#1BHINNEKA TUNGGAL IRA Republic of Indonesia Strengthening the Policy Synergy to Promote Recovery and Maintain Macroeconomic Stability January 2022#2About 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, Financial Services Authority, Ministry of Trade, Ministry of State Owned Enterprises, and Ministry of Energy and Mineral Resources. 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: Rosita Dewi (International Department - Bank Indonesia, Ph.: +6221 2981 8232) Thasya Pauline (Deputy Ministry for Macroeconomic and Finance Coordinator - Coordinating Ministry for Economic Affairs, Ph. +6221 352 1843) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Ph.: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Ph.: +6221 351 0714) E-mail: [email protected] This Presentation Book also can be downloaded from: https://www.bi.go.id/en/iru/presentation/default.aspx 1#3What's New in This Edition Economic Recovery Program and Its Updates ...page 5-19 Fiscal & Financing Policy Update ...page 61-92 0 0 Bank Indonesia Board of Meeting Decision ...page 139-141 Carbon Tax Policy ...page 114-116 Infrastructure Project Development ...page 182-193 2#4Overview 1 Economic Recovery Program and Its Updates 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility Institutional and Governance Effectiveness: 2 Accelerated Reforms Agenda with Institutional Improvement 6 Commitment to Sustainability and Preserving the Environment Economic Factor: 3 Stable Growth Prospects 7 Amid Temporary Moderation External Factor: 4 Improved External Resilience 8 Monetary and Financial Factor: Credible Monetary Policy and Favourable Financial Sector Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision 13#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IRA#6Indonesia's Economic Improvement Trend Continues GDP Growth (%YoY) PMI Markit Indonesia 60 Total Investment (DDI+FDI) Rp Trillion CCI & Retail Sales 10 130 20.0 53.5 55 어 Expansion >50 300 10.0 5 50 110 250 0.0 0 45 200 -10.0 90 -5 40 150 -20.0 100 -10 70 -30.0 35 Contraction <50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 50 30 2019 2020 2021 0 25 Q1 Q3 Q1 Q3 Q1 Q3 Consumer Confidence Index (CCI) Total GDP Household Consumption GFCF Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-2 May-20 Jul-2 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 2019 2020 2021 Retail Sales-g (rhs) Current Account of GDP (%) 8.00 2.00 6.00 1.00 4.00 0.00 2.00 -1.00 0.00 -2.00 -2.00 -3.00 -4.00 -4.00 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2018 2019 2020 2021 Trade Balance (Billion USD) 1 4 7 10 14 7 10 1 4 7 Sources: CEIC, BI, BPS, Bloomberg (as of 27 January 2022) 2019 2020 2021 Balance (Billion USD) Export-g (% YoY)-rhs Import-g (%YoY)-rhs 80.00 60.00 12000 40.00 13000 20.00 0.00 14000 -20.00 15000 -40.00 -60.00 16000 17000 The Indonesian Rupiah and JCI 1/1/20 5/1/20 9/1/20 1/1/21 IDR/USD 5/1/21 9/1/21 1/1/22 JCI-rhs 5000 7000 4000 3000 6500 2000 1000 6000 0 -1000 5500 -2000 -3000 -4000 5000 -5000 -6000 4500 4000 Net Capital flow (Million USD) 1/1/21 2/1/21 3/1/21 4/1/21 5/1/21 6/1/21 7/1/21 8/1/21 9/1/21 10/1/21 11/1/21 12/1/21 1/1/22 Equity Flow (ytd) Bond Flow (ytd) Total 5#7Progress of Vaccination Implementation Vaccination has been carried out since January 2021. As of January 27, 2022, the 1st vaccination dose was 183,6 million (88.19%), and the 2nd dose vaccination was 127,16 million people (61,06%). Vaccination Target | Vaccination Progress TOTAL 208,265,720 Coverage of Covid Vaccination Doses 1 And 2 1st Doses: 87.8% HEALTH WORKER Vaccination 1 Vaccination 2 60 2,041,735 1,965,047 55 1 1,468,764 (139.01%) (133.79%) 50 PUBLIC OFFICERS Vaccination 1 Vaccination 2 Gotong Royong Vaccine: 24,501,094 21,150,115 பா Vaccination 1 = 1,297,282 (8.65%) Vaccination 2 = 1,220,618 (8.14%) 2nd Doses: 60.58% 2 17,327,167 (141.4%) (127.8%) Vaccination 1 Vaccination 2 ELDERLY 15,560,642 10,259,555 3 21,553,118 (72.2%) COMMUNITY Mi & Vaccination 1 (47.60%) Vaccination 2 VULNERABLE 103,297,566 | 72,255,530 141,211,181 (73.15%) (51.17%) Vaccination 1 Vaccination 2 TEENAGER 24,087,890 18,691,566 26,705,490 (90.2%) (69.99%) Total Target 183,677,032 127,164,526 5 S (88.19%) (61.06%) As of 27 January 2022 (1+2+3+4+5) 208,265,720 Source: Coordinating Ministry for Economic Affairs ་་་་་་་་་་ 6#8Covid-19 Handling Strategies Efforts to prevent the entry of COVID-19 variant cases DETECTION Increasing epidemiological vs screening tests. tests Increase traced close . contact ratio SURVEILLANCE Genomic surveillance in areas with the potential to spike cases and tighten entry points: • SGTF, WGS test & quarantine all travelers •Integration of entrance data at several data collection points, including airline, immigration, PCR tests, quarantine, WGS • Traveler quarantine period • • • THERAPETIC Conversion of TT 30-40% from total hospital capacity & supply (including oxygen), medical equipment, & human resources. Deploy backup staff: internship doctor, Koas, final year students. Tightening of hospital admission requirements: saturation <95%, shortness of breath. Supervised by officers or volunteers, so that only moderate, severe, critical cases are in the hospital. Increase utilization centralized isolation. of VACCINATION •Vaccination centers in various places that are easily accessible to the public. •Vaccination card requirements for travelers and in public spaces/facilities. ⚫Acceleration of vaccination in vulnerable groups, including the elderly & people with comorbidities. •Implementation of booster vaccines from early 2022 CHANGES IN BEHAVIOR & HEALTH PROTOCOLS Implementation of Community Activity Restriction Utilization of digital technology in the implementation of Health protocols (3M) and Screening Overseas Regulate the Quarantine flow of Arrival /isolation tourist Door discipline arrivals Optimization of testing efforts with the latest science and technology Delaying the mobilization of Indonesian citizens across countries Early anticipation of the readiness of health facilities Intensify testing Communit ratio and close contact tracing Improve the discipline of health protocols and vaccinations on all Source: Coordinating Ministry for Economic Affairs fronts 7#9Covid-19 Vaccination Plan in 2022 Primary Vaccine Program (198.2 million doses) Primary and Advanced Program Vaccines (378,1 million doses) Government Program Vaccine Booster* (179.9 million doses) 1. Spillover 2021 2. Cohort 12 years 3. 6-11 yrs Notes: *) Booster half dose Direct appointment of the provider business entity 4. Elderly Implementation of Procurement by the Ministry of Health Cooperation with international institutions/agencies Vaccination location: Health Center, Government Hospital Assignment to State- Owned Enterprises (BioFarma) • The third dose (booster) COVID-19 vaccination program begins on January 12, 2022. • The booster vaccine will be given to people over 18 who have received the second dose of the vaccine more than six months ago. There will be at least 21 million people targeted for the booster vaccine program in January 2022. • This program is prioritized for districts/cities with 70% vaccination achievement for dose 1 and 60% for dose 2. • As of January 3, 2022, the government has secured 113 million doses of booster vaccine stock. • The type of vaccine to be used as a booster awaits recommendations from ITAGI (Indonesian Technical Advisory Group on Immunization) and BPOM. Source: Coordinating Ministry for Economic Affairs 5. Adult Vaccine Booster 80#10Community Activity Restriction (PPKM) as a Support for Government Vaccination Program The purpose of PPKM is to suppress positive cases of covid-19 as a precondition for success for handling Covid-19 and for national economic recovery Large Scale Social Restriction (PSBB) - April 2020 PSBB Transition Assessment of the Covid-19 Pandemic Situation Level transmission level response capacity pandemic situation level October 2020 O Community Activities Restriction Level 0 Level 1 Level 2 Level 3 Level 4 Enforcement (PPKM) 11 Jan 8 Feb 2021 Micro-Scale PPKM Situation 9 Feb 2 Jul 2021 without not occur but The Emergency PPKM local 3 Jul 20 Jul 2021 transmis sion preventing transmission a situation where transmission does there are limitations to situations with low community incidence a community transmission situation with limited response capacity and a risk of inadequate health services transmission with insufficient response capacity uncontrolled PPKM Level 1 to 4 21 Jul 2021 - 31 Jan 2022 In line with the implementation of PPKM, government support for the community and small businesses is strengthened through social protection assistance and economic assistance for MSMEs Source: Coordinating Ministry for Economic Affairs 9#11National Economic Recovery Program Will Continue In 2022 To Anticipate The Expansion Of The Impact Of Covid-19 During 2021 (Reached IDR658,6 T or 88,4% of IDR744.77 T) HEALTH Budget IDR.214.96 T Realization IDR.198.5T (78.8%) 2022 Potential Risks of the Increased of COVID-19 Impact in 2022 include: Increased testing, tracing, dan treatment Increased Patient Claims as the number of cases increases SOCIAL PROTECTION Budget IDR.186.64 T Realization IDR.171.0T (91,6%) Expansion of community protection SUPPORT FOR MSME AND CORPORTATION Budget IDR.162.40 T Realization IDR.116.2T (71,5%) TOTAL: PRIORITY PROGRAM Budget IDR.117.94 T Realization IDR.105.4T (89,3%) BUSINESS INCENTIVE Budget IDR.62.83 T Realization IDR. 67.7T (107,7%) The allocation of the Program has the potential to increase in line with the development of handling COVID-19 HEALTH: IDR455,6 T IDR122.5 T SOCIAL PROTECTION: IDR 154.8 T STRENGTHENING ECONOMIC RECOVERY: IDR 178.3T 10#12• • Breakthroughs to Strengthen Support for Corporate Loans and the Hotel, Restaurant, and Cafe Sector by 2021 The Government provides support for Corporate Business People in the form of Government Guarantees to protect, maintain, and increase the economic capacity of Business Actors from the real sector and the financial industry in carrying out their business. The government also provides incentives for businesses affected by the COVID-19 pandemic, such as the hotel, restaurant and cafe sector Relaxation on the Terms of Corporate Credit Guarantee Program PMK 32/2021 Affirmation of relaxation of restructuring and new loans from Financial Services Authority (OJK) Change of Guarantee Process Simplify the terms and stages of Credit Guarantee Hotel, Restaurant and Café Sector Incentives Fund Placement and Guarantee Schemes for Hospitality SMEs credit schemes and guarantees for restaurants and cafes Source: Coordinating Ministry for Economic Affairs $1 11#13Policy Synergy in the Property and Automotive Sector The government, together with BI and OJK, have provided a stimulus to the property and automotive sectors to encourage public consumption and at the same time improve the performance of the business sector and will be continued in 2022 (regulations under discussion). 2 Government B Bank Indonesia QJK OJK Automotive Sector Property Sector Giving VAT Incentives on Luxury Goods Borne by the Government for Motor Vehicles through PMK No. 120 of 2021 which amend PMK No 31 of 2021 |⚫ Car which produced with local purchases > 60%. I⚫ The PPnBM Discount stimulus is given in stages: ➤ For 4x2 Type (<=1500 cc): 100% during Sep- Dec 2021 ➤ For 4x2 Type (>1500 cc, <= 2500 cc): 50% during Sep-Dec 2021 ➤ For 4x4 Type (>1500 cc, <=2500 cc): 25% during Sep-Dec 2021. Giving Government-Borne VAT Incentives Borne by the Government for the Submission of Landed Houses and Apartment Residential Units through PMK 103 of 2021 which amend PMK No. 21 of 2021 Relaxation of down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles, while I maintaining prudential principles I and risk management as stipulated I by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Relaxation of Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property, while maintaining prudential principles and risk management, as stipulated by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Letter of the Chief Executive of Banking Supervision and Non-Bank Financial Institutions : • • Relaxation of Risk Weighting Policy for Credit Risk Weighted Assets Motor Vehicle Financing Exemption from the Maximum Credit Lending Limit to Battery- Based Electric Motor Vehicle Manufacturers Relaxation of Risk Weighted Assets for Credit / Mortgage Funding Depends on the LTV / FTV Ratio through the Letter of the Chief Executive of Banking and IKNB Supervision. Source: Coordinating Ministry for Economic Affairs 12#14The Pre-Employment Card Program Successfully Helped Indonesian Workers During the Pandemic Period The Pre-employment Card is a program from the government for job seekers to workers affected by Covid-19 to improve skills through training as well as get incentives. Registration 79 M Registrant in Pre-Employment Card Websites From all Cities and Regencies in Indonesia 34 Province 514 Cities and Regencies Recipients 2020 5,5 M Pre-Employment Card Recipient (Batch 1-11)* 5,3 M Recipients Has received an incentive 13.4 T Incentives Have Been Disbursed Recipients 2021 60.6 49.4 50.7 46.148.8 53.951.2 39.4 5,7 M 5,9 M Pre-Employment Card Recipient (Batch 12-19) 5,84 M Recipients have completed training Recipients have received incentives 14,12 T Total incentives have been distributed unemployment work entrepreneur employee ■before joining the pre-employment card (January 2021) I after joining the pre-employment card Graduation Stages for Pre-Employment Card Program Recipients to the People's Business Credit Program (KUR) Through business financing support, people who have graduated from the Pre-Employment Card Program and received training can start businesses. The integration of this program is expected to encourage National Economic Recovery through strengthening the SME actors. Commercial Small Credit Finance Micro (KUR Credit Kecil) Super- (KUR) Pre- Micro Employment Credit Card Program Source: Coordinating Ministry for Economic Affairs, as of January 10, 2021 13#15National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 • • சச AA INDUSTRIAL CONDITIONS Require to deepen Industrial Structure Necessary to be independent on raw materials and production Unsupportive regulations and incentives The P3DN Program is not yet optimal 7 SECTORS FOCUS Food and Beverage Textiles and Clothing Import Reduction STRATEGIC STEPS through Import Substitution in Industries with Large Import Value Encouraging the Deepening of Industrial Structure Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Source: Ministry of Industry Automotive Chemical Electronic Utilisation 60% (2020) Utilisation Utilisation 75% 85% (2021) (2022) Pharmacy Medical Devices • Absorption of workers affected by layoffs Increased domestic spending capacity • Increase in the export market 14#16Fiscal Incentives Policy to Boost the Economy The government facilitates fiscal incentives to create a conducive investment climate, especially for industry players. Through increased investment, it is hoped that it can strengthen the domestic industrial structure TAX HOLIDAY TAX ALLOWANCE INVESTMENT ALLOWANCE SUPER DEDUCTION TAX • . • The criteria are new investment, taxpayers including pioneer industries, and income received from the main business activities carried out. Pioneer industries are defined as industries that have broad linkages, provide added value and high externalities, introduce new technologies, and have strategic value for the national economy. There are 18 industrial sectors that fall within the scope of pioneer industries Updated: 31 Dec 2020 82 Taxpayers; 14 countries investors Investment plan of IDR 1,356 trillion Realization of IDR 204 Trillion Business locations in 24 provinces Workforce of 112 thousand Source: Coordinating Ministry for Economic Affairs • To encourage investment labor-intensive in a industries, • To increase direct investment activities for certain business fields and/or in certain areas. • The facilities include reduction in net income of 30% of the total investment for six years, accelerated depreciation and amortization, imposition of income tax on dividends paid to foreign tax subjects of 10% or lower based on a tax treaty, and compensation for losses of up • to ten years. The criteria are having a high investment value or for export, a large absorption of labor; or have a high local content. support programs for job creation and absorption Indonesian workers. of • Incentives in the form of facilities to reduce net income by up to 60% for labor-intensive sectors • There are 45 labor- intensive industrial sectors and employ an average of 300 workers in 1 tax year. . Super Deduction Vocational • Engaging industry in vocational activities to provide knowledge and encourage the transfer of knowledge • A maximum reduction of 200% gross income from costs in the context of providing work practice, apprenticeship, and / or learning activities R & D Super Deduction • Increase the role of industry in fostering innovation and the use of the latest technology in the production process Maximum gross income deduction of 300% over R&D costs carried out in Indonesia 15#17Government Support for MSMEs During the Covid-19 Pandemic In the form of relaxation of asset quality assessments, postponement of principal & interest subsidies, low-interest working capital loans guaranteed by Askrindo and Jamkrindo, tax incentives for MSMEs borne by the government, and Productive Presidential Assistance for Micro Enterprises MSMES CREDIT RESTRUCTURING WORKING CAPITAL CREDIT 1 ASSET QUALITY ASSESSMENT 2 POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES 3 According to POJK KUR Super Mikro: Loan up to IDR 10 million No. 11/POJK.03/2020 & • 14/POJK.05/2020 Interest subsidy will be 19% consist of additional interest subsidy 6% and regular interest subsidy 13%, debtors pays 0% interest from Aug - Dec 2020. 4 KUR MKM (SMEs): Asset Quality LOW INTEREST IDR30 Trillion Government Placement of Funds at Bank Himbara Arrangement: ≤ • 10 Loans IDR billion can be based only on the accuracy of principal interest payments Restructurisation: The credit quality for affected debtors is determined to be current restructuring since The restructuring is carried out without a ceiling limit type of financing Loan up to IDR 10 million up to IDR 500 million • • Postponement of installments and 6% additional interest subsidy for the period from Apr-Dec 2020 to 0%. KUR MSME Credit, non-KUR: Loan > IDR 500 million up to IDR 10 billion Postponement of installments and interest subsidies 3% for the first 3 months and 2% for the next 3 months 5 UMi, Mekaar, Pegadaian (Pawnshop) Postponement of principal installments and interest subsidies for 6 months from Apr-Sep 2020 Fintech Loan, Co-op, Farmers, LPDB, LPMUKP, UMKM PEMDA Relaxation is given a 6% interest subsidy for 6 months Based on Coordination Meeting held by Financing Policy Committee for MSME on December 28, 2020, KUR implementation in 2021 are as follows: Additional interest subsidy 3% for 6 months, debtors pays 3% interest. Increase the ceiling of KUR in 2021 to IDR 253 trillion. GUARANTEE Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT Income Tax for MSMEs is borne by Government MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). MICRO BUSINESS PRODUCTIVE 6 PRESIDENT ASSISTANCE Direct assistance to 13 million Micro Enterprises and 1 million street vendors in the amount of IDR 1.2 million per recipient Source: Coordinating Ministry for Economic Affairs 16#18◉ People's Business Credit (KUR) program to increase access to finance for entrepreneurs and SMEs 1 Increase the ceiling of KUR in 2021 to IDR 373,1 trillion The KUR ceiling for 2022 was initially set at IDR 250 trillion. The Coordination Meeting of the Financing Policy Committee for MSMEs on December 29, 2021 decided to increase the KUR ceiling in 2022 from Rp250 trillion to Rp373.17 trillion and will be evaluated in the first semester of 2022. Ceiling KUR 2022 Total Ceiling has Distributed: Rp373.14 trillion KUR SuMi KUR Micro KUR KUR Small TKI Rp21.19 trillion (5.7%) Rp239.21 trillion (64.1%) Rp112.35 trillion (30.1%) Rp0.39 trillion (0.1%) • 2 Relaxation of the KUR Policy During the Covid-19 Small business KUR without limitation on accumulation of KUR ceiling up to December 31, 2022 Delaying the target of the production sector untill. December 31, 2022 or in accordance with the consideration of the Financing Policy Committee for MSMEs. Provision of further incentives in the form of extension of KUR restructuring Provision of administrative relaxation for prospective KUR debtors during the Covid-19 pandemic based on the objective assessment of KUR Distributors Additional 3% KUR interest subsidy for 6 months (until 30 June 2022) 3 Changes in KUR Policy To Expand and Increase KUR Distribution ☐ Changes in the ceiling for Micro Business KUR (without additional collateral) which was previously above Rp. 10 million up to Rp. IDR 50 million to above IDR 10 million untill IDR 100 million. Change of Special/Cluster KUR without limitation on accumulation of KUR ceiling for the production sector (non-trade) and interest subsidies according to the type of KUR. Increased PMI KUR ceiling from untill IDR 25 million to untill IDR 100 million, withdrawal (KUR disbursement) according to PMI needs and simplification of KUR distribution. The reduction in interest subsidies/margin subsidies for KUR Super Micro KUR decreased by 1% to 12%; KUR Micro fell 0.5% to 10%; Small KUR interest subsidy remains at 5.5%; and interest subsidies for PMI Placement KUR decreased 0.5% to 13.5%. Source: Coordinating Ministry for Economic Affairs 17#19Ease, Protection and Empowerment of Cooperatives and MSMEs in Law No. 11 Of 2020 Concerning Job Creation and Government Regulation No. 7 Of 2021 11 Training and Assistance in the Utilization of Bookkeeping/ Financial Recording Systems/ Applications 12 Incubation Management 01 Cooperatives (Establishment Cooperatives, of Cooperative Businesses, Sharia Cooperatives) Changes in MSMEs Criteria, MSMEs 02 Financing, MSMEs Partnerships in Law no. 20/2008 on MSMEs Ease of Business Licensing 06 for Micro and Small Enterprises Ease of Financing 07 Facilitation and Fiscal Incentives for Micro and Small Enterprises 03 MSMEs Single Database 08 Special Allocation Fund for Micro, Small, Medium 13 Enterprises Integrated Management of Micro Legal Assistance and 04 and Small Enterprises 09 Assistance and Services for Small Micro and Small Enterprises Micro Enterprises 40% Allocation of Micro and 05 Partnership with Medium and Large 10 Small Enterprises Products/ Enterprises Services in Government Procurement of Goods/ Services 30% Allocation for Provision of Promotional Places, Business Places, and/or Micro and Small Enterprises Development at Terminals, Airports, Ports, Railway Stations, Toll Road Rest Areas and Other Public Infrastructure Source: Coordinating Ministry for Economic Affairs 18#20• • Integration of Various Types of Social Assistance and Financing for Super Micro and MSMEs is Continually Encouraged The Government has began to empower super micro, micro and small businesses that are un-bankable through Productive Presidential Assistance & Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR. Based on KUR Super Micro scheme, people could have loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and medium enterprises (MSME) is given an additional interest subsidy of 6% until 31 Dec 2020. For 2021, MSME is given an additional interest subsidy of 3% for 6 months, so MSME pays 3% interest. A Commercial Financing Patterns Social Assistance F Unbanked B Fully commercial loan Subsidized loan Special scheme of commercial loan Rolling soft loan C CSR D E Productive Presidential Assistance & Pre- employment Card Partnership and Community Development Program (PKBL) & Private CSR Bankable MSMEs Financing Mekaar UMi BWM LPDB* KUR Super Micro People's Business Credit Commercial (KUR) Regular Facilities Social grants Private PKBL & CSR Funds Interest Subsidy from the Government Government Guarantee Market Mechanism Source: Coordinating Ministry for Economic Affairs Business Ability 19#21Section 2 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement BHINNEKA TUNGGAL IRA#22Rank 20 30 40 50 60 70 80 90 2007-2008 Improving Global Perception ...with recent improvements on governance effectiveness Global Competitiveness Index¹ 2008-2009 2009-2010 Higher rank is better Corruption Perception Index³ 2010-2011 2011-2012 2012-2013 2013-2014 India Indonesia Philippines Bulgaria 2014-2015 2015-2016 2016-2017 2017-2018 2018* 36 41 45 50 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long- term growth. 2019* Worldwide Governance Indicators² Colombia 60 60 53 51 Higher rank is better 42 38 80 28 46 44 42 40 38 Indonesia India Philippines Bulgaria Colombia 2010 2011 2012 2013 2014 44 Voice and Accountability Government Effectiveness Rule of Law 40 39 37 2015 2016 2017 2018 2019 Political Stability/Absence of Violence Regulatory Quality Control of Corruption we 36 34 34 =4 32 Higher score is better 1. Source: World Economic Forum - The Global Competitiveness Report 2019; 2. Source: World Bank - The Worldwide Governance Indicators 2020 Update; 3. Source: Transparency International - Corruption Perceptions Index 2020 Report 30 2012 2013 2014 2015 2016 2017 2018 2019 2020 21 21#23A Well Maintained of Indonesia's Sovereign Credit Rating in The Midst of Economic Recovery BBB+ BBB BBB- Indmenteco BB+ Below Investment Grade BB BB- B+ R& JCRA S&P Fitch Moody's 2008 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2030 2021 Fitch Ratings BBB / Stable November 2021, Rating Affirmed at BBB/Stable "Indonesia's rating balances a favourable medium-term growth outlook and a still low, but rising, government debt/GDP ratio against a high dependence on external financing, low government revenue and lagging structural features such as governance indicators and GDP per capita compared with 'BBB' category peers. S&P Global Ratings BBB / Negative April 2021, Rating Affirmed at BBB/Negative "The affirmation reflects Indonesia's solid economic growth prospects and historically judicious policy dynamics. The negative outlook reflects our expectation that Indonesia will face sustained fiscal and external pressures related to the COVID-19 pandemic over the next 12-24 months". MOODY'S Baa2/ Stable 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." R&I April 2021, Rating Affirmed at BBB+/Stable JCR BBB+ / Stable "In R&l view, Indonesia's economy that plunged in 2020 will likely return to a pre- coronavirus growth level in one to two years. The government's structural reform efforts are also expected to boost growth potential in the medium to long term. Despite the pressure on the fiscal side caused by policy responses, the government debt ratio remains relatively low. The economic resilience to external shocks is maintained thanks to flexible policy responses by the government and the central bank and ample foreign reserves". December 2020, Rating Affirmed at BBB+/Stable BBB+ / Stable "The ratings mainly reflect the country's solid domestic demand-led economic growth potential, restrained public debt, and resilience to external shocks supported by flexible exchange rate and monetary policies and accumulation of foreign exchange reserves. Additionally, the government has been maintaining the momentum of economic structural reforms even amid the pandemic, as evidenced by the enactment of the "Omnibus Law on Job Creation". 22#24Structural Reform Towards "Indonesia Maju 2045" and Out of the Middle-Income Trap GDP 2019 RANKING #16 *World Bank Making Indonesia 4.0 Job Creation Law RANKING TOP 10 INDONESIA MAJU 2045 WORLD GDP 2035 2036 EXIT MIDDLE 2030 INCOME TRAP* O 2018 2019 2025 BONUS DEMOGRAPHY 2020 2021-2022 ELECTION 2024 Income per capita : US$ 3.911,7 Entering the Political Year REFORM NEW LEADER "New Normal" 2 Years 3 Years 5 Years Income per capita: STIMULUS RECOVERY 2022 US$ 4.174,5 G Income per capita : US$ 6,305* Income per capita : US$ 8,804* PRE COVID Source: Coordinating Ministry for Economic Affairs Income per capita : US$ 12,233* POST *Based on the 2020-2024 National Medium Term Development Plan 23 23#25Medium-Term National Development Plan (RPJMN) 2020-2024 President's Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation". President's Missions Top 5 Presidential Priorities 7 RPJMN Development Agenda 1 Improving the Quality of the Indonesian Labour Force 1 HR Development Achieving Productive, Independent 2 and Competitive Economic Structure 3 Attaining Equitable and Prosperous 2 National Development Infrastructure Development Achieving Sustainable 4 Environmental Climate Developing Cultural Progress 3 5 Reflecting the Nation's Personality Regulation Simplification Developing a Dignified and Trustworthy 6 Legal System Free from Corruption 4 Protection of All Nations and 7 Provision of Security to All Citizens 00 Attaining Good, Effective, and Reliable Governance Economic 5 Achieving Synergy of Governmental 9 Framework with the Regional Government Simplification of Bureaucracy Transformation 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 Source: National Development Planning Agency 24 24#26Indonesia G20 Presidency 2022: a Snapshot Co-Sherpa Diverse Priorities Agenda Representing the national interest and envisioned to be Indonesian legacy at the G20 forum <<<< | | || || | || TT 878 G20 Indonesia 14 Working Groups, 1 Task Force, 1 Initiative Involving 17 Ministries/Institution from SHERPA TRACK and FINANCE TRACK 10 Engagement Groups Represented by Non-Governmental Organization including Supreme Auditor Institution and House of Representative as Chair for SA120 dan P20 5 Cross-cutting Issues (i) Human Capital; (ii) Digitalization; (iii) Multilateralism; (iv) Global Partnership, and; (v) Youth and Women Empowerment Priority Pillars Productivity, Resilience & Stability, Sustainable & Inclusive Growth त विदी A More than 150 locations Theme "Recover Together, Recover Stronger" Economic benefits of the Indonesia's G20 Presidency in 2022 (150 Meetings/Side-Events for 1 year)* Domestic consumption is estimated to increase by Rp1.7 T and Domestic GDP to increase by Rp.7.43 T a. b. The holding of meetings in various cities increases the role of MSMEs and the absorption of 33,000 workers in various sectors. Source: Coordinating Ministry for Economic Affairs C. In aggregate, the economic benefits are 1.5 - 2 times greater than the "IMF-WBF Annual Meetings in Bali 2018" 25#27The Framework of Job Creation Law AL New Business Creation GREENFIELD INVESTMENT www COMPANY (111> Supply Brownfield PRODUCTION HOUSEHOLD Demand Business Development JOB CREATION LAW New Job Creation Welfare Creation CONSUMPTION Increased Purchasing Increased Income Power Source: Coordinating Ministry for Economic Affairs 26#28The Job Creation Law Encourages Employment and Facilitates New Business Opening While Recovering the Post-Pandemic Economy The Job Creation Law is an effort to reform regulations that can make it easier to do business to increase investment and productivity, as well as an effort to get Indonesia out of the middle-income trap Through the Omnibus Law method, 79 laws were revised and simplified The Job Creation Act (Act Number 11 of 2020 on Job Creation) 186 Articles dan 15 Chapters 51 Implementing Regulations The government continues to operate The Job Creation Law in all sectors, both in the central and regions, which include: 1. INA Operations 2. Special Economic Zone (SEZ) Clasters in the Job Creation Law 1. Improving the Investment Ecosystem and Business Activities 2. Employment 3. Ease, Protection, and Empowerment of Cooperatives and SMEs 4. Ease of Business 5. Research and Innovation Support 3. MSME and Cooperative Protection and Empowerment 4. Ease of doing business in the tax sector 6. Land Procurement 7. Economic Zone 8. Central Government Investment and Acceleration of National Strategic Projects 9. Implementation of Government Administration 10. Imposition of Sanctions 5. Implementation of Online Single Submission 6. Employment Source: Coordinating Ministry for Economic Affairs 27 27#29The Government Will Immediately Follow Up The Constitutional Court's Decision On The Job Creation Law COMPREHENSIVE EXPLANATION TO THE PUBLIC, MARKETS, ASSOCIATIONS, AND INVESTORS To affirm that the Job Creation Law and its implementing regulations are still in effect and no material on the Law has been annulled by the Constitutional Court. Thus, the implementation of the Job Creation Law which concerns, among others, Business Licensing and OSS, Employment including provincial and district/city minimum wages, facilities for MSMEs still applies. AMENDMENT OF LAW 12/2011: a. To add the methods and techniques for preparing Law through omnibus approach to fulfill positive legalistic aspects. b. The amendment will be included in the 2022 Priority Prolegnas. IMPLEMENTING REGULATIONS OF THE JOB CREATION LAW: a. b. C. Governmental dan Presidential Regulations, which are issued after the Constitutional Court's ruling, are treated as operational and will utilize other legal bases. For example, Presidential Regulation on the Commodity Balance (Neraca Komoditas) will be based on Trade Law. The Ministerial/Head of Institution Regulations dan Regional/Head of Regional Regulations still need to be completed. The implementation of Risk-Based Business Licensing and Online Single Submission system continues as Source: Coordinating Ministry for Economic Affairs FOLLOW UP PLAN a. REVISION OF THE LAW ON JOB CREATION: a.Will refer to the amendments of Law 12/2011 (adjustment of the methods and techniques of Law preparation) b. To ensure sustainability and legal certainty, the revision of the Law on Job Creation must be completed immediately before the G-20 Summit C. The completion of the Law on Job Creation revision before the G-20 Summit will give a positive impression of Indonesia's consistency in structural transformation. 28 28#30Positive Investment List: Improving the Investment Ecosystem in Indonesia Changes in the licensing process and expansion of business fields for investment will be a game changer in accelerating investment and opening new jobs Changes in the Regulation of the Investment Business Field Presidential Regulation No 44 of 2016 "Indonesia Negative Investment List" List of Business Fields Closed to Investment 20 business activities Business Activities Allocated for or Requiring Partnership with Cooperatives and MSMEs 145 business activities Business Activities that are Open with Certain Requirements 350 business activities Presidential Regulation No. 49 of 2021 (PR 49/2021), which amends PR 10/2021 "Investment Business Field" Priority Business Activities 246 business activities Business Activities Allocated for or Requiring Partnership with Cooperatives and MSMEs 182 business activities Business Activities that are Open with Certain Requirements Source: Coordinating Ministry for Economic Affairs 37 business activities In principle, all business fields are open to investment, except for business fields that are declared closed for investment or activities that can only be carried out by the Central Government. • Investment value for FDI > IDR 10 billion. However, to encourage technology-based startups in SEZs, FDI investment value can be <= IDR 10 billion Priority Business Activities with the following criteria: National strategic project/program Capital intensive Labour intensive High technology Fiscal Incentives 1. Tax Incentives: • Tax Allowances • Tax Holidays • Investment Allowances 2. Customs incentives in the form of import duty exemption for import of machinery and goods for industrial development and expansion Pioneer industry Export oriented Oriented in research, development, and innovation activities Non-Fiscal Facilities 1. Ease of obtaining business licenses 2. Provision of supporting infrastructure 3. Guarantees on availability of energy and materials 4. Immigration 5. Manpower 6. Other non-fiscal supports 29 29#31Implementing Regulation on Risk-Based Licensing A new paradigm in accelerating the licensing process to improve Indonesia's investment competitiveness Ease of Doing Business Ex-ante Licensing (satisfying all requirements in advance) is effectively. replaced by ex-post licensing (the requirements are checked afterward), which will be particularly advantageous for low- and medium-risk businesses. Risk-based Business License Risk Based Business Licensing aiming to simplify the procedure to obtain a business license based on risk analysis and determination of the scale of a business (whether it is a small or a big business) There are 16 sectors in which the Gov Regulation No 5/2021 covers licensing: Low Risk Medium Risk 9. Transport; 1. Marine & fisheries; 10. Health, medicine and food; High Risk Business Identification 2. Agriculture; 11. Education and culture; 3. The environment & forestry; 4. Energy & mineral resources; 5. Nuclear energy; 6. Industry; 7. Trading; 8. Public works and housing; 12. Tourism; 13. Religion; 14. Post, telecommunications, broadcasting, electronic systems and transactions; Only required to obtain a Business Identification Business Identification Number + Standard Number + License + Standard Certificate issued by either the 15. Defense & safety; 16. Employment. KEMENTERIAN INVESTASI/ BKPM Source: Coordinating Ministry for Economic Affairs central or regional government Online Single Submission (OSS) – Risk Based Approach (RBA) will be implemented starting August 9, 2021 in all regions of Indonesia Number Certificate 30 30#32Indonesia Investment Authority (INA) as an Alternative Source of Economic Development Financing ÎNA INDONESIA INVESTMENT AUTHORITY • PP Number 73 of 2020 concerning Initial Capital for indonesia Investment Authority • Legal basis PP Number 74 of 2020 concerning Indonesia Investment Authority Development • PP Number 49 of 2021 concerning Tax Treatment of Transactions Involving Indonesia Investment Authority and/or Entities Owned The Supervisory Board has been formed based on Presidential Decree No. 6/P of 2021 • The Board of Directors has been formed based on the Decree of the INA Council Number 1 of 2021 • . An initial capital of IDR 15 T has been allocated in 2020 and an additional capital of IDR 15 T in 2021 so that the total capital is IDR 30 T There have been discussions with more than 50 companies to become strategic partners, and several countries have expressed a desire to partner with INA Main Sectors of Investment Toll Road Seaports Airport Digital Infrastructure Health Services Plantation Industrial Area Traditional Energy Investment Cooperation Development • MoU for Toll Road Project for 35 sections on 20 May 2021 The signing of the INA - DP World Cooperation on October 31, 2021 The signing of the INA - ADG Investment Framework Agreement on November 1, 2021 Source: Coordinating Ministry for Economic Affairs Renewable Energy 31#3351 Regulations for Job Creation Law (Substance Grouping) Spatial 1. Government Regulation No. 21 of 2021 concerning the Implementation of Spatial Planning 2. Government Regulation No. 43 of 2021 concerning Settlement of Inconsistencies in Spatial Planning, Forest Areas, Permits, and / or Land Rights 3. Government Regulation No. 45 of 2021 concerning the Implementation of Geospatial Information 4. Presidential Regulation No. 11 of 2021 concerning Cooperation between the Central Government and State-Owned Enterprises in Providing Basic Geospatial Information Land and Land Rights 1. Government Regulation No. 18 of 2021 concerning Management Rights, Land Rights, Apartment Units and Land Registration 2. Government Regulation No. 19 of 2021 concerning Implementation of Land Acquisition for Development for Public Interest 3. Government Regulation No. 20 of 2021 concerning Control of Neglected Areas and Lands 4. Government Regulation No. 23 of 2021 concerning Forestry Implementation 5. Government Regulation No. 24 of 2021 concerning Procedures for Imposing Administrative Sanctions and Procedures for Non-Tax State Revenues Derived from Administrative Fines in the Forestry Sector Environment 1. Government Regulation No. 22 Year 2021 concerning Implementation of Environmental Protection and Management Construction and Housing to 1. Government Regulation No. 12 of 2021 concerning Amendments No. Government Regulation 14 of 2016 concerning Implementation of Housing and Settlement Areas 2. Government Regulation No. 13 of 2021 concerning the Implementation of Flats to 3. Government Regulation No. 14 of 2021 concerning Amendments Government Regulation No. 22 of 2020 concerning Implementation Regulations of Law No. 2 of 2017 concerning Construction Services concerning 4. Government Regulation No. 15 of 2021 Implementation Regulations of Law No. 6 of 2017 concerning Architects 5. Government Regulation No. 16 of 2021 concerning Implementation Regulations of Law No. 28 of 2002 concerning Buildings 6. Presidential Regulation No. 9 of 2021 concerning the Agency for the Acceleration of Housing Management Cooperatives and SMEs 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Source: Coordinating Ministry for Economic Affairs 32#3451 Regulations for Job Creation Law (Substance Grouping) Investment 1. Government Regulation No. 42 of 2021 concerning the Ease of National Strategic Projects 2. Government Regulation No. 44 of 2021 concerning Implementation of the Prohibition of Monopolistic Practices and Unfair Business Competition 3. Government Regulation No. 48 of 2021 concerning Third Amendment to Government Regulation No. 31 of 2013 concerning Implementation Regulations of Law No. 6 of 2011 concerning Immigration 4. Presidential Regulation No. 10 of 2021 concerning the Investment Business Field 5. Government Regulation No. 73 of 2020 concerning Investment Management Institutions2. 6. Government Regulation No. 74 of 2020 concerning Authorized Capital for Management Institutions Investation Fiscal 1. Government Regulation No. 9 of 2021 concerning Tax Treatment to Support Ease of Doing Business 2. Government Regulation No. 10 of 2021 concerning Regional Taxes and Regional Levies in the Framework of Supporting Ease of Doing Business and Regional Services 3. Government Regulation No. 49 of 2021 concerning Taxation Treatment of Transactions Involving Investment Management Institutions and / or Entities They Own Employment 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Economic Zone 1. Government Regulation No. 40 of 2021 concerning the Implementation of Special Economic Zones 2. Government Regulation No. 41 of 2021 concerning the Implementation of Free Trade Zones and Free Ports Government Goods / Services 1. Presidential Regulation No. 12 of 2021 concerning Amendments to Presidential Regulation No. 16 of 2018 concerning Government Procurement of Goods / Services Source: Coordinating Ministry for Economic Affairs 33 33#3551 Regulations for Job Creation Law (Substance Grouping) Licensing and Sector Business Activities 1. Government Regulation No. 5 of 2021 concerning Implementation of Risk-Based Business Licensing 2. Government Regulation No. 6 of 2021 concerning the Implementation of Business Licensing in Regions 3. Government Regulation No. 25 of 2021 concerning the Implementation of the Sector of Energy and Mineral Resources 4. Government Regulation No. 26 of 2021 concerning the Implementation of the Agricultural Sector 5. Government Regulation No. 27 of 2021 concerning the Implementation of the Marine and Fisheries Sector 6. Government Regulation No. 28 of 2021 concerning the Implementation of the Industrial Sector 7. Government Regulation No. 29 of 2021 concerning the Implementation of the Trade Sector 8. Government Regulation No. 30 of 2021 concerning Implementation of the Road Traffic and Transportation Sector 9. Government Regulation No. 31 of 2021 concerning the Implementation of the Shipping Sector 10. Government Regulation No. 32 of 2021 concerning the Implementation of the Aviation Sector 11. Government Regulation No. 33 of 2021 concerning the Implementation of the Railway Sector 12. Government Regulation No. 38 of 2021 concerning Accompanying Accounts for Umrah Travel Expenses 13. Government Regulation No. 39 Year 2021 concerning Implementation of the Halal Product Guarantee Sector 14. Government Regulation No. 46 of 2021 concerning Post, Telecommunication and Broadcasting 15. Government Regulation No. 47 of 2021 concerning the Implementation of Hospitalization Source: Coordinating Ministry for Economic Affairs 34 ==#36Improving National Logistics System Resiliency: "Key Priorities In Encouraging The Investment The government established an integrated logistics system through The National Logistic System Development Policy (SISLOGNAS). This system aims to facilitate the flow of goods to fulfill the community's basic needs and increase the competitiveness of national products. LOGISTICS PROGRAM FOR 2022-2024 1 Commodity-based improvement framework 1. Specify a specific commodity. 2. 3. Identify demand patterns, supply patterns and logistics costs. Set logistics efficiency targets for these commodities, for example: a. Lead time for domestic goods delivery; Increasing national logistics efficiency, focusing on food and health products This focus aims to ensure the availability and reliability of logistics services to support the smooth distribution of goods at the district and city levels. Increasing efficiency and effectiveness of export/import flows of national leading products and imports of priority industrial raw materials. This focus aims to improve the smooth flow of exports and imports, both goods and documents, to increase Indonesian products' competitiveness in the global market. Source: Coordinating Ministry for Economic Affairs 2 3 b. Lead time at the port for import-export goods. Strengthen Key-Enabler 1. Mapping and collaborating stakeholders and off-takers to implement the action plans. 2. Establish a responsible organization to ensure the implementation of action plans to support the achievement of logistics efficiency targets. Organizing action plans based on 6 key drivers Preparing action plans based on the six key drivers to achieve efficiency in national logistics and the effectiveness of export/import flows. 6. Regulations, Rules and Legislation 5. Human Resource Managemen 4. ICT 3. Logistics Service Provider 2. Transportation Infrastructure Competitiveness and Social welfare 1. Main Commodity Sources: RPJMN 2020-2024; Presidential Regulation No.26/2012 Concerning Blueprint of National Logistics System Development Key Drivers: Logistic Action Plan Transportation Infrastructure → There are +90 projects of infrastructure development spread across Indonesia, such as toll roads, ports, airports and railways, to support the improvement of the logistics process Logistics Service Provider → Through Government 5/2021, of the total 81 standard classifications of business field in overall logistics sectors, 72 (around 89%) required NO LICENSE but only identification business number and/or standard certificate. Furthermore, through Presidential Regulation 10/2021, there are relaxations toward foreign investment requirements. In the logistics sectors, the relaxations take form in the allowability of foreign investment equity to fully own a business. ICT NLE is a system to provide one-stop services for the transmission of data, trade logistics documents, and secure and reliable information to serve G2G, G2B, and B2B transactions for domestic and international trade Human Resource Management → Some programs include (a) The establishment of the National Occupational Map for Logistics and Supply Chain (b) Legalization of the Indonesian National Occupation Competency Standards#37& 00 Investment Facilitation Services During COVID-19 Pandemic 1 2 3 4 Companies Operation Support Optimizing facilitation for companies that accelerate the development and operation of business activities through the issuance of letters of support to companies while still observing the COVID-19 protocol Visa Recommendations for Company Leaders Providing Visa recommendations for foreign companies' leader visit to related to their industry exploration /relocation and company operations. Including to obtain an entry permit visit visa during large scale social restriction (PSBB). Visa recommendations for foreign skilled workers Providing Visa recommendations for foreign skilled workers who will enter the country related to their investment realization / implementation Managing Existing Investment Realization Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation 51 Optimization of Business Licensing Services BKPM continues to provide business licensing services amid the COVID-19 Pandemic. The average business license issued during the pandemic both online and offline is 4000- 5000 permits per day. Source: Investment Coordinating Board (BKPM) 36#38Enhancing Business License Service Standard Presidential Regulation to Accelerate Ease of Doing Business implemented since 2014 Main Policy Policy Goals Improve efficient, streamlined, & integrated business license service standards 2 A B Provide business licensing process assurance in terms of the costs and lead times Accelerate the business licensing process 3 M Source: Coordinating Ministry for Economic Affairs 1st Phase 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 Overcome the barriers to doing business in Indonesia 4 6 5 Increase coordination & synergy between central & regional government Implement integrated licensing process (single submission) 2nd Phase Business license regulatory reforms Implementation of the Single Submission system Note: 1st and 2nd Phase are implemented in parallel 37 32#39Improving Investment Climate ...Bonded Logistic Center launched in 2016 to Improve Indonesia's Competitiveness Bonded Logistic Center (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the implementation of the 1st Economic Policy Package, launched on March 2016 PLB facility aims to to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and To date, 52 Bonded Logistic Center has been launched to support various industries. Small and medium industry textile (chemical Food & beverages industry Oil and gas, and mining industry Personal care/ home care industry Synthetic Auto- motive industry medium industries; increase Heavy Equipment industry Textile (cotton) industry. Aircraft investment; and to make Defence Indonesia to become a logistics hub in Asia Pacific. industry MRO industry industry substances) Source: Coordinating Ministry for Economic Affairs 38#40Improving Investment Climate Online Single Submission (OSS) Has Been Launched in 2018 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 Sectors Environment & Forestry Sector Electricity Sector Public Works & Housing Sector Health Sector Industry Sector Marine & Fishery Sector Medicine & Food Sector Transportation Sector Trade Sector Information & Communication Sector Business licenses can be secured in under an hour Source: Coordinating Ministry for Economic Affairs Other Sector The Advantage of Using OSS 良 Standardized business licenses are available More practical Accessible at anytime and anywhere Ellectronically integrated The whole licensing process is monitored by the Task Force 39#41Improving Investment Climate ...revision of the Negative Investment List in 2018 Introduction of New Foreign Ownership Regulation for Strategic Sectors Cold storage Before After Before Sports Center, Film Processing Lab, Crumb Rubber After Restaurants, Bars Pharmaceutical Raw Materials Manufacturing Before After Before After 33% 100% 100% 100% 100% 49% 51% 85% Key Reforms in Negative Foreign Investment List 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 Strengthen implementation of negative investment law through active roles from ministries, agencies and regional governments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) Toll Road Operator, Telecommunication Testing Company Before After Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Conventions Before After 95% 100% 67% 67% 33% 51% Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Telecommunication Provider Before After Consultancy for Construction¹ Before with Integrated Services After Before After 49% 67% 67% 67% 55% 65% 40 40#42Investment Realization in Q3-2021 QI QII Q III QIV QI QII Q III QIV QI QII Q III QNV QI Q II QIII QIV QI QII Q III QIV QI Q II QIII DDI 504 52.5 55.6 58.1 68.8 610 649 67.6 764 806 8447 869 87.2 95.6 100.7 103.0 112.7 943 102.9 108.6 108.0 106.2 113.5 IFDI 961 99.4 99.7 101.0 97.0 109.9 111.7 112.0 108.9 95.7 89.1 99.0 107.9 104.9 105.0 105.3 98.0 97.6 106.1 111.1 111.7 116.8 103.2 TOTAL 146.5 151.9 155.3 159.1 165.0 170.9 176.6 179.6 185.3 176.3 173.8 185.9 195.1 200.5 206.7 208.3 210.7 191.9 209.0 214.7 219.7 223.0 216.7 DDI: Domestic Direct Investment FDI: Foreign Direct Investment *) The achievement of investment realization in period of January-September 2021 is a rounding numbers 2020 2021 Q-111 2021 Q-1 Q-11 Q-III Q-1 DDI 112.7 94.3 102.9 108.0 Q-11 Q-III 106.2 Y-O-Y Q-O-Q TARGET 2021** ACHIEVEMENT *** 113.5 10.3% 6.8% 430.2 76.2% FDI 98.0 97.6 106.1 111.7 116.8 103.2 -2.7% -11.6% 469.8 70.6% TOTAL 210.7 191.9 209.0 219.7 223.0 216.7 3.7% -2.8% 900.0 73.3% JANUARY - SEPTEMBER 2020 DDI 309.9 FDI 301.7 TOTAL 611.6 JANUARY - SEPTEMBER 2021 327.7 331.7 659.4 January - September 611.6 y-o-y 210.7 659.4 7.8% 191.9 QUARTER III 2020 2021 Q-I Q - II **) 2021 Investment Realization Target: IDR858.5 T (Strategic Plan) 2020 2020 As regulated in BKPM Regulation Number 2 of 2020 concerning BKPM Strategic Plan 2020-2024 The adjustment of investment realization target for 2021: IDR900 T (President's Instruction) ***) Towards the 2021 investment realization target according to the President's Instruction Source: Investment Coordinating Board (BKPM) y-o-y 223.0 219.7 216.7 209.0 3.7% Q - III Q-I Q-II Q-III 2020 2021 2021 In Rupiah Trillion 2021 41#43Investment Realization in Q3-2021 (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD billion) Singapore 36.6% Hong Kong 12.7% 0.9 Japan 0.7 9.9% China 8.5% 0.6 USA 7% 0.5 Source: Investment Coordinating Board (BKPM) 2.6 By Region Other Services Mining in IDR Trillion Banten 14.2 Riau 16.5 East Java 18 DKI Jakarta 23.9 West Java 34.8 By Sector in IDR Trillion 19.4 21 25.1 26.6 28.1 Metal, Metal Goods, Except Machinery, and Equipment Industry Transportation, Warehouse, and Telecommunication Housing, Industrial Estate, and Office Building 42#44Investment Realization in Q3-2021 (excluding the upstream oil and gas sector and financial services) Outside Java IDR 110.4 T (48.6%) Q3 - 2020 Total: IDR 209.0 T Realization y-o-y Java Java 5.7% Outside Java IDR 98.6 T (51.4%) Outside Java TOTAL 1.9% 3.7% IDR 112.5 T (52.1%) Direct Investments IDR tn FDI DDI -TOTAL III Q3 - 2021 Total IDR 216.7 T Java IDR 104.2 T (47.9%) 216.7 113.5 103.2 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2013 2020 2014 2015 2016 2017 2018 2019 2021 Source: Investment Coordinating Board (BKPM) 43#45Potential Investment Realization Reaches IDR 708 T IDR 708T Potential Investment Realization IDR 517.6 (73.1%) The potential value facilitated Companies that had been facilitated: Rosneft YTL Power 211.9T LOTTE CHEMICAL 61.2T 58.1T YL GROUP YTL 38.0T (PT Tanjung Jati Power) PT. INDO RAYA TENAGA VALE 39.2T PY VALE NOONESIA TU Solving stalled investment issues is one strategy to attract investors 21.7T 14.0T HYUNDAI KOBEXINDO wwwqyr how INDONESIA PLAYER 9.5T tlb 5.2T 7.7T 2.7T GCL CJ CHEILJEDANG 2.4T GELIGA PT Multimas Nabati Asahan (PT Tenaga Listrik Bengkulu) PT Sumber 2.0T ANI Masdar 1.8T Mutiara Indah 1.8T Minahasa Cahaya 1.8T Lestari Perdana APT Galempa A HUBADALA (SMIP) Sejahtera Bersama bp MALUNDO 1.1T 1.0T PERTAMINA GEOTHERMAL ENERGY 6.0T 主 2.3T 2.8T JAMBI INTEGRATED CITY, 2.4T (Project Hululais) Klaten, Central Java Dumai, Riau Indonesian government does not only facilitates large investment issues, but also medium & small investments Source: Investment Coordinating Board (BKPM), data up to Dec 2020 GORONTALO LISTRIK PERDANA FIRST 14.7T PACIFIC Others 1.4T 5.4T (PT Halmahera Persada Lygend) 1.4T (PT Sulawesi Cahaya Mineral) 44#46Section 3 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IRA#47Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia Manageable Inflation Rate 4th Most Populous country in the World; 64% in productive age 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 Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration New Economic Structure High Infrastructure Investments 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 Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 46#48National Economic Recovery Expected to Continue Strong GDP Growth¹ 7.07 3.51 % QoQ - YoY 8.0 6.0 4.0 5.05 3.83 2.0 8.27 3.74.31 4.01 3.14 4.01 4.21 4.20 3.19 3.09 3.06 B.31 0.04 1.55 0.0 (2.07) (1.73) -2.0 30.36) (0.16) (1.81 (0.30) (1.70.41) (1.69) (0.52) -4.0 -6.0 -8.0 Q1 Q3 Q1 Q3 Q3 Q1 Q3 Q3 Q1 Q3 2014 2015 2016 2017 2018 2019 2020 2021 Favourable GDP Growth Compared to Peers² (1.742.41) (0.42 0.96) (419) 10.00 % yoy 5.00 9.00 6.30 5.60 4.40 3.80 0.00 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 -5.00 • Indonesia's economy maintained positive growth in the third quarter of 2021 despite moderating in response to a surge of the highly contagious Delta variant of coronavirus. The national economy grew 3.51% (yoy) in the third quarter of 2021, down from 7.07% (yoy) in the previous period. Economic growth was primarily supported by exports in line with persistently solid demand in Indonesia's trading partner countries. Meanwhile, domestic demand moderated as a corollary of mobility restrictions introduced to overcome the Delta variant. Indonesia's main economic sectors maintained positive momentum, despite contractions felt by sectors relating to public mobility. Moving forward, Bank Indonesia will continue to strengthen coordination with the Government and other relevant authorities to accelerate economic growth, including monetary-fiscal policy coordination, reopening priority sectors, increasing exports as well as economic and financial inclusion. • In terms of spending, all GDP components maintained lower growth compared with conditions in the previous period. Household consumption expanded 1.03% (yoy), down from 5.96% (yoy) in the second quarter of 2021 due to public mobility restrictions in several regions of Indonesia. Investment moderated to 3.74% (yoy), bolstered by building investment, and government consumption grew 0.66% (yoy) in line with the expenditure reallocation to accelerate the national economic recovery program and contain the Delta variant. Meanwhile, exports continued to perform well on the back of strong global demand, growing 29.16% (yoy) in the reporting period. Imports, on the other hand, also grew 30.11% (yoy) in the Q3 of 2021. • Indonesia's major economic sectors, namely the Manufacturing Industry, Trade and Mining, maintained positive performance. In contrast, however, sectors relating to mobility, such as Accommodation and Food Service Activities, as well as Transportation and Storage, experienced contractions. Spatially, positive national economic performance was supported by nearly all regions, 2022 Growth Projection *) -10.00 Bulgaria Indonesia Colombia Philippines India -15.00 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption Source: World Economic Outlook Database - October 2021; * indicates estimated figure 2. *) Consensus Forecast number will be given later Institutions GDP growth 2022 Budget Bank Indonesia 5.2 4.7-5.5 IMF (WEO, Jan 2022) 5.6 World Bank (GEP, Jan 2022) 5.2 ADB (ADO, Dec 2021) 5.0 47#49GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY)¹ 2016 2017 By expenditure HH. Consumption Non profit HH. consumption Government consumption Gross Fixed Cap. Formation Exports 4.7 4.2 4.2 4.8 Imports GDP (3.1) (1.5) (5.9) 3.9 (5.0) (3.4) (4.1) 2.7 4.9 5.2 5.0 4.9 6.4 6.7 6.7 6.7 6.6 8.1 8.5 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 4.5 4.8 5.3 (1.7) 8.4 2.7 (2.4) 4.8 0.2 5.0 5.0 5.0 6.0 5.3 6.9 8,1 3.5 3.8 2.1 2,7 7.1 7.3 6.2 7,9 16.5 8.4 8.9 5,8 ** 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 Q1 Q2 Q3 5.0 5.1 5.0 5.0 5.0 4.9 5.0 4.9 5.0 4.9 5 5,2 5 5,1 5,1 5,0 5,2 5,0 5,0 5,0 2,8 -5,5 -4,0 -3,6 -2,6 -2,2 6,0 1,0 8,8 8,7 11 9,1 17,0 15,3 7,4 3,5 10,6 -5,0 -7,8 -2,0 -2,1 -4,3 -4,0 4,1 3,0 5,2 6,3 4,6 4,8 5,3 8,2 1,0 0,5 3,3 3,8 -6,9 9,8 1,8 1,9 2,6 8,0 0,7 5,8 6,9 6,1 6,7 5,0 4,6 4,2 4,1 4,5 1,7 -8,6 -6,5 -6,2 -4,9 -0,2 7,5 3,7 7,4 8,3 4,6 6,5 -1,5 -1,8 0,1 -0,4 -0,9 0,4 -12,0 -11,7 -7,2 -7,7 7,1 32,0 29,2 15.4 11.9 8.1 13 15 14 7,4 12 -6,5 -6,7 -8,3 -7,9 -7,4 -3,6 -18,3 -23,0 -13,5 -14,7 5,4 31,7 30,1 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 3,0 -5,3 -3,5 -2,2 -2,1 -0,7 7,1 3,5 Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption GDP Growth by Sector (%, YoY) 2018 2020 2021 2016 2017 2018 2019 2020 2021 By sectors Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Tot Q1 Tot Agriculture, forestry, and fishery Mining and Quarrying 1.2 1.0 0.2 1.4 0.9 2.1 Manufacturing Construction Wholesale and Retail Trade, Repair of Car and Motorcycle Transportation and Storage 4.7 4.6 4.5 3.3 6.8 5.1 5.0 4.2 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3,3 4,7 3,6 3,8 3,9 (1. 3) 4.3 4.3 3.5 4.9 5.2 6.0 7.0 7.0 1,8 5,3 1.8 0.0 0.7 1,1 2,6 2,7 2,2 2,2 2,3 4.5 4.3 4,6 7.2 6.8 7,4 3,9 4,4 4,2 4,3 3,9 5,7 5,8 5,6 6,1 5,9 5,7 5,6 5,8 Q2 Q3 Q4 Tot 3,1 4,2 3,6 -0,7 2,3 0,9 1,2 3,5 4,1 3,7 3,8 5,8 WOO 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5 5,2 5,3 4,4 5 5,2 4,6 4,4 4,2 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 5,4 5,9 6,7 7,6 4,6 6,4 Q1 Q2 Q3 Q4 Tot 0,0 2,2 2,2 2,6 1,8 3,4 0,4 -2,7 -4,3 -1,2 -2,0 -2,0 2,1 -6,2 -4,3 -3,1 -2,9 -1,4 6,6 3,7 2,9 -5,4 -4,5-5,7 -3,3 -0,8 4,4 3,8 1,6 -7,6 -5,0 -3,6 -3,7 -1,2 9,4 5,2 1,3 -30,8 -16,7 -13,4 -15,0 -13,1 25,1 -0,7 Q1 Q2 Q3 0,4 1,3 5,2 7,8 Information and communication 10. 7.6 9.3 8.9 9.6 8.9 11.1 8.8 8.3 9.6 7,8 5,1 8,1 7,1 7 9,1 9,6 9,2 9,8 9,4 Financial service 9.3 13.6 9.0 4.2 5 8.9 6.0 5.9 6.1 Other Services 6.0 5.6 4.5 3.8 4.9 4.2 3.5 4.8 3.8 5.5 4,3 6.0 3,1 3,1 6,2 4,2 7,2 4,5 6,2 8,5 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5,1 4,6 5,4 6,2 6,7 6,4 6,2 5,3 5,2 5,2 5,2 6,8 7,3 6,4 6,2 5,1 4,6 -6,2 -1,4 -1,7 -1,2 -2,6 9,8 -0,8 5,1 5,0 5,0 5,0 3,0 -5,3 -3,5 -2,2 -2,1 -0,7 7,1 3,5 9,8 10,8 10,7 10,9 10,6 8,7 6,9 5,5 6,6 10,6 1,1 -0,9 2,4 3,2 -3,0 8,3 4,3 6,7 GDP Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 48#50Economic Performance Improved In Almost All Regions Regional GDP of The Third Quarter of 2021 (%, yoy) Aceh 2.8 SUMATRA 528 3.78 North Sumatra 3.7 (0) (2.26) 42211 W 2000 KALIMANTAN +39 432 -224 -2,BL 4.21 2011 Rlau 4.1 West Sumatra 3.3 Riau Islands 3.0 Jambi 5.9 KEP. BABEL 6.1 South Bengkulu 2.5 Sumatera 3.9 DKI 2.4 201 North Kalimantan NATIONAL 7.07 (0.71) (2.19) (3.49) N 1 2000 2021 5.2 H 目 2021 Gorontalo 3.0 West Kalimantan 4.6 Central Kalimantan East Kalimantan 4.5 North Sulawesi 3.2 North Maluku 11.4 West 3.6 South Kalimantan West Sulawesi 2.5 Central Sulawesi 10.2 Papua -1.8 4.8 South Sulawesi 3.2 South-East Sulawesi 4.0 Maluku 4.2 Lampung 3.0 Central East Java Java West 2.6 3.2 Banten Java 4.6 3.4 Bali -2.9 West Nusa Tenggara 2.4 DIY East Nusa Tenggara 2.4 JAVA 7.92 2.3 10.92 (2.60) 11.911 IN 3.03 BALINUSRA 3.77 5.12 743 Q III'21 > QII'21 Q III'21< Q II'21 Source: BPS, calculated Source: Central Bureau of Statistics of Indonesia (BPS), calculated 0.09 Papua 14.5 SULAMPUA 8.62 пл -1,05 W 3.29 3.51 49 40#51% 100.0 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 2010 2011 Taxes Transportation and Warehousing I Mining and Quarrying Other Services Wholesale and Retail Trade Agriculture, Forestry, and Fishery 2012 2013 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 ◆ Q3-2019 I Financial and Insurance Services Construction Q4-2019 13.93 13.51 13.37 13.36 13.34 13.49 13.48 13.16 12.81 12.65 13.57 13.44 11.19 12.71 12.84 15.45 14.68 11.97 13.70 13.22 14.28 14.30 2019 Q1-2020 Q2-2020 40.0 22.04 21.76 21.45 21.03 21.08 30.0 20.99 20.52 20.16 19.86 20.07 19.52 19.62 19.70 19.98 19.86 19.86 19.63 19.81 19.88 19.83 19.29 19.15 20.0 10.46 11.81 11.61 11.01 9.83 6.28 7.65 7.18 7.58 8.08 7.77 7.39 6.95 6.16 8.09 9.55 7.26 6.82 6.44 7.64 6.98 6.48 10.0 Q3-2020 Q4-2020 Information and Communication ■Manufacturing 2020 Q1-2021 90.0 17.5 17.6 17.88 18.03 18.20 18.64 18.66 18.47 18.35 18.4 18.5 18.3 19.37 18.68 19.08 18.82 19.10 19.8 19.22 18.4€ 18.49 17.0 80.0 70.0 3.73 3.57 3.60 3.53 3.49 3.46 3.72 3.88 3.86 4.03 3.61 3.57 3.63 3.93 4.19 4.20 3.50 4.42 3.52 5.02 3.62 3.78 5.20 5.41 4.15 3.77 4.34 3.95 4.10 4.18 3.89 3.95 5.38 5.53 5.57 5.54 4.34 4.04 5.63 3.96 5.57 60.0 13.46 13.61 13.21 13.21 13.43 13.30 13.19 13.02 13.02 13.19 12.95 12.98 12.95 13.01 13.20 4.24 4.70 4.44 4.66 4.25 5.17 3.58 4.40 12.83 12.83 4.32 4.57 4.51 4.58 4.42 4.26 4.37 4.56 4.57 4.68 4.58 4.51 4.47 4.27 4.21 4.44 3.90 12.85 12.93 13.09 13.08 13.03 50.0 9.13 9.09 9.35 9.49 9.86 10.21 10.38 10.38 10.53 10.76 10.37 10.60 10.75 10.70 10.56 10.60 10.71 10.80 10.12 10.39 11.26 10.96 Indonesia's GDP Share (%) The key drivers of domestic economic growth are the Manufacturing Industry, Trade, and Mining, despite contractions of some sectors related to mobility, such as Accommodation and Food Service Activities, as well as Transportation and Storage. Economic Performance in Most Sectors Starting to Improve Q2-2021 Q3-2021 50 50#52Stronger Fundamentals Facing the Headwinds Inflation Rate (%) Inflation controlled within the target range 1998 2008 12.1 Dec 2021 1.87 (yoy) 1998 82.4 2008 19 Jan 22 IDR Movement (%) IDR depreciated year-to-date -197 -35 -0.77 (ytd) -300 -200 -100 0 1998 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 30 2008 3.8 Nov 2021 3.19 0 5 10 15 20 20 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 25 30 30 35 40 Government Debt/GDP Consistently well-maintained Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 7.8 months of import and external debt repayment 1998 2008 Dec 2021 17.4 More Liquid Market (%) Overnight interbank money market rate is relatively lower 62 50.2 10.5 2.78 1998 2008 Dec 2021 External Debt/GDP Higher than 2008, but significantly lower than 1998 144.9 8.6x 3.1x 2.85x 100.0% 27.4% 41.0% 116.8% 33.2% 37.0% 2008 Nov 2021 2008 2021 2008 Q3-2021 1998 1998 1998 5554 51#53Outlook of Domestic Economy Remains Robust ...domestic economic growth is predicted to rebound in 2021 2021 Economic Outlook • Bank Indonesia projects economic growth in 2021 at the range 3.2-4.0%, and accelerate to 4.7%-5.5% in 2022. Bank Indonesia projects inflation in 2022 to remain under control and within the 3.0±1% target corridor. • Bank Indonesia projects current account surplus of approximately in the range 1.1-1.9% of GDP in 2022. ● Bank Indonesia projects credit growth in 2022 will be around 6.0-8.0% LOAN Π Rp Economic Growth Inflation CAD (% of GDP) Credit Growth 2018 Realisation 5.17% 3.13% 2.98% 11.75% 2019 5.02% 2.72% 2.71% 6.08% Realisation 2020 -2.07% 1.68% 0.4% -2.4% Realisation 2021 3.2-4.0% 1.87% 0.2% 5.24% 2022 4.7-5.5% 3.0±1% 1.1-1.9% 6-8% Source Bank Indonesia 52 2#54Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#55External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid US$bn 10 25050 -5 -10 -15 Current Account Recorded Surplus in Q3-2021 2019: 2013: 2014: 2015: 2016: 2017: 2018: 2020: 2021: CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit (US$29.1bn) (US$26.7bn) (US$17.5bn) (US$16.9bn) (US$16.2bn) (US$30.6bn) (US$30.3bn) (US$4.5bn) (US$4.5bn) CA Deficit CA Deficit CA Deficit CA Surplus A A A A US$bn US$bn 146.87 миним 10.69 6.09 160 18 120 4.47 80 13 8 3 -2 -7 40 0 -12 པ་ད་པས་བག་---སོ་ན་ Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q401020304010203040 1.49 2.0 1.0 15.03 0.0 -1.0 1.42 -2.0 (8.34)-3.0 (3.63) -4.0 -5.0 2017: Surplus US$bn 8 6 4 2 0 -2 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q- 2013 2014 2015 2016 2017 2018 O Current Account Overall Balance Source: Bank Indonesia Trade Balance Surplus Continues 2016: Surplus US$11.83bn US$8.83bn 2018: 2019: Deficit Deficit (US$8.65bn) (US$3.24bn) 2020: Surplus 2021: Surplus (US$21.81bn) (US$33.84n) US$bn Q2Q3Q4Q1Q2Q3Q4Q1Q203 Q4Q1Q2Q3Q4Q1Q2Q3 2019* 2020* 2021** Capital and Financial Account --Reserve Asset (rhs) 2013 2014 2015 2016 Goods Primary Income Current Account (%GDP) (rhs) Source: Bank Indonesia 2017 2018 2019* 2020* 2021** Services Secondary Income Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of December 2021: US$144.9 bn (Equiv. to 7.8 months of imports + servicing of government debt) FX Reserves (LHS) Month of Import & Debt Service (RHS) 150 OG Non-OG Total Month 15 14 140 130 3.3 120 m m M M A 110 при 1.02 100 90 -2.28 80 70 -4 60 5432IO 13 12 11 10 PETELL9876543211 50 14 7 10 1 4 7 10 14 7 10 1 4 7 10 14 7 10 1 4 7 1012 2016 Preliminary Figure Source: BPS 2017 2018 2019 2020 2021 Very Preliminary Figure 2016 Source: Bank Indonesia 2017 2018 2019 2020 2021 54#56Exchange Rate In Line with Fundamentals Movement of Rupiah a.o. 19 Jan'22 ⚫ Quarterly Average Monthly Average IDR/USD 17,000 16,500 16,000 15,500 15,000 14,324 15,711 14,673 14893 14,494 15,179 14,5 14,806 14,322 14,708 14373 14,529 14,180 14157 143?" 14399 14,252 14,265 14,387 14362.5 14,378 14259 14,381 14,220 14,232 14254 14,113 14120/ 13,714 14,855 14,141 14,031 4-Feb 24-Feb 16-Mar 5-Apr 25-Apr -Jun 15-May 24-Jun Aug Aug 14,201 140 14064 14219 14,105 14,122 14,023 14,006 14,044 17-Aug 6-Sep 26-Sep 16-Oct ΛΟΝ- 25-Nov 15-Dec -Jan Rupiah Exchange Rate Fared Relatively Well Compared to Peers 14,000 14323,500 13,000 As a corollary of Bank Indonesia's stabilisation measures and external sector resilience, rupiah exchange rate movements remain under control despite persistent global financial market uncertainty. As of 19th January 2022, the value of the rupiah depreciated by 0.77% (ptp) and 0.01% on average compared with the December 2021 level. The weaker rupiah stems from muted foreign capital inflows despite a maintained domestic supply of foreign exchange and the positive perception of investors concerning the promising domestic economic outlook. Rupiah depreciation is relatively lower, however, than the lost value experienced in several other emerging economies, namely the Philippines (0.98% ytd) and Russia (2.89% ytd). Looking ahead, Bank Indonesia expects to maintain rupiah exchange rate stability in line with solid economic fundamentals despite Furthermore, continued global financial market uncertainty. Bank Indonesia continues to strengthen rupiah exchange rate stabilisation policy in line with the currency's fundamental Rupiah Exchange kat isms through effective monetary operations and adequate market liquidity. YTD 20222 vs 2021 ■point-to-point % average 160 -2.19 TRY Nov-21 -34.25 134.03 140 PHP -3.76 -0.98 19 Jan 2022 IDR -0.77 Dec-21 -0.19 120 MYR -1.08 Jan-22 -0.26 EUR 100 -4.09 90.28 -0.21 KRW -4.09 INR -8:43 80 62.77 0.02 SGD -0.59 60 0.03 BRL -3.76 CNY 0.1335 13.58 40 0.51 JPY -4.52 17 19-Jan-22 1.09 15.1725.2117.80 31.87 12.53 6.80 8.93 4.41 5.73 6.34 5.02 4.19 10.18 5.55 THB -3.81 5.01 3.89 5.62 3.60 5.03 5.43/6.04 5.044.33 6.07 9.55 20 ZAR -4.99 -40.0 -35.0 -30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP 55 55 Source: Reuters, Bloomberg (calculated)#57Global Regional Bilateral Ample Reserves Ample Lines of Defense Against External Shocks Swap Arrangement FX Reserve • Ample level of FX reserves to buffer against external shock • FX Reserves as of of December 2021: US$144.9 bn Japan Singapore China Malaysia ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2021 • The facility is available in USD and JPY . Renewed a 1 year SGD/IDR swap arrangement with the size up to USD10 bn (equivalent) on November 4th 2021 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY250 billion IDR550 trillion (about USD 38.8 billion equiv.) in January 2022 Established a 3 year RM/IDR swap arrangement with a size up to USD2 bn (equivalent) in September 2019 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 Increased in size to U.S.$2 billion in 2005 Entitled to a maximum swap amount of US$ 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 . 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) Source: Bank Indonesia 56#58100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2010 2011 2012 2013 External Debt Structure Healthy External Debt Profile Private External Debt Public External Debt 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020* Q2-2020* Q3-2020* Q4-2020* Jan-21* Feb-21* Mar-21* Apr-21* May-21* Jun-21* Jul-21* Aug-21** Sep-21* Oct-21* Nov-21* 90% 80% 70% 50.7 60% 50% 40% 30% 20% 49.3 10% %0 2009 2010 2011 2012 2013 2014 2014 2015 2015 2016 2017 2017 2018 Q1-2019 The Structure of External Debt is Dominated by Long-Term Debt 100% Short Term External Debt ■Long Term External Debt External Debt Remains Manageable Million USD % % 450,000 17.1 400,000 350,000 300,000 115 12.0 10.2 10.1 250,000 9.9 10.2 11.3 8.0 O O 200,000 7.5 6.5 5.9 150,000 4.8 100,000 5.4 50,000 External Debt External Debt (rhs) 20.0 240 18.0 220 31.8 External Debt to GDP Ratio & Debt to Export Ratio 32.9 36.1 34.334.736.036.736.536.136.1 34.4 37.338.1 39.439.1. % 16.0 29.10 27.4 200 26.5. 14.0 25.0 12.0 180 10.0 160 6.8 8.0 140 6.0 3.7 3.3 3.6 139.5 120 0.3 4.0 1.7 121.8. 123.1 2.0 100 114.9 113.8 0.0 101.0 80 T T 0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020* Q2-2020* Q3-2020* Q4-2020* Q1-2021* Q2-2021* Q3-2021* 2009 Source: Bank Indonesia, External Debt Statistics of Indonesia 2011 2013 2015 *Provisional Figures **Very Provisional Figures 2017 Q1-2019 Q3-2019 Q1-2020* Q3-2020* Q1-2021* Q3-2021* 137.537.0 40 35 206.9 197.2 214.208.9 30 25 76.168.672.168.472.677.083.3 77. External Debt/ Export Ratio (rhs) •External Debt/ GDP Ratio 189.5 175. 20 15 10 5 0 57 44 Q2-2019 Q3-2019 Q4-2019 Q1-2020* Q2-2020* Q3-2020* Q4-2020* Jan-21* Feb-21* Mar-21* Apr-21* May-21* Jun-21* Jul-21* Aug-21** Sep-21* Oct-21* Nov-21* 14.7 85.3#59Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Uruguay 83.5 86 89.7 259 corporates (10.1%) Hedging Ratio* 146 corporates (5.8%) Philippines Panama Mauritius Kazakhstan Indonesia Colombia 0 20 25 26.2 27.2 35.2 36.5 38 37.7 39.2 39.4 40 56.3 54.9 56.3 80.8 86.7 95.4 2022F 2021F 56.1 53.3 57 60 80 100 2021 120 Source: Moody's Credit View Fundamental Data, August 2021 Regulation on Prudential Principle in Managing External Debt Regulation Key Points Object of Regulation 1 Jan 17 & beyond Governs all foreign currency Debt Hedging Ratio ≤ 3 months > 3-6 months Liquidity Ratio (≤ 3 months) Credit Rating Hedging transaction to meet hedge ratio Sanction 25% 25% 70% Minimum rating of BB- (State-owned Enterprises) Must be done with a bank in Indonesia Applied Source: Bank Indonesia ≤ 3 months 2264 corporates (89.9%) Liquidity Ratio* 299 corporates (11.5%) > 3-6 months 2377 corporates (94.2%) 2224 corporates (88.5%) Comply Not Comply *Data as of Q2-2021, with total population 2.,567 corporates Source: Bank Indonesia 58#60Solid Policy Coordination In Managing Financial Markets Volatility 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) 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 State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget State's Budget First Line of Defense Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related SOES (min. level Aware) BPJS (min. level Aware) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) CMP BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 59 59#61BHINNEKA TUNGGAL IKA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#62Flexible Budget As Countercyclical Instrument To Respond The Uncertainty Fiscal deficit was adjusted and PEN was enacted to respond to COVID-19 development as well as to stabilize and stimulate economy Covid-19 timeline Covid-19 declared as outbreak Covid-19 as pandemic & Large social restriction was declared 1st case in Indonesia confirmed President announces 'new normal' 100,000 cases confirmed phase Several region loosened the 1st stage of vaccination rolled out and PPKM was imposed mobility restriction Emergency PPKM was imposed 'Delta Varian' confirmed in Indonesia Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Fiscal Deficit/ GDP (%) Initial Budget 1st adjustment in early stage of pandemic Readjusted due to vast development of pandemic -1.76 -5.07 FEB-APR APR -6.34 JUN Realization for 2020 -6.14 Budget 2021 -5.7 Realization for Budget 2021 -4.65 2022 -4.85 JUL-DEC DEC JAN FEB-MAR JUL DES 2022 Formalized PEN through PP23/2020 Reallocating and refocusing budget. PEN continue in The amount increased 2021 due to surging cases and vaccination program. National Initial measures Economic to mitigate pandemic risk Realization: Recovery (PEN) IDR 405.1 T IDR 695.24 T IDR 575.2 T IDR 403.94T IDR 699.43T 2020: Extraordinary Policy PEN is strengthened due to the new wave, for social protection expansion and hospital costs IDR 744.75 T Realization for 2021 IDR 658.6 T 2021: Pandemic Handling & Recovery 61#632021 Budget Records An Excellent Performance Gov't revenue exceeds the target; Expenditure is optimal, while efficient Budget Financing in 2021 serves as strong capital for fiscal consolidation in 2023 The realization of the 2021 Budget Deficit is around 4.65% of GDP, Rp222.7 Trillion lower than the target: Revenue outturn is 14.9% above the target, also surpassing the pre-pandemic level • For the first time in 12 years, tax collection surpassed the target owing to the strengthening economy, while at the same time providing incentives for the business world. Surging commodity prices and trade performance has boosted custom and non-tax revenue. Government spending increased strongly to support the covid-19 containment efforts and facilitating recovery economic recovery 2019 2020 2021 Account (IDR T) Diff Audited Growth (%) Audited Growth (%) Budget Realized* from budget % of Budget YOY (%) A. Revenue I. Tax Revenue 1,960.6 1,332.7 II. Customs & Excise 213,5 0.9 1.5 3.9 1,647.8 16.0 1,072.1 (19.6) 213.0 0.2 III. Non-tax Revenue 409,0 (0.1) B. Expenditure 2,309.3 4.3 I. Central Government 1,496.3 2.8 1. Line Ministries 873,4 3.2 343.8 (15.9) 2,595.5 12.4 1,833.0 22.5 1,59.6 21.3 2. Non-Line Ministries 622,9 2.3 773.3 24.2 Of which: a. Interest Rate 275.5 6.8 314.1 14.0 373.3 b. Subsidy 201.9 (7.0) 196.2 (2.8) 175.4 1,743.6 2,003.1 1,229.6 1,277.5 215.0 269.0 298.2 452.0 2,750.0 2.786.8 1,954.5 2.001,1 1,032.0 1,189.1 922.6 812.0 343.5 243.1 259.4 114.9 21.6 47.9 103.9 19.2 54.0 125.1 26.3 153.8 151.6 31.5 36.7 101.3 7.4 46.5 102.4 9.2 157.1 115.2 12.2 (110.6) 88.0 5.0 (29.8) 92.0 9.4 67.7 138.6 23.9 • II. Regional Transfer & Village Funds 813.0 7.3 762.5 (6.20 795.5 785.7 (9.8) 98.8 3.0 C. Primary Balance (73.1) 536.4 D. Surplus (Deficit) (348.7) 29.4 % to GDP (2.2) (633.6) 766.4 (633.1) (440.2) (947.7) 171.8 (1,006.4) (783.7) (6.14) (5.70) (4.65) 192.9 222.7 69.5 (30.5) 77.9 (17.3) E. Financing 402.1 31.5 F. Surplus of Financing 53.4 245.6 *preliminary numbers 1,193.3 196.8 1,006.4 868.6 (137.7) 86.3 (27.2) 84.9 Line Ministries' (LM) spending went up, focusing on the pandemic handling and social welfare programs. Efficient debt interest payments supported by low yields & reduced debt issuance Transfer to region increased to support regional government in tackling the covid-19 and supporting recovery Lower debt financing of Rp310 T by utilizing SKB III and accumulated budget surplus (SAL), while the main investment financing is to support infrastructure. Surplus of Financing (SILPA) 2021 is IDR 84.9 T, as the impact of a lower deficit and more efficient budget financing. 62 62#64Tax Revenue Hit 103.9% of Target in 2021, or Grew by 19.2% 1,332.7 1,072.1 1,277.5 19.2 • 1.5 (19.6) 2019 2020 2021 Tax (IDR trillion) Growth (%) Income Tax Realization of tax revenue in 2020 amounted by IDR 1,277.5, on the back of: Improvement from the majority of the sectors along with strengthening economic recovery • Increasing people's mobility and consumption, thus VAT receipt rose strong and exceeded the pre pandemic level VAT IDR696.5 T (101.9%) IDR551.0 T (106.3%) Property and Other Taxes IDR30.1 T (110.2%) 772.3 696.5 28.8 594.0 531.6 551.0 27.7 30.1 450.3 3.0 17.3 10.5 8.3 (23.1) 22.3 (3.7) (1.1) (15.3) 2019 2020 2021 2019 2020 2021 2019 2020 2021 Income Tax Growth (%) I non oil and gas Growth PPh (%) Driven by the increase in oil and gas prices as well as improving economic activity VAT (IDR trillion) Due to raising in both Domestic VAT (people's activities returned to normal level) and Import VAT (import activities increased significantly) Property Tax and Others (IDR trillion) --Growth (%) Supported by tariff adjustment on Stamp Duty 63#65Most of Sectors Showed An Excellent Performance In 2021 -2.3 -20.0 16.4 TAX REVENUE GROWTH BY SECTORS (% YoY) Manufacturing (30.5%)* *: Share from total 28.0 7.3 3.1 -14.3 -18.9 0.0 18.8 9.2 9.4 4.5 -15.6 -17.7 -20.4 Financial Services Construction & Transportation & Trade (22.5%) & Insurance (13.3%) Real Estate (6.1%) Warehousing (4.2%) 59.8 -43.4 Mining (5.2) • Manufacturing and trade sectors have posted double-digit growth since Q2 20201, on the back of the recovering global and domestic demand, which drove an increase in production, consumption, export, and import. Financial Services and Insurance slightly contracted due to a decrease in the interest rate and tariff reduction in final income tax on bond interest. Construction & Real Estate Sectors grew positively, supported by the rising number of construction activities for business as well as for private houses. Mining performance showed a strong recovery due to improving global demand and rising commodity prices. The recovery of the Transportation & Warehousing sector is in line with the increasing mobility of the people. 64 59#66Customs, Excise, and Non-tax Revenue Also Grew Remarkably 213.5 3.9 Customs and Excise (IDR Trillion) 213.0 (0.2) 269.0 2019 2020 2021 Growth (%) Non-Tax Revenue (IDR Trillion) (0.1) 31.5 (15.9) 452.0 409.0 26.3 48.9 343.8 119.5 69.3 124.5 151.1 111.2 80.7 30.5 66.1 154.9 150.8 97.2 • Customs and Excise 2021 rose significantly driven by the performance of all revenue components, reached 125% of the budget • Excise revenue has consistently grown since 2019. from international trade taxes to record high growth. The recovery of export and import activities in 2021 led to revenue Excise Import Duties Export Duties 708,2 172.4 176.3 195.5 37.5 32.4 38.9 19.9 21.3 8.0 10.9 2.3 (4.1) (47.9) (13.5) 4.3 34.6 2019 2020 2021 2019 2020 2021 2019 2020 2021 • 2019 2020 2021 Natural Resource Public Service Agency (BLU) Separated State Wealth Growth (%) Others The realization of non-tax revenue in 2021 amounted by IDR452.0 T (151.6% of the budget, or grew by 31.5%). Primarily driven by increasing trend of commodity prices of (oil & gas, minerals and coal, and CPO) 65#67Government Spending Has Shown Good Performance The hard work of the gov't budget continue to support the pandemic handling as well as economic recovery Accumulative Central Government Spending (IDR Trillion) Transfer to Region (IDR Trillion) 820 2,500 7.3% 1 2,000 1,500 The realization of central 810 1 Transfer to Region improve public 800 government services, support budget in 2021 is 790 3.0% pandemic handling, higher compared alleviate extreme 780 to 2019 and 2020 1,000 poverty, as well as 770 813.0 1 Expenditure grew -6.2% support financial 500 significantly and 760 785.7 brought positive 750 capacity of local government 762.5 0 impact to 740 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Indonesian people 730 2019 2020 2021 2019 2020 2021 Line Ministries' Operational (Goods and Services) Spending Line Ministries' Capital Expenditure Social Protection Budget Health Budget Subsidy (IDR Trillion) 26.1% (IDR Trillion) Financing, IDR2.0T (IDR Trillion) (IDR Trillion) 24.8% 26.5% 69.1% ■ 2020 ■2021 7.4% Line Ministries, IDR207.7T IDR 480.0T Transfer to Region and Village Fund, IDR20.2T 30.5% -20.5% 51.6% 421. (130.5% 291.3 17.5% 34.6% 190.9 241.5 2 of Budget) 142.0 525.4 172.3 108.8 87.4 102.7 2020 2021 Accelerated payments for vaccines, Covid-19 treatments, assistance for Micro Business 2020 2021 Basic infrastructure and connectivity projects still continue dam, irrigation network and connectivity Non Line Ministries, IDR250.1T Distribution of PEN Program assistance as a cushion for poor and vulnerable families affected by the Covid-19 pandemic 2020 2021 Health spending mainly used for Covid-19 handling: vaccine, patient care, health workers incentives Non-Energy Subsidy Energy Subsidy Subsidy aims to protect the poor and the vulnerable and support the MSMEs 66 99#68The National Economic Recovery Program (PEN) Has Effectively Cushioned The Impact Of Pandemic The program continues to offer support for communities during hard times and accelerate the economic recovery 2020 National Economic Recovery Program (PEN) amounted to IDR 575.2 T, was enacted to respond to the Covid- 19 pandemic handling and aim to save people's lives and economy. . The realization of the National Economic Recovery program for 2021 amounted IDR 658.6 T or 88.4% of its plan* e.g. • HEALTH SECTOR IDR198.5T Vaccine Procurement (310.9M Doses) Medical Facilities, treatment cost, testing & tracing *preliminary figures 2021 SOCIAL PROTECTION IDR171T e.g. • Cash Transfer, Conditional Cash Transfer & Staple Food Assistance • Pre-Employment Card • Internet Subsidy and Electricity Bill Discount Extreme poverty eradication program PRIORITY PROGRAMMES e.g. IDR105.4T • Tourism Supports, Food Security/Food Estate and Infrastructure . • Health Insurance Aid for Non-Wage Workers Vaccine R&D FIRMS & MSMES SUPPORT • Loan Facility for Regional Govt IDR10T through PT. SMI • Labor Intensive Program (2.26M workers) IT-related Program & Industry area development IDR116.2T e.g. e.g. . • Ultra-Micro business assistance and cash transfer Guarantee Fee subsidy for MSMEs firms • Liquidity support for the banking sector, interest subsidy for business and Capital Injection • BUSINESS INCENTIVES IDR67.69T Income Tax subsidy for employers and MSMEs Income Tax Exemption on Import Tax discount for Automotive, and property sector Subsidy on Import Duty 2022 National Economic Recovery Program will continue in 2022, particularly for health sector, pandemic handling and economic recovery program 67 40#692022 Budget Continues To Support Economic Recovery And Structural Reform While also become an important step toward fiscal consolidation Macro-Economic Assumption R Economic Growth 5.2% Deficit (% to GDP) (in trillion) Budget 2021 Figures Revenue IDR 1,846.1 T Tax -4.65 3.0% Inflation (348.7) -6.1 -4.85 O IDR 1,510.0 T Exchange Rate 14,350 10-year T-Bonds Rate ICP (USD/barrel) Oil Lifting ('000 bpd) 6.80% 2019 663 63 703 Gas Lifting ('000 bopd) 1,036 Non-Tax Revenue IDR 335.6 T Expenditure IDR 2,714.2 T CG Expenditure IDR 1,944.5 T Transfer to Region IDR 769.6 T Grant (947.7) 2020 (868.6) 2021* (868.0) IDR 0.6 T 2022** Note: * Temporary realization; **Gov't Budget figures; excluding the impact from HPP Law (tax reform) Revenue • Tax Revenue: Continue the tax reforms, tax base expansion, taxpayers compliance & administration improvement, and better measured & targeted of tax incentives. • Non-tax revenue among others, improving the planning, supervision and reporting through more integrated IT system; and asset optimization. Expenditure • Policies synergies in health care (incl. health system reform), social protection and economic recovery. • Strengthening programs to build competitive human resources and carrying on infrastructure development and technology adaptation. • Strengthening fiscal decentralization to improve welfare and distribution between regions. Financing • Deficit and Budget Financing to decrease by 9.7% ⚫ Fiscal deficit ratio is set at 4.85% of GDP. • With efficient and prudent financing sources, including the use of accumulated budget surplus. 68#702022 State Budget Supports Development Sectors • • • • GOALS: Improve the quality of human capital Support the economic recovery and structural reforms EDUCATION (IDR542.8T) • Increase the skills and professionalism of the teachers • Accelerate the rehabilitation of education facilities Strengthening vocational education through quality standardization and developing research and innovation Increase the synergy of Central Government, Local Government, and Line Ministries HEALTH (IDR255.4T) Continue the COVID-19 Handling (Gov't vaccination, patient treatment) Increase the effectiveness of insurance for maternal health (Jampersal) and make it integrated into JKN program Strengthen the reforms of national health system Continue the efforts to lower the stunting incidence • C SOCIAL PROTECTION (IDR431.5T) Continue to develop the Unified Database (DTKS) and synergizing with other relevant data Supoport the social protection reforms Support the program of insurance scheme from losing job Develop the scheme of Adaptive Social Protection $ INFRASTRUCTURE (IDR365.8T) Support the basic service infrastructure Enhance the productivity (connectivity and mobility) Providing the energy and food infrastructure Equal provision and access to infrastructure and ICT • FOOD SECURITY (IDR92.3T) Improve the food access and coverage Increase the productivity and revenue of the farmers and fisherman Pengembangan Kawasan Sentra Produksi Pangan (Food Estate) TOURISM (IDR10.1T) Accelerate the development of 5 Super Priority Tourism Destinations (Danau Toba, Borobudur, Mandalika, Labuan Bajo and Likupang) The development of tourism and creative economy Tourism recovery and Rebranding ICT (IDR25.4T) The ICT infrastructure development Encourage the adoption of digital transformation in various economic sectors and government Establising the National Center of Data • and the SPBE Implementation 69#71The Economy Is Projected To Recover Stronger in 2022 Right Timing To Implement Energy Subsidy Reform ENERGY SUBSIDY (IDR134,0 T) 1. LPG 3 Kg subsidy transformation Transforming the 3 Kg LPG subsidy on target and becoming a recipient-based target, which in its implementation will be directed to be integrated with other social assistance programs. This needs to be done gradually and carefully taking into account the economic and social conditions of the community. 2. Implementing targeted electricity subsidies according to DTKS The provision of electricity subsidies is only given to those who are entitled, and for household customers should be in accordance with DTKS. 3. Continue to provide fixed subsidies for diesel and price difference subsidies for kerosene NON-ENERGY SUBSIDY (IDR72,9 T) 1. Improving e-RDKK data and application of fertilizer subsidy redemption mechanism through farmer cards 2. Determine a number of new KUR customer targets, both from MSMEs and farmers as an effort to increase business 3. Improving the quality and innovation of economy class services for rail and sea transportation, as well as support for the procurement of light rail infrastructure 70 70#722022 Budget To Support Reforms Toward Better Targeted And Life Cycle Approach, And Developing Adapative Social Protection 308.4 -12.86% karti 61.48% 498.0 487.8 429.9 2019 2020 PROGRAM KELUARGA HARAPAN Meraih Keluarga Seahtera Social Protection -2.05% -11.87% 2021 Outlook 2022 Budget Growth (yoy) 2022 Social Protection Budget Conditional Cash Transfer (PKH) (10 million families) Food Assistance (Kartu Sembako) (18,8 million families) prokerja Pre-Employment Card (2,9 million workers) Unemployment benefit (JKP) Village Cash Transfer (BLT Desa) Electricity Subsidy LPG Subsidy 2022 Social Protection Policy 1. Continuing improving unified database (DTKS) and synergizing with other relevant data • Improving targeting accuracy and complementarity of social protection programs for the poor and vulnerable. 2. Supporting gradual and measurable Social Protection Reforms • Integration of social assistance program for people with disabilities (in PKH and other programs) . Better targeted energy subsidies, directed for family/household in unified database (DTKS) 3. Supporting Unemployment Benefit • To maintain decent life for workers who lost their jobs 4. Improving the implementation quality of social protection programs and developing adaptive social protection • • Improving the quality of social protection programs to reduce poverty and inequality optimally Preparing flexible and adaptive social protection to anticipate crisis or disaster and through life cycle 5. Continuing life cycle social protection through social assistance, subsidies, and Village Cash Transfer 71 71#73Infrastructure Budget Assists The Improvement of Connectivity and Productivity Development is directed to support strengthening provision of basic services and technology information Infrastructure 2022 INFRASTRUCTURE BUDGET POLICIES 1. Acceleration of the infrastructure projects completion that were delayed due to the pandemic 2. Development priority towards the strategic output that supporting economic recovery 3. Strengthen the financing synchronization/integration between line ministries, local government and SOEs/Private 2022 Infrastructure Budget 365.8 T Central Govt. Expenditure 168.3 T Reg. Transfer & Village Fund 102.2 T Budget Financing 95.2 T Infrastructure Budget will be directed for: Supporting the availability of infrastructure and basic services such as: ■ Special House Construction 2,250 unit ■ Flats Construction 3,501 unit ■ Water Supply System 222,425 SR ■ Wastewater Treatment System 7,904 KK Providing affordable, reliable, and environmental friendly energy and food infrastructure : ■ Household Gas Construction 10,000 kilo SR Irrigation Network Construction 105 Thousand Ha Promoting high productivity through connectivity and mobility infrastructure such as: New road construction 205 km " New bridge construction 8,244 m ☐ Trans Sumatera Toll Road (JTTS) construction Railway construction 6,624 km New airport construction 6 Delivering equitable access on infrastructure and technology information, toward human capacity development and digital literacy: ■ 2,344 BTS network construction in 3T region ☐ 25 GBPS internet network development through satellite connection 22 72#74Policy Direction For 2022 Budget Maintaining the right balance between anticipating pandemic risk, accelerating economic recovery, and supporting structural reform COVID-19 HANDLING: Strengthening health sector as the key to economic recovery 1. Vaccination for community immunity 2. Health Protocol 3. Health Facilities & Health Worker 4. Medicine MAINTAINING THE RESILIENCY AND SURVIVAL ABILITY AS WELL AS ACCELERATING RECOVERY Through social protection program for businesses and MSMEs. 1. Conditional Cash Transfer (PKH), Staple Food Assistance, Pre- employment card, Cash Transfer through Village Fund 2. Interest subsidy & incentives for businesses. ANTICIPATING PANDEMIC RISK, ECONOMIC RECOVERY, AND STRUCTURAL REFORM Optimum implementation of Budget 2022 as FOUNDATION for FISCAL CONSOLIDATION in 2022. all STRUCTURAL REFORM: To improve competitiveness and enhance production capacity. 1. Education for excellent and integrity human resources 2. Reliable health system 3. Adaptive social protection 4. Improving investment climate 5. Infrastructure that support economic transformation 6. Institutional reform. M COMPREHENSIVE FISCAL REFORM: 1. Tax reform 2. Spending better (Zero based budgeting), allowance for risk dan automatic stabilizer 3. Financing Innovation (eg. PPP, SWF, SMV) and debt management. 73#75Accelerating Structural Reforms Is A Key To Enhance Medium To Long-term Growth The Covid-19 pandemic has underscored the urgency to accelerate the structural reforms Key for Further Strong and Sustainable Economy in Medium Term Maintaining growth momentum through promoting growth engine: consumption, investment, export & production sectors = Structural reforms for improving productivity: Implementation of Job Creation Law, SWF / INA, Risk-Based OSS System Increasing investment & export competitiveness: creating quality jobs and sustainable economic recovery Structural reforms along with fiscal reforms (APBN) focus on priority areas: Health, Education, Social Protection, Infrastructure, Tax Reform, Regional Government Revenue Sharing Law (HKPD), and Tobacco Excise Policy (CHT) Source: Statistics Indonesia, MoF Calculation Economic Growth Decomposition (%) 6.0 5.5 5.3 3.7 2.5 3.0 2.4 1.1 2.2 0.9 2.2 1.1 1.6 1.0 1.8 2.4 1.0 05 -2.1 Business as usual Reform Scenario -5.0 COVID-19 2010-2019 2020 Recovery 2021 2022-2025 Projection Productivity ■Labor ■Capital ◆ Growth (Average) 74#76Comprehensive Structural Reforms Are Needed To Capitalize Demographic Dividend Fiscal reform will facilitate further structural reforms Human Capital Real Sector Reform through Improve the quality of education, health, and effectiveness of social protection to improve the quality of human resources. FISCAL REFORM Tax reform, improvement of spending quality (spending better) & innovative financing Continue the acceleration of infrastructure development through digital infrastructure and logistics efficiency, as well as connectivity. Infrastructure development (Physical capital) Omnibus Law on Job Creation Deregulation Simplification of Bureucracy Transformation of Economy Financial Sector Reform ■ Job Creation ■ Ease of Starting Business Support the Eradication ■ of Corruption • • Investment ecosystem improvement Land procurement • Economic zones • Central government • Business licensing • Employments MSME Supports Ease of Doing Business • Research & innovation investment & national strategic projects acceleration • Government • administration Imposition of Sanctions Deep financial markets - Depth • Broadly accessible financial sector - Access⚫ Efficient, strong and stable financial system - Efficiency 75#77Tax Regulation Harmonization Law (HPP) Strengthens Tax Reform Raising the tax ratio as well as maintain fiscal sustainability POLICY CHANGES IN THE HPP LAW GENERAL PROVISIONS AND PROCEDURES Integration of the ID Number with the Taxpayer Number, Appointment of third parties as withholding, collecting, depositing and/or reporting tax (including e-commerce) VOLUNTARY DISCLOSURE PROGRAM Improve taxpayers' compliance through voluntarily reporting or disclose unfulfilled tax obligations with applied final income tax rate. The program is implemented from 1 January 2022 to 30 June 2022 EXCISE Strengthening the mechanism for determining excisable goods; and Applying criminal sanctions as a last resort in excise crime for violations of permits, releasing excisable goods, unpackaged excisable goods, excisable goods originating from criminal acts, and the sale and purchase of excise stamps. INCOME TAX • New bracket for income >IDR 5 billion at 35% tax rate, Corporate Income Tax in 2022 remains at 22% Income Tax rate at 0.5% for MSME (threshold IDR 500 million) Employee non-cash benefits become tax object VALUE ADDED TAX • Increasing VAT rate from 10% to 11% from 1 April 2022, and to 12% by 2025 Reducing the VAT exemptions and facilities, CARBON TAX • Introduction of the carbon tax in 2022 through a gradual basis according to a roadmap that will consider the development of a carbon market, achievement of NDC targets, sector readiness, and economic conditions. Tax Reform Impact • Without reform and the HPP Law, tax ratio 2021-2025 will stagnate in 8.3%-8.9% of GDP. • With the reform and implementation of the HPP Law, the tax ratio is estimated to reach 9.25% of GDP (in 2022) and 10.14% of GDP (in 2025). • TAXATION REVENUE AND TAX RATIO 2021-2025 10.14 11 10 9.55 9.25 9.33 10 8.87 9 di 9 8.87 8 8.28 8.30 8.35 8.42 8 00 With yearly average growth of tax 7 revenue by 13.07, tax ratio is 2021 2022 2023 2024 2025 expected to 10.14% of GDP in 2025. Tax ratio baseline Tax Ratio reform+HPP#78New Excise Policy For Tobacco Products (CHT) 4 PILLARS TOBACCO EXCISE POLICY Health Improve the quality of human resources through reducing smoking prevalence Revenue Improvement As a source to supports national development programs revenue Labor Sustainability Consider the impact on tobacco farmers, workers, and the tobacco products industry. Eradiction of Illegal Excisable Goods Mitigate the risk from the policy to illegal cigarettes Main Changes in 2022 CHT Policy (Effective in January 2022) Adjustment of excise tariffs and the floor retail price for all types of cigarettes by a weighted average of 12% Simplification of the tariff structure to 8 layers Optimizing the CHT Revenue Sharing Fund (DBH) policy as a cushion for the CHT policy The adjustment of excise rates and the minimum limit for retail selling price types of E-Cigarettes and Other Tobacco Processing Products is 17.5%, with specific excise rates. The 2022 CHT policy will reduce cigarette consumption by an average of 3.0% per year. 77#79The Law On Central-regional Fiscal Relations (UU HKPD) Conceptual Framework EQUALITY OF SOCIETY PROSPERITY IN INDONESIA The Allocation Of Efficient National Resources By Developing Transparent And Accountable Financial Relation Between Central And Local Government ΟΙΚΟ Decreasing vertical and horizontal imbalances Redesign the management of transfers to the regions to reduce inequality and promote efficient and effective improvement in the quality of spending, through performance- based Transfers to Regions Harmonization of central and local government spending Accelerating development in regional area to achieve national goals Quality of Local Government Spending Improving the quality of regional spending to be more efficient, productive and accountable Strengthening local taxing power Restructuring & integrating types of regional taxes are aimed at reducing administrative & compliance costs as well as optimizing collections Accountability that is oriented on results,, efficiency, equality certainty, and universality Integrated and synchronized information and evaluation system Supervising, monitoring, and evaluation Competent, professional, and integrity human resources 78#802021 Financing Needs Include National Economic Recovery (PEN) program funding Government Securities (GS) Loan Budget Deficit 2021 Domestic GS 80-85% Domestic Loan IDR2.7 T Foreign Loan - e.q US$ 2 Foreign 12-15% Project bio Denominated Bonds APBN: 1,006 T Outlook: 939,6 T GS Policy: Retail GS 3-6% Foreign Loan - Program e.q US$ 5 - 6 bio Loan Policy: (APBN & Outlook: 5,7% of GDP) + Investment financing Lending Liabilities Other financing Matured debt Optimization of medium-long tenor domestic GS to mitigate refinancing risk $ Foreign GS as a complement to avoid the crowding out effect Retail GS to increase participation public in financing development Measurable private placements, consider needs financing and state treasury conditions Coordination with Bl in fulfillment GS issuance target Program loans can be optimized up to USD6 ...billion at capacity lenders with consideration cost and risk USD2 billion project loan according to implementing capacity project Flexibility of use program loan with target issuance of foreign GS Source: Ministry of Finance 79#81Strengthened Synergy Between Monetary and Fiscal Policy Background The increase in the spread of Covid-19 including the delta variant requires large financing, among others, for handling health and humanity as a result of the COVID-19 pandemic 2. The government and Bank Indonesia (BI) are coordinating solidly, in which BI actively participates in the purchase of SBN in the primary market, including the contribution to health and humanitarian financing. 3. The agreement between the Government and Bl is stated in the Joint Decree of the Minister of Finance and the Governor of Bank Indonesia concerning the Scheme and Coordination Mechanism between the Government and Bank Indonesia in the Context of Financing for Health and Humanitarian Management to Handle the Impact of the Corona Virus Disease 2019 (COVID-19) Pandemic through Purchases in the Market Initial by Bank Indonesia on Government Securities and/or Government Sukuk (or referred to as SKB III) Principles 1. Maintaining fiscal space and fiscal sustainability in the medium term 2. Reduce the APBN deficit gradually below 3% in accordance with the provisions of the legislation 3. Maintaining the exchange rate stability, interest rate and inflation under control 4. Prioritizing credibility and integrity of fiscal and monetary management 5. Encouraging sustainable economic growth Maintaining financial sustainability of the Government and Bank Indonesia 6. Source: Ministry of Finance 80#82Strengthened Synergy Between Monetary and Fiscal Policy Policy Synergy Between Bank Indonesia and the Government Contributes to the Acceleration of Economic Recovery The Enactment of Emergency Law No.1/ 2020 (Becoming Law No.2 / 2020) Allows BI to Buy GS in the Primary Market 1st Joint Decree between Minister of Finance and Governor of Bank Indonesia (BI) on April 16, 2020 (SKB I). The role of Bl is to act as backstop buyer in the primary market 2nd Joint Decree between Minister of Finance and Governor of BI on July 7, 2020 amended with Joint Decree on July 20, 2020 (SKB II) puts in place the burden sharing scheme between Government and Bl 3rd Joint Decree Between Minister of Finance and Governor of BI on August 23, 2021 (SKB III) The Third Joint Decree concerns the scheme and coordination between the Government and Bank Indonesia in the context of financing healthcare and humanitarian handling as a response to the current condition of the COVID-19 pandemic GOVERNMENT SECURITIES (SBN) ISSUANCE AND BI CONTRIBUTION SCHEME Bl contributes all interest costs on the financing for vaccination and healthcare with a maximum amount of IDR58T (2021) and IDR40T (2022), taking into account Bl's balance sheet capacity and capability Cluster A Cluster A : 2021 IDR58 T 2022 IDR40 T Healthcare includes vaccination program and other healthcare financing related to COVID-19 pandemic Interest Rate Bl reverse repo 3 Months Tenor Healthcare related to COVID-19 pandemic other than Cluster A Humanitarian handling in the form of various protection programs for affected communities/ small businesses BANK INDONESIA Interest Rate BI reverse repo 3 Months Tenor GOVERNMENT The issuance of Government Securities is done through a private placement: reducing the target for SBN auction and manage cost of debt All Government Securities are issued at variable rate using BI 3-month Reverse Repo Interest Rate. SBN is tradable and marketable The remaining interest costs for financing other health care as well as humanitarian handling will be covered by the Government with a reference interest rate for Bl RR 3M (below market rate) Cluster B : Cluster B 2021 2022 IDR157 T IDR184 T • Source: Ministry of Finance, Bank Indonesia 81#83Government Securities Financing Realisation (a.o Dec 31, 2021) Government Securities (GS) Government Debt Securities (GDS) IDR Denominated GDS - Coupon GDS - Conventional T-Bills - Private Placement | - Retail Bonds Foreign Denominated Bonds - SEC USD-EUR REG SHELF TAKE-DOWN - Samurai Bond - SDG Bonds - SEC USD REG SHELF TAKE-DOWN - USD Onshore Bonds (Trillion IDR) Realization (ao. December 31, 2021) Sovereign Sharia Securities (Sukuk) Domestic Sovereign Sharia Securitoes - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk - Retail Sukuk - Private Placement Global Sukuk BI Purchase (SKB III) Source: Ministry of Finance Note: including GSO transaction 1,301.65 764.63 649.37 522.03 55.35 23.50 48.50 115.25 92.41 13.18 8.36 1.30 0.00 322.02 279.23 219.25 48.73 11.25 42.79 215.00 82 32#84Republic of Indonesia - Dual Currency USD3bn and EUR1bn Issuer Issuer Rating Exp. Issue Rating Format Issue Pricing Date Settlement Date Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) Baa2 Moody's / BBB S&P / BBB Fitch SEC Registered Senior unsecured fixed rate notes off US SEC Shelf January 5, 2021 January 12, 2021 PB/Others, CB/SWR Ban Investor Breakdown by Investor Type Isurance PF, 95% RIEUR033 CB/SWF PB/Others, 3% 1% Banks, 8% Insurance PF 20% RI0351 Banks, 1% PB/Others, 1% PB/Others, AM/FM, 75% CB/SWF 8% AM/FM, 58% CD/SWE -5% Insurance PF. 24% RI0371 Currency Size US$1.25bio USD US$1.25bio US$0.5bio Euro €1bio Banks, 26% RI0331 AM/FM, 63% Tenor Long 10-year Long 30-year Long 50-year Long 12-year Insurance PF,2% Maturity March 12, 2031 March 12, 2051 March 12, 2071 March 12, 2033 Coupon (p.a.) 1.850% 3.050% 3.350% 1.100% Investor Breakdown by Geography Yield 1.900% 3.100% 3.400% 1.174 Price 99.538% 99.020% 98.794% 99.165% US, 20% Listing Use of Proceeds Singapore, Frankfurt Stock Exchange The net proceeds are for general purposes of the Republic of Indonesia, including its Covid-19 relief efforts RIEUR0333 APAC, 9% EMEA, 71% EMEA, 30% US, 27% RI0351 Transaction Highlights • The lowest yields and coupons throughout the issuance of Indonesian Global Bonds for all tenors and currencies All tranches priced inside of the Republic's existing credit curve with negative new issue premium and at the tightest levels for every one of the tranches • The transaction was well-executed and competitively priced, with final pricing across all tranches pricing 45bps inside of initial price guidance for USD and 40bps inside of initial price guidance for EUR Source: Ministry of Finance EMEA, 22% US, 20% APAC, 43% EMEA, 31% RI0331 APAC, 58% AM/FM, 69K RI0371 US, 37% APAC, 32% 83#85Republic of Indonesia - Samurai Bond JPY100bn Issuer Issuer Rating Exp. Issue Rating Format Pricing Date Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) Baa2 Moody's / BBB S&P / BBB Fitch Samurai Bond (Public Offering) May 21, 2021 Investor Breakdown by Investor Type Others, 19.6% Settlement Date Deal Size Size Tenor May 27, 2021 JPY100bn Shinkin banks/ Regional JPY29.0bn JPY46.8bn JPY1.2bn JPY18.2bn JPY2.5bn JPY2.3bn Public Funds, 3-year 5-year 7-year 10-year 15-year Maturity May 27, May 27, May 26, May 27, May 27, 20-year May 27, banks, 8.9% 0.2% Coupon 2024 0.33% 0.57% 2026 2028 2031 2036 2041 Central Central 0.70% 0.89% 1.17% 1.44% Banks, 4.0% Cooperative s, 7.0% Re-offer Spread over YMS+35 YMS+56 YMS+65 YMS+76 YMS+90 YMS+105 Yen Mid Swap (YMS) Daiwa/Mizuho/Nomura/SMBC City Banks, 22.2% Asset Managers, 31.1% Insurers, 7.0% Joint Lead Managers Transaction Highlights . Rol's seventh consecutive year accessing this market with JPY 100 billion or larger sized benchmark transactions since 2015. This benchmark sized transaction has been achieved with the lowest JPY spreads and coupon levels in comparison with Rol's past Samurai deals, maintaining a fairly low premium over its USD secondary curves • The lowest coupon in the history of the issuance of Samurai Bonds for a tenor of 10 years, amounting to 0.89%. This coupon is even lower when compared to the issuance of 10-year Samurai Bonds with JBIC guarantee in 2015 which was at the level of 0.91%. • Rol successfully issued mid to long tenured tranches (5-year and above) for more than 70% of the total issuance with the lowest ever dependency on 3-year tenor. This significant demand shift from 3-year tranche to longer tenors reflected investors' confidence on Rol's fundamentals. Source: Ministry of Finance 84 ==#86Republic of Indonesia - Global Sukuk USD3bn Investor Breakdown by Investor Type 5-Year USD 10-Year USD 30-Year USD 7% 12% Issuer Issue Format Issuer Rating Pricing Date Republic of Indonesia 144A/Reg S, Senior, Unsecured, Wakala US$ Trust Certificate ("Sukuk") issued under a USD$25billion Trust Certificate Issuance Program Baa2 Moody's (Stable) / BBB S&P (Neg) / BBB Fitch (Stable) 02 June 2021 10% Issue Date 09 June 2021 (T+5) Tenor Maturity Trance Size Profit Rate 9-Jun-26 USD1.25B 1.5% fixed, 5-year Sukuk 10-year Sukuk 9-Jun-31 USD1.00B 30-year Green Sukuk 9-Jun-51 33% 16% USD750M semiannual, 30/360 2.55% fixed, semiannual, 30./360 3.55% fixed, semiannual, 30/360 5-Year USD Re-Offer Price 100.00% 100.00% 100.00% 2% Re-Offer Spread UST +70.4bps UST +95.7bps UST +125.5bps Listing SGX-ST and Nasdaq Dubai 41% Joint Bookrunners Co-Managers 18% 29% 6% 27% 35% " ■ ME/Islamic ■ Europe ■ US ■ Asia (ex-Indonesia) Indonesia Investor Breakdown by Geography 10-Year USD 256 23% 30-Year USD 1% 19% 34% 6% 8% Transaction Highlights . CIMB, Citigroup, Dubai Islamic Bank, HSBC, SCB (B&D) PT BRI Dana Sekuritas, PT Trimegah Sekuritas Indonesia Tbk Republic of Indonesia marked their annual return to the Sukuk market with the issuance of Global Sukuk which was very well received by investors by generating a total order book in excess of USD 10.3 billion reflecting an oversubscription of more than 3.43x. • The transaction was carried out in line with the 2021 financing strategy, including accommodating the needs of the state budget in handling the impact of the Covid 19 pandemic. The USD 3 billion issuance also included a Green Tranche. The Green tranche was issued under the 30 year tenor for the first time, which is also the first in the world, after consistently issuing Green Sukuk with a 5 year tenor every year since its debut in 2018. This aptly demonstrates the Republic's dedication and long term commitment to Green and sustainable finance, as well as pioneering financing methods in the fight against climate change. Source: Ministry of Finance 40% 12% 5% 30% 4% 10% 12% - Fund Managers - CBS/SWFs - Ins/Pension = Banks ■ PB & Others Achievement ■ Lowest ever 5, 10 and 30 year yield, spread over UST and profit rate achieved by the Republic of Indonesia for global Sukuk issuance, First ever 30 year Green Sukuk issuance in the world, ■Robust investor orderbook allowed pricing below fair value across all tranches. Challenges Global • financial market conditions are very volatile and still affected by the Covid 19 pandemic • Performed under WFH conditions . No roadshow. 85 63%#87Republic of Indonesia - Dual Currency USD1,65bn and EUR500mio Issuer Issuer Rating Format Pricing Date Settlement Date Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) SEC Registered Allocation by Investor Type Allocation by Geography Banks 21% PB/Others 1% EMEA US 23% 19% US$ 10 Y July 21, 2021 PF/INS/ SWF/CB 21% AM/FM APAC July 28, 2021 57% 58% Banks 4% Currency USD Euro PB/Others EMEA US 1% 21% 28% Series RI0351 RI0731 (Reopening) RI0371 (Reopening) RIEUR0729 US$ Tap of '51s PF/INS/ SWF/CB 49% APAC Issue Size US$600 million US$750 million US$300 million €500 million AM/FM 46% 51% Tenor Maturity 10-year July 28, 30-year 50-year March 12, March 12, 8-year July 28, Banks 1% PB/Others 1% FMEA 32% 2031 2051 2071 2029 US$ Tap of '71s PF/INS/ US 46% Coupon (p.a.) 2,150% 3,050% 3,350% 1,000% SWF/CB AM/FM 88% APAC 22% 10% Yield 2,200% 3,100% 3,350% 1,068% Banks 6% Price 99,553% 99,031% 99,995% 99,481% EUR Listing Singapore, Frankfurt Stock Exchange BY PF/INS/ SWF/CB 16% PB/Others 2% US 8% APAC 20% AM/FM EMEA Use of Proceeds General Purposes, Including Covid-19 relief efforts 76% 72% Transaction Highlights • . Tightest ever spread achieved by ROI for a US$ 10Y issuance to date (Implied spread of +90.8bps over 10Y UST) Tightest ever spread and yield achieved by ROI for a EUR 8Y transaction . • For the USD tranches, garnered total orders of >US$4.7 bn at reoffer representing oversubscription of 2.4x - Achieved negative new issue concessions across all 4 tranches despite UST volatility and a crowded primary market on the day of bookbuild • The transaction marks one of the larger global offering by the Republic and as such demonstrates the Republic's ability to respond swiftly to markets and capture favorable issuance windows representing oversubscription of 2.8x. For EUR, garnered orders of >€1.2bn at reoffer Source: Ministry of Finance 86#88Republic of Indonesia Sustainable Development Goals (SDG Bond) EUR500mm & Liability Management US$1.25bn Issuer Republic of Indonesia Allocation by Investor Type Allocation by Geography Issuer Rating Format Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) SEC-Registered Shelf Take-Down INS/PF 4% PB 1% SWF/CB/SSA EMEA 28% 7% Settlement Date September 23, 2021 US$ Tap Tranche US$ Tap of '31s US$ 40 Year EUR Long-12 Year of '31s Banks/Broker 20% AM/FM 68% US 35% >US$2.0bn 3.3x covered APAC 37% across 58 accounts Currency USD USD Euro Issue Size US$650 mm €500 million SWF/CB 1% PB 1% Original Principal $600mm Amount Banks/Broker 9% EMEA 30% US 23% >US$1.3bn Reopening Size $600mm US$ 40Y 2.0x covered Maturity 28 Jul 23 Sep 2061 23 Mar 2034 PF/INS 18% 2031 AM/FM 71% APAC 47% across 89 accounts Coupon (p.a.) 2.150% 3.200% 1.300% Yield 2.180% 3.280% 1.351% Price 99.734% 98.225% 99.419% SSA/CB INS/PF 7% 6% Use of Proceeds Repurchase certain of its outstanding global bonds pursuant to its tender offer announced on Sep 13,2021 Invest in projects that may qualify as Eligible SDGs Expenditures EUR Long- 12Y US 3% APAC 13% >€1.2bn 2.4x covered Banks/Broker 16% across 80 accounts AM/FM 71% EMEA Listing Transaction Highlights Singapore, Frankfurt Stock Exchange 84% • One of the first Sovereign SDG conventional bond issuance in the region and the first SDG Bond Framework verified by CICERO and IISD globally. On the back of strong demand from ESG-focused accounts, the Republic was able to price flat to its outstanding curve with zero new issue concession, and inside a potential conventional issuance. Final pricing implied that we were able to achieve a price compression of 27 bps, well inside the initial price thoughts level of MS+140-145bps. ⚫ The successful debut SDG Offering demonstrates the Republic of Indonesia's commitment towards financing environmental and social projects in contribution to the 2030 National Development Agenda and to be aligned with the SDGs. Source: Ministry of Finance 87#89GS Primary Market Performance 2020 - 2021 Through Auction In 2021, average incoming bid = IDR56.77 tn/auction while average awarded bid = IDR18.97 tn/auction [IDR Trillion] 450 Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) 400 350 300 250 200 150 5.14 6.50 Average Incoming Bid 2020 = IDR54.50T/ auction Average Awarded Bid 2020 = IDR15.85T/ auction 14.00 12.17 12.00 100 50 3.91 3.14 B.01 1.98 Jan-20 Feb-20 T Mar-20 Apr-20 Source: Ministry of Finance May-20 Jun-20 Jul-20 Aug-20 Sep-20 T Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 4.92 4.24 3.85 4.00 3.86 3.35 2.45 2.95 3.06 2.96 2.16 2.27 2.30 2.00 2.03 2.23 1.85 8.43 8.00 10.00 6.00 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 88#90Ownership of IDR Tradable Government Securities (a.o Dec 31, 2021) (IDR tn) Description Banks* Dec-18 Dec-19 Dec-20 481.33 20.32% 581.37 21.12% 1,375.57 35.54% December 31, 2021 1,591.12 34.01% • 17.13% Govt Institution Govt Institutions (Bank Indonesia**) 253.47 10.70% 262.49 9.54% 454.36 11.74% 801.46 17.13% 34,01% BANK Bank Indonesia (gross) GS used for Monetary Operation Non-Banks 48,87% NON-BANK Mutual Funds 217.36 9.18% -36.11 -1.52% 1,633.65 68.98% 118.63 5.01% Insurance Company and Pension Fund Foreign Holders 414.47 17.50% Foreign Govt's & Central Banks Individual Others Total 273.21 9.93% 10.72 0.39% 1,908.88 69.34% 130.86 4.75% 471.67 17.13% 893.25 37.71% 1,061.86 38.57% 163.76 6.91% 194.45 7.06% 73.07 3.09% 81.17 2.95% 134.22 5.67% 163.32 5.93% 2,368.45 100% 2,752.74 100% 874.88 22.60% 420.51 10.86% 2,040.83 52.72% 161.32 4.17% 1,220.73 26.09% 419.27 8.96% 2,286.40 48.87% 157.93 3.38% 542.82 14.02% 655.24 14.00% 973.91 25.16% 891.34 19.05% 178.31 4.61% 233.45 4.99% 131.21 3.39% 221.41 4.73% 231.57 3,870.76 5.98% 360.47 7.70% 100% 4,678.98 100% IDR 1.092.02T on January 24, 2020, foreign in nominal terms. holders reach a record high 68,41% Portion of foreign ownership in the mid & long term sector (≥ 5 years). MUTUAL FUND INSURANCE & PENSION FUND FOREIGN 3,38% 14,00% 19,05% INDIVIDUAL OTHERS 4,73% 7,70% Note: 1) 2) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund. Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance 89#91Disciplined and Advanced Debt Portfolio Management Prudent Fiscal Deficit Stable Debt to GDP Ratio Over the Years IDR Tn Government Debt / GDP (%) 1,500 10% 8,000.00 41.00% 45% 1,177 8% 39.39% 1,000 7,000.00 40% 6% 6,000.00 27.46% 28.34% 29.40% 29.81% 30.18% 819.86 35% 407 442 446 500 362 358 4% 852.91 30% 5,000.00 24.68% - 2% 19 14 50 25% 4,000.00 3,000.00 2,000.00 1,000.00 1,931.22 2,410.01 2,780.86 3,248.93 764.48 810.74 746.32 734.85 755.12 3,612.69 4,014.80 5,221.65 6,091.85 4 20% -58 -69 (20)56) (66) (9135) (36) - 0% 15% -298 (500) (308) (269) (341) (349) -2% -1.8% 10% -2.6% -2.5% -2.2% -2.5% -4% 5% (1,000) (956) -6% 0% -6.1% 2014 2015 2016 2017 2018 2019 2020 2021* (1,500) -8% 2015 2016 2017 2018 2019 2020 Bond Loan Debt to GDP Weighted Average Debt Maturity of ~8.6 Years 10 9.75 9.5 9.39 9.13 6 8.5 8.68 8.6 8.52 8.5 8.37 IGS Nett Loan Nett Non-Debt Surplus (Deficit] Budget --Ratio Deficit to GDP Well Diversified Across Different Currencies % of Yearly Issuance 1% 1% 1% 1% 1% 7% 4% 6% 6% 5% 4% 5% 4% 20% 31% 29% 30% 27% 23% 57% 59% 58% 62% 66% 70% 7.5 2016 2017 2018 2019 2014 2015 2016 2020 2017 2018 2019 2020 Dec-21 2021* ■IDR USD EUR JPY OTHER 8 Source: Ministry of Finance 90 90#92Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks (%) 21.0 20.7 21.0 19.2 19.7 17.5 16.1 14.8 13.7 12.1 10.6 10.6 9.8 14.2 13.12 Declining Exchange Rate Risks (%) 43.4 44.6 42.6 41.3 41.0 37.9 33.5 30.03 7.43 13.2 12.2 12.1 12.1 12.2 12.32 11.4 10.7 2014 2015 2016 2017 2018 2019 2020 2021* 2014 2015 2016 2017 2018 2019 2020 2021* FX to GDP Ratio ■VR Proportion Refixing Proportion ■FX Proportion Debt Maturity Profile IDR tn 700 600 ■IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 162 500 179 177 186 142 400 111 166 141 300 108 106 487 200 422 356 361 374 276 100 0 30 300259210 34739 48 10 38 199 165 112 111154 2026 2027 2036 5 2038 0 2037 2039 28 51 32 87 61 143 35 2040 Aw 2041 2042 00 2043N 2044 NW 2045 301 20 76 33 69 2046 2047 2048 2049 2050-2071 Source: Ministry of Finance Upcoming Maturities (Next 5 Years) 39.3 40.4 41.0 39.6 40.11 36.0 33.9 34.7 25.0 25.5 24.3 22.7 22.8 22.8 21.4 20.1 9.9 10.6 7.7 8.4 8.1 7.8 6.5 6.4 130 26 36 2014 2015 2016 2017 2018 2019 2020 2021* ■1 Year 3 Year 5 Year 91#93Holders of Tradable Central Government Securities Balanced Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities Foreign Ownership of Gov't Domestic Debt Securities by Tenor 19.0% 25.2% 29.4% 38.2% 37.5% 39.8% 37.7% 38.6% 37.0% 34.8% 33.5% 38.6% 46.9% 39.3% 34.1% 35.6% 36.8% 39.0% 35.8% 39.8% 37.8% 39.9% 36.8% 42.0% 40.3% 37.7% 38.6% 25.2% 19.0% 35.5% 34.0% 17.3% 22.0% 22.1% 23.8% 18.4% 23.9% 22.5% 23.4% 20.3% 21.1% 5.1% 1.9% 6.7% 4.0% 4.8% 5.0% 4.3% 2.4% 4.6% 3.0% Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 ■>10 >5-10 >2-5 ■>1-2 Foreign Holders Domestic Non -Banks Domestic Banks 10-1 % Foreign Ownership of Total Source: Ministry of Finance 92 22#94Section 6 Commitment to Sustainability and Preserving the Environment BHINNEKA TUNGGAL IKA#95Climate Change Risk on Indonesia Indonesia is classified as a country that is vulnerable to the impact of climate change Very Vulnerable Vulnerable Intermediate Less Vulnerable Least Vulnerable Unrated Sovereigns Source: Standard and Poor's, 2014 RISKS OF CLIMATE CHANGE 0 ન Indonesia is a country that is very vulnerable to climate change Indonesia is an archipelagic country WITH >17,000 islands and is vulnerable to climate change risks such as the rise of sea level From 2010-2018, national GHG emissions experienced an increasing trend of around 4.3% per year. From 1981-2018, Indonesia experienced increasing temperature of 0.03 °C per year Sumber Data: KLHK (2020), data diolah Indonesia experiences a sea level rise of 0.8-1.2 cm/year, while around 65% of the population lives in coastal areas Source: BMKG (2020) Source: Bappenas (2021) WATER SCARCITY Increasing levels of floods and severe drought will exacerbate the scarcity of clean water. LAND ECOSYSTEM DAMAGE It is scientifically predicted that severe forest fires will occur. This can lead to loss of ecosystems, biodiversity, and changes in Biomass. HEALTH QUALITY DECREASE Floods can cause the spread of vector-borne diseases and death from drowning. An increase in temperature can cause death from heat stroke. FOOD SCARCITY Changes in the production of biomes and ecosystems can lead to food scarcity for all living things. Climate Change may increase the risk of hydrometeorological disasters, which currently reach 80% of the total disasters that occurred in Indonesia. Source: NDC, 2016 Indonesia's potential economic losses can reach 0,66% to 3,45% of GDP in 2030 source: Roadmap NDC Adaptasi, 2020 MARINE ECOSYSTEM DAMAGE Rising sea surface temperatures cause the extinction of coral reefs, seaweed, mangroves, some biodiversity and marine ecosystems. Source: Ministry of Finance 44 94#96Global Trends Strengthening Attention to Climate Change UNFCCC-COP26 GOALS B G20 FORUM The G20 has encouraged countries' commitments on the issue of climate change, including phasing out subsidies on fossil fuels. 01 Secure global net zero by mid- coal 02 Adapt to protect communities 03 Mobilise finance 04 Work together to deliver ⚫ finalise the Paris Rulebook century and keep 1.5 degrees within reach and natural habitats protect and restore ecosystems warning ⚫developed countries mobilise at least $100bn in climate finance per year by 2020. to systems and resilient •International electric vehicles infrastructure financial institutions unleashing ⚫ collaboration between governments, businesses civil society. and the encourage and agriculture trillions in private investment in and public finance sector ⚫ accelerate the phase-out of ⚫ curtail deforestation speed up the switch build defences, EUROPEAN UNION The European Union is discussing a Border Carbon Arrangement policy (part of the EU Green Deal) or the imposition of import taxes on goods that produce emissions according to the amount of emissions produced INTERNATIONAL FINANCE INSTITUTIONS Global financial institutions such as Goldman Sachs, have committed to start reducing and even stopping financing for projects related to fossil fuels. The global trend of ESG funds (funds that pay attention to ESG principles in their investment activities) has been increasing rapidly since 2020. renewables Countries will be encouraged to achieve Net Zero Emissions by 2050 in COP26 Source: Ministry of Finance 95#97GHG emissions Net Zero Emission (NZE) BUSINESS AS USUAL NET-ZERO 2010 2020 2030 2040 2050 2060 2000 2000 2090 2100 Source: World Resource Institute لبليليلا NET ZERO EMISSIONS Net Zero Emission is a more ambitious Long Term Strategy to keep the global temperature rate below 1.5 degrees. 1. 10 Key Solutions to Achieve NZE 2050 PHASE OUT coal plants 6. INCREASE public transport Emissions Reduction 2. Gross Emissions Net Emissions Carbon Removal 3. 4. DECARBONIZE Cement, stel & plastics INVEST in clean energy & efficiency RETROFIT buildings 7. * 8. 000 9. 101 DECARBONIZE aviation and shipping HALT deforestation & RESTORE degraded lands REDUCE food loss and waste 5. SHIFT to electric vehicles 10. EAT more plants & less meat ipcc INTERGOVERNMENTAL PANEL ON climate change In 2018, the Special Report on Global Warming of 1.5°C, the Intergovernmental Panel on Climate Change (IPCC) stated the importance of achieving the NZE by 2050 or earlier to prevent the worst effects of climate change. PARIS2015 LMNL COP21-CMP11 Sumber: World Resource Institute Long Term Strategy was mandated ini Paris Agreement Article 4.19 "All Parties should strive to formulate and communicate long-term low greenhouse gas emission development strategies...." Source: Ministry of Finance 96 96#98Indonesia's Net Zero Emission Currently, there are 48 Parties (with a global emission share of 54%) that have SUBMIT communicated to the UNFCCC regarding the target NZE. Indonesia and 148 other Parties (with a global emission share of 46%) have not submitted the document The Government of Indonesia is drafting the Long Term Strategy on Low Carbon and Climate Resilience 2050 (LTS-LCCR) document and sectoral strategies to support the commitment to Net-Zero Emission 2050. 33,3% of global emissions Source: Ministry of Finance Source: World Resource Institute 18,8% of global emissions 46% of global emissions 1,9% of global emissions Net-zero Target in Law 5 Parties Net-zero Target in Policy Document 27 Parties Net-zero Target in Political Pledge 16 Parties No Document Submitted 149 Parties. 97#99The Government's commitment to climate change mitigation has been formulated in the Nationally Determined Contribution (NDC) and Net Zero Emission (NZE) INDONESIA'S CLIMATE CHANGE AGENDA Paris Agreement and Nationally Determined Contribution (NDC) 2030 MITIGATION GHG Emission Reduction Target Per NDC Sector (MTon CO₂e) INDONESIA N EMISSION REDUCTIO N TARGET FORESTRY ENERGY & TRANSPORTATION WASTE AGGRICULTUR E IPPU 29% 497 314 11 9 3 Target: 29% national effort 41% 692 446 40 4 3.25 41% with international support Long-Term Strategy for Low Carbon and Climate Resilience 2060 Mandate from: Paris Agreement Article. 4.19 Dec. 1/CP.21 Para 35 Policy Strengthening and Implementation Capacity Climate Technology Finance Development and Building Transfer LCCP Scenario: • Peak emission 5 sector in 2030 = 540 Mton CO2e • Net-Sink FOLU in 2030 • Net Zero Emission in 2060 or sooner Carbon Trade Stated in: Carbon • First NDC (2016) Carbon Tax Pricing . • Updated NDC (2021) (initial rate: Rp30/Kg CO2e) Climate Resilience Social Economic Resilience 2 Resilience and 3 Ecosystem and Livelihood Landscape Resilience ADAPTATION Toward Net Zero Emission 2060 98#100Commitment to Sustainability and Climate Change Mitigation Republic of Indonesia's Commitment to Sustainability which Includes Climate Change Mitigation Commitment to Sustainability Successfully implemented the Sustainable Development Goals by achieving the 2030 development agenda introduced by the United Nations (UN). The Indonesia's Presidential Regulation no. 59/2017 concerning the implementation of SDGs in Indonesia mandated the Ministry of National Development Planning to provide the Roadmap of SDGs in Indonesia Background of Commitment Combining public and private funds to support Sustainable Development Goals (SDG)s The Government of Indonesia through the Ministry of Finance and PT Sarana Multi Infrastruktur (SMI) seeks to achieve the SDGs through the establishment of an integrated platform called "SDG Indonesia One"1 which combines public and private funds through blended finance schemes to be channeled into infrastructure projects related to the achievement of SDGs The President's Nawacita Programme The Nine Agenda Priorities of the President's priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs 13 14 PAAT JUDGE PERTATION SUSTAINABLE DEVELOPMENT GOALS Mitigation Based on the Paris Agreement and Indonesia's NDC, Gol has committed to reduce greenhouse gas emission by 29% in 2030 on unconditional mitigation scenario using self-financing, and by 41% in 2030 on conditional mitigation scenario using international financing support Based on National Energy Policy, increase New Renewable Energy to 23% of national energy mix by 2025 Strengthen the Core Actions through strengthening the policy framework, human and institutional capacity, socializing, and researching With regards to forestry, the actions should include deforestation prevention, forest degradation prevention, conservation, and others Note: (1) SDG Indonesia One, PT Sarana Multi Infrastruktur Environment Commitment and Objectives Adaptation Climate Change: Significant risks for Indonesia's natural resources that will impact the production and distribution of food, water, and energy National Action Plan on Climate Change Adaptation: National framework for adaptation initiatives mainstreamed Development Plan into the National Medium-term Goal of Indonesia's climate change adaptation strategy: reduce risks on all development sectors by 2030 through local capacity strengthening, improved knowledge management, convergent policy on climate change adaptation and disaster risks reduction Biodiversity Indonesia is the world's largest archipelago comprising over 16,056 islands with unique ecosystems containing a large number of diverse species. Contains the world 3rd largest area of rainforests Biodiversity Strategy and Action Plan 2015-2020 was launched to provide an outline on how biodiversity could be utilized sustainably to improve economic and development opportunities. Source: Ministry of Finance 99#101Climate Governance in Indonesia Ministry of Finance is responsible for climate fiscal policy Ministry of Finance c.q. The Fiscal Policy Agency is also the National Designated Authority of the Green Climate Fund (NDA- GCF) as the core interface between the country and the GCF Climate Change National Focal Point (NFP- UNFCCC) •Leading role in Climate Policy Formulation and Coordination -Coordinating climate program implementatir and MRV Source: Ministry of Finance Coordinating Ministries Coordinating Ministry of Economic Affairs Coordinating Ministry of Maritime and Investment Ministry of Environment and Forestry Ministry of Finance (Focal Point) •Climate Finance Policy Formulation & Coordination *Planning & Budgeting for Climate Programs •Climate Budget Tagging *Mobilizing other financing source for climate actions Central Bank and Financial Sector Authority Also coordinating with Central Bank (BI) and FSA (OJK) to promote green and resilience development through fiscal, monetary, and financial policy mix National development plan related to Climate Programs Planning & Budgeting for Climate Programs Climate Budget Tagging Ministry of National Development Planning Technical Line Ministries & Agencies " Implementing role in climate programs and climate budget Implementing role in climate policy and targets 100#102Commitment to Handling Climate Change NATIONAL CLIMATE CHANGE POLICY TIMELINE 1994 UNFCCC ratification to UU No.6/1994 2004 Kyoto Protokol ratification to UU No.17/2004 2011 and RAN-GRK and RAN-API 2014 FISCAL POLICY RESPONSE TO CLIMATE CHANGE ISSUES Mitigation Fiscal Framework Tax Incentives for NRE and clean technology development Revocation of Fuel Subsidy Implementaion of Climate Budget Tagging NEXT STEP OF CLIMATE RELATED FISCAL POLICY CO2 에 CLIMATE CHANGE AGENDA NATIONAL AND GLOBAL 13 PENANGANGAN PERUBAHAN IKLIM Preparation of fiscal instruments related to Carbon Tax and Carbon Trading Nationally Determined Contribution (NDC) SDGs 13: Climate Action updating Mitigation Fiscal Framework 300-04 Paris Agreement ratification 2016 to UU No.16/2016 2016 Submission of Nationally Determined Contribution (NDC) to UNFCCC Indonesia's Green Bond/Sukuk Framework Mainstreaming Climate Budget Tagging in local government budget Ecology-based Fiscal Transfer Integration of Climate Change Planning, Budgeting and MRV Systems Preparation of SDGs Government Securities Framework Low Carbon Development Planning in RPJMN 2020- 2024 NET ZERO CO, EMISSIONS 2050 2020 RPJMN 2020-2024 Prioritas Nasional 6 Source: Ministry of Finance Agenda Net-Zero Emission 101#103National Climate Financing GEI SONUSE 9065-0704 13 PENANGANGAN PERUBAHAN IKLIM NET ZERO CO, EMISSIONS 2050 Funding support to achieve the targets of the climate agenda can come from the public, private and international sectors towards "a just and affordable transition" SOURCE OF FINANCING STATE BUDGET DOMESTIC Carbon Tax/Excise • Central Government Expenditure . TKDD Expenditure • Financing (Green Sukuk, SDGs Bond) • • NON-STATE BUDGET Carbon Trading Private Investment and CSR BPDLH SDG Indonesia One . ICCTF ⚫ Financial Services sector (Bank and Non Bank) • Capital market Philanthropy .⚫ State Owned Enterprises Source: Ministry of Finance • CHALLENGES AHEAD, ESPECIALLY DUE TO THE COVID-19 PANDEMIC Limited fiscal space Strengthening the fiscal reform agenda and fiscal consolidation will be the key to fiscal sustainability onward. Optimal mobilization of non-state budget climate change funding sources. Ensure that the economic recovery and transition to a green economy is Just and Affordable. INTERNASIONAL BILATERAL Government Private MULTILATERAL • Green Climate Fund ⚫ Global • Environment Facility Adaptation Fund ⚫ MDBs ⚫ IFIS Strengthen the viability of green projects so that they can be financed by the financial sector and receive international support. The current market mechanism has not been able to reflect the price difference between the Green and non-Green sectors. Currently, it is still limited to Green Financing, it is necessary to strengthen Greening the Finance in order to support the sustainable development agenda. 102#104The Need of Climate Change Funding Indonesia's commitments are derived into each sector's agenda. The commitments have significant financial consequences Reference Second Biennial Update Report, KLHK (2018) Roadmap NDC Mitigation Indonesia, KLHK (2020) Cost Estimation of Climate Change Mitigation Scope The cost of mitigating climate change to achieve NDC Cost of climate change mitigation to achieve NDC (using mitigation action cost approach) Cost/Impact Estimation Accumulated mitigation cost reaches IDR3.461 trillion until 2030 Accumulated mitigation cost in 2020-2030 reaches IDR3.779 trillion (IDR343,6 trillion per year) The Need of Climate Change Mitigation Funding, by Sector NDC Mitigation Roadmap (Rp trillion) Sectors Second BUR (Rp trillion) Forestry Energy and Transportation 77,82 3.307,20 93,28 3.500,00 IPPU 40,77 0,92 Waste 30,34 181,40 Agriculture 5,18 4,04 Total 3.461,31 3.779,63 Source: Second Biennial Update Report (2018) & Roadmap NDC Mitigasi (2020) Source: Ministry of Finance Policies are required to ensure that financing requirements are met. 103#105State Expenditure for Climate Change the average climate change budget allocation in the 2018-2020 State Budget is IDR102.65 trillion per year the average mitigation and co-benefit budget reached the average adaptation budget reaches IDR 40.4 trillion IDR 62.7 trillion per year per year IDR trillion 140.00 6.0% 6.5% 4.0% 120.00 2.8% 5.5% 48.64 100.00 4.5% 80.00 3.5% 39.20 60.00 2.5% 33.30 40.00 20.00 83.83 1.5% 58.46 44.51 0.5% -0.5% 2018 2019 2020 • Around 88% is used to finance green infrastructure. • Approximately 12% is used to finance supporting activities such as regulations and policies, R&D, capacity building, and community empowerment. • The share of the climate change budget in the APBN has a downward trend. It is necessary to strengthen climate change commitments in the work plans of the Ministries/Agencies in the future. IPPU, 0.02% Composition of the Climate Change Waste, 4.94% Mitigation Budget by sector Energy and Transportati on, 83.93% Source: Ministry of Finance, calculated Alokasi Anggaran Alokasi Anggaran Adaptasi (LHS) Alokasi Anggaran Alokasi Anggaran Mitigasi & Co-Benefit (LHS) Porsi dalam APBN (RHS) Agriculture, 6.97% Forestry and LULUCF, 4.14% Non- Infrastructur e 11.9% Composition of Climate Change Budget by Type of Output Infrastructure 88.1% 104 (%)#106Role of The Ministry of Finance in Mobilizing Funds From Non-State Budget GREEN CLIMATE FUND SDG Indonesia One bpdlh Ingungen • The GCF is the implementing entity for the UNFCCC financial mechanism which was established by the Conference of Parties (COP) in 2010. • • Has the potential to help Indonesia achieve its Nationally Determined Contribution (NDC) target without burdening the state budget. The world's largest climate change fund. • Intended for developing countries. • Have a variety of financial instruments. • Have a balanced target between mitigation and adaptation • SDG Indonesia One is an integrated funding cooperation platform managed by PT. SMI by combining public funds and private funds through a blended finance scheme to be channeled into infrastructure projects in Indonesia related to the achievement of the SDGs. • SDG Indonesia One funding sources come from the private sector, donors/philanthropy, financial institutions, institutional investors, and bilateral and multilateral institutions. • BLU BPDLH or Indonesia Environment Fund (IEF) is a merger between the BLU of the Center for Forest Development Financing and the environmental conservation program of the Ministry of Environment and Forestry. • IEF manages and provides the funds needed for environmental and forestry protection, • preservation and conservation, biodiversity management, and climate change mitigation and adaptation. IEF not only manages funds in the environmental & forestry sector, but also in the fields of energy, agriculture, transportation, marine & fisheries, and industry. Source: Ministry of Finance 105#107GCF Approved Indonesian Projects/Programs GCF Readiness 1 Programs I and II for NDAs and Nationally Accredited Agencies GGGI Project Preparation 2 Grants: (PPF) for Bus Rapid Readiness | USD850.000 Readiness II USD998.000 Transit Development in Semarang VSMi Result-based Payment UN 3 (RBP) REDD+ Indonesia DP (2014-2016) Grant: USD788.000 RBP: USD103,8 m 4 Geothermal Resource Risk Mitigation Facility (GREM) Funding Scheme (in million USD) 7.5 2.5 5 THE WORLD BANK ■ GCF - Loan ■GCF Reimbursable Grant ■GCF - Grant 310 Climate Investor One (CIO) Funding Scheme (in million USD) 100 26.5 FMO Entrepreneurial Development Bank Global Subnational Climate Finance (SnCF) Funding Scheme (in million USD) - GCF - Reimbursable Grant ■ Co-Financing - Development Fund (Grant) ■ Co-Financing - 18.5 150 9.5 IUCN PEGASUS GCF Grant ■GCF - Equity 222 225 GCF Funding: USD100 m; Co-financing: USD310 m. IBRD - Loan Ministry of Finance/ PT. Sarana Multi Infrastruktur 310 GCF Funding: USD100 m; CEF Tier 1 (Grant) ■ Co-Financing - CEF Tier 2 Co-financing: USD721,5 m. (Equity) 600 GCF Funding: USD168,5 m; Co-financing: USD609,5 m IUCN Grant Pegasus Capital Advisors - Equity Source: Ministry of Finance 106#108Achievements of SDG Indonesia One Achievement of SDG Indonesia One Quarter 1 2021 Blended Finance Project (Indicative) 19 Projects consists of 4 financing projects and 15 project development activities Ecosystem Enabler 9 Activities Consists of capacity building activities and sharing sessions Funds Mobilization USD791 m Support for grants, de- risking and loans as stated in the agreement with the donor Drinking Water, 5% Sectors Supports Renewable Energy,... Indonesian SDG Performance One had been supporting the following SDGs Target On-Going Programs Solar Rooftop Program Urban Infrastructure Program 6 DAN SANITASI Disaster Area Rehabilitation Program 9 Sustainability Promotor # Technical Assistance on Green Finance PLN Facility PERTAMINA Technical Assistance on Global Green Bond Issuance Clean Water Program Renewable Energy Program Source: Ministry of Finance Financing, 21% Grants for TA, 79% ENERGI BERSIH DAN TERJANGKAU 13 PENANGANGAN PERUBAHAN IKLIM 17 KEMITRAAN UNTUK MENCAPAI TUJUAN 107#109Indonesia Environment Fund /BPDLH 13 PRIORITY PROGRAMS In accordance with the Regulation of the Minister of Finance No. 124 of 2020 concerning Procedures for Management of Environmental Funds bpdlh Ingungen na CO₂ 1. Climate change control (including the REDD+ program) 2. Sustainable forest management (including the REDD+ framework) 3. Forest and land fire control and peatland restoration (including the REDD+ framework) 4. Social forestry and environmental partnership (including the REDD+ framework) 5. Forest and land rehabilitation activities and other supporting activities (including the REDD+ framework) 6. Conservation of biodiversity and ecosystem (including the REDD+ framework) 7. Control of pollution and/or environmental damage(including the REDD+ framework) H 8. Increasing the competitiveness of natural resource-based industries 9. Treatment of solid, liquid and hazardous waste 10. Use of environmentally friendly and low-carbon materials and technologies 11. Increasing the application of energy efficiency, NRE, and social energy conservation and environmental partnership 12. Reducing disturbances, threats, and violations of environmental and forestry laws 13. Other environmental protection and management activities Source: Ministry of Finance 108#110Funding Gap for Climate Change Management NDC Unconditional Target (avoiding emission in 2030 as much as 29% of BAU) Total Cumulative 2020-2030 Fiscal Policy Responses 100% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% -27% 40% -33% 0% The need of green investments Estimate of green investments by Estimate of green investments by Government Sector Private Sector (365 milyar USD) (97 milyar USD) (120 milyar USD) Gap (148 milyar USD) (1) The effects of covid are estimated to be apparent until 2023. (2) The need for green investment refers to the actual amount of green investment per tonne of emissions averted in the past, as well as the ratio of investment in mitigatied sector vs adaptation in the past. (3) does not take into account the role of local governments. (4) The cost of non-field works is factored into the calculations. APBN Optimization of budget utilization Optimal mobilization of non-Budget climate change funding sources, domestically and internationally. Taxation and Excise incentives • to stimulate the role of the private sector, for example through efforts to develop EBT and electric vehicles Ministries/Agencies Budget for Climate Change Mitigation and Adaptation • CBT in planning and budgeting systems Transfer to Regions and Village Funds (TKDD) . TKDD also encourages the increase of regional governments role in dealing with climate change : a. Physical DAK (food, water, health, environment and forestry sectors) b. Non-Physical DAK (waste management) c. Regional Incentive Fund (incentive from waste management performance) d. Village Funds (use of low-emission alternative energy) e. Ecology Based Fiscal Transfer (financial assistance for environmental improvement) Innovative Financing for Sustainable Development . Strengthening green infrastructure financing and deepening the Islamic financial market through Green Bond/Sukuk Framework dan SDGS Government Securities Framework CCFF bpdlh insungentido GREEN CLIMATE FUND SDG Indonesia One PISP 109#111Recent Policies Facing the existing challenges, the Government continues to develop innovative policies. Two of them are: a. Climate Change Fiscal Framework (CCFF) b. Carbon Pricing CCFF is a framework for formulating fiscal policies and strategies to mobilize funds outside the Budget Indonesia Commitment to Climate Change Financing Supply Analyze current spending on climate activities from public sector. NDC sectors Ministries Non-ministries Map current spending on climate activities from private sector. Financing Needs Financing Gaps Climate Fiscal Strategy Map next- decade need for climate finance. Identify total finance gap for all (public and private sectors). Fiscal and non-fiscal policies affecting climate action Strategy to mobilize public finance Strategy to mobilize private finance Policy and governance of climate finance actors, mandates and coordination Identify barriers, enabling environments, and innovative public- private financing mechanisms. Improved coordination mechanism across actors to deploy climate finance and monitor impact URGENCY - Strengthening Fiscal Functions - Supporting NDC, SDGs & RPJMN commitments Mobilizing funding sources - Strengthening the framework of funding institutions Climate Finance Mobilization, Governance and Impact 110#112Phasing Out Coal Scenario 120 100 80 Skenario Zero Carbon 2060 (%) 1 7 9 8 29 45 50 53 8 60 40 。。 20 68 62 59 24 11 0 2020 2045 2050 PLTU 2025 2030 2040 PLTGU Nuklir ■ PLTA PLTP EBT Lain PLTS + PLTB Skenario Zero Carbon 2060 (TWh) 1800 1600 1400 1200 1000 800 600 400 200 0 2020 2025 2030 PLTU PLTGU Nuklir ■ PLTA 2040 2045 2050 2060 2060 PLTP EBT Lain PLTS + PLTB In 2060 All Power Plants in Indonesia are Using Clean Energy 1. The market size utility in 2060 is 1,800 TWh, currently electricity production is 300 TWh plus the launch of 120 TWh from the 35 GW program, so there is room for 1,380 TWh for additional New Renewable Energy (NRE) generating capacity. 2. From 2020 onwards, the portion of PLTU capacity will be reduced (in the graph, it can be seen from the decreasing black color). 3. Efforts to retire fossil power plants will start in 2030 and significantly decrease in number by 2040, following the completion of the power plant contract. 4. Nuclear plants will enter in 2040 to maintain system reliability as nuclear technology becomes more secure. 5. Phase out all coal-fired power plants in 2056, because they have been replaced by NRE. 6. Meanwhile, the development of NRE power plants will experience a massive increase starting in 2028 due to the advancement of battery technology which is getting cheaper. Then it will increase exponentially starting in 2040. And by 2045, the portion of NRE will already dominate the total power plant. The next decade, all power plants in Indonesia came from NRE. Source: Ministry of Finance 111#113Roadmap Moving Towards Decarbonization and Coal Phase Out REPLACEMENT OF COAL & GAS PLANT PLTU BY PLT EBT BASELOAD 1,1 GW ↑ RETIREMENT SUBCRITICAL STAGE II (9 GW) RETIREMENT ULTRA SUPERCRITICAL STAGE I (24 GW) RETIREMENT ULTRA SUPERCRITICAL FINAL (5 GW) 2021 2025 2030 2035 2040 2045 2050 2055 2060 RETIREMENT SUBCRITICAL STAGE I (1 GW) RETIREMENT PLTU SUPERCRITICAL (10 GW) RETIREMENT ULTRA SUPERCRITICAL PROGRESSIVELY STARTING 2045 - 2056 1. Initial phase out until 2025 by replacing diesel plants and PLTGU with RNE Plants. 2. 2nd phase out in 2030 by retiring PLTU operations outside Java. 3. 3rd phase out in 2035 by retiring FTP-1 Power Plants. 4. 4th phase out in 2040 to 2056 by retiring all supercritical and ultra supercritical IPP. Source: Ministry of Finance Source: PT PLN (2021) 112#114Carbon Pricing or Carbon Economic Value (NEK) is a part of a comprehensive policy package for climate change mitigation End of Period 01. Trading instruments, consists of 2 types: a. Emission Trading System (ETS) an entity that emits more buys emission permit from other entities that emits less b. Crediting Mechanism: entities undertaking emission reduction activities can sell their carbon credits to other entities requiring carbon credits Emission Trading System First Period Batas Atas Entity A Emisi (emission cap) and Entity Batas Atas Emisi (emission cap) B have the Emission same B Allocation allocation Certificate Emission at the beginning of the period Emission Offset Obtained B 02. Non-trading instruments, consists of 2 types: a. Carbon tax, imposed on carbon content or carbon emitting activity b. Result Based Payment (RBP): payment is given as a result of emission reduction 2 A C Initial Emission Final Emission Emission Reduction Certificate Emission Obtained Carbon Tax Result-Based Payment A A has an allocation surplus that can be sold to B B Batas Atas Emisi (emission cap) B is a business entity that is subject to a cap C is a business entity that is not subject to a cap Carbon Content GRK Emitting Activities Non-Trading No carbon rights transfer 11 F3#115Carbon tax is one of the instruments of Carbon Economic Value (NEK) OBJECTIVES 1 CHANGE BEHAVIOR Aims to change the behavior of economic actors to sw tcn to cw-carbor green economic activities. 2 SUPPORTS EMISSION REDUCTION Support GHG emission reduction targets in the med um and org term. 3 ENCOURAGE INNOVATION AND INVESTMENT Encouraging carbon markets develoomert, technologica innovators, and investments that are more efficent, low-carbon, and environmentaly frendy. PRINCIPLES 1 JUST Based on the polluters-pay-principle. AFFORDABLE Paying attention to affordability aspect for the benefit of the wider community. 3 GRADUAL Paying attention sector readiness so as not to burden the community. 11 4#116The legal basis for the carbon tax has been established, while derivative regulations are being drafted • • . • • • Law no. 7/2021 on the Harmonization of Tax Regulations - Article 13 Key Provisions: Imposition: imposed on carbon emissions that harm the environment. Directions for carbon tax imposition: pay attention to the carbon market roadmap and/or the carbon tax roadmap that includes a carbon emission reduction strategy, priority sector targets, alignment with new and renewable energy development and alignment between various other policies. The principle of carbon tax: the principle of just and affordability by considering the business climate and small communities. The carbon tax rate is set higher or equal to the carbon price in the carbon market with a minimum rate of IDR 30.00 per kilogram of carbon dioxide equivalent (CO2e). The utilization of state revenues from the Carbon Tax is carried out through the State Budget mechanism. It can be used, among others, to control climate change, provide social assistance to poor households affected by carbon taxes, subsidize renewable energy, and others. Taxpayers participating in carbon emission trading can be granted a carbon tax deduction. Enforcement of the carbon tax: effective on April 1, 2022, which was first imposed on an agency operating in the coal-fired power plant sector with a cap and tax scheme in line with the implementation of the carbon market, which has already been implemented starting in the coal- fired power plant sector. Presidential Regulation no. 98/2021 concerning the NEK Implementation - Article 58 Key Provisions: Carbon levies are defined as state levies both at the central and local levels, based on carbon content and/or potential carbon emissions and/or total carbon emissions and/or performance of Mitigation Actions. Furthermore, the arrangement for its implementation is carried out in accordance with the provisions of the laws. Thus, carbon levies can be in the form of existing state levies (e.g. Motor Vehicle Tax, Fuel Tax, PPnBM) and other levies that will be applied (e.g. the imposition of a Carbon Tax). Implementing Regulations being Developed: 1. MoF Reg of Carbon Tax Tariff and imposition basis 2. MoF Reg of Carbon Tax Imposition Procedures and Mechanisms 3. GR of Carbon Tax Roadmap 115#117The carbon tax roadmap is designed for a just and affordable principle 1 • 2021: • Enactment of the Presidential Regulation on Carbon Economic Value Enactment of the HPP Law, with one of its clauses being a carbon tax • Development of a technical mechanism for Carbon Tax and Carbon Exchange • Piloting of carbon trading in the power sector by the Ministry of Energy and Mineral Resources with an average price of IDR • 30,000/tCO2e Evaluation of the implementation of carbon trading piloting in the power sector by the Ministry of Energy and Mineral Resources 2 2022 . • Synchronization of Cap & Trade and Cap & Tax of the Electricity Sub Sector Determination of the cap for the coal power generation sector by the Ministry of Energy and Mineral Resources Limited application of carbon tax (cap & tax) to coal-fired power plants at a rate of IDR30,000/tCO2e Setting up a carbon trading support MRV System (SRN). Preparation of carbon trading technical regulations (KLHK) 2025: 3 Full implementation of carbon trading via carbon exchange Expansion of the Cap & Trade and Cap & Tax sectors gradually, in accordance with the readiness of the sectors. The carbon tax rate will be evaluated periodically and set higher or equal to the carbon price in the carbon market 116#118Indonesia's Green Project Priority Sector Indonesia realizes that investment in green and sustainable infrastructure is becoming increasingly important in post-pandemic. Regarding the NDC targets in reducing carbon emission, Indonesia has outlined the PPP priority sectors of 2020-2024, in which two sectors are related to climate issue, respectively: • Urban Transport, and Waste Management PPP Focused Sectors 2020-2024 Water and Sanitation * Urban Transport Gas Distribution + Housing Health Facility Waste Management ☐ Environmental quality aspects of projects are considered since the beginning of PPP project cycle, notably in planning and preparation stage, such as climate change issues and promoting green financing. The Project Development Facility (PDF) from MoF is focused to assist those priority sectors while considering environmental and other quality aspects during project preparation and its implementation. ப ப Additionally, GOI also initiate the development of ESG framework to be implemented to projects which involve private financing and at the same time obtain government supports. Source: Ministry of Finance 1 2 PPP Green Project City Street Lighting, Surakarta, Central Java Waste Management, Legok Nangka, West Java 3 Waste Management, Jatibarang, Central Java Expected to contribute for 70% energy efficiency by using LED technology as well as carbon emission reduction Expected to manage around 2,000 ton waste per day from 6 municipals Expected to manage around 1,000 ton waste per day from Semarang City 117#119The Role of Fiscal Policy in Green Economic Transformation Rp TAX State revenue policy is directed to support the development of renewable energy as well as environmentally friendly business areas The Ministry of Finance provides tax facilities in the form of tax holiday, tax allowance, import duty exemption, VAT reduction, government borne income tax, and reduction of property tax to support the development of geothermal and other renewable energy State expenditure policy is directed to support low-carbon and climate-resilient government spending (spending better). The Ministry of Finance implements the Mechanism of Climate Budget Tagging at the national and regional levels to determine the contribution of the State Budget and Sub- National Budget to tackle climate change. Implementation of climate budget tagging in the region in collaboration with the Ministry of Home Affairs and Local Government. Source: Ministry of Finance Financing policy is directed to support expansive fiscal policy through the development of innovative financing instruments The Ministry of Finance issues Sovereign Green Sukuk (Green Islamic Bond) both global green sukuk and green sukuk retail to finance climate mitigation and adaptation projects. 118#120Fiscal Incentives Rp TAX: Tax Holiday Income Tax Facility VAT Facility Import Tax Facility Property Tax Several tax incentives to promote green private investment. Instruments 100% tax discount for Up to 20 years depends on the amount of investment for 17 pioneer industries. Tax Allowance for geothermal businesses, renewable energy generators, and bioenergy industries. The exemption of article 22 income tax on imported goods for geothermal business activities. VAT exemption on imported goods for geothermal activities. Import tax exemption on geothermal activities. Fiscal Transfer Strengthening the capacity of sub-national governments in tackling climate change. Profit Sharing Fund on Natural Resources (DBH SDA) DBH SDA Forestry DBH SDA Geothermal Special Allocation Fund for Physical Development (DAK Fisik): • DAK Fisik Agriculture & Irrigation Development • DAK Fisik Environment Development DAK Fisik Forestry Development • DAK Fisik Marine & Fisheries Development Non Physical Special Allocation Fund (DAK Non Fisik) DAK Non Fisik for Waste Management (for tipping fee support) Incentive Fund (DID) • Property tax deduction exploration stage. up to 100% for DID on Waste Management Source: Ministry of Finance 119#121Fiscal, Monetary, and Financial Sector Policy Mix for Green Economy Fiscal Policy: KEMENTERIAN KEUANGAN REPUBLIK INDONESIA 1. Mitigation Fiscal Framework 2. Implementation of Govt. Expenditure for Climate Change 3. Tax Facilities 4. Republic of Indonesia's Green Bond/Sukuk Framework 5. Indonesia SDGs Government Securities Framework 6. Sustainable Finance Platform: SDG Indonesia One, Green Climate Fund, BPDLH 7. Development of Climate Change Fiscal Framework 8. Government support for new and renewable energy (NRE) development BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Central Bank Policy: 1. Macroprudential Policy that encourages financing in green building and environmentally friendly vehicles 2. Technical Assistance/Capacity Building to increase awareness about sustainable and green finance 3. International Cooperation Forum (Network for Greening the Financial System/NGFS) QJ OTORITAS JASA KEUANGAN Financial Sector Authority Policy: 1. Roadmap of Sustainable Finance, 2. Regulation of Sustainable Finance Implementation, 3. Green Bond/Sukuk Regulation, 4. Capability Enhancement to market participants with support from the International Finance Corporation (IFC) and the Sustainable Banking Network (SBN) Source: Ministry of Finance 120#122Sustainable Finance Initiatives Ex Br A www.Y OK B Sustainable Finance Roadmap Phase I (2015-2019) OJK is committed to supporting the Indonesian Government's target to achieve Net Zero Emission and enhancing stakeholders' awareness on the importance of development. Phase I Achievement Strategic Policies 1. Implementation of 8 sustainable finance principles. 2. Reports of SF Action Plan from financial institutions. 3. Corporate Social Responsibility fund allocation. 4. Financial institutions' Sustainability Report. Enhancing Awareness sustainable finance 1. Capacity building for OJK's supervisors and stakeholders. 2. Guideline on Sustainable Credit, Financing, Investment for palm oil plantation and industry, clean energy, green building, and organic farming with sharia scheme. Institutional Collaboration 1. Collaboration with ministries and other national/international organizations, including universities and research centers. Regulation on Sustainable Finance OJK stipulated some regulations to support SF a. POJK No.51/2017 regarding the Implementation of SF for Financial Institutions, Issuers and Public Companies, which aims to enhance awareness of the financial industry, regulate financial institutions' obligation to submit action plan for enhancing sustainable finance and to publish sustainability report. b. POJK No.60/2017 regarding framework and incentives for issuance of green bonds. In 2020, OJK also issued supervisory guidance and policy regarding incentives for electric vehicle-related financing. C. Source: Financial Services Authority (OJK) OFPRICAN RITA (3551-257951 MATHE Green Taxonomy Sustainable Finance Roadmap Phase II (2021-2025) focuses on sustainable finance ecosystem development consisting of 7 components. The Roadmap reflects OJK's commitment to realizing transparent regulations, building synergies in cooperation with relevant ministries/agencies and stakeholders, as well as improving the capabilities of the financial industry. ESG Risk Integration in Financial Institutions Risk Management Developing Incentives Guidance of Sustainable Finance Implementation in the Capital Market and NBFI . Supporting Infrastructure Development • Product Innovation . Policy Product Guidebook of Credit/Financing/ Investment in Sectors National Campaign - Indonesia Sustainability Week Sustainable Finance Inclusion Program Informative Publications for New Investors Awareness Market Infrastructure Development of Sustainable Finance Information Hub SUSTAINABLE FINANCE INDONESIA Human Resources Non- Government Support Coordination among related Ministries/ Institutions • • • Sustainable Finance Training and Training of Trainers E-learning development Developing Research Centers ⚫Pilot Project on Sustainable Finance Sustainable Finance Taskforce Monitoring and Evaluation of the Implementation of Sustainable Finance 121#123OJK's Support for Sustainable Finance Development 1 OJK strategic actions to ensure effective implementation of Sustainable Finance principles and to respond to climate change: 1. Developing a Green Taxonomy 2. Preparing for carbon exchange operations, in line with the Government's policy 3. Developing a reporting system for financial institutions, including green financing/instruments in accordance with the Green Taxonomy 4. Developing a risk management framework for financial services industry and a risk-based supervision guideline for supervisors to implement climate-related financial risks 5. Developing innovative and feasible project financing schemes 6. Enhancing awareness and providing capacity building programs for all stakeholders Source: Financial Services Authority (OJK) 2 The establishment of the Financial Services Sector Sustainable Finance Task Force as a forum for cooperation and coordination with the industry to respond to developments in sustainable finance at national, regional and global forums. 122#124Urgency of the Development of Green Taxonomy Urgency of Green Taxonomy Development at OJK - To standardize green definitions and criteria. - To regularly monitor credit/financing disbursement to the green sectors. - To improve reporting process carried out by the Financial Services Industry. Targets - Policy in the green sector, as the basis for developing innovative products and/or sustainable financial services as well as incentive and disincentive mechanisms for financial services sector. Availability of database for green sectors. Strategic Goals To develop standard definitions and green criteria of economic sector activities that support sustainable development, and climate change agenda in Indonesia. - To encourage innovation and investment in economic activities that have a positive impact on improving the quality of the environment. - To encourage the financial sector to provide financing for green economy activities. - To provide a reference for financial services sector, investors, business players (national and international) to disclose information related to financing, funding, or investment in green economy activities. Source: Financial Services Authority (OJK) 123#125Green Taxonomy . Proposed Definition of Green Taxonomy Classification of sectors based on business activities that support environmental protection and climate change mitigation and adaptation. The Green Taxonomy is used as a guideline for information disclosure in the Financial Services Sector and can be used as a reference for creating innovative sustainable financial products and/or services. In developing the Green Taxonomy, OJK actively participates in the Financial Stability Board, particularly regarding sustainable financial disclosure for Financial Services Institutions in the Financial Stability Board - Workstream on Climate Disclosures/WSCD and the ASEAN Taxonomy Board. The finalization of the Green Taxonomy involved 43 Directorate Generals in 8 related ministries to confirm the thresholds and to categorize around 2,700 sectors and sub-sectors classification. Green Taxonomy Definition Green taxonomy is a classification system that establishes a list of environmentally sustainable economic activities. (EU Green Taxonomy, 2019) A classification tool for the financial industry (banking) to protect the environment and reduce greenhouse gas emissions. (China Green Catalogue, CBRC, 2013). Benefits of Green Taxonomy As a guideline for allocating capital, a tool to support risk assessment, and a reference for other stakeholders in supporting efforts to mitigate and adapt to climate change. In its development, the green taxonomy is flexible and dynamic so that it can adapt to investment strategies and patterns and changes in technology, science, activities and new data. Source: Financial Services Authority (OJK) (ASEAN Taxonomy for Sustainable Finance ver.1, Nov 2021) 124#126Innovative Financing: Sovereign Green Sukuk and SDGs Bond Sovereign Green Sukuk and SDG Bond No Issuance Value Green Sukuk Financed Sector Allocation (2018-2020) (Domestic and Global) 81% 62% 49% 1 Global Green Sukuk (Mar 2018) USD 1,25 billion 2 Global Green Sukuk (Feb 2019) USD 750 million 8% 6% 27% 17% 11% 5% 9% 11% 7% 7% 3 Green Sukuk Retail (Nov 2019) IDR 1,46 trillion 4 Global Green Sukuk (Jun 2020) USD 750 million Renewable Energy 5 Green Sukuk Retail (Nov 2020) IDR 5,42 trillion Energy efficiency Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Sustainable Transport Waste and Waste to Energy Management 2018 2019 2020 6 Global Green Sukuk (Jun 2021) USD 750 million 7 SDG Bond (Sep 2021) EUR 500 million SDGs Financing Needs in Indonesia In USD Billion, 2020-2030 8 Green Sukuk Retail (Nov 2021) IDR 5,00 trillion • Sovereign green sukuk is Indonesia's main financing instrument for climate actions. . • Total global green sukuk financing: USD 3.5 billion • • Rol issued its debut SDG Bond in September 2021, which was also the first issuance of sovereign conventional SDG bond in Asia. Source: Ministry of Finance 759 668 588 517 • Total green sukuk retail financing: IDR 11.88 trillion 453 396 400 Green sukuk has financed various projects in 5 sectors and mostly for transportation projects. 147 302 3:00 261 404 39% 227 372 192 347 316 200 247 267 291 100 17 168 226 206 8:00 Est. SDGs Financing Distribution In USD Billion, 2020-2030 Non-Government Government 4,710 700 1:00 44% 3,030 500 56% B1% BALL High 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 BAU High 125 Sour: APPEALS, SOR, 2008#127Republic of Indonesia Sustainable Development Goals (SDG BOND) EUR500 Million Issuer Republic of Indonesia Issuer Rating Format Moody's: Baa2 (Stable) / S&P: BBB (Negative) / Fitch: BBB (Stable) SEC-Registered September 23, 2021 Settlement Date Tranche Currency USD Tap of 2031s USD USD 40 Year USD EUR Long-12 Year EUR Issue Size $650 million €500 million (SDG) Original Principal $600 million Amount Reopening Size $600 million Maturity July 28, 2031 September 23, 2061 Coupon (p.a.) 2.150% 3.200% March 23, 2034 1.300% Reoffer Yield Reoffer Price Use of Proceeds Listing 2.180% 99.734% 3.280% 98.225% Repurchase certain of its outstanding global bonds pursuant to its tender offer announced on September 13, 2021 1.351% 99.419% Invest in projects that may qualify as Eligible SDGs Expenditures SGX-ST and Frankfurt Stock Exchange Transaction Highlights ■ Debut Sustainable Development Goals (SDG) EUR issuance by an Asian Sovereign ■ Debut Liability Management transaction and Debut US$ 40 Year issuance by ROI ■ Tightest ever spread achieved by ROI for a US$ 10Y issuance to date yet again (implied spread of +85.8 over 10Y UST) ■ Tightest ever spread achieved by ROI for a EUR 12 / long-12 Year issuance ■ Achieved zero to negative new issue concessions across all 3 tranches despite a crowded primary market on the day of bookbuild ■ The successful debut SDG Offering demonstrates Rol's commitment towards financing environmental and social projects in contribution to the 2030 National Development Agenda and to be aligned with the SDGs. Source: Ministry of Finance 126 126#128Indonesia's Existing Green Bond and Sukuk Framework Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects 1 2 Use of proceeds of Green Bond and Green Sukuk Eligible Green Projects must fall into one of the nine eligible sectors Project Evaluation and Selection Review and approval process by Ministry of Finance and National Development Planning Agency Project selection will utilize the Climate Budget Tagging (CBT) mechanism 3 Management of Proceeds Management - Ministry of Finance The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance Line Ministries The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects 4 Reporting Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report on the list of projects, amounts of proceeds allocated to such projects and estimation of beneficial impacts The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction Source: Indonesia's Green Bond & Green Sukuk Framework 127#129Indonesia's Existing Green Bond and Sukuk Framework (cont'd) Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects Eligible Sectors Green Shading according to CICERO's second-party opinion Dark Green Renewable Energy Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Medium to Dark Sustainable Transport Waste and Waste to Energy Management Green Tourism Sustainable Agriculture Light to Medium Energy efficiency Sustainable Management of Natural Resources The Framework Excluded Use of Proceeds for New Fossil Fuel- Large Scale Based Power Source: Green Sukuk Allocation and Impact Report - May 2021 Electric Light Green Green Building Hydropower Plants > 30 MW Nuclear Assets 128#130Indonesia SDG Government Securities Framework (cont) Updated Green Bond and Sukuk Framework which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects (of social (SDGs), green or blue projects) Eligible SDGs Expenditures with Green and Blue focus Dark Green Renewable Energy* Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction* Medium to Dark Sustainable Transport Waste and Waste to Energy Management* Green Tourism* Sustainable Water and Wastewater Management Light to Medium Energy efficiency* Sustainable Management of Natural Resources on Land Light Green Green Building Eligible SDGs Expenditures with Green focus can be further linked to Blue (ocean related) projects Alignment with the Rol's 2030 SDGs Target Sustainable Management of Natural Resources on Ocean* GOOD HEALTH 6 CLEAN WATER AFFORDABLE AND DECENT WORK AND INDUSTRY, INNOVATION 11 SUSTAINABLECITIES AND WELL-BEING AND SANITATION CLEAN ENERGY ECONOMIC GROWTH AND INFRASTRUCTURE AND COMMUNITIES 12 RESPONSIBLE CONSUMPTION Source: Indonesia SDG Government Securities Framework AND PRODUCTION QO 13 CLIMATE ACTION 14 LIFE BELOW WATER 15 LIFE DN LAND 129#131Indonesia SDGs Government Securities Framework (cont) Updated Green Bond and Sukuk Framework which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects (of social (SDGs), green or blue projects)arecfv D7YC34E Eligible SDGs Expenditures with Social focus Employment Generation including through the Potential Effect of SME Financing and Microfinance Socioeconomic Advancement and Empowerment Access to Essential Services Food Security and Sustainable Food Systems Affordable Basic Infrastructure Alignment with the Rol's 2030 SDGs Target GURLION NO 1 POVERTY 2 2.1 FLIEL 4 5 EDICI GENDER EQUALITY CLEAN WATER 8 DECENT WORK AND 9 AND SANITATION ECONOMIC GROWTH 舞團 555 The Framework Excluded Use of Proceeds for New Fossil Fuel- Based Power Electric Large Scale Hydropower Plants > 30 MW Source: Indonesia SDG Government Securities Framework INDUSTRY, INNOVATION AND INFRASTRUCTURE 10 REDUCED INEQUALITIES 11 SUSTAINABLE CITIES AND COMMUNITIES ID Nuclear Assets 130 130#132Overview of the Indonesia SDGs Government Securities Framework The SDGs Government Securities Framework is the Key to the Issuances of Green and SDGs Securities Journey of The Republic of Indonesia SDGs Government Securities Framework ("SDGs Framework") January 2018 Published a Green Bond and Green Sukuk Framework & obtained a Second Party Opinion from CICERO 2018-2021 Successfully issued 4 Green Sukuk based on ROI Green Bond and Green Sukuk Framework SDGs Government Securities Framework August 2021 SDGs Framework developed to demonstrate how ROI intends to issue Green and Blue Bonds and Sukuk ("Green Securities") and Social and Sustainability Bonds and Sukuk ("SDGs Securities") Aligned with International Standards & Principles Use of Proceeds 1 New or existing Eligible SDGs Expenditures with Green and/or Social focus ("Eligible Expenditures") All Green and SDGs Securities issued under The Republic of Indonesia ("ROI") SDGS Government Securities Framework will align with international standards and principles Process for Project Evaluation and Selection 2 Budget Tagging Process to select Eligible SDGs Expenditures for Green and SDGs Securities Management of Proceeds 3 The Managed within the Government's general account; allocation register will be established The Green Bond Principles Sustainability Bond Guidelines The Social Bond Principles ACMF 4 Reporting Annual allocation reporting and impact reporting Source: Republic of Indonesia SDGs Government Securities Framework Source: Ministry of Finance 131#133External Review of Indonesia SDGs Government Securities Framework Engaged with CICERO and IISD to Adhere to the Best Market Practice of External Reviews Joint Second Party Opinion from CICERO Shades of Green¹ and IISD² "CICERO °C Shades of Green IISD International Institute for Sustainable Development Republic of Indonesia 9DCs Framework Second Opinion கர் Extracts of Republic of Indonesia SDGs Framework Second Opinion The Green Bond Principles The Social Bond Principles The "In alignment with the green bond principles, social bond principles, and sustainability bond guidelines." Sustainability Bond Guidelines "CICERO Shades of Green governance procedures in the Republic of Indonesia's framework to be Good." "Eligible social projects credibly aim for enabling sustainable development that will be supported by proposed comprehensive reporting of impacts" "We rated Republic of Indonesia's green bond and sukuk issuances under this framework CICERO Medium Green". ban dann von ka man ald J..... LA PAZ Awwww Aligned with Best Practice and to Obtain Assurance on Post-Issuance Annual Reporting The Republic of Indonesia will engage an independent third party to provide assurance on its annual reporting on Green and SDGs Securities and the compliance of each Green and SDGs Securities issued with this Framework Source: Joint Second Party Opinion from CICERO and IISD on the Republic of Indonesia SDGs Government Securities Framework Note: 1. 2. CICERO is a global, independent, research-based second party opinion provider on green bond frameworks IISD is a Second Party Opinion provider offering practical solutions to the growing challenges and opportunities of integrating environmental and social priorities with economic development Source: Ministry of Finance IISD 132#134Indonesia's Green Initiatives: Financing Green Projects Indonesia's Green Projects Financed by a Combination of Green Sukuk and Other Funding Sources The Government of Indonesia has issued four sovereign global green sukuk, consecutively in March 2018, February 2019 and June 2020 & 2021, with the total amount of USD 3.5 Billion Global Green Sukuk Proceeds Allocation by Sector (in percentage) 83% 2021 Issuance USD 750 million USD 750 million 2020 Issuance 2019 Issuance USD 750 million 2018 Issuance USD 1.25 billion 2018 2019 2020 In 2019-2020, the Government of Indonesia issued two retail green sukuk in November 2019 and November 2020, with the total amount of USD 490.1 million (IDR 6.86 trillion) Use of Proceeds 2020 Global Green Sukuk Issuance The 2020 Global Green Sukuk Issuance comprised of 0.08% and 49% financing new projects 51% refinancing existing projects 7.21% 10.77% 49.51% 33.02% Sustainable Transport Waste and Waste to Energy Management Resilience to Climate Change for Highly Vulnerable Areas and Sectors/ Disaster Risk Reduction Project Owner Financing of 2020 new projects 2 Refinancing of Ministry of Public 2018 projects Works and Housing Ministry of Transportation Ministry of Agriculture Note: 55% 48% 9% 11% 7% 7% 27% 22% 8% 8% 11% 5% Renewable Energy Energy efficiency Resilience to Climate Change for Highly Vulnerable Areas and Sustainable Transport Sectors/Disaster Risk Reduction Waste and Waste to Energy Management Cumulative 2018, 2019, and 2020 Global Green Sukuk Issuance Allocation by Sector 11% 5% Renewable Energy Energy efficiency 41%: Sustainable Transport Allocation by Activity 43% Adaptation 0 36% Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction 6% Waste and Waste to Energy Management 57% Mitigation Information extracted from Green Sukuk Issuance Allocation and Impact Report (May 2021), which has obtained a limited assurance statement from EY Projects were financed in Indonesian Rupiahs and the currency exchange rate is based on the State Budget Assumption for 2020 budget year of IDR 14,400 per USD. Source: Ministry of Finance 133#135Indonesia's Green Initiatives: Projected Environmental and Social Impacts Environmental Benefits Arising from 2020 Global Green Sukuk Projected Environmental and Social Impacts For 2020 Global Green Sukuk Sustainable Transport • • Expected to: Reduce 1,415,718 tCO2e of GHG emission Reduce travel time by 30 minutes on average Increase passengers-km by 1.3 times (over 2.5 billion passengers are expected to shift from private mode of transportation) Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction • Expected to: Fulfill raw water supply needs for drinking water of 275.5 m³ Protect 1,920.4 Ha of areas from flooding Rehabilitate 134,700 Ha of tertiary irrigation network Develop 1,071 units of other water source Benefit 1,236,000 people Create and revitalize 12,000 Ha of rice field Waste to Energy and Waste Management Expected to 2,059,094 households benefit due to the improved waste management SUSTAINABLE DEVELOPMENT GOALS AFFORDABLE AND CLEAN ENERGY 8 DECENT WORK AND 9 INDUSTRY, INNOVATION 11 SUSTAINABLE CITIES AND COMMUNITIES 13 CLIMATE ACTION ECONOMIC GROWTH 134#136Tangible Results from Indonesia's Green Sukuk Initiatives Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance in 2020 Proceeds from Indonesia's Green Sukuk Initiative has been successfully deployed to a range of eligible Green projects Locations Amount Committed to Finance 2020 New Projects Amount Committed to Refinance 2020 Projects Impacts Social / SDGs Project Examples Financed Refinanced Note. Resilience to Climate Change Across the country Sustainable Transport Jakarta, Java, Banten Waste and Waste to Energy Management All provinces except Banten USD 371.3 million USD 247.7 million 10 Management of Dam, Lake and Other Water Retention Facilities (Financing) Development of water retention units, i.e. water retention basins (embung), dams, and lakes in 22 provinces across Indonesia. These projects provided solutions for the local community to access the groundwater. Locations: 22 provinces across Indonesia Preservation Expansion and of Agricultural Lands (Refinancing) Implementation of rice-field opening and revitalization project in areas highly vulnerable to climate change impacts which may threaten food security. Locations: Potangoan Village of Buol Regency in Central Sulawesi *Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW USD 0.6 million USD 54.1 million 13 ACTION Development and Management of Railway Transport and Supporting Facilities (Refinancing) ° Upgrade of South Line Java Railways Network from single to double track connecting Cirebon City in West Java Province to Jombang Regency in East Java Province. The upgrade of double-track lines becomes a significant part in the effort to improve the role and efficiency of the railroad mode in Java, minimizing the transport burden of road networks. Furthermore, the goal is to improve interregional connectivity to reduce the regional disparity. USD 80.8 million AB Supervision and Development of Settlement Sanitation (Refinancing) While municipal solid waste management focuses to reduce number of waste disposed to landfill by applying 3R principles, the Ministry of Public Works and Housing priorities to develop regional landfill for 3-4 ciities, and improve the carrying capacity and management from open dumping to sanitary landfills Locations: All provinces except Banten Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (May 2021), which has obtained a limited assurance statement from EY Projects were financed in Indonesian Rupiahs and the currency exchange rate is based on the State Budget Assumption for 2020 budget year of IDR 14,400 per USD. Source: Ministry of Finance 135#137Government Support for New and Renewable Energy PISP Fund & Government Guarantee for Electricity Projects To promote new and renewable energy development, the Government provides fiscal support in the form of government guarantee (credit guarantee and business viability guarantee) and Geothermal Fund Facility (PISP Fund). Several guarantees has been provided to renewable energy power plant construction and Power Purchase Agreement (PPA). PISP funds (and its co-finance), can be used for geothermal development in the exploration, exploitation, and development stages, and are eligible for Government Drilling, SOE Drilling/Public Window, and Private Drilling/Private Window. PISP Fund Exploration Financing Facilities PISP Co-financing (MOF Regulation 62/2017) Goal Fund Manager Total Funds Fund Distribution Main feature Financing exploration, exploitation and PLTP PT Sarana Multi Infrastruktur (SMI) IDR 3,1 Trillion (revolving fund) Loans, capital injections, and data provisions ■ De-risking facility for exploration stage ■ Minister of Finance's Assignment Letter (SK) to PT SMI to finance exploration project. Governance ■ Monitoring and supervision by The Joint Committee between MoF and MEMR. Engage academic experts to receive technical knowledge. (Collaboration with international funding) Geothermal Energy Upstream Development Project (GEUDP) - World Bank Geothermal Resource Risk Mitigation (GREM) CTF grant (USD49million) and GEF grant (USD6,25million). Aims to support the government's geothermal data and information provisioning facility (Government Drilling). PT SMI as fund manager & PT GDE as implementing agency. Total USD655 million (loan, grant, and PISP co-finance) Aims to support exploration on the SOE Drilling & Private Drilling scheme. Source: Ministry of Finance 136#138Section 7 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#1392021 Bank Indonesia's Policy Mix Synergy to Accelerate Economic Recovery, while Maintaining Macroeconomic and Financial System Stability 1 Maintaining accommodative monetary policy stance (lowering policy rate 125bps in 2020, and 25ps in February 2021) Maintaining rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms Strengthening the monetary operations strategy to reinforce the accommodative monetary policy stance Focusing on the quantity channel by providing liquidity to stimulate economic recovery 1 1 1 1 R Monetary Policy Controlling inflation through Inflation Control Team in national and regional level Supporting the State Budget through SBN purchases in the primary market in line with Act No. 2/2020, while maintaining macroeconomic stability Coordination with other Authorities 幅 2 Macro- prudential Policy BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA 3 5 4 1 Supporting national economic recovery program in cooperation with the MOF 1 1 Promoting lower lending rates through close supervision and public communication in coordination with OJK Strengthening policy coordination with the Government and Financial System Stability Committee to maintain macroeconomic and financial system stability 1 Financial Market Deepening Payment System Policy 1 Strengthening accommodative macroprudential policy to stimulate growth of loans / financing allocated to priority sectors, incl. SMEs, and inclusion of export L/C as a financing component to stimulate bank lending to the corporate sector and export-oriented businesses Refining the MSME credit ratio into the Macroprudential Inclusive Financing Ratio (RPIM) by expanding the scope of bank partners to disburse inclusive financing as well as through inclusive financing securitisation and other business models Accommodative macroprudential policy stance by: Relaxing the Loan / Financing-to-Value (LTV / FTV) ratio on housing loans/financing Relaxing down payment requirements on automotive loans /financing Holding the countercyclical buffer (CCB) at 0% Macroprudential Intermediation Ratio (MIR) in the 84-94% range Macroprudential Liquidity Buffer (MLB) at 6% with 6% repo flexibility, and the sharia Macroprudential Liquidity Buffer (SMLB) at 4.5% with repo flexibility at 4.5% Relaxing credit card policy 1 Accelerating digital transformation payment system policy and faster implementation of Indonesia Payment System Blueprint 2025 Strengthening and expanding electronification: Social program, e-payment for Government Source: Bank Indonesia Strengthening money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in the forex market Accelerating infrastructure development, including Electronic Trading Platforms (ETP) as well as a Central Counterparty (CCP) 1 Developing Money Market Development Blueprint 2025 1 Extending the 0% QRIS merchant discount rate (MDR) for micro merchants until 30th June 2022 to maintain QRIS acceptance and uptake as well as industry sustainability 1 Implementing the first phase of BI-FAST, starting in the second week of December 2021 138#140Bank Indonesia Policy Mix: January 2022 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The Bl Board of Governors agreed on 19th and 20th January 2022 to hold the BI 7-Day Reverse Repo Rate at 3.50%, while also maintaining the Deposit Facility (DF) rates at 2.75% and Lending Facility (LF) rates at 4.25%. ୪୧ Rp Hold the BI 7-Day Reverse Repo Rate at 3.50% Strengthening the accommodative macroprudential policy stance in 2022 to revive bank lending to the corporate sector and drive the national economic recovery, while maintaining financial system stability Strengthenin g rupiah exchange rate policy to maintain exchange rate stability in line with economic fundamental s and market mechanisms. Accelerating foreign exchange market deepening to support rupiah exchange rate stability, while expanding the availability of hedging instruments and promoting international trade and investment. Accelerating payment system digitalisation to stimulate economic recovery, particularly in terms of household consumption, while advancing an inclusive and efficient economy and finance Strengthening policy for an inclusive and green economy and finance, particularly on the credit demand side, to support a sustainable economic recovery through MSME development and the empowerment of low-income individuals to level up MSMEs and sharia businesses, while strengthening Bank Indonesia's green and institutional policies to support the transition towards a low-carbon economy. Source: Bank Indonesia 139#141Further Strengthening of an Accommodative Bank Indonesia's Policy Mix BI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market And Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy . BGM 19-20 JAN 2022 1.Strengthening rupiah exchange rate policy to maintain exchange rate stability in line with economic fundamentals and market mechanisms. Normalising liquidity policy, while safeguarding the banking industry's ability to extend financing to the corporate sector and buy SBN to fund the State Revenue and Expenditure Budget (APBN) as the ratio of liquid assets to deposits is currently high at 35.12%. Normalisation will be achieved by gradually increasing rupiah reserve requirements for conventional commercial banks from the current level of 3.5% as follows: • • • 1. 150bps increase to 5.0%, with a daily requirement of 1.0% and average requirement of 4.0%, effective from 1st March 2022 2. 100bps increase to 6.0%, with a daily requirement of 1.0% and average requirement of 5.0%, effective from 1st June 2022 3. 50bps increase to 6.5%, with a daily requirement of 1.0% and average requirement of 5.5%, effective from 1st September 2022 Normalising liquidity policy by gradually increasing rupiah reserve requirements for sharia banks and sharia business units from the current level of 3.5% as follows: 1. 50bps increase to 4.0%, with a daily requirement of 1.0% and average requirement of 3.0%, effective from 1st March 2022 2. 50bps increase to 4.5%, with a daily requirement of 1.0% and average requirement of 3.5%, effective from 1st June 2022 3. 50bps increase to 5.0%, with a daily requirement of 1.0% and average requirement of 4.0%, effective from 1st September 2022 Providing reserve requirement remuneration of 1.5% for conventional commercial banks, sharia banks and sharia business units meeting the rupiah and average reserve requirements referred to in points b and c. 2.Strengthening the accommodative macroprudential policy stance in 2022 to revive bank lending to the corporate sector and drive the national economic recovery, while maintaining financial system stability. . • • Offering incentives for banks disbursing financing to priority sectors and inclusive financing and/or banks achieving the Macroprudential Inclusive Financing Ratio (RPIM) target in the form of a 100bps reduction in the daily reserve requirement, effective from 1st March 2022 Strengthening implementation of the RPIM, primarily through bank commitment to the RPIM target, based on the expertise and business models available. Maintaining accommodative macroprudential policy by holding: (a) CCyB at 0%, (b) MIR in the 84-94% range with a lower disincentive parameter of 84% from 1 Jan 22, and (c) Macroprudential Liquidity Buffer (MPLB) at 6% with repo flexibility of 6% and the sharia MPLB at 4.5% with repo flexibility of 4.5%. Strengthening prime lending rate (PLR) transparency in the banking industry with a focus on interest rate spread by bank group BGM: Board of Governor Meeting Source: Bank Indonesia 140#142Further Strengthening of an Accommodative Bank Indonesia's Policy Mix BGM: BI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market And Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy BGM 19-20 JAN 2022 3. Accelerating payment system digitalisation to stimulate economic recovery, particularly in terms of household consumption, while advancing an inclusive and efficient economy and finance: • • • Expanding QRIS uptake through: (i) implementation of a strategy to attract 15 million new QRIS users in 2022 via collaboration with the industry, government ministries/agencies and the community, (ii) expansion of QRIS features, (iii) preparation of business models and the technical aspects of cross-border QRIS implementation with Malaysia. Increasing the number of participants, expanding the services and garnering greater acceptance of BI-FAST for more efficient transactions between banks and members of the public. Intensifying the electronification program through: (i) social aid program (bansos) digitalisation, (ii) electronification of local government services, particularly the acceleration and expansion of regional digitalisation (P2DD), (iii) integration of different transportation modes. Safeguarding the availability of quality rupiah currency fit for circulation throughout the territory of the Republic of Indonesia by strengthening the digitalisation strategy and expanding currency distribution, including the Sovereign Rupiah Expedition Program (Program Ekspedisi Rupiah Berdaulat) in outer, frontier and remote (3T) regions, while expanding the Rupiah Love, Pride and Understanding movement (Cinta Bangga dan Paham (CBP) Rupiah). 4. Accelerating foreign exchange market deepening to support rupiah exchange rate stability, while expanding the availability of hedging instruments and promoting intl trade and investment. • • Implementing regulatory reform of the domestic foreign exchange market, primarily focusing on: (i) relaxing the threshold on spot transactions with an underlying from USD25,000 per month to USD100,000 per month, (ii) developing a non-US dollar reference rate against the rupiah as a fixing rate for derivative transactions to support hedging activity, (iii) standardising the instruments to support transaction digitalisation through the Electronic Trading Platform (ETP) and Central Counterparty (CCP). Expanding the use of Local Currency Settlement (LCS) through socialisation activities targeting the banking industry, corporate sector and other potential users in cooperation with relevant institutions during January and February 2022. 5. Strengthening policy for an inclusive and green economy and finance, particularly on the credit demand side, to support a sustainable economic recovery through MSME development and the empowerment of low-income individuals to level up MSMEs and sharia businesses, while strengthening Bank Indonesia's green and institutional policies to support the transition towards a low-carbon economy. Board of Governor Meeting Source: Bank Indonesia 6. Strengthening international policy by expanding cooperation with other central banks and international organisations, promoting trade and investment and ensuring the success of six priority agendas in the Finance Track in conjunction with the Ministry of Finance during Indonesia's G20 Presidency in 2022. 141#143Liquidity Remains Very Loose in Line with Accommodative Monetary Policy Stance and the Impact of Synergy Between BI and the Government to Support Economic Recovery Principles for Long Term Government Bond Purchasing by Bank Indonesia in the Primary Market Market Mechanism Prudent Maintaining the Credibility of Monetary Policy and Maintaining Economic Stability Measured Tradable & Marketable Tradable SUN/SBSN Considering the Impact on Inflation GOVERN Uphold Good Governance Source: Bank Indonesia SUSTAINABLE Last Resort Bl as a standby buyer for Non-Public Goods • • • Bank Indonesia has injected liquidity through quantitative easing (QE) to the banking industry totalling Rp147.83 trillion in 2021 and Rp5.93 trillion in 2022 (as of 18th January 2022) Bank Indonesia in 2021 purchased SBN to fund the State Revenue and Expenditure Budget (APBN) totalling Rp358.32 trillion, consisting of: (i) Rp143.32 trillion through the primary market in accordance with the Joint Decree (KB) issued by the Minister of Finance and Governor of Bank Indonesia, which remains effective until 31st December 2022, and (ii) private placement totalling Rp215 trillion to fund the health and humanitarian budgets for Covid-19 pandemic handling in accordance with the Joint Decree (KB) issued by the Minister of Finance and Governor of Bank Indonesia on 23rd August 2021. In 2022 (as of 18th January 2022), Bank Indonesia has purchased SBN in the primary market totalling Rp2.20 trillion The expansive monetary policy stance supported loose liquidity in the banking industry in December 2021, as reflected by high ratio of liquid assets to deposits at 35.12% and deposit growth of 12.21% (yoy). Liquidity in the economy has also increased, as indicated by narrow (M1) and broad (M2) money supply aggregates, which grew 17.9% (yoy) and 13.9% (yoy) in the reporting period Bank Indonesia will normalise liquidity policy in 2022, while safeguarding the banking industry's ability to extend financing to the corporate sector and buy SBN to fund the State Revenue and Expenditure Budget (APBN) 142#144Stable Monetary Environment Despite Challenges Strengthened Monetary Policy Framework Well Maintained Inflation Ensured Price Stability 20 20 (%) 8.00 CPI (%, yoy) rhs 19 August 2016 The New Monetary Operation Framework 7.00 Core (%, yoy) - lhs LF Rate: 7.00 15 Volatile Food (%, yoy) - lhs2 Administered (%, yoy) - lhs 6.00 BI Rate: 6.50 5.00 3.20 4.00 10 5 0 H 1.56 3.00 1.87 2.00 1.79 2013 2014 2015 2016 2017 2018 2019 2020 Rupiah Exchange Rate Fared Relatively Well Compared to Peers 2021 Credit Growth Profile % yoy Jan-16 Apr-16 Jul-16 Q4-2016 Q3-2017 20.0 YTD 20222 vs 2021 point-to-point average -2.19 15.0 TRY PHP -34.25 -0.98 -3.76 Q2-2018 Q1-2019 Q4-2019 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 LF Rate: 4.25 BI 7Day RR Rate: 3.50 DF Rate: 2.75 Dec-21 Jan-22 6.32 4.67 10.7 0.19 $10.0 -0.67 IDR -1.08 -0.26 MYR -4.09 5.0 -0.21 EUR -4.09 KRW -843 0.02 0.0 INR -0.59 0.03 SGD -3.76 BRL 0.1335 -5.0 0.51 CNY -4.52 1.09 JPY 19-Jan-22 -3.81 -10.0 3.60 THB -4.99 ZAR -40.0 -35.0 -30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 Source: Reuters, Bloomberg (calculated) Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Total Growth Working Capital Loans Investment Loans Consumption Loans 4.01 1/ 4.01 Jul-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 24 143#145Regional Inflation Remains Under Control ...supported by a well maintained inflation in all regions SUMATRA 1.91 2.13 235 2.10 2.08 Regional Inflation, 2021 KALIMANTAN 2.26 190 1.88 Aceh 2.2 Riau Islands 2.3 North Sumatra 1.7 Bengkulu 2.4 1.91 Riau 1.5 Babel Islands 3.7 West Sumatra 1.4 Lampung 2.2 South Sumatra 1.8 Jambi 1.7 Sep-21 Ok-21 Nov-21 Des-23 NATIONAL INFLATION DECEMBER 2021: 1.87% (yoy) Inf > 4% 3% Inf≤4% 2% Inf≤3% 1.80 1.70 165 1.61 1.60 1.53 1.55 1.30 1.47 1.75 Inf≤2% Source: BPS, calculated 1.40 1.35 1.30 Sep 21 0121 New 21 D21 JAVA 1.75 Source: Central Bureau of Statistics of Indonesia (BPS), calculated ཐཱ ༞ ཤྲཱ ཕྱ ཎྜ ཟ ིི ཥ ིི་ 1.88 Sep-21 2.50 2.26 2.09 1.97 West Kalimantan 1.5 South Kalimantan 2.5 East Kalimantan 2.1 Central Kalimantan 3.3 North Kalimantan 2.7 SULAWESI 2.47 Gorontalo 2.6 5:00 2.47 North Sulawesi 2.6 2.12. 1.89 2.01 2.00 Central Sulawesi 2.2 150 100 050 West Sulawesi 4.4 South Sulawesi 2.4 South-East Sulawesi 2.6 OKT 20 Nov-21 Des 21 Banten 1.9 2.01 2.00 1.82 DKI Jakarta 1.5 West Java 1.7 1.58 1.55 130 100 Central Java 1.7 0.50 East Java 2.5 DI Yogyakarta 2.3 Sep-21 Okt-21 Nov 21 Des-21 BALI-NUSA TENGGARA 2.01 Bali 2.1 West Nusa Tenggara 2.1 East Nusa Tenggara 1.7 Sep-21 Okt 21 Nov-21 Des-21 ཏྲྰཾ་ ཉྭ་རྩ་རྩ་ཎྜ་རྩ་ 2.50 0.93 2.09 1.92 2.81 Maluku 4.0 Sep-21 04-21 Nov-23 Des-23 MALUKU-PAPUA 2.81 North Maluku 2.4 Papua 1.8 West Papua 3.5 144#1464 Strategies to Achieve the Inflation Target 2022 Target Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining volatile food inflation less than 4% Controlling administered price inflation 4 Strategies 1. Price Affordability 2. Supply Availability 3. Well Managed Distribution 4. Effective Communication Stabilizing the price Managing demand side Strengthening production, Government food reserves and food export-import management Strengthening institution Encouraging trade cooperation between regions Improving trade infrastructure Improving data quality Strengthening central-regional coordination Source: Bank Indonesia 145#147Relaxing Reserve Requirement Ratios Lower reserve requirements, effective 1st May 2020 Regulation 1 2 3 4 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% 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% 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% 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 146#148Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 1 Considerations for Macroprudential Instruments Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 2 3 4 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 regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018. 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. This macroprudential policy instrument is countercyclical and can be adjusted in line with prevailing economic and financial dynamics. Source: Bank Indonesia 147#149Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) 1 MIR Accounting Formula Credit Owned Bond Deposit Issued Bond 2 Rate and Parameters Ceiling 94% • Floor 84% 3 Scope of credit/financing . and deposits to calculate MIR MIR Sharia . MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit Issued Sharia Bond Ceiling 94% • Floor 84% • Minimum • 14% Capital Adequacy Requirement • Minimum Capital Adequacy Requirement 14% Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 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 Monthly Commercial Bank Reports Corporate bonds and/or corporate sukuk • 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 • Financing: rupiah and foreign currency Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds Monthly Sharia Bank Reports Corporate bonds and/or corporate sukuk • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering 4 Source of Data 5 Criteria for securities held • • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution Effective from January 1, 2022: MIR in the 84-94% range with a lower disincentive parameter of 84% *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 148#150Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 6 Percentage of the securities held 7 Criteria for securities issued 100% (MTN) medium-term notes (MTN), floating rate notes • sharia-compliant medium-term notes (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds • 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 8 88 Securities Reporting 9 Scope of deposits to meet DD MIR /DD MIR Sharia 10 Relaxation of DD MIR/Sharia DD MIR • Administrated by an authorised securities institution Offline delivery mechanism (email) • 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 • 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 149#151Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* 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. Policy Backgrounds • • • • 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, Bl 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, Bl is only encouraging banks with low non-performing loans and adequate capital resilience to expand credit/financing. *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia Main Regulatory Points 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: Credit + Owned Bond Deposit + Issued Bond + Loan/Financing Received Lower disincentive parameter MIR/sharia MIR RR= Lower Disincentives Parameter X (Lower Bound MIR/Sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 14% KPMM ≤ 19% KPMM 19% Lower Disincentives Parameter 0.00 0.00 0.10 0.15 Upper disincentive parameter MIR/sharia MIR RR= - of 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%. 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). 150#152Strengthened MIR and Sharia MIR to accelerate economic recovery To accelerate the economic recovery through stimulating bank lending to the corporate sector and export-oriented businesses, BI has decided to strengthen Macroprudential Intermediation Ratio (MIR/Sharia MIR)) policy through the inclusion of export L/C as a financing component, while incrementally introducing regulatory disincentives in the form of MIR related reserve requirement Expanding the scope of securities in the formula to calculate MIR through the inclusion of a new component, namely export L/C, while maintaining the MIR/Sharia MIR at 84-94% a. Incremental reintroduction of the MIR related reserve requirement (RR) disincentive for banks with an MIR below 75% from 1st May 2021, below 80% from 1st September 2021 and below 84% from 1st January 2022: i. 0.15 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement (KPMM) above 19% ii. 0.10 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement above 14% and up to 19% iii. 0.00 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement below or equal to 14% iv. 0.00 for banks with a gross NPL/NPF ratio above or equal to 5% c. The upper disincentive parameter is set at 0.00 for banks with a Minimum Capital Adequacy Requirement below or equal to 14% and banks with a Minimum Capital Adequacy Requirement above 14%. Current Regulation New Regulation Current Regulation New Regulation Regulation MIR (CCB) Sharia MIR (SCB and SBU) Regulation MIR (CCB) Sharia MIR (SCB and SBU) In the form of and/or corporate sukuk; Criteria of Securities held corporate bonds In the form of corporate sukuk; 1.Issued by nonbank corporation and residents. 2 Offered to the public through a public offering. 3.Rated by a rating agency no lower than investment grade. 4.Administrated by an institution In the form of corporate bonds and/or corporate sukuk; In the form of corporate sukuk; Lower Lower NPL/NPF KPMM Disincentive Parameter NPL/NPF KPMM Disincentive Parameter Criteria of Securities held 1. Issued by nonbank corporation and residents. 2. Offered to the public through a public offering. >19% 0.00 >19% 0.15 14%<KPMMS 14%<KPMM< 3. Rated by a rating agency no lower than investment grade. <5% 0.00 <5% 0.10 19% 19% authorised to provide securities settlement and custodial services. 4. Administrated by an institution authorised to provide securities settlement and custodial services. ≤14% 0.00 <14% 0.00 ≥5% 0.00 ≥5% 0.00 In the form of export L/C, Applicable to banks with an MIR/Sharia MIRbelow 75% from 1stMay 2021, below 80% from 1stSeptember 2021 and below 84% from 1stJanuary 2022 151#153Principles of Macroprudential Liquidity Buffer (MPLB) Regulation 1 Rate 2 Components 3 Calculation Formula 4 Flexibility 5 Sources of Data on Deposits MPLB (Conventional Commercial Bank) MPLB Sharia (Sharia Banks) 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) • 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) Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to 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 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 • 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 152#154Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020. Regulation Before 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% of rupiah deposits After 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 Board of Governor Meeting January 2022 : Macroprudential Liquidity Buffer (MPLB) at 6% with repo flexibility of 6% and the sharia MPLB at 4.5% with repo flexibility of 4.5% Regulation 1 Lower upper limit on credit card interest 2 Temporary reduction of minimum payment requirements Credit card policy, effective 1st May 2020. Before 2.25% per month 10% After 1.75% per month 5% Effective Period 1st July 2021 until 30th June 2022 3 Temporary reduction of late payment penalties 3% or maximum of 1% or maximum of until 30th June 2022 Rp150,000 Rp100,000 153#155Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* 1. 2. 3. Prudential aspects of Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios 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%. 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. 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 debtor and developer/seller's bank account. LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia 154#156Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2022) Bank Indonesia relaxes he Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property to stimulate credit growth in the property sector, while maintaining prudential principles and risk management, Policy Objectives and Background a. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. b. C. d. Considering the need to stimulate recovery, particularly in the property sector, and considering the sector has strong backward and forward economic linkages. The amendment also takes into consideration the contained credit/financing risk in the property sector. The LTV ratio is set at an upper limit of 100% for banks meeting the NPL/NPF requirements and regulations concerning the liquidation of partially prepaid property (inden) are being relaxed, which must comply with prudential principles and risk management. a. Changes to LTV/FTV Ratio on Non-Green Property Loans/Financing Current Regulation NPL/NPF Criteria Met Property Loans Financing NPL/NPF Criteria Not Met* Property Loans/Financing Property Financing based on MMO and IMBT Contracts 田 New Regulation NPL/NPF Criteria Met Property Loans/Financing based on NPL/NPF Criteria Not Met* Property Loans/Financing based on Murabahah and Istishna Contracts Property Financing based on MMO Source: Bank Indonesia Property Facility 1 based on Murabahah and Istishna Contracts 22 Financing based on MMQ and IMBI Contracts 1 22 based on Murabahah and Istishna Contracts 12 23 Murabahah and Property Financing based on MMO and IMBT Contracts and IMBI Contracts 12 23 Facility Istishna Contracts 1 22 1 22 1 2 23 1 2 23 Landee House Type >70 85% 90% Type>21-70 90% 95% 85% 75% 65% 90% 80% 70% 85% 75% |85% 75%| Type ≤21 Apartment - - - - Landec House Type >70 Type >21-70 Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 95% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% 100 100 % % 95% 95% Type >70 85% 90% Type >21-70 90% 90% Type ≤21 90% 90% 85% 75% 65% 90% 80% 70% 95% 85% 75% 95% 85% 75% 85% 75% 85% 75% Apartment - Type >70 Type >21-70 100% 100% 100% 100% 100% 100% Shop House/Office 90% 90% 85% 75% 85% 75% Type ≤21 100% 100% 100% 100% 95% 95% House Notes: Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100 100 % % 100% 95% 90% 90% 95% 90% 90% 95% 95% 1. denotes LTV ratio policy at bank discretion 2. Based on PB No. 21/13/PBU2019 *) NPLANPF Criteria: 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio on property loans/finanong <<5% 155#157Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2022) b. Changes to LTV/FTV Ratio on Green Property Loans/Financing Ketentuan Saat Ini NPL/NPF Criteria Met Property Loans/Financing Property Financing based on MMO and IMBT Contracts NPL/NPF Criteria Not Met" Property Loans/Financing Property Financing based on MMO and IMBT Contracts Ketentuan Baru NPL/NPF Criteria Met Property Loans/Financing based on Murabahah and Istishna Contracts 1 Property Financing based on MMQ and IMBT Contracts 22 1 22 PP Bdsr NPL/NPF Criteria Not Met* Property Loans/Financing based on Murabahah and Istishna Contracts 1 23 2 Akad MMQ & Akad IMBT 1 2 23 Facility based on Murabahah and Istishna Contracts 1 27 1 22 2 based on Murabahah and Istishna Contracts 1 23 1 2 23 Facility Landed House Landec House Type >70 Type >21-70 90% 95% 95% 90% 80% 70% 95% 85% 75% 90% 80% 90% 80% Type >70 100% 100% 100% Type >21-70 100% 100% 100% Type $21 Type ≤21 100% 100% 100% 100% 95% 90% 100% 95% 95% 100% 100% 95% 90% 95% 90% 90% 95% 95% 95% 95% 95% 100% 95% 95% Apartment Type >70 90% 95% |90% 80% 70% 95% 85% 75% Type >70 100% 100% 100% Type >21-70 95% 95% 90% 80% Type $21 95% 95% 90% 80% 90% 80% |90% 80% Type>21-70 100% Type $21 100% 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100% 100% 95% 95% 100% 95% 95% Shop House Office 95% 95% 90% 80% 90% 80% Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% House Notes 1. denotes LTV ratio policy at bank discretion *NPLANPF Criteria 2. Based on PB No. 21/13/PB/2019 3. Criteria for a green building a Property area <2,500m², assessed by Bank Indonesia using tools from an approved green building appraisal institution and/or certified directly by an approved green building appraisal institution, b. Property area 2500m², certified by an approved green building appra sal institution. 1. Gross NPL/NPF ratio < 5%, and 2. Net NPL/NPF ratio on property loans/financing <5% c. Changes to Indent Regulations Current Regulation Source: Bank Indonesia New Regulation Repeals regulations concerning the gradual liquidation of Indent and the maximum cumulative liquidation of property loans or property financing. 2. Banks are required to maintain prudential principles and risk management when liquidating property loans/financing on indent. Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation up to 30% of ceiling upon completion of loan contract 1. up to 50% upon completion of foundations up to 90% of ceiling upon completion of roof up to 100% of ceiling upon signing of BAST accompanied by AJB and a cover note. 156#158Adjustment of LTV/FTV Requirements on Automotive loans/financing (effective from 1st March 2021 until 31st December 2022) Bank Indonesia relaxes down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles to stimulate credit growth in the automotive sector, while maintaining prudential principles and risk management Policy Objectives and Background a. b. C. d. e. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. Considering the need to stimulate recovery, particularly in the automotive sector, and considering the sector has strong backward and forward linkages in the economy. The policy is implemented as part of the policy mix with fiscal stimuli issued by the Government, including a reduction to the luxury goods sales tax (PPnBM). The amendment also takes into consideration the contained credit/financing risk in the automotive sector. Looser downpayment requirements on automotive loans must comply with prudential principles and risk management. Changes to Down payment Requirements on Automotive Loans/Financing Current Requlation Downpayment Requirements on Non-Green Vehicles New Regulation Devinpayment solirements Source: Bank Indonesia Downpayment Require rents Downpayment Requirements on Green Vehicles Vehicle Type NPL Requirements Met NFL Requirement Not Met NFL Requirements Met-- NPL Requirements Not Met Vehicle Type on Non-Green Vehicles NPL Requirements Met on Green Vehicles NFL Requirements Not Met NFL Requirements Met- NFL Requirements Not Met Two Wheels 19% 20% 0% 15% Two Wheels 0% 10% 0% 0% Two Wheels 15% 25% 0% 20% Two Wheels 0% 10% 0% 0% or More (Non- Commercial) Two Wheels 10% 15% 0% 10% of (Non- Commercial) Two Wheels More 0% 5% 0% 0% Mare or More (Commercial) (Commercial) *) previous regulation, PBI No. 21/13/PBI/2019 *) Requirements as follows: 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio <5% Notes: Green vehicles include battery electric vehicles (BEVS) as stipulated in prevailing laws and regulations on accelerating the battery electric vehicle program for road transportation. 157#159Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry Bank Indonesia published the “Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" to accelerate monetary policy transmission and expand the dissemination of information to corporate and individual consumers in order to enhance governance, market discipline and competition in the credit marketending Rate and Deposit Rate Response to BI7DRR Key Takeaways • The decline in the prime lending rate (PLR) is becoming more limited and driven by private banks. The cost of loanable funds (CoLF) remains the main factor affecting the decline in PLR, while profit margins continue to increase. The downward trend in new lending rates continues, which occurred in all group of banks. The decline was driven by improved risk perception, as reflected in a decrease in risk premium and LaR. • The spread of new lending rates for large banks is wider than for non-large banks, as large banks attempted to maintain profitability amidst high credit risk. 12 11 10 9 8 7 Б Pursuant to OJK Regulation (POJK) No. 37/POJK.03/2019 concerning Bank Report Transparency and Publication, the PLR consists of three components, namely; 5 i. the cost of loanable funds (COLF), incl. the cost of funds, cost of services, regulatory costs and other costs; ii. overhead costs (OHC), incl. labour costs, education and training costs, R&D costs, rental costs, promotion and marketing costs, maintenance and repair costs, fixed asset and inventory depreciation costs as well as other overhead costs; and iii. profit margin, which is determined by the respective bank for lending activity. Graph 2. Prime Lending Rates by Bank Group Bank Indonesia has maintained an accommodative monetary and macroprudential policy stance in order to stimulate economic growth. • 12 10 8 Graph 3. Prime Lending Rate Performance by Component 6 86 4 3.98 2 3.30 3,23 3,23 0 10.89 9.73 5 8,94 8,99 9.61 8,79 8,75 8.70 8.70 4 6,12 6,13 3 2,86 2,89 2,86 2,59 2,62 Prior to the Covid-19 pandemic, from June 2019 until Feb 2020, BI lowered the BI7DRR policy rate five times by a total of 125bps from 6.00% to 4.75%. From March 2020, Bank Indonesia lowered the policy rate another four times (100bps) to a level of 3.75% in November 2020, and lower another 25 bps in Februari 2021 to 3.50%. In terms of liquidity, accommodative monetary and macroprudential policy significantly boosted liquidity in the banking industry in order to maintain financial system stability and the bank intermediation function. Graph 1 Prime Lending Rate, BI7DRR and 1-Month Term Deposit Rate Performance Jan Feb Mar Apr Mei Jun Inr Agt Sep Okt ΛΟΝ Des Jan Feb Mar 10.14 6,39 8,71 8,70 5,63 5,65 5,20 451 3,50 3,75 Des Jan Feb Mar 3,17 3,05 ΛΟΝ 4 IRIAL Mei Sep Nov 2019 BPD Source: Bank Indonesia JEW BUMN Mei das inc Nov Jan Mar Mei 2020 2021 BUSN KCBA das MON 2 Mar เอา 2019 2020 HPDK OHC Nov 2021 Margin Keuntungan 2019 Spread (SBDK BI7DRR) Deposito 1 bulan Source: OJK 2020 Spread (SBDK - Sb depo 1 bln) ******* SBDK BI 7 DRR 2021#160Improving the Effectiveness of Monetary Policy Transmission Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars B Reformulation of Monetary Policy Operational Framework Implementation of BI 7 Day Reverse Repo Rate Enhancement of monetary policy signal Implementation of Money Market Deepening Program Enhancement of instruments and transactions Implementation of Reserve Requirement (RR) Averaging Enhancement of banking liquidity management Blueprint for Money Market Development (BPPU) 2025 launched on Dec 14th, 2020 to build a reliable and efficient ecosystem for money market development in Indonesia Initiative I Promoting Digitalization and Strengthen Financial Market Infrastructures (Trading venue, central counterparty, BI-SSSS, BI-RTGS, trade repository) Initiative II Strengthening Effectiveness of Monetary Policy Transmission (Repo, IndONIA and JIBOR, Overnight Index Swap, DNDF, LCS) Initiative III Developing Economic Financing Sources and Risk Management (long-term hedging, sustainability and green financing, investor retail, asset securitization) Blueprint is accessible here: https://www.bi.go.id/en/publikasi/kajian/Pages/Blueprint-Pengembangan-Pasar-Uang-2025.aspx Source: Bank Indonesia 159#161Principles of Domestic Non Deliverable Forward (DNDF) Transaction 1. 2. 3. Purposes To support the effort of stabilizing the Rupiah exchange rate through the additional of alternative hedging instruments To support the development and deepening of the domestic financial market 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 derivative 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 against 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 against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah Source: Bank Indonesia 160#162Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: Transaction between: III Bank Customer III Can only be performed to hedge rupiah exchange rate risk. 1. Must have Underlying Transactions: X Including all following activities : a. b. C. Trade of goods and services Investments, loans, capital, and other investements. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excluding following activities: a. b. ن فن d. e. f. نه نه نه g. Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies Intercompany loan Money changer activities. Bank Foreign Party III III 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank - Bank Source: Bank Indonesia 161#163Principles of Domestic Non Deliverable Forward (DNDF) Transaction Source: Bank Indonesia 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 Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging Customer/ Foreign Party Overseas Bank Hedging Cover Hedging Bank 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. 162#164Amendment 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 Article 3 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without underlying documents Article 6 2. DNDF can be terminated (unwind); Article 11 3. Underlying documents must be final (firm) with additional supporting documents 4. Not Regulated; Article 11 *Effective on May 17th, 2019; English version of the regulation is available in Bl website. Source: Bank Indonesia 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 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. 163#165• Strengthening Jakarta Interbank Spot Dollar Rate (JISDOR) To accelerate money market deepening The strengthening of JISDOR to increase domestic foreign exchange market credibility and support exchange rate stability. This measures is in line with the benchmark reform initiatives taking place on global financial markets, to establish a reference rate that represents daily exchange rates based on transactions supported by best practice methodologies. ✓ Effective starting April 5, 2021 • JISDOR is obtained by calculating the weighted average based on transaction volume of the Rupiah exchange rate against USD on the spot market within the specified time window Before Implementation Specification After Implementation Information Currency Pair USD/IDR Not changed Data type Actual USD/IDR spot transactions traded in interbank market Not changed Data Reporting Media SISMONTAVAR Publisher Administrator Bank Indonesia Observation Range 08.00-09.45 08.00-16.00 Not changed Not changed Changed Jakarta Time JISDOR Publication Time Calculation Method 10.00 WIB Weighted average rate of USD/IDR spot transactions traded in interbank market Jakarta Time * 16.15 WIB * Changed Not changed Publication Media Bank Indonesia Website Not changed * Adjustment of the operational time for the domestic FX Market operating hours during The COVID-19 Pandemic: Monitoring Period JISDOR ranges: 09.00-15.00, JISDOR published at 15.15 Jakarta Time. JISDOR is available on every working days on https://www.bi.go.id/en/statistik/indikator/Default.aspx Source: Bank Indonesia 164#166Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) As hedging instruments against Rupiah interest rate changes IRS market development OIS market development We're Here 3 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) IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest Improvement of IRS transaction liquidity rate 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 165#167OIS and IRS Transactions: General Provisions 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. Calculation Base ACT/360 Market Conventions Interest Payment based on Netting OIS Quotation rates based on 2 decimals 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. IndONIA Index with 5 decimals Compound Floating Rates (CFR) based on 5 decimals Notional of Net interest payment in IDR with O decimals Settlement Date = 1 business days after Maturity Date (MD) 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). Source: Bank Indonesia 166#168Enhancement of Monetary Operations Framework 3 2 STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement. ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties 4 MOVING FROM AXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS PROGRESS • • • PREVIOUS JIBOR Can be traded among contributor banks for 10 minutes. • Up to the amount of IDR10 billion. Up to 1-month tenor. CURRENT JIBOR (as per June 1st, 2016) Can be traded among contributor banks for 20 minutes. Up to a total of IDR20 billion. • Up to 3-month tenor. Source: Bank Indonesia 167#169Signs of Recovery in Financial Intermediations Bank loans continue to grow, supported by consumption and working capital loans. Despite still being in the contraction zone, financing growth has steadily improved for the last few months. Financing growth continued its improving trend in the past few months and grew by -3.60% (y-on-y) in November 2021. LOAN In November 2021, Bank loans continued to grow by 4.84% (y-on-y) and 0.93% (m-to-m). IDR Tn Bank Loans YoY Growth (rhs) YoY 6,000 5710.116% IDR tn 500 5,000 12% 400 4,000 8% 4.82% 300 3,000 4% 200 2,000 0% 1,000 -4% 100 0 -8% 0 IDR Tn 220 200 180 160 140 120 100 80 60 40 20 0 2016 Financing Growth (rhs) YOY 10% 5% 363 0% -3.60% -5% -10% -15% -20% Total of securities issuance reached IDR363.29 Tn (YTD) as of 31 December 2021, indicating a more optimistic signal to economic recovery. ΠΙΡΟ Rights Issue Corporate Bond & Sukuk 197.27 Life insurance premium recorded a 6.6% growth (y-on-y) while General & Reinsurance premium improved and recorded a 5.8% growth (y-on-y) in November 2021. Life Insurance Premium Growth General & Reinsurance Premium Growth 2017 Source: Financial Service Authority (OJK) 61.66 104.35 10 28220& -10 -20 2018 2019 2020 2021* Apr-19 Mar-1 Jan-19 Feb-19 ar-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Apr-20 May-20 Jun-20 Feb- Mar- Aug-20 Jul- Sep- Oct- Nov- Dec- Jan-21 Mar-21 Apr-2 Feb- May-21 Jun-21 Jul-21 Aug- Oct- Nov- 6.6 5.8 168#1700 2 4 Jan- Feb- Apr- May- Aug-19 Sep- 10 15 20 20 Jan-19. Feb-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 % 6 Net Interest Margin Resilient Financial Institutions Domestic financial institutions remain sound and stable, supported by strong capitals and leverage amidst hurdles due to the pandemic. 20 % 25 CAR of the banking sector indicated ample liquidity with a value of 25.59% and Tier-1 capital at 23.95% as of November 2021.*) CAR ■Tier 1 A RBC of the insurance industry increased and stayed well above the minimum threshold (120%) with Life Insurance RBC at 589.6% and General Insurance RBC at 322.9% in November 2021. Profitability of the banking industry recorded at steady level, reflected by stable NIM and ROA at 4.51% and 1.91% respectively in November 2021. Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Return on Assets % 4 4.51 3 2 1.91 1 >> 25.59 Life Insurance (Lhs) General Insurance (rhs) 322.9 900 400 23.95 800 350 700 300 600 250 500 589.6 200 400 300 threshold Insurance RBC (rhs)= 120%| 150 100 200 threshold Insurance RBC (Lhs) = 120% 100 50 0 0 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19. Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Gearing ratio of multi-finance companies slightly decreased but remained below the threshold with a ratio of 1.91 times in Nov 2021. Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 169 1.91#1713 2 1 0 5 4 Jan-19 Feb-19 Mar-19 Manageable Credit Risks with Adequate Liquidity Financial institutions are equipped with ample liquidity while credit risks are maintained at a relatively low level and remain below the threshold... Liquid Assets to Non-Core Deposits and Liquid Assets to Deposits remain well-above the thresholds, following banks' cautious appetite for lending. *) $ In November 2021, General Insurance Investment Adequacy Ratio improved while Life Insurance Investment Adequacy Ratio was steadily above the threshold. % % 170 160 Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs) 154.948 240 220 150 35 200 180 140 34.2430 160 130 120 25 140 120 110 20 100 100 90 80 15 80 threshold LA to Deposit (rhs) = 10% 60 70 10 40 60 threshold LA NCD= 50% 20 5 50 40 0 Jan-19Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 ווו Banking NPL ratios remained stable from the past 2 months and still below the threshold at 3.19% gross and 0.98% net as of November 2021. Jan-19 0 % Apr-19 May-19 Jun-19 Jul-19 Aug-19. Sep-19 NPL Net Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Life Insurance General Insurance threshold Investment Adequacy Ratio= 100% May-19 Mar-19 Jul-19 Jan-21 - Nov-20 Sep-20 Jul-20 May-20 Mar-20 Jan-20 -Nov-19 -Sep-19 - Mar-21 Nov-21 Sep-21 Jul-21 -May-21 % NPF of multi-finance companies remained below the 5% threshold and recorded at 3.92% as of November 2021. *) ■NPL Gross 6 5 3.19 4 3 0.98 2 - Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 1 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 0 Jan-19 May-19 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 3.92 170 198.47 105.5#1720 300 Jan-19 Feb-19 IDR Tn 1,500 1,200 900 600 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19. Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 0 2 1 3 Jan-19 Feb-19 Mar-19 Apr-19 May-19 5 4 Jun-19 Jul-19 Aug-19 Insurance Manageable Market Risks Several market risks indicators still show an adequate performance and remains manageable.. Net Open Position continue to stay well below the maximum limit of 20%. The value is slightly decreased to 1.6% in November 2021 Net asset value (NAV) of equity mutual funds are stable with low volatility, marking optimism in the capital market. Sep-19 Oct-19. Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Both insurance investment and pension fund value rose to IDR1,326.39 Tn and IDR313.16 Tn in November 2021, respectively. *) Pension Funds (rhs) IDR Tn IDR Trillion 400 250 350 200 150 300 100 250 50 200 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 [61-uer Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 IDR Tn 800 600 400 1.6 200 Jan-20 Jul-20 Aug-20 Sep-20 Oct-20- - ΟΖ-ΛΟΝ NAV Equity Mutual Funds Dec-20 Jan-21 Feb-21 JCI (rhs) 8,000 6,000 4,000 2,000 As of 30th December 2021 0 Multi-finance companies' exposure to foreign and domestic debt remains low following financing growth slowdown. *) Domestic Debt Foreign Debt Feb-19 Mar-19 ] Apr-19 May-19 Jun-19 Jul-19] Aug-19 Sep-19] Oct-19 Nov-19 Dec-19 Jan-20 Feb-20] Mar-20 Apr-20 May-20 Jun-20 Jul-20] Aug-20 Sep-20 Oct-20 Nov-20] Dec-20] Jan-21] Feb-21 | Mar-21 Apr-21 ] May-21] Jun-21 Jul-21 Aug-21 Sep-21 Oct-21] 171 Nov-21] Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Dec-21#173IDR Tn 100 50 0 -50 -100 -150 Jan-19 Domestic Capital Market Performance Amid Global Challenges 10900 Despite the emergence of the Omicron variant, investors are still optimistic for a faster economic recovery and countries are still boosting their vaccination rate. Entering 2022, global indices performed moderately with some countries still face challenges to recover JCI's movement remained positive in early 2022, reflecting positive sentiments and confidence from the market. Stock Index Performance as of 13 January 2022 (compared to 31 Dec'21) Comp Bond Index Comp Stock Index (rhs) TURK 340 11.12% SIN HKN 4.12% 4.08% 320 PHIL 2.37% THAI 1.41% 300 INDO 0.89% 280 BRAZ 0.82% EU 0.27% 260 MAL -0.06% JPN WORLD S KOR -0.09% 240 -0.16% -0.52% 220 US CHIN2.13% -0.61% (% YTD) 200 7000 6500 6000 6,640.4 5500 5000 4500 4000 3500 3000 T -3% -1% 1% 3% 5% 7% 9% 11% 13% ■Gov't Debt Securities Non-resident portfolios of government bonds & equity recorded a total net buy of IDR2.33 Tn in January 2022. Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Source: Bloomberg and Ministry of Finance T Jul-20 Sep-20 Nov-20 Jan-2 Yield (%) Equity 10 4.62 9 8 -2.29 7 f 13 January, 2022 N Sep-2 Nov-2 5 10 Jan-19 Mar-19 May-19 Jan-19pr-19Jul-19Oct-19an-20Apr-20Jul-200ct-20an-2Apr-21ul-2Dct-21Jan-22 Government bond yields remain competitive with a slight increase, followed by stable rupiah as risk premium is maintained. Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 5-yr Yield 20-yr Yield Nov-20 10-yr Yield USD/IDR IDR (rhs) 18,000 14,000 10,000 6,000 2,000 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 172#174The Indonesian Financial Services Sector Master Plan (2021-2025) Enhancing Financial Services Sector's Resilience and Competitiveness The 2021-2025 MPSJKI STRENGTHENING RESILIENCE AND COMPETITIVENESS Strengthening capital and accelerating consolidation of Financial Services Institutions (FSI) Strengthening governance, risk management and market conduct Synchronize FSS regulations and supervision by referring to the best practices and/or international standards Strengthening Integrated Supervision of Financial Conglomerates and Cross Cutting Issues DEVELOPMENT OF FINANCIAL SERVICES SECTOR (FSS) ECOSYSTEM Increasing the role of the FSS in supporting priority economic sectors, MSMEs, job creation and regional development Establish FSS integration to add value of Sharia Finance in the development of halal industry and sharia economic ecosystem Expand the financial access and foster public financial literacy Strengthening consumer protection in the FSS Accelerating financial market deepening Supporting FSI business expansion to carry out multi-activities business Increase the role of financial services in the sustainable finance to achieve the SDGs DIGITAL TRANSFORMATION ACCELERATION Support FSS digital transformation innovation and acceleration Developing regulatory framework which supports digital financial sector ecosystem Improving human capital capacity in the financial services sector in line with the development of the digital industry Strengthening the role of research to support FSS digital innovation and transformation Accelerate the implementation of IT-based supervision (Suptech) in OJK and use of Regtech by FSS Perform Business Process Reengineering to increase the quality of licensing, regulation and supervision Source: Financial Service Authority (OJK) COLLABORATION AND COOPERATION AMONG STAKEHOLDERS (ENABLER) 173#175Indonesian Financial Literacy National Strategy (SNLKI) 2021-2025 Taking into account some strategic programs of Strategi Nasional Literasi Keuangan Indonesia (SNLKI) 2013, SNLKI (Revisit 2017), results from SNLIK 2019, and recommendations from various parties, SNLKI 2021-2025 was launched. VISIONS Creating Well Literate Indonesian Society to be Able to Get Suitable Financial Products and Services to Achieve Sustainable Financial Prosperity I 2021 3 STRATEGIC PROGRAMS Financially Competent Wise Financial Attitude And Behavior Access To Finance 2022 I 10 priority targets in the SNLKI 2021-2025 1. Students; 2. Youths; 3. Employees; 4. Farmers and fishermen; 5. Migrant workers; 6. MSMEs; ROADMAP SNLKI STRATEGIC PROGRAMS 2023 7. People with disability; 8. People in 3T (Foremost, Outermost, Behind) areas; 9. Women/housewives; 10. Community 2025 • • Conduct the 4th National Survey on Financial Literacy and Inclusion (SNLIK) • Curriculum Intensification Implementation of Affirmative Action in Financial Literacy and Education for 3T Area and the Disabled Source: Financial Service Authority (OJK) • Intensifying the use of LMS through Inter- Agency Strategic Alliances 2024 Expand the scope of Financial Literacy and Inclusion, specifically in generic financial inclusion products • Enhance Digital Financial Literacy and Education (Smartphone-based Dashboard Application and Tools) Evaluate the Effectiveness of SNLKI 2021 Implementation 174#176Loan Restructuring Extension under POJK No.17/2021 Rationality > Avoid Cliff Effect Push factor to the economy ☛ Higher certainty in preparing 2022 Business Plan POJK 11/2020 1 POJK 48/2020 2 POJK 17/2021 March 2020 December 2020 Key Points on the Stimulus September 2021 Applicability Extension period from 31 March 2022 to 31 March 2023 ✓ Applicable for Commercial Banks and Rural Banks LOAN QUALITY ASSESSMENT Loan quality assessment with 1 pillar only for loan with a ceiling of ≤IDR 10 Billion □ Loan quality on restructuring of loan and/or financing to Covid-19 affected debtors is determined to be “Current” since restructured Banks can provide new loan/financing/providing other funds to debtors affected by COVID-19 without applying uniform classification RISK MANAGEMENT Specific Criteria for Restructuring Debtors ❖ Adequacy of Loan Provision ✰ Dividend Distribution Prerequisites ✰ Stress testing: The impact of restructuring on capital and liquidity Source: Financial Service Authority (OJK) 175#177Digital Banking Transformation Blueprint The Blueprint for Digital Banking Transformation, which was released on 26 Oct 2021, will provide directions for the development of banking digitalization which includes the following aspects: Data Technology Data Protection IT Governance Technology Architecture Data Transfer Data Governance Emerging Technology & Application Machine Learning • ΑΙ • Cloud Computing • Open API • Block Chain / Distributed Ledger Technology Regtech Suptech Customer Engagement Source: Financial Service Authority (OJK) Risk Management Collaboration Institutional Arrangement IT Risk Management Outsourcing Platform Sharing Finance & Investment Cooperation Cybersecurity between financial institutions and non- financial institutions Culture Leadership Organizational Design Talent Customer Customer Experience Customer Insight Customer Trust and Perception Customers with Disability 176#178OJK Strategic Policy in 2022 Anticipating the Impact of Cliff Effect Risk from Policy Normalization and Potential Risks of Covid-19 Development E Encouraging the Acceleration of Green Economy Transformation and Mitigating Climate-Related Risks OJK's 8 Strategic Policies 2022 Developing an Accountable, Effective and Efficient Organization Accelerating the Supervision Reform of the Non-Bank Financial Industry (NBFI) Encouraging the Acceleration of Digital Economic Transformation Improving the Effectiveness of Financial Inclusion and Consumer Protection Programs Continuing the Initiative to Change from A Traditional Approach of Supervisory Business Process Towards the Integrated Supervision of Financial Services Sector Based on Information Technology Supporting National Economic Growth by Strengthening the Islamic Financial Services Sector Source: Financial Service Authority (OJK) 177#179A Comprehensive Financial Deepening Program ...strategy to tackle challenges in deepening Indonesia's financial markets 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 Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR 1 2 STRATEGIC ACTION PLAN 3 ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars RISK MANAGEMENT DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market Bond FX Market Market Stock Market Syariah Market Structure Product Market 7 Elements of Financial Fund Market Infrastructure Regulatory Framework Market Ecosystem Instrument Benchmark Rate & Standardization Coordination & Education Source: Bank Indonesia Intermediaries 178#180BI's Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA) Bl 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) Pilot Project Source: Bank Indonesia KARTY RELAREA SEMATERA Gradual Implementation Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) I 9876543210 XXYYZZ 12345678 LPG Subsidy 2016-2020 Full Implementation Interconnected & interoperable payment system T T 179#181Progress of NCSA Programs • • Family Hope Program (Program Keluarga Harapan - PKH) The Family Hope Program (PKH) is a program that provides cash to very poor households. IDR1.89 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. with • In 2019, PKH has been distributed to 9.84 million house hold on noncash basis total realization of IDR32.75T. KARTU KELUARGA SEJAHTERA 126 5678 12345678 AGO RAMANALS 1107 • • Non Cash Food Assistance (Bantuan Pangan Non Tunai - BPNT) 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. IDR110 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). . In 2019, BPNT has been distributed to 15 million household on non cash basis with total realization of IDR15.44T Source: Bank Indonesia 180#182Section 8 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA#183National Strategic Project (PSN) list is established in 2016, and have undergone several amendments until recently stipulated under Coordinating Minister Regulation No.7/2021 Pres. Regulation No. 3/2016 2016 225 Projects 1 Program IDR 2.631 T PSN List Evaluation Pres. Regulation No. 58/2017 2017 245 Projects 1 Program IDR 4.417,6 T PSN List Evaluation Pres. Regulation No. 56/2018 2018 223 Projects 3 Programs IDR 4.150 T PSN List Evaluation Pres. Regulation No. 109/2020 2020 201 Projects 10 Programs IDR 4.817,7 T PSN List Evaluation Project included in the PSN List Proposed project is evaluated by KPPIP ✰ and approved through High level Limited Meeting (Ratas) Ongoing project from the previous list and being pushed by the government The project has been declared Complete and there are no issues that need to be resolved The project no longer requires PSN || || ㅁ facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2021 208 Projects 10 Programs IDR 5.698,5 T Project excluded from the PSN List 182#184National Strategic Project (PSN) consist of 208 Projects and 10 Programs with estimated investment value of USD 396,23 Billion 44 Projects Sumatera USD 54,13 B 16 Projects Kalimantan USD 35,17 B *) based on Coordinating Minister Regulation No. 7 /2021 1 84 Java Program Projects USD 137,07 B A Toll Road 56 Projects Smelter Program 9 12 Program Projects National USD 107,33 B 11% 20% 22 Projects Sulawesi 10 Projects Maluku & Papua Investment Proportion USD 39,43 B USD 19,27 B 69% 1 20 Projects Bali & Nusa Tenggara USD 4,08 B PSN covers 12 sectors and 10 program State Budget 43,5 B Private 273,4 B SOE Budget 79,3 B *1 USD = 14.380 IDR National Tourism Program Dam & Irrigation 57 Projects Industrial Estate 19 Projects Railway 16 Projects Energy 15 Projects Seaport 16 Projects Water & Sanitation 12 Projects Superhub Program Electricity Program Economic Equity Program Technology 5 Projects Housing 2 Projects C Sea Wall 1 Proyek Border Dev. Program Toll Access Program Food Estate Program x Airport 8 Projects Education 1 Project Waste to Energy Program 183#185• . • The accumulated 130 Projects that have been completed spread across various sector and have significant role in accelerating Economic Recovery during COVID-19 pandemic and Completed in 2016 7 Airports Completed in 2017 10 Projects (USD 4,27 B) 2 Toll Roads National ARA 11 Million Estimated Labour Absorption since 2016-2024 & With 1,9 Million Estimated direct labour absorption from 2020-2024 *Notes: Includes direct and indirect labour absorption through PSN Competed in 2018 32 Projects (USD 14.43 B) Completed in 2019 30 Projects (USD 11,5 B) Completed in 2020 12 Projects (USD 8,57 B) Completed in 2021 24 Projects (USD 6,2 B) • ⚫ 2 Railway 1 Aiport 4 Airports • 1 Airport . 6 Toll Roads • 1 Toll Roads • 1 Access Road 4 Dams • 4 Dams • 4 Ind. Estate • 1 Railway • 2 Cleanwater Supply • 6 Dams • 1 Airport 9 Toll Roads 1 Irrigation • 4 Smelter • 3 Toll Roads • 11 Dams 1 Seaport 1 Gas Facility • 6 Ind. Estate . 10 Toll Roads • 1 Marine • 1 Seaport • 1 Seaport • 1 Gas Pipeline . 3 Border Dev. 5 SEZ Agriculture 2 Railway • 1 Cleanwater Supply • 1 Technology • 4 Border Dev. • 1 Dam 1 Seaport • 3 Ind. Estate • 1 Housing • • 1 Irrigation 2 Smelter • 2 Dams 1 Railway . 2 Technology • 1 Ind. Estate Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) *1 USD = 14.380 IDR 184#186Government of Indonesia has set various initiatives to drive private sector participation in Infrastructure sector especially for National Strategic Projects 1 2 3 4 I Public Private | Partnership (PPP) Limited Concession Integrated Funding Land Value Capture (LVC) Scheme (LCS) Platform 185#187Government of Indonesia has conducted institutional reforms to establish a conducive PPP ecosystem... 1 Institutional Reforms for PPP Implementation kpop KPPIP: P Coordinating unit in ! Public Private Partnership (PPP) decision-making processes and debottlenecking efforts for infrastructure acceleration PPP Stages KANTOR BERSAMA KPBU REPUBLIK INDONESIA PPP Joint Office: Information center for policy Indonesia IIGF Infrastructure Guarantee coordination and Fund: Provides capacity building to encourage guarantee and ♥SMi Sarana Multi Mi Infrastruktur: Facilitating infrastructure financing, preparing project, and serving supports the use of PPP schemes project preparation advisory Project Development Facility (PDF) Outline Business Case Determination of Funding Scheme Tender document + Transaction PPP Agreement Financial Close preparation Final Business Case (FBC) Legend P Happ Ministry of National Development Planning Ministry of Finance PIC Government Contracting Agency (PJPK) IIGF PPM/ Kementerian PPM Bapp Bappenas Business Entity KANTOR BERSAMA KPBU REPUBLIK INDONESIA KANTOR BERSAMA KPBU REPUBLIK INDONESIA KANTOR BERSAMA KPBU REPUBLIK INDONESIA IIGF Ckp VSMI P Business Entity Lender Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 186#188... and has issued end-to-end regulations and supports to encourage PPP projects implementation 1 ! Public Private Partnership (PPP) Project Development Facility (PDF) Preparation Project development facility assists the Government Agency (GCA) in Contracting PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI and PT IIF, Ministry of Finance Viability Gap Funding (VGF) Guarantee Scheme Tax Facilities Availability Payment Land Acquisition A facility which contributes to construction cost in order to increase project financial feasibility Managing entity: Ministry of Finance based on GCA proposal Govt's commitment: Max 49% per project cost Guaranteeing govt. contractual obligations under infra. concession agreements and MoF Reg. No. 130/PMK.08 /2016 re: Govt. guarantee for electricity project acceleration Managing entity: Indonesia Infra. Guarantee Fund (IIGF) and MoF Govt's commitment: US$ 450 Mil Bidding Process MoF Reg. No. 150/2018 allowed 100% Tax Holiday for 18 Pioneering Industries for 5 - 20 years depending on the investment value. The tax holiday is not only given to the new investments but can also be obtained by the existing taxpayers who want to expand their business. Managing entity: Ministry of Finance A scheme in which concessionaires receive periodic payments from central or regional government if the service standard is fulfilled. The MoF Regulation and MOHA Regulation on Availability Payment have been stipulated. Managing entity: Ministry of Finance Ministry of Home Affairs Construction A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing entity: Ministry of Finance; Ministry of Agrarian and Spatial Planning/BPN, and BLU-LMAN Govt's commitment: US$ 1.2 Bio (2016) US$ 2.4 Bio (2017) US$ 2.6 Bio (2018) The Government has just issued GR No. 78/2019 regarding Tax Allowance Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) US$ 1.6 Bio (2019) Synchronization with 1 Online Single Submission (OSS) System 2 Additional positive list from 145 to 183 type of business sectors Certainty on specific 3 eligible assets allowed to obtain the incentives 187#189Government of Indonesia has stipulated Limited Concession Scheme as an asset recycling scheme for brownfield infrastructure asset 2 Limited Concession Scheme (LCS) Limited Concession Scheme (LCS) is a concession agreement, that includes asset operations and development, between Government and Private Entities for 20+ years of concession period. LCS Concept 900 ARR Government can get: • • • Upfront payment that can be received at the time of Financial Close, and/or Annuity payment during the concession period Additional incentives in the form of revenue sharing All future CAPEX will be borne fully by the concessionaire, thus easing the burden of Government's budget Government guarantees the issuance of permits and licenses Flexible operations allow private sector to innovate and increase revenue Does LCS serve as privatization? NO It does not eliminate the ownership and control of the Government Government remains the owner of the infrastructure asset LCS limits "super-profits" for concession holders Government will receive upfront payment yet its not selling the asset Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 188#190Limited Concession Scheme as an Alternative of Financing through Presidential Regulation No 32/2020 on Infrastructure Financing through Limited Concession Scheme 2 Limited Concession Scheme (LCS) Definition Limited Concession Scheme of Infrastructure Asset is the asset concession agreement to improve operations of Government assets (BMN) and/or SOEs' assets to generate revenue to improve similar project operations and/or finance other infrastructure provision Infrastructure Financing Priority Revenue generated by the LCS will be used to fund the priority infrastructure projects and/or national strategic infrastructure projects LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOEs to private sector to operate, maintain, and develop the assets; As the rewards, Government and/or SOE will receive upfront payment or annuity payment during the concession period Future CAPEX during the concession period will be borne by the concession holder to ease the Government and SOE budget burdens Technical Criteria for the LCS assets The asset has been fully operated for minimum 2 years The asset needs to improve operation efficiency based on international standard ✔ Asset's useful life minimum is 10 years For the SOE's asset, the asset must have positive cash flow for minimum 2 years in a row and has been audited at least 3 years in a row ✔ For Government asset (BMN), the asset should be on the Ministry Financial report that has been audited based on the Government Accountancy Standard in the previous period Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 189#191SDG Indonesia One is launched by PT SMI as an integrated funding platform for private investor 3 JOOO Integrated Funding Platform Profile of PT SMI • . PT SMI is a SOEs' non-bank financial institution with 100% of its shares owned by the Indonesian government. The first financial institution in Southeast Asia accredited by Green Climate Fund (GFC SDGs Initiative • The platform was launched in October 2018 • The Pipeline Projects comprise public transportation sector, health care, renewable energy, tourism and drinking water supply system Impact toward SDGs: Increase funds availability for infrastructure projects and project appropriateness. AllB THE WORLD BANK UNWORLD BANKRUP ASIAN INFRASTRUCTURE INVESTMENT BANK ADB gef Cartone Cle AFD CTF GREEN MATE TUND KFW MUFG CTBC BANK Standard UOB Chartered 中国银行(香港) BCA Danamon EMTN Program "USD 2 billion mandiri Shelf Registration Conventional Bonds I Rp 30 trillion (USD 2.13 bio) Shelf Registration Conventional Bonds II Rp 25 trillion (USD 1.77 bio) • Shelf Registration Sukuk Mudharabah Rp 3 trillion (USD 0.21 bio) Shelf Registration Green Bonds Rp 3 trillion (USD 0.21 bio) MTN Rupiah Rp 850 bio (USD 0.06 bio) .MTN USD 300 mio Maybank Development Partners HSBC PermataBank DBS USD 700 mio Offshore Bank Loan Loan Syndication SMI Capital Market Infrastructure Projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Source: PT SMI, 2019 MOXSDA'S 2000 PITER Focuses on 15 out of 17 components in SDGs which are related to infrastructure development 190#192Currently KPPIP is developing a Land Value Capture Scheme to further unlock infrastructure investment potential Land Value Capture (LVC) A policy approach that enables communities to recover and reinvest economic value increases and increases in economic productivity that result from public investment and other government actions. (Lincoln Institute of Land Policy) Open Housing & Settlement Keep Investing- network Grows Human Settlement Improvement Tax based LVC Land and Property Tax Value Uplift Betterment Levies and Special Assessment Development Based LVC Land Sale and Rent Air Right Sale Tax Increment Financing (TIF) Joint Development Land Readjustment Retain a Portion LVC Benefit Triple Win LVC • Local revenue from tax and levy • • Better city planning and development Regional growth I Better Urban Mobility Reducing Subsidy • Distributed development in urban area Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Source: KPPIP, Kemenko Perekonomian, Desember 2020 Creating Fiscal Space 191#193All National Strategic Projects have been given a special facility to ease each of the project's implementation as stipulated in the Pres. Regulation No. 109/2020 PSN Facility Land transfer fee waiver for PSN Local content utilization Electronic permit licensing Government guarantee Spatial planning IT Monitoring system by KPPIP Land aquisition Existing New norm on Presidential Regulation No. 109/2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) SOE appointment Debottlenecking Procurement acceleration Law settlement assistance Project acceleration for private investment 192#194Government of Indonesia has ratified a number of significant implementing regulation as part of regulatory reform to ease infrastructure investment Government Regulation No. 42/2021 on Ease of Doing Business for PSN Government Regulation No. 19/2021 on Land Acquisition for Public Interest Government Regulation No. 43/2021 on Spatial Adjustment for Forest and Land Right/Permit ****** TTT טטט ********** الا Government Regulation No. 21/2021on Spatial Planning Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Government Regulation No. 64/2021 on Land Bank Institution 193#195Acceleration of 35.000 MW Program The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects 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 Government Assignment 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. 1 EPC Powerplant and Transmission PT PLN Provision of Electricity 2A 2B 23 PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance Independent Power Producer Direct Lending PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter Strengthen Equity Strengthen PLN's Balance Sheet Loan from independent lenders Equity Injection by the Government Refinancing Hedging Bond issuance by PT PLN Asset Revaluation Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 194#196Significant Progress on Infrastructure Projects Roads Won FON FR OPBY Trans-Sumatra Toll Road Dams Merah Putih Bridge, Ambon Drinking Water Processing Jatigede Dam (Operational) Umbulan Drinking Water Provision System, East Java Transportation Jakarta MRT Project² Terminal 3 Ultimate Soekarno-Hatta² New Tanjung Priok Port Project² Nop Goliat Dekai, Papua Improving Monitoring System on Infrastructure Projects¹ 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. Database Project information such as map, track, existing study and latest project status. 2 Platform data outlook that is efficient and functional using a user-friendly framework. 12 1 An integrated IT system with monitoring capacity for stakeholders, so that they can have real time data. 3 Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 195#197Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Credit Guarantee Business Viability Guarantee (BVG) PPP Guarantee Political Risk Guarantee Government Guarantee Program 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. - I Toll road Full credit guarantee for PT Hutama Karya's debt payment obligations for 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. Contingent Liabilities from Government Guarantee as of Q3 2021** No. Programs Central Government Guarantee for Infrastructure Guarantee Document Credit Outstanding /Investment Exposure (billion)* 1 the 2 Coal Power Plant 10,000MW Fast Track Program (FTP 1) Clean Water Supply Program 10 USD 0.87 6 USD 0.00 3 Direct Lending from International Financial Institution to SOES 10 USD 1.83 4 Sumatra Toll Road 10 USD 3.13 5 Renewable energy, Coals & Gas Power Plant 10,000 MW 7 USD 3.98 (FTP 2) 6 Public-Private Partnerships (PPP) 7 USD 6.11 7 Regional infrastructure financing 1 USD 0.21 8 Public Transportation (Light Rail Transit) 1 USD 0.68 9 Electricity Infrastructure Fast Track Program (35 GW) 6 USD 5.09 Total 58 USD 21.89 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 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 Source: Ministry of Finance 1 From 2008 to Q3-2021**, the government has issued 92 guarantee documents with total value of USD41.80 billion, there were 32 guarantee documents worth USD5.08 billion have been expired. 1 The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. Starting from 2008 the Government has allocated a contingent budget with respect to these guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund. This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees. **) Currency conversion of IDR14,496.00/USD1 and IDR17,254.61/EUR1 (as of end June 2021) 196#198Government Financial Facilities for PPP Projects Financial Facilities to Attract More Private Participation More Funding Schemes are on the Pipelines Viability Gap Fund (VGF) Project Development Facility (PDF) LCS (Limited Concession Scheme) Government Guarantees (directly by MoF or through IIGF) Availability Payment Schemes Financing from PT. SMI and PT. IIF PINA (Non-Government Budget Infrastructure Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: Financing) Source: Ministry of Finance 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. • • Scheme Characteristics Asset is owned by public sector Operating asset, not greenfield project Records positive cash flow for the last several years Predicted revenue 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. . Scheme Characteristics Asset is owned by private sector Greenfield brownfield / operating projects 197#199New Guarantee Schemes for Non-PPP Projects Guarantee on SOE Direct Lending from International Financial Institutions (IFIs) The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing, State finance soundness Guarantee for Regional Infrastructure Financing Provision with 3 main principles: Fiscal sustainability Best practice of fiscal risk management Based on Government Regulation No. 95/2015 and Ministry of Finance Regulation No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried out by PIP (Government Investment Center). The Government had issued Ministry of Finance Regulation No 174 of 2016 to provide guarantee to PT SMI on the assignment of regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. 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. 198#200Magelang, Central Java f indonesia.travel @indtravel indonesiatravel @indtravel wonderful indonesia www.indonesia.travel