

40

80

120

160

-15

-10

-5

0

5

10

15

20

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1*Q2*Q3*Q4**

2013 2014 2015 2016 2017 2018 2019**

Indonesia's Balance of Payments

Current Account Capital and Financial Account Overall Balance Reserve Asset (rhs)

US$bn US$bn2019:

CA Deficit(US$30.4bn)

-1.13

-0.50-1.63

-3.00

-2.00

-1.00

0.00

1.00

2.00

3.00

4.00

1 3 5 7 9

11 1 3 5 7 9

11 1 3 5 7 9

11 1 3 5 7 9

11 1 3 5 7 9

11 1 3 5 7 9

11 1 3 5 7 9

11 1 3

2013 2014 2015 2016 2017 2018 2019 2020

OG Non-OG Total

-

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

50

60

70

80

90

100

110

120

130

1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1 4 7 10 1

2013 2014 2015 2016 2017 2018 2019 2020

FX Reserves (LHS) Month of Import & Debt Service (RHS)

MonthUS$bn

39

Exchange Rate In Line with Fundamentals

Movement of Rupiah

Rupiah Exchange Rate Fared Relatively Well Compared to Peers

IDR/US$ The rupiah regained some of its lost value in the second week of April 2020 as global

financial market panic began to subside. On 13th April 2020, the rupiah appreciated

4.35% (ptp) on the level recorded at the end of March 2020. Notwithstanding, the

rupiah has still depreciated by around 11.18% on the level recorded at the end of

2019. The rupiah appreciated in April 2020 in response to an influx of foreign capital

flows to domestic financial markets after various policies were implemented around

the world to mitigate the economic impact of COVID-19, including in Indonesia. The

stronger rupiah was also supported by the maintained supply of foreign exchange from

domestic players, which underpinned rupiah exchange rate stability. Bank Indonesia is

confident that the current value of the rupiah is adequate to support economic

rebalancing, as the currency is fundamentally undervalued. Furthermore, rupiah

stability is expected as the currency strengthens towards Rp15,000 per US dollar at

the end of 2020. Bank Indonesia will continue to bolster rupiah stabilization policy in

line with the currency's fundamental value and market mechanisms. To that end, Bank

Indonesia will increase the intensity of triple intervention policy through the spot and

Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the

secondary market. To boost the effectiveness of exchange-rate policy, therefore, Bank

Indonesia will continue to optimize monetary operations in order to ensure sound

market mechanisms and adequate liquidity in the money and foreign exchange

markets.

Source: Bank Indonesia

Rupiah Exchange Rate Volatilty

15630

14601

14798

14134

1425414120

14064 14219

16195

14,141

14,381 14,220

14,031

14,232

14,113

14,006

13,714

15,179

16,195

13,000

13,500

14,000

14,500

15,000

15,500

16,000

16,500

17,000

12

-Ma

y

12

-Ju

n

12

-Ju

l

12

-Au

g

12

-Se

p

12

-Oct

12

-No

v

12

-De

c

12

-Ja

n

12

-Fe

b

12

-Ma

r

12

-Ap

r

12

-Ma

y

12

-Ju

n

12

-Ju

l

12

-Au

g

12

-Se

p

12

-Oct

12

-No

v

12

-De

c

12

-Ja

n

12

-Fe

b

12

-Ma

r

12

-Ap

r

IDR/USD

Quarterly Average

Monthly Average

data as of April 13th, 2020

0.25

-0.41

-0.71

-0.78

-0.84

-1.23

-1.76

-2.26

-2.37

-5.71

-6.27

-6.57-9.30

0.16

0.07

0.50

-0.38

0.42

-0.01

-0.81

-1.07

0.17

-2.27

4.35

1.91

-1.23

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0

PHP

KRW

CNY

JPY

SGD

MYR

EUR

INR

THB

TRY

IDR

BRL

ZAR

point-to-point

average

*data as of April 13th, 2020

YTD 2020 vs 2019

%

18.1%17.0%

16.0%

7.0%5.4%

6.4% 6.2%4.7%

28.7% 28.5%

18.0%

23.7%

3.7%

5.9%

14.4%

5.1%

15.99%

ZAR BRL TRY IDR THB PHP INR MYR

2019

YTD 2020

Average YTD 2020

*data as of April 13th, 2020

40

Ample Lines of Defense Against External Shocks

Ample level of FX reserves to buffer against external shock

FX Reserves as of March 2020: US$121.0 billion

South Korea Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2020

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

Chiang Mai Initiative

Multilateralization

(CMIM) Agreement

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

agreement

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

Doubled to US$240 bn effective July 2014

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

The facility is available in USD and JPY

IMF Global Financial

Safety Net - GSFN

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

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

Bila

tera

lR

egio

na

lG

lob

al

FX Reserve

Ample Reserves

Swap Arrangement

Source: Bank Indonesia

ASEAN Swap

Arrangement (ASA)

Entitled to a maximum swap amount of USD600 million under ASA

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

Doubled to USD2 billion in 2005

Singapore Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2019

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

November 2018

Malaysia Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019

41

Solid Policy Coordination In Managing Financial Markets Volatility

Source: Ministry of Finance

First Line of Defense

State’s Budget

Buyback fund at DG of Budget Financing and

Risk Management

Investment fund at Public Service Agency

(BLU) (min. level Aware)

State Owned Enterprises

(BUMN)’s Budget Related SOEs (min. level Aware)

Social Security Organizing

Agency (BPJS)’s BudgetBPJS (min. level Aware)

Second Line of Defense

State’s Budget

State General Treasury Account (Rekening KUN)

(min. level Alert)

Accumulated cash surplus (SAL) (min. Level Crisis)

Gov’t Securities Crisis Management Protocol (CMP)

Indicators:

- Yield of benchmark series;

- Exchange rate;

- Jakarta Composite Index;

- Foreign ownership in government securities

Policies to address the crisis at every level :

- Repurchase the government securities at secondary market

- Postpone or stop the issuance

Bond Stabilization Framework

The enactment of Law No. 9/2016 regarding Prevention and

Mitigation of Financial System Crises as a legal foundation

for the government to serves at the time of financial crisis in

the form of Financial System Stability Committee (KSSK)

KSSK members: the Ministry of Finance, Bank Indonesia, the

Financial Services Authority, and the Deposit Insurance

Corporation

Swap facility arrangements based on international

cooperation

Enhancing coordination between government institutions

and continuous dialogue with market participants

Implementing Crisis Management Protocol (CMP)CMP

Implementing Bond Stabilization Framework (BSF)BSF

42

Strengthened Private External Debt Risk Management

Regulation Key Points

Phase 1

Jan 1,2015 –

Dec 31,2015

Phase 2

Jan 1,2016 –

Dec 31,2016

Phase 3

Jan 1, 2017 &

beyond

Object of Regulation Governs all Foreign Currency Debt

Hedging Ratio

< 3 months 20%* 25%**

> 3 – 6 months 20%* 25%**

Liquidity Ratio (< 3 months) 50% 70%

Credit Rating Not applicable Minimum rating of BB-

Hedging transaction to meet

hedge ratio

not necessarily be done with a bank in

Indonesia

Must be done

with a bank in

Indonesia

Sanction As of Q IV-2015 Applied

External Debt/GDP (%)

Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio

Source: Bank Indonesia

Liquidity Ratio*

Hedging Ratio*

*Data as of Q3 2019, with total population 2.602 corporates

Regulation on Prudential Principle in Managing External Debt

Source: Bank Indonesia

Source: Moody’s Statistical Handbook, November 2019

23.9

36.2

20.0

39.9

57.3

23.0

36.7

20.9

42.9

56.5

21.9

37.0

21.4

42.3

54.3

0 10 20 30 40 50 60 70

Philippines

Indonesia

India

Colombia

Bulgaria

2020F

2019F

2018

2,341 ,

90%

261 ,

10%

≤ 3 months

2,443 , 94%

159 , 6%

> 3 - 6 months

2,294 , 88%

308 , 12%

Comply Not Comply

43

Healthy External Debt Composition

External Debt Structure

Source: Bank Indonesia, External Debt Statistics of Indonesia, April 2020*Provisional Figures

The Structure of External Debt is Dominated by Long-Term Debt

External Debt Remains Manageable External Debt to GDP Ratio & Debt to Export Ratio

%% %

121.8 114.9

101.0

113.8

123.1

139.5

168.4

176.1

168.0

160.8

168.7 172.4

177.4 183.7

31.8

26.5 25.0

27.4 29.1

32.9

36.1 34.3 34.7

36.0 36.8 36.6 36.2 36.1

0

5

10

15

20

25

30

35

40

80

100

120

140

160

180

200

External Debt / Export Ratio External Debt / GDP Ratio (rhs)

42.6 41.447.4 50.0 53.6 55.8 54.1 50.5 48.8 50.4 50.8 49.8 50.0 49.8 49.5 50.1

57.4 58.652.6 50.0 46.4 44.2 45.9 49.5 51.2 49.6 49.2 50.2 50.0 50.2 50.5 49.9

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Private External Debt Public External Debt

18.3 21.2 20.7 21.7 21.2 20.2 17.9 17.1 15.6 16.0 16.2 15.8 14.1 15.7 14.6 14.6

81.7 78.8 79.3 78.3 78.8 79.8 82.1 82.9 84.4 84.0 83.8 84.2 85.9 84.3 85.4 85.4

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Short Term External Debt Long Term External Debt

Million USD

11.5

17.1

11.312.0

5.4

10.2

5.9

3.0

10.1

6.5

8.3

10.1 10.5

7.7

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

18.0

20.0

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000 External Debt External Debt Growth (rhs)

44

Manageable External Debt ProfileShort term non-bank corporate debt (non affiliation) represents only 8.6% of total private external debt

Private

Short-Term1

Private

Non-Bank

External Debt

Position

Affiliation

Non Affiliation

US$155.2bn

or

76%

of Private Ext.

Debt

US$19.5bn

or

9.6%

of Private

Ext. Debt

US$11.8bn

or

5.8%

of Private

Ext. Debt

US$17.7bn

or

8.7%

of Private

Ext. Debt

Public Long Term1 Private Bank

US$29.5bn

or

14.4%

of Private

Ext. Debt

US$204.2bn

or

50.1%

of total

Ext. Debt

US$49bn

or

24%

of Private

Ext. Debt

External Debt Position as of February 20201 Based on remaining maturity

Source: External Debt Statistics of Indonesia, April 2020

US$407.5bn

US$203.3bn

or

49.9%

of Total Ext.

Debt

Fiscal Performance and Flexibility:Prudent Fiscal Policy to Combat the COVID-19 Pandemic and Maintaining Economic Sustainability

Section 4

46

Optimizing the Policy Mix to Combat the COVID-19 Pandemic and Maintaining Economic Sustainability

Source: Ministry of Finance

2

Budget Refocusing & Reallocation

STIMULUS I

Rp8,5 TSTIMULUS II

Rp22,5 TSTIMULUS III

Rp405,1

Line ministries and regional govt: budget priorities to

tackle COVID-19

Strengthening the domestic economy through:• Accelerating spending &

encouraging labor-intensive policies

• Spending stimulus

Maintaining people's purchasing power and ease of export and import:• Fiscal stimulus• Non-Fiscal Stimulus• Policy in the Financial Sector

Rescueing national health and economy, as well as maintaining the stability of the financial

sector (through Perppu No.1 Tahun 2020)• State Financial Policy (health, social safety

net, business support & economic recovery financing support)

• Policy in the Financial Sector

FISCAL POLICY

MONETARY*

• Reducing BI 7DRR• Increasing triple intervention intensity• Lowering Currency Statutory Reserves

(GWM) in Rupiah & foreign currency• Extend SBN tenure

BANKING

• Relaxation of credit/financing/fund provision requirements for MSMEs

• MSMEs credit/financing restructuring

MONETARY AND FINANCIAL POLICY

Rp190 T Spending cut/saving

Rp55 T Spending Reallocation

*For more detail please see section 5

47

Extraordinary Handling of The COVID-19 PandemicGovernment Regulation in lieu of law (Perppu) No. 1/2020 stipulates that everything spent by the government on Covid-19 economic recovery programs will be regarded as a measure to save the economy from crisis and not a state loss

Source: Ministry of Finance

48

Extraordinary Handling of The COVID-19 PandemicGovernment Regulation in lieu of law (Perppu) No. 1/2020 stipulates that everything spent by the government on Covid-19 economic recovery programs will be regarded as a measure to save the economy from crisis and not a state loss

Source: Ministry of Finance

49

Source: Ministry of Finance

Background:

• Adjustment of state budget deficit

threshold

• Utilization of budget funding alternative

sources

• Adjusment of mandatory spending,

shifting and refocusing central and

regional budgets

• SBN issuance and loan program to

finance the additional deficit

• Incentives and tax facilities

• Implementation of the National

Economic Recovery Program for the

sustainability of the real sector and

financial sector.

MAIN PRINCIPLE/SETTINGS IN PERPPU

State Financial Policy Financial Sector Policy• Expanding the authority of KSSK and

the scope of the KKSK meeting

• Strengthening the authority of the BI,

including in buying long-term SBN in the

primary market to support the handling of

Covid-19 pandemic

• Strengthening the authority of Financial

Service Authority (OJK) and Deposit

Insurance Corporation (LPS) to prevent

risks that endanger financial system

stability and protect bank customers.

• Strengthening the authority of the

government in handling banking

problems and financial system stability

due to COVID-19 pandemic

PERPPU No. 1 of 2020Quick and Extraordinary Steps in Handling COVID-19

and the ImpactCOVID-19 PANDEMIC:

• Escalation of confirmed case and fatalities

• Great economic impact• Potential disruption to the stability of

financial system

Need quickand

anticipatory

step

Forceful

urgency1 2

PERPPU No. 1 of 2020as a legal basis for taking rapid and

extraordinary and coordinated steps to counter the COVID-19 pandemic.

- carried out while maintaining good governance -

Extraordinary Handling of The COVID-19 PandemicGovernment Regulation in lieu of law (Perppu) No. 1/2020 stipulates that everything spent by the government on Covid-19 economic recovery programs will be regarded as a measure to save the economy from crisis and not a state loss

50

COVID-19 Impacts and CountermeasuresPerpu No. 1/2020 provides a legal basis to take extraordinary steps in tackling COVID-19 humanitarian crisis and saving the economy

Source: Ministry of Finance

Health and Mental

Threats

Disruption of Social

& Economic Activity

Disruption in Real Sector and Increased Risk in

the Financial Sector

Losing source of income

Declining purchasing power and

consumption ability

Disruption in business activity

(production, investment, and

trade)

Business is facing potential

bankruptcy

Increase in financing and

banking nonperforming loan

Liquidity and solvency issues

in the financial sector (bank and

nonbank)

Health Measures:

Appoint dedicated hospital,

emergency hospital, equipment

support, and medical personnel

support

Testing and tracing

physical distancing, work and

study from home, etc.

Large-scale Social Restriction

(PSBB)

Business Support:

Reducing of import restriction (lartas) including manufacturing

support, food and health/medical goods, acceleration of the export-import process, and improvement of services through

the National Logistics Ecosystem

Incentives and tax facility

The National Economic Recovery Program through PMN,

placement of Government investment, and/or guarantee activities

Various policies and relaxation in the financial sector: BI, OJK,

LPS, and the Government

Social Safety Net:

PKH improvement and expansion

Basic food cards improvement and

expansion

Pre-Work Card expansion and flexibility

Exemption from electricity bills

Additional interest rate subsidy

assistance

Infected

Starving

Death

Triggering mental health issues

(anxiety, fear, sadness)

51

The objectives of Government Stimulus

Source: Ministry of Finance

1. Helping economic player to survive the impact of COVID-19

2. Minimizing the number of work terminations (PHK)

3. Supporting banks in providing relaxation and liquidity

Trade sector could be one of the hardest-hit business sector, particularly because most of them are classified as MSMEs (with big concerns whether they have sufficient financial capacity to survive until the outbreak ends)

MSMEs absorp around 97% of total workforce and 99% of total job field, thus it is very crucial for the Government to maintain the sustainability of those MSMEs, minimize the number of layoffs, and maintain the level of unemployment in a tolerable level.

In order to break the vicious cycle in conducting credit in this time of crisis, liquidity injection becomes important. It needs to be done to channel liquidity to the real sector that needs cashflow to undergo a crisis due to COVID-19.

Global economy as well as Indonesia economy face extraordinary challenges because of the impact of COVID-19. To overcome these, liquidity channeling policies need to be prepared in order to achieve the following objectives:

52

Flexibility In 2020 Budget To Respond Emergency ConditionWidening the deficit above 3 percent of GDP is to accelerate the mitigation of COVID-19, salvage the economy from threatening crisis, and maintain the stable financial system

Source: Ministry of Finance

Slow economic activity, plummeting of oil and commodities price

Tax incentive for businesses

Focusing for health, social safety net, and businesses support, including the small and medium one;

Reducing the non-priority spending, refocusing, and reallocating to bolster the management of COVID-19;

Enhancing the spending for COVID-19 treatment

Widening (Rp545.8T)

The increasing of accumulated cash surplus utilization (Rp45 trillion)

Financing to promote the national economy recovery (Rp150 trillion)

Adding the securities issuance to cover financing gap

Revenue Spending

Deficit

Budget(Rp307.2T) = 1.76% GDP

Outlook(Rp853.0T) = 5.07% GDP

BudgetRp2,233.2T

BudgetRp2,540.4TOutlook

Rp1,760.9T

OutlookRp2,613.8T

53

Outlook of 2020 Budget Revenue in COVID-19 Emergency

Source: Ministry of Finance

DOMESTIC

REVENUE

TAX REVENUE FROM D.G.TAX

TAX REVENUE

CUSTOMS & EXCISES

REVENUE

Growth: -5.4% | Tax Ratio 9.4%

• Slowdown of economic growth and oil price war

• Tax incentive facilities stage II (PMK 23/2020)

• Additional tax relaxation Stimulus widening

• Reducing of Corporate Income Tax into 22%

• Possibility of Dividend Income Tax suspend due to

Omnibus Law

Growth: -5.9%, by calculating the impact of:Growth: -2.2%,

considering the stimulus

effect of import duty

exemption for 19 industries

Growth: -26.5%

Reckoning the influence of:

• The drop of oil and gas

prices due to the lower ICP’s

assumption

• It is similar to non-oil and gas

commodities since the coal’s

price has plunged

GROWTH

-10% FROM 2019’s REALIZATION

OR

78.9% 2020 BUDGET TARGET

54

State Expenditure & Transfer to Regions Outlook in The APBN 2020 Amid Emergency Situation due to COVID-19

Source: Ministry of Finance

//////////////////////// ////////////////////////

BUDGET

REFOCUSING &

REALLOCATION TO

FIGHT COVID-19

Rp190 TExpenditure Savings:

(Line Ministries: Rp95,7 T and Transfer to Region Rp94,2 T)

Rp54,6 TExpenditure Reallocation

Rp255,1 TAdditional spending to mitigate

COVID-19 (PERPPU)

////////////////////////

• Rp75 T Additional health spending

• Rp110 T Increasing Social Safety Net

• Rp70,1 T Support for business

sector/industry

OUTLOOKDBH(Revenue sharing) in line with state revenue change

DAU(general allocation fund) Cut by 10%

DAK Fisik(Physical Specific Allocation Fund) cut by 25% except for education and health programs

DAK Non Fisik(Non Physical Specific Allocation Fund) has been taking into account additional incentive for healthcare workers of Rp3,7 T

DID & Dana Desa(Incentive Fund & Village Fund) taking into account disbursement capacity.

Dana Desa(Village fund) can be used for cash transfer social assistance in village level

55

State Financing Outlook in The APBN 2020 Amid Emergency Situation due to COVID-19

Source: Ministry of Finance

DEFICIT

OUTLOOK

INCREASE TO BE

5,07%OF GDP

FROM

1,76% OF GDPIN APBN 2020

FINANCING

Additional financing will use accumulated cash surplus

(Saldo Anggaran Lebih /SAL), endowment fund, and

fund from BLU.

NON DEBT FINANCING Rp108,9 T

Debt financing will come from:

• Government bonds issuance (SBN), in global and

domestic market,

• Loan withdrawal from multilateral and bilateral

sources.

• Government bonds issuance including bonds that will be

purchased by Bank Indonesia in the primary market.

Rp545,7 TRILLION

DEBT FINANCING Rp654,5 T

Government will utilize debt financing sources with

relatively low cost and manageable risk.

Adittional education

financing Rp18,6 T to

fulfill mandatory education

spending of 20% of total

budget

Non debt financing include:

Financing t support National

Economic Recovery

Program of Rp150 T

56

The Realization of The State Budget up to March 2020 Controlled State budget Amid the Pandemic Pressure

Source: Ministry of Finance

Budget (IDRtn)

2019 2020

Budget

Realization

as of 31

March

% to Budget Growth (%) Budget

Realization

as of 31

March

% to Budget Growth

A Revenue and Grant 2,165.1 349.0 16.1 4.6 2,233.2 375.9 16.8 7.7

I. Domestic Revenue 2,164.7 348.9 16.1 4.6 2,232.7 375.9 16.8 7.7

1. Taxation Revenue 1,786.4 278.7 15.6 6.2 1,865.7 279.9 15.0 0.4

a. Tax Revenue 1,577.6 247.7 15.7 1.3 1,642.6 241.6 14.7 (2.5)

b. Custom and Excise 208.8 31.0 14.8 73.1 223.1 38.3 17.2 23.6

2. Non Taxation Revenue 378.3 70.2 31.0 (1.2) 367.0 96.0 26.2 36.8

II. Grants 0.4 0.1 33.7 (43.7) 0.5 0.1 15.5 (47.4)

B Expenditure 2,461.1 452.1 18.4 7.7 2,540.4 452.4 17.8 0.1

I. Central Government Expenditure 1,634.3 260.7 16.0 11.4 1,683.5 277.9 16.5 6.6

1. Line Ministries Expenditure 855.4 128.8 15.1 24.8 909.6 143.0 15.7 11.0

2. Non Line Ministries

Expenditure778.9 132.0 16.9 0.9 773.9 134.9 17.4 2.2

III. Transfer to Region and Village Fund 826.8 191,3 23.1 3.1 856.9 174.5 20.4 (8.8)

1. Transfer to Region 756.8 181.2 23.9 3.4 784.9 167.3 21.3 (7.7)

2. Village Fund 70.0 10.1 14.4 (1.9) 72.0 7.2 10.0 (28.6)

C Primary Balance (20.1) (32.5) 161.5 87.1 (12) (2.6) 21.6 (92.0)

D Surplus/(Deficit) (296.0) (103.1) 34.8 20.1 (307.2) (76.4) 24.9 (25.8)

% of GDP (1.8) (0.65) (1.76) (0.45)

E Financing 296.0 177.9 60.1 16.9 307.2 74.2 24.2 (58.3)

57

Government SecuritiesIndicative Financing Plan for 2020

Source: Ministry of Finance

Government Securities

(GS)

Issuance

Composition

GS Rupiah

Domestic

[82% - 86%]

Auction

[76% – 80%]

Non-auction

[6% - 8%]

Foreign

Denominated GS

International

[14% - 18%]

• Auction:

• Conventional Securities – 24x

• Islamic Securities – 24x

• Non-auction:

• Retail GDS (tradable/ORI & non-tradable), Retail

Sovereign Sukuk (tradable/Sukri & non-tradable);

• Private Placement – based on request.

• Foreign denominated GS as complementary

Avoid crowding out in domestic market.

• The target amount can be adjusted to the potential

of other financing sources and financing needs.

*in IDR Trillion

58

Government Securities Financing Realization(as of March 31, 2020)

Source: Ministry of Finance

*Dual-currency bonds issuance using SEC format amounted USD2 bn and EUR1 bn, settlement on January 14, 2020

(BI mid day exchange rate; 1 USD = 13,654 IDR & 1 EUR = 15,207.83 IDR)

- Including SBR009 issued February 17, 2020

59

GS Primary Market Performance 2019-2020Through Auction

Source: Ministry of Finance

2.11

3.11 2.80

2.12 2.15

3.17

2.59

1.97 2.34

2.97

2.44

5.14

6.50

3.01

-

1.00

2.00

3.00

4.00

5.00

6.00

7.00

-

50

100

150

200

250

300

350

400Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS)

Incoming bid 2020 = Rp65.49T , while awarded bid 2020 = Rp13.91T

60

Republic of Indonesia – USD4.3bn GLOBAL BONDS ISSUANCE

Source: Ministry of Finance

On April 7, 2020, the Republic of Indonesia priced a transaction comprising USD4.3bn in senior unsecured notes

Issuer Republic of Indonesia

Issuer Rating Baa2 Moody’s (Stable)

BBB S&P (Stable)

BBB Fitch (Stable)

Exp. Issue Rating Baa2 Moody’s / BBB S&P / BBB Fitch

Format U.S. SEC registered

Issue Senior unsecured fixed rate notes

Pricing Date April 6, 2020

Settlement Date April 15, 2020

Aggregate Size USD4,300 mm

Long 10.5-year Long 30.5-year Long 50-year

Maturity Oct 15, 2030 Oct 15, 2050 Apr 15, 2070

Tranche Size USD1,650 mm USD1,650 mm USD1,000 mm

Coupon (p.a.) 3.850% 4.200% 4.450%

Reoffer Price 99.573 99.150 99.009

Reoffer Yield (p.a.) 3.900% 4.250% 4.500%

Listing Singapore, Frankfurt Open Market

Law New York

Use of Proceeds For general purposes of the Republic of Indonesia, including

financing COVID-19 relief and recovery

Transaction Highlights

Net proceeds will be used for general purposes of the Republic, including financing COVID-19 relief and recovery efforts for the Republic to contain the virus and mitigate its

impact on Indonesia.

The Republic's fiscal policy amidst volatile market conditions includes support for healthcare, the social safety net, and small and medium enterprises.

The debut 50-year offering on strong demand in the long end of the curve.

The transaction is the largest global offering by the Republic and demonstrates the Republic’s ability to respond swiftly to markets and capture favorable issuance windows.

Investor Breakdown

by Investor TypeInvestor Breakdown by Region

RI1030

RI0470

RI1050

45%

25%

21%

9%

52%

20%

26%

2%

44%

38%

18%

45%

25%

21%

9%

US Europe Asia ex-Indonesia Indonesia

RI1030

RI0470

RI1050

64%

20%

1%

4%

1%

10%

Asset Managers

Insurance/Pension Fund

Central Bank/Sovereign Wealth Fund

Banks

Private Banks

Others

64%20%

1%4%

1%10%

71%

22%

1%1% 2% 3%

85%

11%

1%1% 1% 1%

61

Disciplined and Sophisticated Debt Portfolio Management

Weighted Average Debt Maturity of ~8.5 Years

Prudent Fiscal Deficit

Source: Ministry of Finance

Well Diversified Across Different Currencies

% of Yearly Issuance

Source: Ministry of Finance

Source: Ministry of Finance

Source: Ministry of Finance

Stable Debt to GDP Ratio Over the Years

IDR Tn Government Debt / GDP (%)

Note: *as of endo of December by using GDP assumption (interpolation)

265

362 407

442

358

(9)

19

(4) (20)

14

(7)

(58) (69) (56) (66)

(227)

(298) (308) (341) (269)

-2.2%

-2.6% -2.5% -2.5%

-1.8%

-3.0%

-2.5%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

(400)

(300)

(200)

(100)

-

100

200

300

400

500

2014 2015 2016 2017 2018

SBN (neto) Pinjaman DN & LN (neto)

Non Utang (neto) Surplus (Defisit) APBN

Rasio Defisit APBN thd. PDB (RHS)

Non Debt (Net)

Bonds (Net) Loans (Net)

Budget Surplus/Deficit

Fiscal Deficit (%GDP, RHS)

1,931.2 2,410.0

2,780.6 3,248.6

3,612.7 4,014.8 4,292.73 714.4

677.6

755.1

734.8 746.2

810.7 764.5

24.7%

27.4% 28.3%29.4% 29.8% 30.2%

32.1%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

-

1,000.0

2,000.0

3,000.0

4,000.0

5,000.0

2014 2015 2016 2017 2018 2019*) Mar-20

Bond Loan Debt/GDP Ratio [RHS]

9.8

9.4

9.1

8.7

8.4

8.5 8.6

2014 2015 2016 2017 2018 2019 Mar-20

ATM (in years)

57% 59% 58% 62% 59%

31% 30% 30% 27% 29%

4% 4% 4% 4% 5%7% 6% 6% 5% 6%

1% 1% 1% 1% 1%

0%

20%

40%

60%

80%

100%

2016 2017 2018 2019 Mar-20

IDR USD EUR JPY OTHER

62

Well Balanced Maturity Profile With Strong Resilience Against External Shocks

Declining Interest Rate Risks

Debt Maturity Profile

Declining Exchange Rate Risks

Upcoming Maturities (Next 5 Years)

IDR tn

Note: using GDP assumption

Source: Ministry of Finance

14.813.7

12.1

10.6 10.69.8 10.2

21.0 20.7

17.5

19.2 19.7

16.114.9

2014 2015 2016 2017 2018 2019 Mar-20

Variable rate ratio [%] Refixing [%]

176

273

215 225

283

129 139 141 134

208

128 143 96 94

150

46 99

28

89 62

29 23 20 33 28 - - 20 35

-

110

177

195 190

183

177 139 140 142

96

58 51

31 27

19

39

9

31

37

4

3 3 39 27 35

35 22

42 30 55.7

-

50

100

150

200

250

300

350

400

450

500

20

20

20

21

20

22

20

23

20

24

20

25

20

26

20

27

20

28

20

29

20

30

20

31

20

32

20

33

20

34

20

35

20

36

20

37

20

38

20

39

20

40

20

41

20

42

20

43

20

44

20

45

20

46

20

47

20

48

20

49

-20

58

IDR Denominated (Triliun Rp)Other Currencies (Triliun Rp)

10.712.2 12.1 12.1 12.3 11.3

13.3

43.4 44.542.6

41.3 41.037.9

41.3

2014 2015 2016 2017 2018 2019 Mar-20

FX Debt to GDP ratio (%) FX Debt to total debt ratio (%)

7.7 8.46.5

9.9 10.68.1 6.7

20.121.4 22.7

25.0 25.5 24.3 23.5

33.9 34.7 36.039.3 40.4 41.0 40.1

2014 2015 2016 2017 2018 2019 Mar-20

in 1 year (%) in 3 year (%) in 5 year (%)

63

Holders of Tradable Central Government SecuritiesMore Balance Ownership In Terms of Holders and Tenors

Foreign Ownership of Gov’t Domestic Debt Securities by TenorHolders of Tradable Gov’t Domestic Debt Securities

Source: Ministry of Finance

23.9% 22.5% 23.4%20.3% 21.1%

26.9%

37.8% 39.9% 36.8% 42.0% 40.3%

40.3%

38.2% 37.5% 39.8% 37.7% 38.6%

32.7%

0%

20%

40%

60%

80%

100%

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Mar-19

Foreign Holders Domestic Non -Banks Domestic Banks

3.2% 3.5% 5.0% 4.3% 2.4% 2.4%1.3%

5.3%5.1%

1.9% 6.7% 7.9%

11.8%

17.8% 17.3%

18.4%

22.0%23.1%

39.0% 37.4% 35.6% 36.8%34.1%

31.6%

44.7%

36.0% 37.0% 38.6%34.8% 35.0%

38.2% 37.5%39.8%

37.7% 38.6%

32.7%

0%

20%

40%

60%

80%

100%

Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Mar-20

0-1 >1-2 >2-5 >5-10 >10 % Foreign Ownership of Total

64

Ownership of IDR Tradable Central Government Securities(as of March 31, 2020)

1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund.

2) Others such as Securities Company, Corporation, and Foundation.

*) Including the Government Securities used in monetary operation with Bank Indonesia.

**) net, excluding Government Securities used in monetary operation with Banks.

(IDR tn)

Source: Ministry of Finance

Description Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Mar -2020

Banks* 350.07 23.95% 399.46 22.53% 491.61 23.41% 481.33 20.32% 581.37 21.12% 763.39 26.94%

Govt Institutions (Bank

Indonesia**)148.91 10.19% 134.25 7.57% 141.83 6.75% 253.47 10.70% 262.49 9.54% 255.10 9.00%

Bank Indonesia (gross) 157.88 8.90% 179.84 8.56% 217.36 9.18% 273.21 9.93% 426.08 15.04%

GS used for Monetary

Operation 23.63 1.33% 38.01 1.81% (36.15) (1.52%) 10.72 0.39% 170.98 6.03%

Non-Banks 962.86 65.87% 1,239.57 69.90% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% 1,814.88 64.05%

Mutual Funds 61.60 4.21% 85.66 4.83% 104.00 4.95% 118.63 5.01% 130.86 4.75% 129.44 4.57%

Insurance Company and

Pension Fund221.45 15.15% 325.52 18.36% 348.86 16.61% 414.47 17.50% 471.67 17.13% 498.08 17.58%

Foreign Holders 558.52 38.21% 665.81 37.55% 836.15 39.82% 893.25 37.71% 1,061.86 38.57% 926.91 32.71%

Foreign Govt's & Central

Banks110.32 7.55% 120.84 6.81% 146.88 6.99% 163.76 6.91% 194.45 7.06% 183.58 6.48%

Individual 42.53 2.91% 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95% 86.97 3.07%

Others 78.50 5.37% 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93% 173.48 6.12%

Total 1,461.85 100% 1,773.28 100% 2,099.77 100.00% 2,368.45 100.00% 2,752.74 100.00% 2,833.36 100.00%

Monetary and Financial Factor:Credible Monetary Policy Track Record and Favourable Financial Sector

Section 5

66

Bank Indonesia’s Policy MixTo Maintain Macroeconomic and Financial System Stability

Source: Bank Indonesia

Implementing Macro prudential

Intermediation Ratio (RIM)

Implementing Macro prudential Liquidity

Buffer (MLB)

Electronification: Social program, e-

payment for Government

Financial technology

National Payment Gateway (NPG)

QRIS (QR Indonesia Standard)

Expanding National Clearing System

(SKNBI) services

Developing market instruments for financing

infrastructure

Developing financial market infrastructures

Rupiah Interest Rate Swaps (IRS) and Overnight Index

Swap (OIS)

Domestic non-Deliverable Forward (DNDF)

Developing the Commercial Papers (Surat Berharga

Komersial)

Controlling inflation: TPIP, TPID

Structural reforms: Government

Financial deepening & stability: KSSK

(Financial System Stability

Committee), OJK (Financial Services

Authority)

Coordinating efforts in reducing

Current Account Deficit

Accommodative monetary policy

consistent with controlled inflation

in the target corridor, while serving

as a pre-emptive measure to

maintain domestic economic growth

momentum

Stabilize exchange rate consistent

with fundamentals

Optimize monetary operations in

order to ensure market

mechanisms and adequate liquidity

in the money and foreign exchange

markets

Monetary

Policy

Coordination

with other

Authorities

Financial Market

Deepening

Macro-

prudential

Policy

Payment

System

Policy

1 2

3

45

67

Bank Indonesia Policy Mix: April 2020

The BI Board of Governors agreed on 13th and 14th April 2020 to hold the BI 7-Day Reverse Repo Rate at

4.50%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.75% and 5.25%.

Rupiah Reserve Requirement Lowered by 200 bps

Continue to

optimize monetary

operations in order

to ensure market

mechanisms and

adequate liquidity

in the money and

foreign exchange

markets

Holds the BI

7-Day

Reverse Repo

Rate at

4.50%

Continue to strengthen

coordination with

financial authorities and

relevant government

ministries/agencies will

constantly be improved in

terms of formulating an

optimal policy mix and to

mitigate escalating risk in

the financial system.

Source: Bank Indonesia

Focus on

macroprudential

policy measures on

efforts to maintain

financial system

stability and

anticipate potentially

higher risks in the

financial sector due

to COVID-19.

Reinforced its policy

mix towards mitigating

the risk of COVID-19

transmission, perceives

adequate space to

lower the policy rate

due to mild inflationary

pressures and the

urgent need to

stimulate economic

growth

Monetary policy

considers the need

to maintain external

stability amidst

heightened global

financial market

uncertainty

68

Bank Indonesia Policy Mix: April 2020

1) To stabilize and strengthen rupiah exchange rates, Bank Indonesia has strengthened the intensity of triple intervention policy through the spot and

Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the secondary market.

2) To support national economic recovery efforts from the deleterious COVID-19 impact, Bank Indonesia will increase monetary easing through

quantitative easing as follows:

a. Expand monetary operations by providing banks and the corporates a term-repo mechanism with SUN/SBSN underlying transactions of tenors up to

one year.

b. Lower the rupiah reserve requirement ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units,

effective from 1st May 2020.

c. Relax the additional demand deposit obligations to meet the Macroprudential Intermediation Ratio (MIR) for conventional commercial banks as well

as Islamic banks/Islamic business units for a period of one year, effective from 1st May 2020.

3) To strengthen liquidity management in the banking industry and in relation to the lower rupiah requirements, Bank Indonesia has raised the

Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective

from 1st May 2020. The banking industry is required to meet the additional MLB through purchases of government issued SUN/SBSN in the primary

market.

4) To increase the uptake of non-cash payment instruments in order to mitigate the COVID-19 impact, Bank Indonesia is increasing various payment

system policy instruments as follows:

a. Supporting government programs to accelerate non-cash social aid program (bansos) disbursements to members of the public in conjunction with

payment system service providers by expediting the electronification of relevant social programs, including the Family Hope Program (PKH), Noncash

Food Assistance Program (BPNT), Pre-Employment Card and Smart Indonesian Card (KIP).

b. Increasing public socialization activities in collaboration with payment system service providers to increase the uptake of non-cash payment

instruments through digital banking, electronic money and broader QRIS acceptance.

c. Relaxing credit card policy by lowering the upper limit for credit card interest, minimum payment requirements and the penalties for late payments,

while supporting credit card issuer policy to extend the due date for customers.

The BI Board of Governors agreed on 13th and 14th April 2020 to hold the BI 7-Day Reverse Repo Rate at 4.50%,

while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.75% and 5.25%.

Rupiah Reserve Requirement Lowered by 200 bps

69

Bank Indonesia Policy Mix: March 2020Mitigating the risk of COVID-19 transmission

To strengthen coordination and the various policy measures already taken, Bank Indonesia on March

2nd 2020 introduced a variety of five follow-up policy measures to maintain monetary and financial

market stability as well as mitigate the COVID-19 risks

1) Intensify triple intervention policy to ensure rupiah exchange rates move in line with the currency's fundamental

value and market mechanisms. To that end, Bank Indonesia will optimize its intervention strategy in the DNDF

market, spot market and SBN market in order to minimize the risk of increasing rupiah exchange rate volatility.

2) Lower the FX reserve requirements for commercial banks from 8% to 4%, effective 16th March 2020, which will

increase FX liquidity in the banking industry by around USD3.2 billion and simultaneously alleviate foreign exchange

market pressures.

3) Lower the rupiah reserve requirements by 50bps for banks financing export-import activity in coordination with the

Government. Effective from 1st April 2020 for a period of nine months before a further review, this policy is

expected to facilitate export-import activity through lower costs/fees.

4) Expand the range of underlying transactions available to foreign investors in order to provide alternative hedging

instruments against rupiah holdings.

5) Reaffirm that global investors can utilize global and domestic custodian banks to conduct investment activity in

Indonesia.

70

Bank Indonesia Policy Mix: March 2020Mitigating the risk of COVID-19 transmission

Bank Indonesia on the Board of Governors Meeting 18th and 19th March 2020 has reinforced its policy mix towards mitigating

the risk of COVID-19 transmission, while maintaining money market and financial system stability and catalyzing economic growth

momentum through the following policy measures:

1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and

market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market.

2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March

2020.

3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate

liquidity, effective from 19th March 2020.

4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while

encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes.

5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards

(DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than

23rd March 2020.

6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing

of MSMEs and other priority sectors, effective from 1st April 2020.

7) Strengthening payment system policy to support COVID-19 mitigation efforts by:

• providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions;

• encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank

Indonesia from Rp600 to Rp1 and from customers to the banking industry from a maximum of Rp3,500 to Rp2,900, effective from 1st April 2020

until 31st December 2020; and

• supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program

(BPNT), Pre-Employment Card and College Smart Indonesia Card.

71

Bank Indonesia Policy Mix: March 2020Mitigating the risk of COVID-19 transmission

Bank Indonesia on the Board of Governors Meeting 18th and 19th March 2020 has reinforced its policy mix towards mitigating

the risk of COVID-19 transmission, while maintaining money market and financial system stability and catalyzing economic growth

momentum through the following policy measures:

1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and

market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market.

2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March

2020.

3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate

liquidity, effective from 19th March 2020.

4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while

encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes.

5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards

(DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than

23rd March 2020.

6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing

of MSMEs and other priority sectors, effective from 1st April 2020.

7) Strengthening payment system policy to support COVID-19 mitigation efforts by:

• providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions;

• encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank

Indonesia from Rp600 to Rp1 and from customers to the banking industry from a maximum of Rp3,500 to Rp2,900, effective from 1st April 2020

until 31st December 2020; and

• supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program

(BPNT), Pre-Employment Card and College Smart Indonesia Card.

72

Bank Indonesia Policy Mix: April 2020Mitigating the risk of COVID-19 transmission

As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of

Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the

Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate

the COVID-19 impact is as follows:

1) Lower the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively;

2) Intensify triple intervention policy in the spot and DNDF markets and purchasing SBN in the secondary market;

3) Reduce the foreign currency reserve requirements for conventional commercial banks from 8% to 4%;

4) Extend the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as well as increase the frequency of FX Swap auctions to

daily in order to ensure adequate liquidity;

5) Expand the types of underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against

rupiah holdings in Indonesia;

6) Lower the rupiah reserve requirements by 50bps for banks that are engaged in export-import financing, as well as the financing of MSMEs

and other priority sectors;

7) Loosen the Macroprudential Intermediation Ratio (MIR);

8) Provide hygienic currency fit for circulation, reduce the costs of the National Clearing System (SKNBI), maintain a QRIS Merchant Deposit

Rate (MDR) of 0% for micro-merchants, and support non-cash disbursements of various government programs, including the Family Hope

Program (PKH) and Noncash Food Assistance Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia Card.

Bank Indonesia reiterated that rupiah exchange rates are currently adequate and the outlook scenario formulated for the main macroeconomic

indicators is a form of forward-looking anticipatory measure towards prevention through joint efforts, while Bank Indonesia continues to

maintain rupiah stability.

73

Bank Indonesia Policy Mix: April 2020Mitigating the risk of COVID-19 transmission

As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of

Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the

Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate

the COVID-19 impact is as follows:

• Bank Indonesia also backs promulgation of the Government Regulation in Lieu of Law in order to relax prevailing laws to mitigate the COVID-19

impact as an anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary measures,

unconventional policies and policies that exceed previous jurisdiction.

• To that end, Bank Indonesia has reiterated its authority in accordance with Government Regulation in Lieu of Law (Perpu) No. 1 of 2020 as

follows:

1) Expansion of BI authority to purchase long-term government securities (SBN) and government Islamic securities (SBSN) in the primary market in

order to assist the Government finance the handling of the COVID-19 impact on financial system stability.

2) SBN will be purchased in the primary market by Bank Indonesia as a last resort if the market is unable to fully absorb the SBN issued by the

Government. Further provisions will be regulated in conjunction with the Minister of Finance and the Governor of Bank Indonesia based on the

following considerations: financial market conditions and the impact on inflation.

3) As an anticipatory measure, Bank Indonesia will purchase repo securities held by the Deposit Insurance Corporation (LPS) in order to finance the

handling of solvency issues at systemic and non-systemic banks;

4) Provision of short-term liquidity loan or short-term liquidity financing facilities in compliance with sharia principles to systemic and non-systemic

banks;

5) Foreign exchange flow management for residents. The use of foreign exchange by residents, including provisions for the surrender, repatriation

and conversion of foreign exchange to maintain macroeconomic and financial system stability as follows:

6) Bank Indonesia would like to stress that this measure is not a form of foreign exchange control but policy to manage foreign exchange applicable

only to residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign direct investment (FDI) are still required for

the Indonesian economy, thus existing policy permitting the free flow of foreign exchange by foreign investors remains effective.

7) Regulating foreign exchange amongst residents is consistent with international prudential principles for macroeconomic management, particularly

under economic distress, such as the current COVID-19 pandemic.

74

Bank Indonesia Policy Mix: April 2020Mitigating the risk of COVID-19 transmission

Bank Indonesia has agreed a repurchase agreement line (repo line) with the US Federal reserve worth USD60 billion

• The agreement may be used by Bank Indonesia to fulfil US dollar liquidity if required. The repo line facility for Foreign and International

Monetary Authorities (FIMA) has only been extended to a few central banks, thus indicating confidence in Indonesia's economic outlook and

the macroeconomic policies implemented. In addition, Bank Indonesia has also established repo line facilities with several other institutions,

namely the Bank for International Settlements (BIS), worth USD2.5 billion, the Monetary Authority of Singapore (MAS), USD3 billion, as well

as other central banks in the region valued at USD500 million-USD1 billion.

• The agreements will strengthen Bank Indonesia’s second line of defence, encompassing Bilateral Currency Swap Arrangements (BCSA) with

several other central banks, namely the People’s Bank of China (PBoC), worth CNY200 billion (equivalent to USD30 billion), the Bank of

Japan (BOJ), USD22.76 billion, Bank of Korea, KRW10.7 trillion (equivalent to Rp115 trillion), and the Monetary Authority of Singapore

(MAS), USD10 billion.

75

Bank Indonesia Policy Mix: April 2020Mitigating the risk of COVID-19 transmission

Bank Indonesia Issued Implementing Provisions for Auction of Government Debt Securities (SUN) and/or

Government Islamic Securities (SBSN) in the Primary Market

• Bank Indonesia issued Board Member of Governors Regulation No. 22/5/PADG/2020 on Auction of Government Debt Securities and/or

Government Islamic Securities in the Primary Market to Maintain State Financial Management Sustainability as Implementation of

Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management

of Corona Virus Disease 2019 (Covid-19) and/or Encounter the Threat to National Economy and/or Stability of Financial Systems. The

regulation starts to take effect on 20 April 2020.

• The regulation serves as a follow-up to Government Regulation in Lieu of Law Number 1 of 2020, granting authority to Bank Indonesia

among others to purchase Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the primary market . It is

necessary as a funding source for the government to recover the national economy including maintaining state financial management

sustainability including SUN and/or SBSN issued in response to COVID-19 pandemic. Purchase of SUN and/or SBSN in the primary market

is based on principle that Bank Indonesia is a last resort if the market capacity is unable to purchase them and/or result in high yield

increase. Further, this regulation specifies the following:

1) Bank Indonesia holds auction of SUN and/or SBSN and auction of additional SUN and/or SBSN for long-term SUN and/or SBSN in the

primary market as a follow-up to the implementation of Government Regulation in Lieu of Law Number 1 of 2020.

2) Provisions for offer quote and participants of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the

applicable Finance Minister Regulation on auction of SUN and/or SBSN in the domestic primary market.

3) Bank Indonesia may quote an offer to purchase long-term SUN and/or SBSN in auction of SUN and/or SBSN and auction of additional

SUN and/or SBSN in the following manners: a. directly without using the main dealer and/or SBSN main dealer; b. non-competitive bid.

4) Implementation of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Bank Indonesia

provisions for auction of Government securities in the primary market provided that they are not in contravention of this regulation.

76

Principles of Average Reserve Requirement Ratios Improvement

Substance Old NewEffective

Date

a. Additional rupiah

average reserve

requirement for

conventional

commercial banks

Fixed RR: 5%

Average RR: 1.5%

RR: 6.5%

Fixed RR: 4.5%

Average RR: 2%

RR: 6.5%

16th July

2018

b. Annulment of

demand deposit

renumeration

2.5% (from 1.5% RR) 0%

16th July

2018

c. Implementation of

foreign exchange

average reserve

requirement for

conventional

commercial banks

Fixed RR: 8%

Average RR: 0%

RR: 8%

Fixed RR: 6%

Average RR: 2%

RR: 8%*

1st October

2018

d. Implementation of

average reserve

requirement for

Islamic banks

Fixed RR: 5%

Average RR: 0%

RR: 5%

Fixed RR: 3%

Average RR: 2%

RR: 5%*

1st October

2018

* Complemented by harmonisation feature to align with the average reserve requirement in rupiah

feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance

period of 2 weeks)

• Improvement in average reserve requirement is a follow up

to the monetary policy operational framework reform

implemented by Bank Indonesia since 2016.

• Monetary policy operational framework reform started in

August 2016 as BI7DRR replaced BI Rate as policy rate. This

was then strengthened in 1st July 2017, by the

implementation of the average reserve requirement in

rupiah for conventional commercial banks at 1.5% out of the

total 6.5% of GDP reserve requirement in Rupiah. The

reformulation is also backed by various efforts in financial

market deepening.

• The current improvement aims to elevate flexibility in

banking liquidity management, enhance banking

intermediation function, and support efforts in financial

market deepening. This multiple targets will in turn improve

the effectiveness of monetary policy transmission in

maintaining economic stability.

Considerations for the Average Reserve Requirement Ratios

Improvement

Source: Bank Indonesia

77

Relaxing Reserve Requirement Ratios

Regulation

1 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support

export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3%

2 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to

support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3%

3 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export-

import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3%

4 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support

export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3%

Source: Bank Indonesia

Lower reserve requirements, effective 1st May 2020

78

Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB)

Striving to stimulate the bank

intermediation function and liquidity

management, Bank Indonesia

issued Bank Indonesia Regulation

(PBI) No. 20/4/PBI/2018 and Board

of Governors Regulation (PADG) No.

20/11/PADG/2018 concerning the

Macroprudential Intermediation

Ratio (MIR) and Macroprudential

Liquidity Buffer (MLB) for

Conventional Commercial Banks,

Sharia Banks and Sharia Business

Units.

The policy is expected to

stimulate the bank

intermediation function to the

real sector congruent with

sectoral capacity and the

economic growth target in

compliance with prudential

principles, while also overcoming

the issue of liquidity

procyclicality.

The regulation is effective

for conventional

commercial banks from

16th July 2018 and for

sharia banks from 1st

October 2018.

Considerations for Macroprudential Instruments

Macroprudential Intermediation Ratio (MIR) and

Macroprudential Liquidity Buffer (MLB)

1 2 3 4

This

macroprudential

policy instrument is

countercyclical and

can be adjusted in

line with prevailing

economic and

financial dynamics.

Source: Bank Indonesia

79

Principles of Macroprudential Intermediation Ratio (MIR)*

Regulation MIR (Conventional Commercial Bank)MIR Sharia (Sharia Banks and Sharia Business

Units)

1 MIR Accounting Formula Credit + Owned Bond

Deposit + Issued Bond

Financing + Owned Sharia Bond

Deposit + Issued Sharia Bond

2 Rate and Parameters Ceiling 94%

Floor 84%

Minimum Capital Adequacy Requirement 14%

Upper disincentive parameter 0.2

Lower disincentive parameter 0.1

Ceiling 94%

Floor 84%

Minimum Capital Adequacy Requirement 14%

For Sharia business units, the Minimum Capital

Adequacy Requirement is the same as that of the parent

conventional commercial bank

Upper disincentive parameter 0.2

Lower disincentive parameter 0.1

3 Scope of credit/financing and

deposits to calculate MIR / MIR

Sharia

Credit: rupiah and foreign currency

Deposits in rupiah and a foreign currency: (i)

demand deposits, (ii) savings deposits; and (iii)

term deposits, excluding interbank funds

Financing: rupiah and foreign currency

Deposits in rupiah and a foreign currency: (i) wadiah

savings; and (ii) unrestricted investment funds, excluding

interbank funds

4 Source of Data Monthly Commercial Bank Reports Monthly Sharia Bank Reports

5 Criteria for securities held Corporate bonds and/or corporate sukuk Corporate bonds and/or corporate sukuk

Issued by a nonbank corporation and by a resident

Offered to the public through a public offering

Equivalent to investment grade rating affirmed by a rating agency

Administrated by an authorised securities institution

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

80

Principles of Macroprudential Intermediation Ratio (MIR)*

Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business

Units)

6 Percentage of the securities

held100%

7 Criteria for securities issued medium-term notes (MTN), floating rate notes (FRN)

and/or bonds other than subordinated bonds

sharia-compliant medium-term notes (MTN) and/or

sukuk other than subordinated sukuk

Issued by a nonbank corporation and by a resident

Offered to the public through a public offering

Equivalent to investment grade rating affirmed by a rating agency

Administrated by an authorised securities institution

8 Securities Reporting Offline delivery mechanism (email)

9 Scope of deposits to meet

DD MIR /DD MIR Sharia

Average daily total deposits in rupiah at all branch

offices in Indonesia

Including rupiah liabilities to a resident and non-

resident third-party nonbank, consisting of: (i)

demand deposits, (ii) savings deposits; (iii) term

deposits, and (iv) other liabilities

Average daily total deposits in rupiah at all branch

offices and sharia business units in Indonesia

Including rupiah liabilities to a resident and non-

resident third-party nonbank, consisting of: (i) wadiah

savings; (ii) unrestricted investment funds, and (iii)

other liabilities

10 Relaxation of DD

MIR/Sharia DD MIR

Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement

and fund accumulation

The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia

business unit or a recommendation from the Financial Services Authority (OJK)

Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt

from sanctions

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

81

Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)*

• In response to global and domestic economic

developments, BI is maintaining an

accommodative policy mix to maintain the

economic growth while also maintaining

macroeconomic and financial system stability.

• BI relaxed MIR/sharia MIR policy in March

2019, which stimulated bank lending.

Nevertheless, the macroprudential

intermediation ratio (MIR) is again

approaching the upper bound, thus

necessitating efforts to increase bank lending

capacity.

• Considering the potential of bank funding

sources that are not included in the MIR ratio,

for example the expanding share of

loans/financing received by banks, BI decides

to adjust MIR/sharia MIR policy in order to

optimize loans/financing received for bank

lending.

• This policy to stimulate credit growth will

comply with prudential principles. Therefore,

BI is only encouraging banks with low non-

performing loans and adequate capital

resilience to expand credit/financing.

Policy Backgrounds

Source: Bank Indonesia

Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by

including the loan/financing received by banks as a component of funding in MIR/sharia MIR.

• Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic

business units as a source of bank funding in the calculation of MIR/sharia MIR.

• The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation

are as follows:

a. Loans/financing received in Rupiah and foreign currency;

b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial

banks, Islamic banks and Islamic business units;

c. Loans/financing excludes interbank loans/financing.

d. Loans/financing received with a maturity of no less than 1 year; and

e. Loans/financing received based on a loan agreement.

• Based on points a and b, the adjusted MIR/sharia MIR formula is as follows:

• The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted

from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA).

Main Regulatory Points

Credit + Owned Bond

Deposit + Issued Bond + Loan/Financing Received

Lower disincentive parameter

MIR/sharia MIR RR=

Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR

Target – Bank’s MIR/Sharia MIR) x Deposit

Upper disincentive parameter

MIR/sharia MIR RR=

0.2 x (Bank’s MIR/sharia MIR - Upper Bound of

MIR/Sharia MIR Target – ) x Deposit

*This disincentive applies for banks with CAR below 14%.

*This adjustment will be effective from December 2nd, 2019

82

Principles of Macroprudential Liquidity Buffer (MLB)

Regulation MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks)

1 Rate 4% of rupiah deposits (including Sharia Business Units

deposits)

4% of rupiah deposits

2 Components Securities denominated in rupiah held by a conventional

commercial bank that may be used for monetary

operations (including SBI/SDBI/SBN); and

Sharia-complaint securities denominated in rupiah held by

an Sharia business unit that may be used for sharia-

compliant monetary operations (including SBIS/SBSN)

Sharia-complaint securities denominated in rupiah

held by an Sharia bank that may be used for sharia-

compliant monetary operations (including SBIS/SBSN)

3 Calculation Formula Percentage of rupiah securities held by a conventional

commercial bank to rupiah deposits

Percentage of sharia-compliant rupiah securities held by

an Sharia bank to rupiah deposits

4 Flexibility Under certain conditions, the securities used to meet the MLB

may be used for repo transactions to Bank Indonesia for open

market operations, totalling no more than 2% of rupiah

deposits

Under certain conditions, the securities used to meet the

sharia MLB may be used for repo transactions to Bank

Indonesia for open market operations, totalling no more

than 2% of rupiah deposits

5 Sources of Data on

Deposits

Monthly Commercial Bank Reports

Rupiah deposits to calculate MLB are the average daily

total deposits at all branches in Indonesia

Rupiah deposits include: (i) demand deposits, (ii) savings

deposits; (iii) term deposits, and (iv) other liabilities

Monthly Sharia Bank Reports

Rupiah deposits to calculate sharia MLB are the

average daily total deposits at all branches in

Indonesia

Rupiah deposits include: (i) wadiah savings; (ii)

unrestricted investment funds, and (iii) other liabilities

83

Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy

Regulation Before After

1 Increase in the Macroprudential Liquidity Buffer (MLB)

for conventional commercial banks

4% of rupiah deposits 6% of rupiah deposits

2 Increase in the Macroprudential Liquidity Buffer (MLB)

for Islamic banks and Islamic business units

4% of rupiah deposits 4.5% of rupiah deposits

Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020.

Regulation Before After Effective Period

1 Lower upper limit on credit card interest 2.25% per month 2% per month 1st May 2020

2 Temporary reduction of minimum payment

requirements

10% 5% 1st May 2020 – 31st

December 2020

3 Temporary reduction of late payment

penalties

3% or maximum of Rp150,000 1% or maximum of Rp100,000 1st May 2020 – 31st

December 2020

4 Supporting credit card issuer policy to extend

the due date for customers

Issuer discretion 1st May 2020 – 31st

December 2020

Credit card policy, effective 1st May 2020.

84

Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios*

The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection*

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

through housing loan, specifically by adjusting the LTV ratio for property

loan and the FTV ratio for property financing for the 1st facility, 2nd

facility, etc., making the largest LTV ratio for property credit and FTV

ratio for property financing as shown in the table below.

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

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

mechanism to a maximum of 5 facilities without taking account of

the orders

3. Adjusting the arrangement of stages and amount of property

loan/financing disbursement of indent property:

Source: Bank Indonesia

*As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019

85

Prudential aspects of Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios

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 / FTV Exemptions

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

Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios*

Source: Bank Indonesia

86

Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing*

1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing.

a. BI decides to relax the LTV ratio for property loans and FTV ratio for property

financing by 5% from current ratio as follows:

Source: Bank Indonesia

Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV

ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii)

relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans.

Policy Backgrounds Main Regulatory Points

*This adjustment will be effective from December 2nd, 2019

• In response to global and domestic economic

developments, BI is maintaining an accommodative policy

mix to maintain the economic growth while also

maintaining macroeconomic and financial system stability.

This effort will be targeted to several potential sectors.

• Considering the ongoing needs to stimulate the property

and automotive sectors which have a huge backward and

forward linkages to other sectors in the economy, BI

decides to relax LTV/FTV policy for property

loans/financing and down payments on automotive loans

in compliance with prudential principles.

• Additional incentives are also given to support sustainable

development through green financing in order to reduce

potential disruptions to financial system stability stemming

from environmental degradation.

• As a prudential mitigation, those relaxations will be given to

borrower with strong repayment capacity and low

credit/financing risk.

• BI will regularly evaluate this policy at least once a year.

87

2. Additional incentive on the LTV ratio for green property loans and

FTV ratio for green property financing.

a. The Green Property criteria refers to the standards/certificates

issued by a nationally or internationally recognized

environmental institution.

b. Green property that is granted for the incentive has to meet the

following standards:

i. For residential areas/buildings in certified green belt

areas, each unit in the residential area/building is

considered to meet the criteria.

ii. In case that the residential area/building is not a certified

green belt area, an evaluation will be conducted on each

unit as follows:

For buildings < 2500m2, the bank may conduct a self-

assessment using the tools/applications provided by a

recognized institution.

For buildings > 2500m2, the assessment must be

conducted by a recognized institution;

For new buildings constructed in an area by one

developer or group of developers, the assessment must

be conducted by a recognized institution and the

certificate must be submitted by the developer

i. Additional incentive for green property on LTV ratio for

property loans and FTV ratio for property financing is 5%

from the LTV/FTV ratio presented in Table 2 as follows:

Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing*

Source: Bank Indonesia

Main Regulatory Points

3. Adjustment of Down Payments on Automotive Loans/Financing

a. Down Payments on Automotive Loans/Financing is adjusted as

follows:

i. Relaxation on the down payments of automotive loans or

automotive financing 5%-10% from current regulations;

ii. The relaxation should consider the gross NPL/NPF ratios

and gross NPL/NPF ratios on automotive loans/financing;

iii. The adjustment of down payments of automotive

loans/financing in points a and b is as follows:

*This adjustment will be effective from December 2nd, 2019

88

4. Adjustment of Down Payments on Green Automotive Loans/Financing

a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles.

b. The down payments on green automotive loans or green automotive financing is adjusted as follows:

i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5;

ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing;

iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows:

Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing*

Source: Bank Indonesia

Main Regulatory Points

Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from

December 2nd, 2019

*This adjustment will be effective from December 2nd, 2019

89

Principles of Domestic Non Deliverable Forward (DNDF) Transaction

Purposes

1. To support the effort of stabilizing

the Rupiah exchange rate through

the additional of alternative

hedging instruments

2. To support the development and

deepening of the domestic

financial market

3. To increase the confidence of

exporters, importers, and investors

in conducting economic and

investment activities through the

flexibility of hedging transactions

against Rupiah currency risk

General Provisions

Domestic Non-Deliverable Forward Transaction (DNDF Transaction)

Plain vanilla derivatif transaction of foreign exchange against rupiah in the form of

forward transaction with fixing mechanism in the domestic market

Forward Transactions

Forward Transactions are sell/purchase foreign currencies againts rupiah whereas the

delivery of funds shall be performed in more than 2 days after the transaction date

Fixing Mechanism

Transaction settlement mechanism without full movement of funds by calculating the

difference between rate on the transaction date and reference rate in JISDOR on a

specified future time agreed in the contract (fixing date)

Other Definitions

The definition of derivative transaction of foreign exchange againts rupiah, Forward

Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia

regulations regarding foreign exchange transaction againts rupiah

Source: Bank Indonesia

90

Principles of Domestic Non Deliverable Forward (DNDF) Transaction

Bank can perform DNDF Transactions as follows:

Bank – Customer

Bank – Foreign Party

Bank – Bank

Transaction between:

Can only be

performed to

hedge rupiah

exchange rate

risk.

1. Must have Underlying Transactions:

Including all following activities :

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)

Excluding following activities:

a. Bank Indonesia certificates;

b. Placement of funds with bank;

c. Unwithdrawn credit facilities;

d. Documents of foreign currencies sales againts rupiah;

e. Money transfer by fund transfer companies

f. Intercompany loan

g. Money changer activities.

2. Nominal of DNDF Transactions ≤ Nominal of Underlying

Transactions

3. Tenor of DNDF Transactions ≤ Tenor of Underlying

Transactions

Source: Bank Indonesia

91

Principles of Domestic Non Deliverable Forward (DNDF) Transaction

Transaction Settlement• Use Fixing mechanism

• Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR

• Settlement currency : IDR

• Roll over and early termination are not allowed

Roll over and early termination for DNDF is prohibited

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

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

• Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign

• Purpose: Hedging

Customer /

Foreign PartyBank

Overseas

BankHedging

Notes:

Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF

transactions with overseas Bank for the purpose of cover hedge.

Cover

Hedging

Source: Bank Indonesia

92

Amendment on DNDF Regulation*to provide more flexibility in DNDF transaction*to increase liquidity and efficiency in domestic foreign exchange market

BI Regulation No. 20/10/PBI/2018

Source: Bank Indonesia

BI Regulation No. 21/7/PBI/2019AMENDMENT

Article 3

1. DNDF transactions must have Underlying

Article 3

1. Sell FX/IDR through DNDF up to $ 5 mio can be done without

underlying documents

Article 6

2. Not Regulated;

Article 6

2. DNDF can be terminated (unwind);

Article 11

3. Underlying documents must be final (firm) with additional

supporting documents

Article 11

3. Underlying documents for buy FX/IDR for DNDF is :

• Final (firm commitment) + Supporting documents

4. Underlying documents for sell FX/IDR for DNDF above

threshold $ 5 mio can be:

• Final (firm commitment) + Supporting documents

• Projection (anticipatory basis) + Supporting documents

Article 11

4. Not Regulated;

Article 11

5. In using estimate underlying transaction documents in the

form of cash flow projection, Bank must evaluate the

appropriateness through:

a. Supplementary documents;

b. Historical data within at least 1 year before; and

c. Track record of the Customer or Foreign Party.

*Effective on May 17th, 2019; English version of the regulation is available in BI website.

93

Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS)

Source: Bank Indonesia

As hedging instruments against Rupiah interest rate changes IRS is a contract between two parties to

periodically exchange rupiah interest rate flows

during the contract period or at the completion

of the contract based on certain notional

amount. IRS pricing is based on JIBOR.

OIS is an interest rate swap agreement based on

a daily overnight reference rate (IndoNIA)

Encourage price transparency in the rupiah

money market

Strengthen monetary policy transmission

Provide alternative hedging instruments

against rupiah interest rate changes

Support securities market deepening in

Indonesia

1

2

3

4

IndoNIA & JIBOR

OIS transaction with IndoNIA as benchmark rate

Alignment between JIBOR and OIS interest rate

Improvement of IRS transaction liquidity

Strengthening reference rate based on realtransactions

94

OIS and IRS Transactions: General Provisions

Source: Bank Indonesia

Market Players. Banks, bank clients, both individual

and non-bank institutions, and also foreign parties.

Transaction Needs Analysis. 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

required to have an analysis on the need of rupiah

interest rate derivative transactions.

Market Conventions. When performing IRS and OIS

transactions, the respective bank is bound by market

conventions agreed upon by market players through

industry association including the Indonesian Foreign

Exchange Market Committee.

Settlement. Settlement can be performed as a netting

payment and every transaction has to be settled in

Rupiah. Close-out netting can be applied under

predetermined conditions.

Market Conventions

Calculation

Base ACT/360

IndONIA Index

with 5

decimals

Compound

Floating Rates

(CFR) based

on 5 decimals

Interest Payment

based on Netting

Notional of Net

interest payment in

IDR with 0 decimals

Settlement Date = 1

business days after

Maturity Date (MD)

OIS Quotation rates

based on 2 decimals

Quotation : 1W, 2W,

1M, 2M, 3M, 4M,

5M, 6M

At the 1st phase, OIS

settlement will only

be done at the end

of the OIS tenor

(MD+1bd).

95

3.00

4.00

5.00

6.00

7.00

8.00

LF Rate BI Rate BI-7Day RR Rate DF Rate LF Rate (Dummy)Rupiah Exchange Rate Remains Comparable to Peers

Well Maintained Inflation Ensured Price Stability Strengthened Monetary Policy Framework

Credit Growth Profile

BI 7Day RR Rate: 4.50

(%)

LF Rate: 7.00

LF Rate: 5.25

BI Rate: 6.50

DF Rate: 3.75

19 August 2016The New

Monetary

Operation

Framework

8.38 8.36

3.353.02

3.613.13

2.72 2.96

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

9.00

-2

0

2

4

6

8

10

12

14

16

18

20

2013 2014 2015 2016 2017 2018 2019 Mar-2020

(%)

CPI (%, yoy) rhs

Core (%, yoy) - lhs

Volatile Food (%, yoy) - lhs2

Administered (%, yoy) - lhs

Source: Bank Indonesia

0.25

-0.41

-0.71

-0.78

-0.84

-1.23

-1.76

-2.26

-2.37

-5.71

-6.27

-6.57-9.30

0.16

0.07

0.50

-0.38

0.42

-0.01

-0.81

-1.07

0.17

-2.27

4.35

1.91

-1.23

-10.0 -8.0 -6.0 -4.0 -2.0 0.0 2.0 4.0 6.0

PHP

KRW

CNY

JPY

SGD

MYR

EUR

INR

THB

TRY

IDR

BRL

ZAR

point-to-point

average

*data as of April 13th, 2020

YTD 2020 vs 2019

%

5.9

3.4

10.3

6.1

0

2

4

6

8

10

12

14

16

18

20

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1

2015 2016 2017 2018 2019 2020

%,yoy

Total Growth

Working Capital Loans

Investment Loans

Consumption Loans

Stable Monetary Environment Despite Challenges

96

Regional Inflation Remains under Control

Source: Central Bureau of Statistics of Indonesia (BPS), calculated

Inflation in most regions remained within the 2020 national inflation target range of 3.0% ± 1%. Inflation in West Java (3,9%) and Aceh (3.9%) remained high,

driven by rising commodity prices of various fish and gold jewelery

REGIONAL INFLATION, MARCH 2020 (%, YOY)

97

4 Strategies to Achieve the Inflation Target

Achieving inflation at 3,5%±1%

• Maintaining core inflation

• Maintaining volatile food stability at 4-5%

• Controlling administered price inflation

2018-2019 Target

Stabilizing the

price

1. Price Affordability

Achieving inflation at 3,0%±1%

• Maintaining core inflation

• Maintaining volatile food inflation less than 4%

• Controlling administered price inflation

2020-2021 Target

Managing

demand side

Strengthening

production,

Government

food reserves

and food export-

import

management

2. Supply Availability

Strengthening

institution

Encouraging

trade

cooperation

between regions

3. Well Managed Distribution

Improving trade

infrastructure

Improving data

quality

4. Effective Communication

Strengthening

central-regional

coordination

Source: Bank Indonesia

4 Strategies

98

Improving the Effectiveness of Monetary Policy Transmission

Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars;

(1) implementation of BI 7day Reverse Repo Rate;

(2) implementation of reserve requirement averaging; and

(3) continue to implement money market deepening program.

Enhancement of monetary policy

signal

Enhancement of banking liquidity

management

Implementation of BI 7 Day

Reverse Repo Rate

Implementation of Reserve

Requirement (RR) Averaging

Reformulation of

Monetary Policy Operational Framework

Enhancement of instruments

and transactions

Implementation of Money

Market Deepening Program

Source: Bank Indonesia

99

Enhancement of Monetary Operations Framework

• Can be traded among contributor banks for 10

minutes.

• Up to the amount of Rp10 billion.

• Up to 1-month tenor.

• Can be traded among contributor banks for 20

minutes.

• Up to a total of Rp20 billion.

• Up to 3-month tenor.

CURRENT JIBOR (as per June 1st, 2016)

PREVIOUS JIBOR

Source: Bank Indonesia

100

Financial Intermediation Managed to Maintain Its Stable Growth

Financial industry's intermediation still experiences positive and moderate growth in Feb-20 despite external pressure.

Source: Financial Service Authority (OJK)

As of Mar-20, the total of capital raising on 2020 reaches IDR 23.43 Tn.

Banking intermediation can still maintain its moderate growth at 5.93% in Feb-20

5,538

5.93%

0%

2%

4%

6%

8%

10%

12%

14%

16%

0

1,000

2,000

3,000

4,000

5,000

6,000

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

IDR Tn yoyBank Loans Growth (rhs)

12.07 9.6 16.43 14.7 0.09

67.12

88.19

35.4529.17

116.18

156.71

114.18122.98

5.46

0

20

40

60

80

100

120

140

160

180

2016 2017 2018 2019 Jan-20 Feb-20 Mar-20

IDR Tn IPO Rights Issue Corporate Bond & Sukuk

Growth of financing distributed by multi-finance also grows moderately at 2.82%

yoy in Feb-20

Growth of insurance gross premium of insurances remains stable as of Feb-20

-3.75

20.94

-30

-20

-10

0

10

20

30

40

50

60

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Life Insurance Premium Growth

General & Reinsurance Premium Growth

452

2.82%

0%

2%

4%

6%

8%

10%

0

100

200

300

400

500

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

yoyIDR tnFinancing Growth (rhs)

101

Stable Financial Institutions

Domestic financial institutions exhibit a relatively stable condition. The capital is consistently well above the minimum requirements, while profitability

and leverage remain to be at a sufficient level.

Source: Financial Service Authority (OJK)

CAR of the banking sector remains high and stable at 22.42% with Tier-1 capital at

20.68% as of Feb-20

Profitability of the banking sector has maintained relatively stable

RBC of the insurance industry remains high and well above the minimum

threshold (120%)

Gearing ratio of multi-finance companies is steadily maintained at a level of below

three times in Feb-20

22,42

20,68

10

12

14

16

18

20

22

24

26

Jan

-18

Feb

-18

Ma

r-1

8

Apr-

18

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-1

8

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Apr-

19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Sep

-19

Oct-1

9

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

CAR Tier 1

670

312

0

50

100

150

200

250

300

350

400

0

100

200

300

400

500

600

700

800

900

Jan

-18

Fe

b-1

8

Mar-

18

Ap

r-1

8

Ma

y-1

8

Jun-1

8

Jul-1

8

Aug-1

8

Sep

-18

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Feb

-19

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-1

9

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Life Insurance (Lhs) General Insurance (rhs)

4,81

2,49

0

1

2

3

4

5

6

Jan

-18

Feb

-18

Mar-

18

Apr-

18

Ma

y-1

8

Jun

-18

Jul-1

8

Aug-1

8

Sep

-18

Oct-1

8

Nov-1

8

De

c-1

8

Jan

-19

Feb

-19

Mar-

19

Apr-

19

Ma

y-1

9

Jun

-19

Jul-1

9

Aug-1

9

Sep

-19

Oct-1

9

Nov-1

9

De

c-1

9

Jan

-20

Feb

-20

Net Interest Margin Return on Assets

2,52

0

1

2

3

4

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Feb

-19

Mar-

19

Apr-

19

Ma

y-1

9

Jun

-19

Jul-1

9

Aug-1

9

Sep

-19

Oct-1

9

Nov-

19

De

c-1

9

Jan

-20

Fe

b-2

0

102

Manageable Credit Risks with Adequate Liquidity

Financial Institutions are equipped with sufficient liquid assets. Credit risks are also managed at a low level and remains below the threshold.

The ratio of liquid assets to deposit and non-core deposits in the banking sector is

maintained well above the threshold.

As of Feb 20, the gross & net NPL ratios of the banking sector are 2.79% and 1%

accordingly, well maintained below the threshold. NPF ratio of the multi-finance industry constantly maintained low at 2.7% as of Feb-20

Investment adequacy ratio in the insurance industry is maintained above 100%

Source: Financial Service Authority (OJK)

108,12

22.81

0

5

10

15

20

25

30

40

50

60

70

80

90

100

110

120

130

140

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Apr-

19

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Sep

-19

Oct-

19

Nov-

19

De

c-1

9

Jan

-20

Feb

-20

%%Liquid Assets to Non-Core Deposits Liquid Assets to Deposits

threshold LA to Deposit (rhs) = 10%

threshold LA/ NCD= 50%

114,83

183,49

0

50

100

150

200

250

Jan

-18

Fe

b-1

8

Mar-

18

Ap

r-1

8

Ma

y-1

8

Jun-1

8

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Feb

-19

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-1

9

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Life Insurance General Insurance

1,00

2,79

0

1

2

3

4

5

Jan

-18

Fe

b-1

8

Mar-

18

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Sep

-18

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Mar-

19

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Sep

-19

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

%

NPL Net NPL Gross

%

%

2,7

0

1

2

3

4

5

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oc

t-1

9

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

103

Manageable Market Risks

Amidst the increasing market volatility, the risk profile of financial institutions remains manageable

Net open position in the banking sector is maintained significantly below the

maximum limit (20%)

Insurance & pension fund investment value is growing steadily.

The exposures of multi-finance companies to foreign debt have largely been

mitigated by company hedging measures

Mutual funds’ net asset value (NAV) is restrained after following a considerable

decline in JCI during March’20

Source: Financial Service Authority (OJK)

2,35

0

1

2

3

Jan

-18

Fe

b-1

8

Mar-

18

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Aug-1

8

Sep

-18

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Mar-

19

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Sep

-19

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

%

0

1.000

2.000

3.000

4.000

5.000

6.000

7.000

260

310

360

410

460

510

560

610

Jan

-19

Fe

b-1

9

Ma

r-1

9

Apr-

19

Ma

y-1

9

Jun

-19

Jul-1

9

Aug-1

9

Sep

-19

Oc

t-1

9

Nov-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Ma

r-2

0

IDR Tn NAV Mutual Funds JCI (rhs)

As of 1 April, 2020

1146.8

280

200

250

300

350

400

0

300

600

900

1.200

1.500

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

May-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oc

t-1

8

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

Nov-1

9

De

c-1

9

Jan

-20

Fe

b-2

0IDR TnIDR Tn Insurance Pension Funds (rhs)

174,05

102,17

0

25

50

75

100

125

150

175

200

225

250

Jan

-18

Fe

b-1

8

Mar-

18

Apr-

18

Ma

y-1

8

Jun

-18

Jul-1

8

Aug-1

8

Sep

-18

Oc

t-1

8

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Mar-

19

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Aug-1

9

Sep

-19

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Domestic Debt Foreign Debt

IDR Tn

104

Domestic Capital Market Performance Amid Global Challenges

Source: Bloomberg and Ministry of Finance

Domestic bond and stock index begin to recover after a sharp fell at the

end of March

Government bonds record capital inflow in Apr-20 after previously experiencing

significant net sell due to global pressure

The COVID-19 pandemic continues to weigh on JCI's performance alongside with the

plunging global stock market

The government bond yields on the benchmark of 10-yr and 20-yr rise to above

8 percent following rupiah depreciation.

-18.0-35.9

-20.5-18.2

-19.9-13.8

-7.5-27.7

-20.2-14.0

-24.1-17.0

-23.1-20.6

-40 -35 -30 -25 -20 -15 -10 -5 0

TURK

BRAZ

US

EU

JPN

MAL

CHIN

PHIL

SIN

HKN

INDO

S KOREA

THAI

WORLD

Stock Index Performance as of 7 Apr ’20 (compared to 31 Dec’19)

0.9

-1.5

-140

-120

-100

-80

-60

-40

-20

0

20

40

60

80

Jan

-18

Fe

b-1

8

Ma

r-1

8

Ap

r-1

8

Ma

y-1

8

Jun

-18

Jul-1

8

Au

g-1

8

Se

p-1

8

Oct-

18

No

v-1

8

De

c-1

8

Jan

-19

Fe

b-1

9

Ma

r-1

9

Ap

r-1

9

Ma

y-1

9

Jun

-19

Jul-1

9

Au

g-1

9

Se

p-1

9

Oct-

19

No

v-1

9

De

c-1

9

Jan

-20

Fe

b-2

0

Ma

r-2

0

7 A

pr-

20

Gov't Debt Securities Equity

266

4,779

3000

3500

4000

4500

5000

5500

6000

6500

7000

200

210

220

230

240

250

260

270

280

290

300

Oct-18 Dec-18 Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Feb-20 Apr-20

Comp Bond Index Comp Stock Index (rhs)

As of 7 April, 2020

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

5

6

7

8

9

10

Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20

Yield (%)5-yr Yield 10-yr Yield 20-yr Yield IDR (rhs)

105

Strategic Policies in Financial Sector

Source: Financial Service Authority (OJK)

Providing financing alternatives

for Goverment Priority Sectors

Supporting acceleration of

national economic growth

Providing financial access to

MSMEs especially in remote

areas

Preparing financial services

industry to cope with

Industrial Revolution 4.0

Improvement of business

process in the industry

106

Continuous Program on Capital Market Deepening…continuously strengthened, including through capital market deepening initiatives

Strengthening market infrastructure

Development of Integrated Licensing (SPRINT).

Enhancement of electronic reporting system.

Development of electronic public offering.

Integrated data warehouse and supervisory system.

Enhancing the supply-side

Product: QIB offering and private placements, private

fund, asset-backed securities, REITs, infrastructure fund,

IGBF (Indonesia Government Bonds Future) & equity

crowdfunding.

Issuer: Financial conglomerates, big bank debtors, local

government, IDX incubators, SMEs, SOEs & big tax payers.

Enhancing the demand-sideStrengthening governance & customer

protection

Development of market players’ capacity

Enhancement of GCG for publicly-listed companies

Establishment of disgorgement fund

Source: Financial Service Authority (OJK)

Enhancing the role of the domestic institutional investors

(insurers & pension funds) in capital markets .

Development of the domestic investor base (conducting

investor education programs).

Simplification in opening securities account.

Development of regional securities companies.

Development of e-bookbuilding.

Online marketing initiative

107

Enhancing Financial Literacy & Inclusion

Source: Financial Service Authority (OJK)

OJK strives to build a strong foundation for financial inclusion programs, to ensure access to financial products &

services by Indonesians of all social classes. Such initiatives also include the enhancement of financial literacy and

financial consumer protection.

Developing

financial education

models utilizing

various delivery

channels

Enhancing the

role of the

“Investment

Alert Taskforce”

The result of OJK’s 2019 national survey demonstrated an improvement in financial literacy & inclusion among

Indonesians compared to that of 2016.

Financial

Literacy

Financial

Inclusion

21.8%

2013

Developing

micro-credit

products with

additional business

support (“KUR

Klaster”)

Promoting the

establishment

of Islamic

microfinance

institutions (“Bank

Wakaf Mikro”)

Strengthening

the role of

Financial Access

Acceleration

Taskforce (TPAKD) in

local areas

29.7%

2016

38.03%

20192019 Target: 35%

59.7%

2013

67.8%

2016

76.19%

20192019 Target: 75%

108

A Comprehensive Financial Deepening Program…strategy to tackle challenges in deepening Indonesia’s financial markets

Source: Bank Indonesia

In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority

launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate “The National

Strategy of Financial Market Development”

Vision:

To Establish Deep, Liquid, Efficient,

Inclusive, and Safe Financial Market

ECONOMIC FUNDING & RISK

MANAGEMENT

MARKET INFRASTRUCTURE

DEVELOPMENT

POLICY COORDINATION,

HARMONIZATION &

EDUCATION

Benchmark Rate &

Standardization

Instrument

Fund Regulatory

FrameworkMarket Infrastructure

Intermediaries

Coordination &

Education

Mission: Financial Market as Sources of National Development Financing

1 2 3

Money

MarketFX Market

Bond

Market

Stock

Market

Syariah

Market

Structure Product

Market

3 Pilars

6 Markets

7 Elements

of Financial

Market

Ecosystem

TARGET KEY PERFORMANCE INDICATOR STRATEGIC ACTION PLAN

109

BI’s Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA)

BI supports government’s program of shifting social assistance to targeted non cash social assistance disbursement

through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG

subsidy.

NCSA Programs

Family Hope Program

(Program Keluarga

Harapan -PKH)

Smart Indonesia

Program (Program

Indonesia Pintar-PIP)

Non Cash

Food Assistance

(Bantuan Pangan

Non Tunai – BPNT)

20

16

-20

20

Pilot Project

Gradual

Implementation

Interconnected &

interoperable

payment system

LPG

Subsidy

Full

Implementation

XXYYZZ12345678

9876543210

Source: Bank Indonesia

110

Progress of NCSA Programs

Family Hope Program

(Program Keluarga Harapan - PKH)Non Cash Food Assistance

(Bantuan Pangan Non Tunai -

BPNT)

• The Family Hope Program (PKH) is a program that

provides cash to very poor households.

Rp 1,89 million /year will be granted for each

household. PKH will be granted every February,

May, August, and November.

• As of December 2017, PKH has been distributed

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

• In 2018, PKH has been distributed to 10 million

households on non-cash basis.

• BPNT is a poverty alleviation and social protection

program that is managed by the central

government. It provides subsidized rice and eggs

to low-income households. Rp 110

thousand/month will be granted for each

household as BPNT that can be used in certain

stores which called e-warong.

• As of December 2017, BPNT was distributed to

1,2 million households in 44 cities.

• In 2018, BPNT has been distributed to 10.1 million

households (65.1% of the target of 15.5 million

households target).

Source: Bank Indonesia

• As of Sept-2019, PKH has been distributed to 9.8

million households on non-cash basis with

realization of 82.52% of the 2019 budget.

• As of Sept-2019, BPNT has been

distributed to 13.0 million households

with realization of 68.04% of the 2019

budget.

111

Stronger Fundamentals Facing the Headwinds

82.4

12.1

6.8

1998

2008

Sep-15

30

3.8

2,79

1998

2008

Aug-15

17.4

50.2

1998

2008

Sep-15

Inflation Rate (%) IDR Movement (%)

Non-Performing Loan/NPL (%)

Government Debt/GDP

Foreign Reserves (USD bn)

100.0%

1998

27.4%

200829.8%

Q4 - 2019

8.6x

1998

3.1x

2008 3.1x

Q4 - 2019

116.8%

199833.2%

200836.1%

Q4 - 2019

More Liquid Market (%)

External Debt (Public & Private) to

FX Reserve RatioExternal Debt/GDP

Inflation controlled within the target range IDR appreciated year-to-date in April 2020

NPL level (gross) is below the maximum threshold of 5%

Consistently well-maintained

Significantly higher than 1998 & 2008, ample to cover 7.0

months of import and external debt repayment

Significantly lower than 1998 crisis

Slightly higher than 2008, but significantly

lower than 1998

Mar ’20 121Mar ’20 2.96 (yoy)

Feb ‘20

62

10.55.7

1998 2008 Jul-15

Overnight interbank money market rate is

relatively lower

Tw IV ‘19

4.8

4.35

-35

-197

-250 -200 -150 -100 -50 0 50

13-Apr-20

2008

1998

(ytd)

112

Outlook of Domestic Economy Remains Robust...domestic economic growth is predicted to be moderated in 2019 and rebound in 2020

2019 and 2020 Economic Outlook

Bank Indonesia projects economic growth in 2020 at around 2.3%, revised down from 4.2-4.6%.

Bank Indonesia projects inflation in 2020 within the target range, namely 3.0%±1%.

Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in 2020 in the 6-8% range, revised down from

9-11% previously, in line with the revised economic growth projection in 2020.

Economic Growth Inflation CAD (% of GDP) Credit Growth

Source : Bank Indonesia

2018

Realization5.17% 3.13% 2.98% 11.75%

2019

Realization5.02% 2.72% 2.72% 6.08%

2020 around 2.3 % 3.0±1% 2.5 - 3 % 6.0-8.0%

Progressive Infrastructure Development:Strong Commitment on Acceleration of Infrastructure Provision

Section 6

114

IIGF has the potential to provide project guarantee

for non-PPP projects

The Government has Enacted Various Reforms to Accelerate Infrastructure Provision

Fiscal Reforms Institutional Reforms Regulatory Reforms

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

Viability Gap Funding (VGF) KPPIP Direct Lending

Increase project financial feasibility by

contributing up to 49% of the construction cost

(MoF Reg. No. 223/2012)

Availability Payment

Land Revolving Fund

Issuance of regulatory framework to allow annuity

payment by the Government during concession

period to concessionaire since project operation

based on infrastructure service availability (MoF

Reg. No. 190/2015 for Central Gov’r and MoHA

Reg. No. 96/2016 for Regional Gov’t.)

A revolving-fund sourced from State Budget, to

accelerate land acquisition (MoF Reg. No.

220/2010)

KPPIP is actively involved in accelerating delivery

of priority infrastructure projects

PT. Sarana Multi Infrastruktur

Merging between PT. SMI and Gov’t Investment

Center (PIP) to become an infrastructure funding

company

Indonesia Infras. Guarantee Fund (IIGF)

PPP Unit

Provide facilities to help GCA on preparing PPP

project (PDF/TA)

BLU LMAN

The State Asset Management Agency (BLU LMAN)

is mandated to provide land fund for National

Strategic Projects to ensure timely land acquisition

process

Allow guarantee for direct lending to SOE to

accelerate financial close process for

infrastructure projects (Presidential Reg. No.

82/2015)

Land Acquisition

Stipulate land acquisition acceleration based on

Law No. 2/2012 (Presidential Reg. No.

148/2015) and land acquisition fee payment for

impacted community (Presidential Reg.

No.56/2017)

Economy Packages

Conduct deregulation for issues hindering

infrastructure delivery and develop a task force

under CMEA to ensure the effectiveness of

economic packages implementation

Risk-sharing Guidelines

IIGF has issued risk allocation and mitigation

guidelines for PPP project

Tax Incentives (Tax Holiday)

MoF Reg. No.35/2018 allowed 100% Tax Holiday

for 17 Pioneering Industries for 5 – 20 years

depending on the investment value

Indonesia Infrastructure Guarantee Fund (IIGF)

IIGF has the potential to provide project guarantee

for non-PPP projects

115

Some of Most Recent ReformsPolicy reforms are aiming to create a more conducive investment climate for infrastructure delivery

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

Presidential Reg. No. 20/2018 on Use of Foreign Labor – released on March 2018

This regulation aims at simplifying the permit application process for foreign workers, hence making the process more efficient and faster, in order to

rise foreign direct investment in Indonesia

Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN – released on June 2017

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 No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic

Projects Implementation – released on May 2017

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.

Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) – 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 of Agrarian and Spatial can issue a recommendation of

spatial utilization; so that the process of obtaining project permission can be done.

MoF No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects and Asset Management of Land Acquisition by

State Asset Management Agency – 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.

116

Reforms Along the Project’s Life Cycle...to encourage and accelerate infrastructure project using PPP scheme

Government of Indonesia

Project

Development

Facility (PDF)

Viability

Funding

Gap (VGF)

Guarantee

FundTax Facilities

Availability

PaymentLand Acquisition

Preparation Bidding Process Construction

Project development

facility contributing

to assist GCA on PPP

project preparation

(PDF&TA)

Managing entity:

KPPIP, PT SMI PT IIF,

and Ministry of

Finance

A facility with

contribution to

construction cost

to increase

project financial

viability

Managing Entitiy:

Ministry of

Finance based

on GCA proposal

Gov’t.

commitment:

49% max. Per

project cost

Guaranteeing

Govt. contractual

obligations under

infrastructure

concession

agreements and

Mof Regulation No

130/PMK.

08/2016 re: Govt

guarantee for

electricity project

acceleration

Managing entity:

IIGF and MoF

Govt’s comitment:

US$ 450 mn

MoF Reg. No.

159/PMK. 010/2015

re: tax holiday for

pioneer sector, such

as base metal, oil

refinery, basic

petrochemical,

machinery, renewable

energy, & telco

equipment industries.

Sector will be further

expanded

Managing entitiy:

Ministry of Finance

A scheme in which

concessionaires

receive sum of

money periodically

from central or

regional government

after the completion

of an asset.

MoF Regulation, and

MoHA Regulation on

Availability Payment

has been ratified.

Managing entity:

Ministry of Finance &

Ministry of Home

Affairs

A facility to support

land acquisition for

infrastructure projects

particularly projects

that involve private

sector

Managing enitiy:

Ministry of Finance,

Ministry of Agrarian

and Land Spatial/BPN

and BLU-LMAN

Gov’t. commitment:

US$ 12 mn (2016)

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

117

Efforts to Accelerate Infrastructure Provision

Regulation improvement to accelerate land procurement process

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

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

land acquisition process.

For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation

No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which

has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the

Regulation allows a Business Entity to allocate funding for a land acquisition which can be

reimbursed by the Government following the completion of land acquisition process. With this

Regulation, the land acquisition process is expected not to be delayed by the unallocated

budget or the delay on the budget disbursement.

Land Procurement Process as Stipulated in Law No. 2 of 2012

Law No. 2/2012 was successfully applied in:

1. Palembang – Indralaya section of the Trans

Sumatera Toll Road Project

2. Java North Line Double Track Rail Project

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

118

Efforts to Accelerate Infrastructure Provision…the establishment of Indonesia Asset Management Agency (LMAN)

Source: Ministry of Finance

Government has established State Asset Management Unit (LMAN) as a solution to

accelerate the land acquisition through the provision of land acquisition fund

1. Unutilized fund can be allocated for the

following year

2. Non-project-specific land acquisition

fund allocation. Unused allocated fund

can flexibly be made available for the

other project

3. Land acquisition fund for PSN projects is

managed under one agency

1. LMAN was established in December 2015

through the issuance of MoF Reg. 219/2015

concerning State Assets Management

2. In 2016, BLU LMAN was mandated to provide

land acquisition fund as a support to Ministry

of Public Works due to US$ 1,081 Mio

shortage of fund to acquire land for priority

toll roads

3. The scope of support is broaden for all

National Strategic Projects through the

issuance of MoF Reg. 21/2017 concerning

land acquisition financing guideline for PSN

4. In January 2018, LMAN has disbursed up to

US$ 881.48 Million (IDR 11.9 Trillion) through

bridging finance scheme for 27 toll road

projects, and planned to start the

implementation of direct payment scheme

Land Acquisition Budgeting SchemeLMAN at a Glance

This LMAN initiative provides better

flexibility, coordination and

management of land acquisition fund

provision for National Strategic

Projects (PSN)

119

New Fundamental Regulations Have Been Initiated in 2017to accelerate infrastructure projects delivery

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

1Government Reg. No. 13/2017 on National Spatial Plan (RTRWN)

The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed

in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that

the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of

obtaining project

permission can be done.

2

MoF No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the

Acceleration of the National Strategic Projects Implementation

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.

3Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN

This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted

community who does not have official rights over the land required for PSN. This regulation helps to solve the

land acquisition problem due to community objection over the land use.

4MoF No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects and Asset

Management of Land Acquisition by State Asset Management Agency

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

120

Under Presidential Reg. No.56/2018, PSN list has been revised into 223 Projects and 3 Programs

projects

27Projects

53Projects

17Projects

12Projects

Sulawesi

US$23.4 BKalimantan

US$35.7 B

Sumatra

US$43.6 BMaluku & Papua

US$34.5 B

893 ProgramsProjects

National Projects

1 2 Projects

Java

US$72.7 BUS$100.7 B

13

Bali &

Nusa Tenggara

US$0.7 B Exchange rate: US$ 1 = IDR 13,500

Road

69 Projects

Dams

51 Projects

SEZs & IEs

29 ProjectsRailway

16 ProjectsEnergy

11 Projects

Ports

10 Projects

Clean Water &

Sanitation

8 Projects

Airports

7 Projects

Irigation

6 ProjectsSmelter

6 Projects

Electricity

1 Program

Technology

4 Projects

Housing

3 Projects

Fisheries/Farming

1 Projects

Sea Dike

1 ProjectsEducation

1 Projects

Economic Equality

1 Program

Aeroplane Industry

1 Program

Project Program

PSN includes 15 sectors at project level and 3 sectors at program level

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

Projects

121

PSN may receive privileges as stipulated in the Presidential Reg. No. 3/2016 j.o. the Presidential Reg. No. 58/2017

01

02

03

Determination of National Strategic Projects

04

05

0607

08

09

10

11

12Permit & Non-permit

Completion

Spatial Planning

Land clearing acceleration

Local Content Utilization

Government Guarantee Provision

Projects Monitoring via KPPIP IT System

SOE’s Assignment

Problems and Hindrance Completion

Accelerate Goods and Service Procurement

Settlement of Legal Issues

Acceleration of Non-State Budget Projects

Additional Facilities

Existing Facilities

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

122

Progress on 223 Projects and 3 Programs PSN

The Estimated Investment Value for

223 Projects + 3 Programs PSN1

1Exclude 7 projects which investment value are still unknown

Exchange rate : US$ 1 = IDR 13,500

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

State Budget

10%

SOEs/ RSOEs31%

Private59%

Total Investment

Value2

US$ 307.4

Billion

State Budget

US$ 31.6 Bn

SOEs/RSOEs

US$ 96.6 Bn

Private

US$ 179.2 Bn

5 Sectors with Highest Investment

Value

Energy

11 Projects

US$ 89.8 Bn

Electricity

1 Program

US$ 76.7 Bn

Roads

69 Projects

US$ 49.7 Bn

Railways

16 Projects

US$ 29.2 Bn

SEZs and IEs

31 Projects

US$ 31 Bn

123

Progress on 223 Projects and 3 Programs PSN

Progress of National Strategic Projects

(as of December 2018)

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

32 projects already completed

32 projects, 1 electricity program, and 1 economic equality program

in construction and partial-operation phase

48 projects in construction and will start operating in 2019

52 projects in construction and will start operating after 2019

14%

15%

21%23%

3%

24%

6 projects in transaction

53 projects and 1 Aircraft Industry Program in preparation phase

Progress of National Strategic Projects

(as of September 2019)

51 projects already completed

27 projects, 1 electricity program, and 1 economic equality program

in construction and partial-operation phase

22 projects in construction and will start operating in 2019

80 projects in construction and will start operating after 2019

4 projects in transaction

39 projects and 1 Aircraft Industry Program in preparation phase

22%

13%

12%33%

3%

18%

124

In 2016 - 2018, 62 PSNs have been Completed with Total Estimated Investment Value of USD23.7 Billion

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

125

Progress on 37 Priority Projects

From the revised National Strategic Projects, the Government has selected a list of 37 Priority Projects to be the focus of

infrastructure provision.

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

1. Balikpapan-Samarinda Toll Road

2. Manado-Bitung Toll Road

3. Panimbang-Serang Toll Road

4. 15 Segments of Trans – Sumatera Toll Road

5. Probolinggo – Banyuwangi Toll Road

6. Yogyakarta – Bawean Toll Road

7. SHIA Express Railway

8. MRT Jakarta South-North Line

9. Makassar-Parepare Railway

10. Light Rail Transit (LRT) of Jakarta-Depok-

Bogor-Bekasi

11. LRT of South Sumatera

12. East Kalimantan Railway

13. LRT of DKI Jakarta

14. Kuala Tanjung International Hub Seaport

15. Bitung International Hub Seaport

16. Patimban Port

17. Inland Waterways Cikarang-Bekasi-Laut (CBL)

18. Palapa Ring Broadband

19. Batang, Central Java Power Plant (CJPP)

20. Central – West Java Transmission Line 500 kV

21. Indramayu Coal-fired Power Plant

22. Sumatera 500 kV Transmission (4 Provinces)

23. Mulut Tambang Coal-fired Power Plant (6 Provinces)

24. PLTGU (16 Provinces)

25. Bontang Oil Refinery

26. Tuban Oil Refinery

27. RDMP/Revitalization of the Existing Refineries

(Balikpapan, Cilacap, Balongan, Dumai, Plaju)

28. Abadi WK Masela Field

29. Unilization Field Has Jambaran-Tiung Biru

30. Indonesian Deepwater Development (IDD)

31. Tangguh LNG Train 3 Development

32. West Semarang Drinking Water Supply System

33. Jakarta Sewerage System

34. National Capital Integrated Coastal Development

(NCICD) Phase A

35. Jatiluhur Drinking Water Supply

36. Lampung Drinking Water Supply

37. Waste to Energy Program in 8 cities

126

Progress on 37 Priority Projects

Recent MilestonesProgress of 37 Priority Projects (as of September, 2019)

Funding Scheme of 37 Priority Projects

Loan Agreement has been signed on 15 November

2017.

On March 2018, pre-qualification stage has resulted 4 shortlisted bidders

Allocation of repayment liability on additional-loan for Phase I and Phase II

has been decided in the KPPIP Ministerial meeting – 49% will be borne by

Central Government and 51% will be borne Provincial Government of DKI

Jakarta.

Patimban Port

West Semarang Water Supply System:

Mass Rapid Transit (MRT) Jakarta South-North

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

66%

26%

8%

US$120.7 billion from Private/

PPP

US$47.7 billion from SOE/

Regional SOE

US$15.5 billion State/

Regional Budget

(including G-to-G loan)

Exchange rate : US$ 1 = IDR 13,500

Total Investment Value

US$ 183.9 Billion

West package has been fully operasional since April 2018.

Palapa Ring

Note: This data is still going to be verified by The Executive Office of President (KSP)

and Indonesia’s National Government Internal Auditor (BPKP)

Outline Business Case has been done on December 2017.

Yogyakarta-Bawen Toll Road

6%

16%

30%24%

8%

16%

3 projects in transaction

6 projects in preparation

6 projects in construction and

partial operation phase

2 project is completed

11 projects in construction and will

start operating in 2019

9 projects in construction and will

start operating after 2019

127

Energy Sector: the Progress of 35.000 MW Program

No Phase MW %

1 Operating 3,792 11

2 Construction 22,739 62

3 Signed Power-purchase Agreement 6,923 21

4 Procurement 1,279 4

5 Planning 734 2

17 Dec ‘14

Cabinet Meeting

“There’s electricity crisis in Indonesia,

requires construction of large capacity

plant "

Jan ‘15

Average economic growth of 6.7%

requires 7,000 MW / year or 35,000

MW / 5 years

(Kepmen ESDM No. 0074/2015 on

RUPTL 2015-2024)

Jan ‘15

Debottlenecking through regulation:

1. Regulation No.1/2015 concerning electricity

supply cooperation & joint utilization of the

electrical network among license holders.

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

Purchasing Electrical Power and benchmark prices

for Electrical Power through the Direct Selection &

Appointment.

16 Mar ‘15 4 May ‘15

June‘17

Cabinet Meeting

Progress of

35,000 MW

Launching 35.000 MW

by the President in

Goa Beach Sanden DIY

The progress so far:

Sulawesi

PLN: 2,000 MW

Private: 1,470 MW

Transmission: 5,275 ckt.km

Substation: 4,390 MVA

Maluku

PLN: 260 MW

Private: 12 MW

Transmission: 653 ckt.km

Substation: 620 MVA

Papua

PLN : 220 MW

Private: 0 MW

Transmission: 364 ckt.km

Substation: 460 MVA

Kalimantan

PLN: 900 MW

Private: 1,735 MW

Transmission: 5,604 ckt.km

Substation: 3,500 MVA

Nusa Tenggara

PLN: 670 MW

Private: 0 MW

Transmission: 2,347 ckt.km

Substation: 1,410 MVA

Sumatera

PLN: 1,100 MW

Private: 8,990 MW

Transmission: 18,729 ckt.km

Substation: 35,521 MVA

Jawa & Bali

PLN: 5,000 MW

Private: 13,697 MW

Transmission: 9,185 ckt.km

Substation: 66,265 MVA

35,000 MW Program Distribution

Source: PLN

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

Note : Progress of 35,000 MW Electricity Program as of August 2019

128

Energy Sector: the Progress of 35.000 MW Program

December 2016

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

706 MW in operating

phase

10,141 MW in

construction phase

8,478 MW sighned

Power-purchase

Agreement

10,560 MW in

procurement phase

2%

28%

24%

30%

16%

5,824 MW in planning

phase

3%

44%

38%

9%6%

8%

52%

32%

5%

3%19%

57%

19%

3%

2%

998 MW in operating

phase

15,676 MW in

construction phase

13,782 MW sighned

Power-purchase

Agreement

3,163 MW in procurement

phase

2,228 MW in planning

phase

2,899 MW in operating

phase

18,207 MW in

construction phase

11,467 MW sighned

Power-purchase

Agreement

1,683 MW in procurement

phase

954 MW in planning phase

6,811 MW in operating

phase

20,168 MW in

construction phase

6,678 MW sighned

Power-purchase

Agreement

829 MW in procurement

phase

734 MW in planning phase

November 2017 December 2018 December 2019

129

Acceleration of 35.000 MW Program

Government

PT PLN

EPC Powerplant

and TransmissionPLN Subsidiary

(Joint Venture)

Independent

Power Producer

Strengthen Equity

2B1

Government Support (outside Guarantee)

• Provision of Primary Energy

• Provision of Renewable Energy

• Simplicity of Permits and non-Licensing

• Spatial Planning

• Land acquisition

• Resolution on Legal Matters

Local Content

Obligation on the usage of local content through

an open book system, price guideline, reverse

engineering or other methods to maximise the

local content.

2A

Assignment

SJKU* Ministry

of Finance

Strengthen PLN‘s Balance Sheet

*)SJKU=Surat Jaminan

Kelayakan Usaha/

Business Viability

Guarantee Letter

The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects

Provision of Electricity

Refinancing Hedging

Financial Asset Optimization

Direct Lending

Direct LendingBond issuance by

PT PLN

Company

Tax Holiday

PT PLN’s divident

allocationLoan from independent

lenders

Asset

Revaluation

Other types of

funding

Equity Injection by the

Government

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

130

Significant Progress on Infrastructure Projects

Database

Project information

such as map, track,

existing study and

latest project status.

An integrated IT

system with

monitoring capacity

for stakeholders, so

that they can have

real time data.

Platform data outlook

that is efficient and

functional using a user-

friendly framework.

Record decisions related to

projects and synchronize

the implementation

schedule that can be

utilized by stakeholders.

KPPIP developed an integrated IT System for monitoring of national

strategic and priority projects, providing database on projects’ latest

status which can be effectively utilized for monitoring and decision-

making purposes.

Improving Monitoring System on Infrastructure Projects1Roads

Trans-Sumatra Toll Road Merah Putih Bridge, Ambon

Dams

Jatigede Dam (Operational)

Transportation

Jakarta MRT Project2

Drinking Water Processing

Umbulan Drinking Water Provision System, East Java

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

2 Not funded from National Budget

Terminal 3 Ultimate Soekarno-Hatta2

New Tanjung Priok Port Project2 Nop Goliat Dekai, Papua

131

Infrastructure Projects and Financing SchemesPromotion of Infrastructure Development to Accelerate Economic Growth

Establishment of PPP Unit

Broad

Objective

Champion project preparation and acceleration of the PPP agenda in

Indonesia

Core

Mandates

Improve quality of project selection under KPPIP – OBC criteria

Support project preparation through PDF support and highlyqualified

transactionadvisors

Act on behalf the Minister of Finance in providing government support and

approvals for projects

Additional

Mandates

Coordinate all public financeinstruments

Provide input for PPP Policy program Development andRegulations

Implement capacity building forGovt. Contracting Agency(GCAs) One stop shop for PPP promotion & Information

Budget Public Private Partnership SOE & Private Sector

Central & regional budget

(special allocation fund &

rural transfer)

Primarily to support basic

infrastructure projects:

– Food security:

Irrigation, dams etc.

– Maritime: Seaports,

shipyardsetc.

– Connectivity: Village

roads, public

transportationetc.

Certain infrastructure projects to be funded and operated through a partnership

between the Indonesian government and the private sector

– Projects ready for auction under the PPP Scheme:

– Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung– Railway projects such as an express line into Soekarno-Hatta International Airport

– Water supply projects such as the West SemarangProject

Various government support for PPP:

– Project Development Facility (PDF): Helps Government Contracting Agencies (GCAs) in project preparation and transaction

– Viability Gap Fund: improves financial viability of PPP projects

– Government Guarantees: Supports PPP projects’ bankability by providing sovereignguarantees

– Infrastructure Financing Fund: Provided through PT SMI and IIGF

– Availability Payment (AP): GCA pays private partner based of availability of

infrastructure services

Government to inject capital into SOEs: Intended

multiplier effect to develop more infrastructure

projects

Key focus areas:

– Infrastructure and maritimedevelopment

– Transportation and connectivity

– Food security

Medium term infrastructure developments to

focus on:

– Water Supply

– Airports

– Seaports

– Electricity and power plants

– Housing

– Mining

Source : Ministry of Finance; Bappenas; KPPIP: “Komite Kebijakan Percepatan Penyediaan Infrastruktur” or National Committee for the Acceleration of Infrastructure Delivery

Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity

Infrastructure Development in order to:

1. Accelerate growth particularly in rural areas

2. Support industrial development and tourism

3. Reduce unemployment and poverty

Infrastructure fundraising needs: $357.9 bn (or equivalent to IDR4,796.2 tn)

245 National Strategy Projects under National Medium Term Plan for 2015 – 2019 with an

estimated total cost of IDR 4,197 tn (USD 313 bn)

37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion)

Majority of 37 priority projects are expected to commence commercial operation by 2018 -

2022

Infrastructure Development is a Key Priority

132

Government Guarantee For Basic Infrastructure DevelopmentReflects strong commitment to national development planning

Source: Ministry of Finance

No. Central Government Guarantee for Infrastructure Programs

Exposure/

Outstanding

(USD bn)

1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 1.75

2 Clean Water Supply Program 0.01

3 Direct Lending from International Financial Institution to SOEs 1.46

4 Sumatra Toll Road 1.53

5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 6.78

6 Public-Private Partnerships (PPP) 3.35

7 Regional Infrastructure Financing 0.19

8 Public Transportation (Light Rail Transit) 0.07

9 Electricity Infrastructure Fast Track Program (35GW) 0.06

Total 15.20

Contingent Liabilities from Government GuaranteesGovernment Guarantee Program

Credit

Guarantee

PPP Guarantee

Business Viability

Guarantee (BVG)

Power (Electricity) – Full credit guarantee for PT PLN’s

debt payment obligation under FTP 1 10,000MW and

35GW programs*.

Clean Water – Guarantee for 70% of PDAM’s debt

principal payment obligations.

Toll road – Full credit guarantee for PT Hutama Karya’s

debt payment obligations for the development of

Sumatra Toll Roads.

Infrastructure - Full credit guarantee on SOE’s borrowing

from international financial institution & guarantee for

PT SMI’s local infrastructure financing.

Public Transportation (Light Rail Transit) – Full credit

guarantee for PT Kereta Api Indonesia’s debt payment

obligations for the development of LRT Jabodebek.

Power (Electricity) – Guarantee for PT PLN’s obligations

under Power Purchase Agreements with IPPs (off-take

and political risk) under FTP-2 10.000MW and 35GW

programs*

Infrastructure – Guarantee for Government-related

entities obligations (line ministries, local governments,

SOEs, local SOEs) under PPP contracts/agreements

From 2008 to Q3-2019, the Government has issued 84 guarantee documents with total

value of USD35.44 billion, 23 of which (worth USD3.44 billion) have expired.

The Maximum Guarantee Limit for the period 2018 – 2021 is set at 6% of GDP.

The space for guarantee issuance for the period 2018-2021 is approximately IDR 1,200

trillion (cumulative).

As of end of September 2019; currency conversion of IDR 14,147/USD1 (Sept 30, 2019)

Political Risk

Guarantee

Infrastructure – Guarantee against infrastructure risks

for National Strategic Projects (Presidential Decree

No.58/2017) which are not covered by other type of

guarantees

*) MOF provides both credit guarantees and BVGs for 35GW program

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Government Financial Facilities for PPP Projects

Financial Facilities to Attract More Private Participation

Those financial facilities were instrumental in supporting the execution of PPP

projects, indicated by the signing of financial close

of the following PPP projects:

Viability Gap Fund

(VGF)

Project Development

Facility (PDF)

Government Guarantees (directly

by MoF or through IIGF)

Financing from

PT. SMI and PT. IIF

Availability Payment

Schemes

More Funding Schemes are on the Pipelines

Project Financing funded by the private sector through

the granting of concessions for an operating asset

owned by the Government/SOE (based on the policy

of the Government) to the private sector to be

operated & managed.

Project Financing funded by any source of funds

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

management funds (insurance, repatriated funds

from tax amnesty, pension funds, etc.), private equity

investors and infrastructure funds. Supported &

facilitated by National Development Planning

Ministry/Bappenas.

• Asset is owned by public sector

• Operating asset, not greenfield project

• Records positive cash flow for the last several

years

• Predicted revenue

• Asset is owned by private sector

• Greenfield / brownfield / operating projects

Scheme Characteristics

Scheme Characteristics

LCS

(Limited

Concession

Scheme)

PINA

(Non-Government

Budget

Infrastructure

Financing)

Source: Ministry of Finance

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Progress of PPP Infrastructure Projects

No Project NameProject Cost

(IDR tn)Financial Facilities Status

1 Central Java Power Plant 40 Guarantee (MoF & IIGF) FC on June 6th, 2016; Construction 30%; COD Target: May 2020

2 Palapa Ring – West Package 1.28 PDF, IIGF Guarantee & AP FC on August 11th, 2016; COD target: February 2018

3 Palapa Ring – Central Package 1.38 PDF, IIGF Guarantee & AP FC on September 29th, 2016; COD target: March 2018

4 Palapa Ring – East Package 5.13 PDF, IIGF Guarantee & AP FC on March 29th, 2017; COD target: September 2018

5 Umbulan Water 2.1 PDF, VGF & IIGF Guarantee FC on August 30th, 2016; COD target: July 2019

Successful Projects Reaching Financial Close in 2016 and 2017

No Project NameProject Cost

(IDR tn)Financial Facilities Status

1 Batang–Semarang Toll Road 11 IIGF Guarantee PPP & guarantee contracts signed on April 27th, 2016

2 Manado–Bitung Toll Road 5.1 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016

3 Samarinda–Balikpapan Toll Road 9.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016

4 Pandaan–Malang Toll Road 5.9 IIGF Guarantee PPP & guarantee contracts signed on June 8th, 2016

5 Serpong–Balaraja Toll Road 6.0 - PPP contracts signed on June 8th, 2016

6 Jakarta–Cikampek Elevated Toll Road 14.8 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and

February 22nd, 2017

7 Krian–Legundi-Krian Toll Road 9.0 Co guarantee (MoF & IIGF) PPP & guarantee contracts both signed on December 5th, 2016 and

February 22nd, 2017

8 Serang–Panimbang Toll Road 5.3 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017

9 Cileunyi–Sumedang-Dawuan Toll Road 8.2 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017

Signed PPP Projects in 2016 and 2017

Source: Ministry of Finance, as of July 2017

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New Guarantee Schemes for Non-PPP Projects

The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOEDirect Lending from IFIs for the Development of Infrastructure Projects.

Guarantee on SOE Direct Lending from International Financial Institutions (IFIs)

Guarantee for Regional Infrastructure Financing Provision

State finance soundness Fiscal sustainabiliyBest practice of fiscal risk

management

The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing,

with 3 main principles:

The Government had issued Ministry ofFinance Regulation No 174 of 2016 toprovide guarantee to PT SMI on theassignment of regional infrastructurefinancing provision, by loan to localgovernments that is transferred from PIPto PT SMI, and new loan channeled by PTSMI to the local government.

Based on Government RegulationNo. 95/2015 and Ministry of FinanceRegulation No. 232/2015, Minister ofFinance assigns PT SMI (Sarana MultiInfrastruktur) to carry out functions inproviding loan to local government, aspreviously carried out by PIP(Government Investment Center).

The objective is to give stimulus to the

acceleration of local infrastructure

development through the ease of access

to infrastructure financing and to boost

local economic growth, as well as to

provide alternative financing schemes in

order to meet local infrastructure

development needs and to reduce

reliance on state/local budget.

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