#1BHINNEKA TUNGGAL IKA Republic of Indonesia Strengthening the Policy Synergy to Promote Recovery and December 2021 Maintaining Macroeconomic Stability#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 61-97 The Law on Central-Regional Fiscal Relations (UU HKPD) ...page 79 The Indonesian Financial Services Sector Master Plan (2021-2025) ...page 174-178 Bank Indonesia Board of Meeting Decision ...page 137-138 2#4Overview 1 Economic Recovery Program and Its Updates Fiscal Performance and Flexibility: 5 Strong Commitment in Maintaining Fiscal Credibility Institutional and Governance Effectiveness: 2 Accelerated Reforms Agenda with 6 Commitment to Sustainability and Institutional Improvement Preserving the Environment 3 Economic Factor: Stable Growth Prospects 7 Amid Temporary Moderation External Factor: 4 Improved External Resilience 00 Monetary and Financial Factor: Credible Monetary Policy and Favourable Financial Sector Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision 3#5Section 1 Economic Recovery Program and Its Updates www BHINNEKA TUNGGAL IKA#6Indonesia's Economic Improvement Trend Continues GDP Growth (%YoY) PMI Markit Indonesia 60 10 55 Expansion >50 5 50 0 45 -5 40 -10 35 Contraction <50 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 30 2019 2020 2020 25 Total GDP Household Consumption GFCF Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Current Account Trade Balance (Billion USD) of GDP (%) 8.00 80.00 60.00 2.00 6.00 12000 40.00 1.00 4.00 13000 20.00 0.00 2.00 0.00 14000 -1.00 0.00 -20.00 15000 -2.00 -2.00 -40.00 -3.00 16000 -4.00 -60.00 1 4 7 10 1 4 7 10 1 4 7 -4.00 17000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2019 2020 2021 Balance (Billion USD) 2018 2019 2020 2021 Export-g (% YoY)-rhs Import-g (% YoY)-rhs Sources: CEIC, BI, BPS, Bloomberg (as of 30 December 2021) Total Investment (DDI+FDI) Rp Trillion 130 230 220 210 200 190 26 110 90 CCI & Retail Sales hat 20.0 10.0 70 0.0 -10.0 -20.0 -30.0 180 170 Q1 Q3 Q1 Q3 Q1 Q3 Consumer Confidence Index (CCI) 2019 2020 2021 Retail Sales-g (rhs) The Indonesian Rupiah 1/1/2020 5/1/2020 9/1/2020 1/1/2021 IDR/USD and JCI 5/1/2021 9/1/2021 ⚫JCI-rhs 5000 7000 4000 3000 6500 2000 1000 6000 0 -1000 5500 -2000 -3000 5000 -4000 -5000 4500 -6000 4000 Net Capital flow (Million USD) 1/1/2021 2/1/2021 3/1/2021 4/1/2021 5/1/2021 6/1/2021 7/1/2021 8/1/2021 9/1/2021 10/1/2021 11/1/2021 12/1/2021 Equity Flow (ytd) Bond Flow (ytd) Total 5#7Indonesia Daily Covid-19 Continues to Trend Down Progress of Daily Confirmed Cases & Active Cases of Covid-19 60,000 50,000 Daily New Cases -Active Cases - rhs 40,000 30,000 20,000 10,000 0 2-Mar 2-Apr 2-May 2-Jun 2-Jul 2-Aug 2-Sep 2-Oct 2-Nov 2-Dec 2-Jan 174,798 (4 Feb) 2-Feb 2-Mar 2-Apr 2-May 2-Jun 2-Jul 700,000 574,135 (24 Juli) 600,000 500,000 400,000 300,000 200,000 100,000 2-Aug 2-Sep 2-Oct 2-Nov 2-Dec Total Recovered Total Deaths Active Cases Provinces Sumatera Total RR Total CFR 09 Aug 31 Dec 608.539 96,20% 22.653 3,58% Jawa & Bali 2.762.471 96,41% 100.413 3,50% 94.824 240.171 1.358 %Share Nasional 31,50% Δ Active Cases 9 Aug -31 Dec -98,57% 2.322 53,86% -99,03% Nusa Tengggara 89.813 97,56% 2.165 2,35% 12.906 79 1,83% -99,39% Kalimantan 340.332 96,81% 11.129 3,17% 47.861 95 2,20% -99,80% Sulawesi 229.982 97,27% 6.244 2,64% 33.980 209 4,85% -99,38% Maluku & Papua 83.004 97,96% 1.484 1,75% 18.766 248 5,75% -98,68% NATIONAL 4.114.141 96,52% 144.088 3,38% 448.508 4.311 100,00% -99,04% Source: Coordinating Ministry for Economic Affairs (as of 31 Dec 2021) 6#8Progress of Vaccination Implementation Vaccination has been carried out since January 2021. As of December 30, 2021, the 1st vaccination dose was 160,28 million people (76.96%), and the 2nd dose vaccination was 113,27 million people (54,39%). Vaccination Target | TOTAL Vaccination Progress 208,265,720 Coverage of Covid Vaccination Doses 1 And 2 1st Doses: 76.96% HEALTH Vaccination 1 Vaccination 2 SU WORKER 2,051,673 1,468,764 (139.69%) PUBLIC OFFICERS Vaccination 1 23,538,657 2 17,327,167 (135.85%) Vaccination 1 ELDERLY 1,964,744 (133.77%) Vaccination 2 21,151,408 (122.07%) Vaccination 2 14,112,267|8,965,709 Gotong Royong Vaccine: Vaccination 1 = 1,297,282 (8.65%) Vaccination 2 = 1,220,618 (8.14%) 2nd Doses: 54.39% 3 21,553,118 (65.48%) (41.60%) |MG COMMUNITY & VULNERABLE Vaccination 1 Vaccination 2 96,676,250 62,911,119 4 141,211,181 (68.46%) (44.55%) Vaccination 1 Vaccination 2 TEENAGER 5 26,705,490 22,595,024 (84.61%) 17,053,345 (63.86%) Total Target 160,282,687 113,270,789 (1+2+3+4+5) 208,265,720 (76.96%) (54.39%) As of 30 December 2021 7 Source: Coordinating Ministry for Economic Affairs#9Covid-19 Handling Strategies DETECTION E Increasing epidemiological tests vs screening tests. Increase traced close contact ratio by involving Babinsa Bhabinkamtibmas. • Genomic surveillance in areas with a potential spike • in cases. Strengthening surveillance at the entrance of the country. THERAPETIC Conversion of TT 30-40% from total hospital capacity & supply (including oxygen), medical equipment, & human resources. Deploy backup staff: internsip 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 of centralized isolation. VACCINATION 50% vaccine allocation in areas with high cases & mobility. 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. • CHANGES IN BEHAVIOR Implementation of PPKM Level 1-4 Utilization of digital technology in the implementation of Health protocols (3M) and Screening Source: Coordinating Ministry for Economic Affairs 8#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 Community Activities Restriction Level 0 Level 1 Level 2 Level 3 Level 4 Enforcement (PPKM) 11 Jan-8 Feb 2021 Micro-Scale PPKM 9 Feb 2 Jul 2021 The Emergency PPKM 3 Jul 20 Jul 2021 PPKM Level 1 to 4 21 Jul 31 Dec 2021 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 Situation without a situation where transmission does not occur but local transmis sion preventing there are limitations to transmission situations with low community incidence a community transmission situation with limited response capacity and a risk of inadequate health services uncontrolled transmission with insufficient response capacity 9#11Covid-19 Handling Fund and National Economic Recovery Strategy to accommodate Health Facilities and Economic Recovery by Integrating Health and Economic Policies Health Sector (COVID-19 Handling) Health Protocol Health protocol based on 3 standards (standard of number, activity, and behavior) Implementation of PPKM Level 1-4 • Utilization of digital technology in the implementation of health protocols Detection Increasing epidemiological vs screening tests. • Increase tracked close contact rate Genomic surveillance in areas with the potential for a spike in cases. Therapeutic . Convert beds 30-40% of total hospital capacity Tighten hospital admission requirements . Increase utilization of centralized isolation • • • • Vaccination 50% vaccine allocation in areas with high cases & mobility. Vaccination centers in places that are easily accessible to the public Vaccination card requirements for travelers and in public spaces Acceleration of vaccination in vulnerable groups, including the elderly & people with comorbidities Committee (Chairman: Coordinating Minister for Economic Affairs) Vice Chairman • Coord. Minister for Maritime and Investment • Coord. Minister for Politics, Law, and Security Vice Chairman • Minister of Health • Minister of Home Affairs Executive Secretary I • Executive Secretary II . Coord. Minister for Human Development and Culture • Minister of Finance Economy Sector (National Economic Recovery/PEN) Intensification of National Economic Recovery Program Acceleration of government spending Labor-intensive program and the development of National Strategic Projects Strengthened support for the manufacturing sector Stimulate household consumption Vice Chairman + Executive Team Leader PEN and Covid-19 2020 Stimulus Minister of SOES 2021 (as of 23 April 2021) 2021 (as of 21 July 2021) Budget TOTAL COVID-19 Task Force PEN Task Force Health IDR 695,2 T (Realization: IDR 579,8 T) IDR63,51 T IDR699,43 T IDR744,75 T IDR175,5 T IDR214,95 T (Chairman: Chairman of BNPB) (Chairman: SOES Vice Minister) Social Protection IDR220,39 T IDR150,88 T IDR187,84 T Business IDR56,12 T IDR56,72 T IDR62,83 T Incentives Health and Economic Policies need to Integrated to Encounter Covid-19 Support for MSMEs and Corporations IDR173,17 T IDR191,13 T IDR161,20 T Priority Program IDR66,59 T IDR125,17 T IDR117,94 T Source: Coordinating Ministry for Economic Affairs, Ministry of Finance, Ministry of Health#12National Economic Recovery Program Will Continue In 2022 To Anticipate The Expansion Of The Impact Of Covid-19 Until December 28th, 2021 (Reached IDR572.36 T or 76.9% of IDR744.77 T) HEALTH Budget IDR.214.96 T Realization IDR.169.33 T (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.165.05 T (88.4% Expansion of community protection SUPPORT FOR MSME AND CORPORTATION Budget IDR.162.40 T Realization IDR.75.98 T (46.8%) TOTAL: PRIORITY PROGRAM Budget IDR.117.94 T Realization IDR.94.20 T (79.9%) BUSINESS INCENTIVE Budget IDR.62.83 T Realization IDR.67.80 T (107,9%) The allocation of the Program has the potential to increase in line with the development of handling COVID-19 IDR414 T HEALTH: IDR117.9 T SOCIAL PROTECTION: IDR154.8 T STRENGTHENING ECONOMIC RECOVERY: IDR141.4 T 11#13• 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 HOTEL 12#14Policy 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. 2 Automotive Sector Property Sector Government B Bank Indonesia QK OJK Giving VAT Incentives on Luxury Goods Borne by the Government for Motor Vehicles through PMK No. 77 of 2021 which amend PMK No 20 of 2021 • ⚫ Car which produced with local purchases > 60%. 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. ! Relaxation of down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles, while maintaining prudential principles and risk management as stipulated | by PBI No. 23/2/PBI/2021 effective I 1st Mar 2021 31st Dec 2021. I 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 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 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. 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 13#15The 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 83 M Registrant in Pre-Employment Card Websites From all Cities and Regencies in Indonesia Recipients 2020 5,5 M Pre-Employment Card Recipient (Batch 1-11)* 5,3 M Recipients Has received an incentive 34 Province 514 Cities and Regencies 13.4 T Incentives Have Been Disbursed Recipients 2021 60.6 49.4 50.7 46.148.8 53.951.2 39.4 5,9 M Pre-Employment Card Recipient (Batch 12-19) 5,84 M Recipients have completed training 5,7 M Recipients have received incentives 13,6 T Total incentives have been distributed unemployment work entrepreneur employee ■before joining the pre-employment card (January 2021) ■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. Small Credit Commercial Finance Micro Credit (KUR (KUR) Kecil) Super- Micro Pre- Employment Credit Card Program Source: Coordinating Ministry for Economic Affairs, as of December 22, 2021 14#16National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 AA INDUSTRIAL CONDITIONS SECTORS FOCUS Require to deepen Industrial Structure • Necessary to be independent on raw materials and production Food and Beverage Unsupportive regulations and incentives • The P3DN Program is not yet optimal Textiles and Clothing 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Source: Ministry of Industry Import Reduction through Import Substitution in Industries with Large Import Value Automotive Encouraging the Deepening of Industrial Structure STRATEGIC STEPS Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers Chemical Electronic Utilisation 60% (2020) Utilisation 75% (2021) Utilisation 85% (2022) Pharmacy Medical Devices • Absorption of workers affected by layoffs Increased domestic spending capacity . Increase in the export market 15#17Fiscal 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 a • 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. • To encourage investment in labor-intensive industries, 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 16#18Government 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 POSTPONEMENT OF PRINCIPAL & INTEREST 2 3 SUBSIDIES According to POJK KUR Super Mikro: Loan up to IDR 10 million Placement of LOW INTEREST Funds at Bank Himbara IDR30 Trillion Government 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. KUR MKM (SMEs): Asset Quality Arrangement: Loans < IDR • 10 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 GUARANTEE Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT 4 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 • 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. Source: Coordinating Ministry for Economic Affairs 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). 6 MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE Direct assistance to 13 million Micro Enterprises and 1 million street vendors in the amount of IDR 1.2 million per recipient 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 01 02 20 Cooperatives (Establishment of Cooperatives, Cooperative Businesses, Sharia Cooperatives) Changes in MSMEs Criteria, MSMEs Financing, MSMEs Partnerships in Law no. 20/2008 on MSMEs 03 MSMEs Single Database Integrated Management of 04 Micro and Enterprises Small Ease of Business Licensing 06 for Micro and Small Enterprises Ease of Financing Facilitation and Fiscal Incentives for Micro and Small Enterprises 07 08 Legal Assistance 09 Assistance Services Special Allocation Fund for Micro, Enterprises Small, - Medium 11 Training and Assistance in the Utilization of Bookkeeping/Financial Recording Systems/Applications 12 Incubation 13 Management 30% Allocation for Provision of Promotional Places, Business Places, and/or Micro and Small Enterprises at Terminals, Development Airports, Ports, Railway and for Stations, Toll Road Rest Areas and Other Infrastructure Micro and Small Enterprises Public Micro and Small 05 Enterprises Partnership 10 with Medium and Large Enterprises Source: Coordinating Ministry for Economic Affairs 40% Allocation of Micro and Small Enterprises Products/Services in Government Procurement of Goods/Services 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 Business Ability Source: Coordinating Ministry for Economic Affairs 19#21Section 2 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement www BHINNEKA TUNGGAL IKA#22Global Competitiveness Index¹ Improving Global Perception ...with recent improvements on governance effectiveness 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 41 2016-2017 36 2017-2018 2018* 2019* Rank 20 30 40 50 60 70 288 2008 Higher rank is better 45 45 50 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long-term growth. 90 India Indonesia Philippines -Bulgaria Corruption Perception Index³ Colombia Worldwide Governance Indicators² 60 60 53 51 Higher rank is better 42 38 28 46 44 42 40 38 ww Indonesia India Philippines Bulgaria Colombia 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 44 Voice and Accountability Government Effectiveness Rule of Law Political Stability/Absence of Violence Regulatory Quality Control of Corruption 40 39 37 36 34 34 Higher score is better 32 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 24#23A Well Maintained of Indonesia's Sovereign Credit Rating in The Midst of Economic Recovery BBB+ BBB BBB- Invotment Coo BB+ Below Investment Grade BB BB- B+ 2008 R& S&P Fitch Moody's Fitch Ratings November 2021, Rating Affirmed at BBB/Stable 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. 2007 2008 2009 2010 2011 2012 2019 2014 2015 2018 2017 2018 2019 2020 2021 S&P Global Ratings April 2021, Rating Affirmed at BBB/Negative 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 Feb 2020, Rating Affirmed at Baa2/Stable 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 12#24Structural Reform Towards "Indonesia Maju 2045" and Out of the Middle-Income Trap GDP 2019 RANKING #16 *World Bank Making Indonesia 4.0 2020 2018 2019 ◇ Job Creation Law Income per capita : US$ 3.911,7 2021-2022 "New Normal" Entering the Political Year 2 Years Income per capita: STIMULUS RECOVERY 2022 US$ 4.174,5 G PRE COVID Source: Coordinating Ministry for Economic Affairs INDONESIA MAJU 2045 RANKING TOP 10 WORLD GDP 2035 2036 EXIT MIDDLE INCOME 2030 BONUS 2025 DEMOGRAPHY ELECTION 2024 NEW LEADER REFORM TRAP* 3 Years 5 Years Income per capita : US$ 6,305* Income per capita : US$ 8,804* 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 Strengthening Economic Resilience to Achieve Superior Economic Growth Achieving Productive, Independent and 2 Competitive Economic Structure 3 Attaining Equitable and Prosperous National Development 2 Infrastructure Development Achieving Sustainable Environmental 4 Developing More Remote Regions to Reduce Economic Gaps and Improve Equality Improvement of Quality and Competitiveness of the Labour Force Climate Developing Cultural Progress Reflecting 5 the Nation's Personality Regulation 3 Simplification Developing a Dignified and Trustworthy Legal 6 System Free from Corruption 4 Protection of All Nations and Simplification of Bureaucracy Call 7 Provision of Security to All Citizens 8 00 Attaining Good, Effective, and Reliable Governance Achieving Synergy of Governmental Economic 5 Transformation 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 9 Framework with the Regional Government 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 <<<< | | || || | || 14 Working Groups, 1 Task Force, 1 Initiative Involving 17 Ministries/Institution from SHERPA TRACK and FINANCE TRACK TT о 878 「 G20 Indonesia 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 जिदी 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 New Job Creation GREENFIELD INVESTMENT 111> Business Development Welfare Creation COMPANY Supply Brownfield PRODUCTION HOUSEHOLD Demand JOB CREATION LAW CONSUMPTION Increased Purchasing Increased Income Power Source: Coordinating Ministry for Economic Affairs 26 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 HI 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 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 3. MSME and Cooperative Protection and Empowerment 4. Ease of doing business in the tax sector 5. Implementation of Online Single Submission 6. Employment Source: Coordinating Ministry for Economic Affairs 27 27#29Positive 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 INVESTMENT 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 Source: Coordinating Ministry for Economic Affairs 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 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 28#30Implementing Regulation on Risk-Based Licensing A new paradigm in accelerating the licensing process to improve Indonesia's investment competitiveness Ease of Doing Business Risk-based Business License 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 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: 9. Transport; Low Risk Medium Risk 1. Marine & fisheries; 10. Health, medicine and food; High Risk Business Identification 2. Agriculture; 11. Education and culture; 3. The environment & forestry; 12. Tourism; 6. Industry; 7. Trading; 4. Energy & mineral resources; 5. Nuclear energy; 13. Religion; 14. Post, telecommunications, broadcasting, electronic systems and transactions; Only required to obtain a Business Business Identification Number + Number + License + Standard Certificate Identification 8. Public works and housing; 15. Defense & safety; 16. Employment. Number KEMENTERIAN INVESTASI/ BKPM Source: Coordinating Ministry for Economic Affairs issued by either the central or regional government Online Single Submission (OSS) - Risk Based Approach (RBA) will be implemented starting August 9, 2021 in all regions of Indonesia Standard Certificate 29#31Indonesia Investment Authority (INA) as an Alternative Source of Economic Development Financing ÏNA INDONESIA INVESTMENT AUTHORITY Legal basis Development • PP Number 73 of 2020 concerning Initial Capital for indonesia Investment Authority • PP Number 74 of 2020 concerning Indonesia Investment Authority 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 30 30#3251 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 1. Government Regulation No. 12 of 2021 concerning Amendments to Government Regulation No. 14 of 2016 concerning Implementation of Housing and Settlement Areas 2. Government Regulation No. 13 of 2021 concerning the Implementation of Flats 3. Government Regulation No. 14 of 2021 concerning Amendments to Government Regulation No. 22 of 2020 concerning Implementation Regulations of Law No. 2 of 2017 concerning Construction Services 4. Government Regulation No. 15 of 2021 concerning 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 31#3351 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 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 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 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 32 32#3451 Regulations for Job Creation Law (Substance Grouping) 1. Government Licensing and Sector Business Activities 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 33 333#35Investment Facilitation Services During COVID-19 Pandemic 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 3 00 1 2 3 4 5 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) 34 =4#36Enhancing 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 Provide business licensing process assurance in terms of the costs and lead times Overcome the barriers to doing business in Indonesia 1 MI Source: Coordinating Ministry for Economic Affairs 2 Accelerate the business licensing process 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 3 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 35#37Improving 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 improve PLB facility aims to efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and medium industries; increase investment; and to make Indonesia to become a logistics hub in Asia Pacific. To date, 52 Bonded Logistic Center has been launched to support various industries. Small and medium industry Food & beverages industry Oil and gas, and mining industry Personal care/ home care industry Synthetic textile Auto- motive (chemical industry Textile industry. (cotton) Heavy Equipment industry Defence industry substances) industry Aircraft MRO industry Source: Coordinating Ministry for Economic Affairs 36#38Improving 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 Other Sector The Advantage of Using OSS Business licenses can be secured in under an hour 良 Standardized business licenses are available Source: Coordinating Ministry for Economic Affairs More practical Accessible at anytime and anywhere Ellectronically integrated Sector The whole licensing process is monitored by the Task Force 37 32#39Improving Investment Climate ...revision of the Negative Investment List in 2018 Introduction of New Foreign Ownership Regulation for Strategic Sectors Sports Center, Pharmaceutical Raw Materials Manufacturing Cold storage Restaurants, Bars Film Processing Lab, Crumb Rubber Before After Before After Before After Before After 33% 100% 100% 49% 100% 51% 85% 100% 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 100% 95% Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Conventions Before After 67% 67% 51% 33% Telecommunication Provider with Integrated Services Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Consultancy for Construction¹ Before After Before After Before After 49% 67% 67% 67% 55% 65% 38#40Investment Realization in Q3-2021 QI QII Q III QIV QI QII Q III QIV QI Q II 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 97.0 109.9 111.7 112.0 106.9 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-III 2021 Q-1 Q-11 Q-III Q-1 Q-11 Q-III Y-O-Y Q-0-Q TARGET 2021** ACHIEVEMENT *** DDI 112.7 94.3 102.9 108.0 106.2 113.5 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 **) 2021 Investment Realization Target: IDR858.5 T (Strategic Plan) 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) 611.6 y-o-y 210.7 659.4 7.8% 191.9 QUARTER III y-o-y 223.0 219.7 216.7 209.0 3.7% 2020 2021 Q-I 2020 Q-II Q-III Q-I Q-II Q-III 2020 2020 2021 2021 In Rupiah Trillion 2021 39#41Investment 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 0.9 12.7% Japan 0.7 9.9% China 0.6 8.5% USA 7% 0.5 Source: Investment Coordinating Board (BKPM) 2.6 By Region 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 Other Services Mining Metal, Metal Goods, Except Machinery, and Equipment Industry Transportation, Warehouse, and Telecommunication Housing, Industrial Estate, and Office Building 19.4 21 25.1 26.6 28.1 40 40#42Investment 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 Q3-2021 Total IDR 216.7 T : Realization y-o-y Java Java 5.7% Outside Java IDR 98.6 T (51.4%) IDR 112.5 Outside Java TOTAL 1.9% 3.7% T (52.1%) Java IDR 104.2 T (47.9%) Direct Investments IDR tn FDI DDI -TOTAL 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 2014 2015 2016 2017 2018 2019 2020 2021 Source: Investment Coordinating Board (BKPM) 41#43Potential 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 YLGDP YTL 38.0T (PT Tanjung Jati Power) 58.1T PT. INDO RAYA TENAGA KOBEXINDO www.gym howther VALE 39.2T PT VALE INDNESIA INDONESIA 14.0T POWER 9.5T Solving stalled investment issues is one strategy to attract investors CJ CHEILJEDANG 2.4T 21.7T HYUNDAI tlb 5.2T 7.7T • 2.7T GCL PT Multimas Nabati Asahan (PT Tenaga Listrik Bengkulu) PT Sumber ANJ 2.0T Apri PT Galempa Sejahtera Bersama MALUNDO 1.1T A HUBADALA Masdar 1.8T Mutiara Indah 1.8T Perdana (SMIP) bp 1.0T 6.0T PERTAMINA 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 2.8T FIRST 14.7T PACIFIC 圣 2.3T JAMBI INTEGRATED CITY 2.4T (Project Hululais) Others 1.4T Minahasa Cahaya 1.8T Lestari 5.4T (PT Halmahera Persada Lygend) 1.4T (PT Sulawesi Cahaya Mineral) 42 42#44Section 3 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IKA#45Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia 4th Most Populous country in the World; 64% in Manageable Inflation Rate 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 Budget reform as a part of larger economic reform initiative Tax base to be broadened from one reduce dependency on commodities Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration 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 New Economic Structure High Infrastructure Investments 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 44#46National Economic Recovery Expected to Continue Strong GDP Growth¹ % QoQ YoY 7.07 3.51 B.31 1.55 8.0 6.0 4.0 5.05 2.0 3.83.27 3.74.31 4.01 4.01 4.21 4.20 3.14 3.19 3.09 3.06 0.04 / 0.0 (2.07) -2.0 (0.16) (1.73) (0.36) (1.81) 1)(0.30) (1.70) (1.69) (0.41) (0.52) -4.0 -6.0 -8.0 (1.742.41) (0.42 0.96) (419) Q1 Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q2 Q3 Q4Q1Q203 2014 2015 2016 2017 2018 Favourable GDP Growth Compared to Peers2 15.00 % yoy 10.00 2019 2020 2021 • 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, 9.50 7.60 4.50 5.00 3.20 3.20 0.00 Growth Prospect *) 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Institutions -5.00 2021 GDP growth (% YoY) -10.00 2021 Budget 5.0 -15.00 Bulgaria Colombia Bank Indonesia 3.2-4.0 India Indonesia Philippines IMF (WEO, Oct 2021) 3.2 World Bank (East Asia and Pacific Economic Update, Oct21) 3.7 1. 2. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption Source: World Economic Outlook Database - October 2021; * indicates estimated figure ADB (ADO, Sep 2021) 3.5 45 *) Consensus Forecast number will be given later#47GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY) 1 2016 2017 2018 2019 By expenditure Q1 Q2 HH. Consumption 5.0 5.1 Q3 5.0 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 5.0 5.0 4.9 5.0 4.9 5.0 4.9 5 Non profit HH. consumption Government consumption Gross Fixed Cap. Formation Exports 6.4 6.7 6.7 6.7 5,2 5 5,1 5,1 6.6 8.1 8.5 6.0 5.3 6.9 8,1 8,8 8,7 11 9,1 17,0 5,0 5,2 5,0 5,0 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2,7 5,2 6,3 4,6 4,8 5,3 Imports GDP 4.7 4.2 4.2 4.8 4.5 4.8 5.3 (3.1) (1.5) (5.9) 3.9 (5.0) (3.4) (4.1) 2.7 4.9 5.2 5.0 4.9 7.1 (1.7) 8.4 (2.4) 4.8 2.7 0.2 7.3 6.2 7,9 16.5 8.4 8.9 5,8 15.4 11.9 8.1 13 5.0 5.0 5.0 5.1 5.2 5.1 5,1 5,3 5,2 5,2 5,2 5,8 6,9 6,1 6,7 5,0 15 14 7,4 12 7,4 8,3 4,6 6,5 -1,5 -6,5 5,1 5,0 2,8 -5,5 -4,0 -3,6 15,3 7,4 3,5 10,6 -5,0 -7,8 -2,0 -2,1 -4,3 -4,0 8,2 1,0 0,5 3,3 3,8 -6,9 9,8 1,8 1,9 2,6 4,6 4,2 4,1 4,5 1,7 -8,6 -6,5 -6,2 -4,9 -0,2 7,5 3,7 -1,8 0,1 -0,4-0,9 0,4 -12,0 11,7 -7,2 -7,7 7,1 32,0 29,2 -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 5,0 5,0 5,0 3,0 -5,3 -3,5 -2,2 -2,1 -0,7 7,1 3,5 2020 2021 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 6,0 1,0 4,1 3,0 8,0 0,7 -2,6 -2,2 Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption GDP Growth by Sector (%, YoY) 2016 2017 2018 2019 2020 2021 By sectors Tot Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Agriculture, forestry, and fishery 1.5 3.5 3.2 5.5 Mining and Quarrying Manufacturing 22 1.2 3.4 7.1 3.3 2.8 (1. 3) 2.4 3.9 3,3 4,7 3,6 3,8 3,9 1,8 5,3 3,1 4,2 2.1 1.8 Construction Wholesale and Retail Trade, Repair of Car and Motorcycle Transportation and Storage 6.8 5.1 5.0 4.2 4.3 4.3 3 3.7 3.9 4.0 4.6 3.5 1.0 0.2 1.4 0.9 4.7 4.6 4.5 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4,6 3,9 4,4 4,2 4,3 5.2 6.0 7.0 7.0 7.2 6.8 7,4 5,7 5,8 5,66,1 5,2 5,3 4,4 0.0 0.7 1,1 2,6 2,7 2,2 2,2 2,3 -0,7 2,3 0,9 3,9 5.2 4.5 4.5 4 5 3,5 4,1 3,7 5,9 5,7 5,6 5,8 3,8 5,8 སྦྱ[སྐུ* 8 3,6 0,0 2,2 2,2 2,6 AANO Q4 Tot Q1 Q2 Q3 1,8 3,4 0,4 1,3 1,2 0,4 -2,7 -4,3 -1,2 -2,0 -2,0 5,2 7,8 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 LO 5 5,2 4,6 4,4 4,2 4,6 1,6 -7,6 -5,0 -3,6 -3,7 -1,2 9,4 5,2 7.4 6.5 8.2 7.6 Information and communication 7.6 9.3 8.9 9.6 8.9 Financial service Other Services GDP 9.3 13.6 9.0 4.2 6.0 5.6 4.5 3.8 4.9 5.2 5.0 4.9 5.0 5.0 5.0 7.4 8.1 8.8 8.9 10. 5 8.9 6.0 5.9 6.1 4.9 4.2 3.5 4.8 5.1 8.2 8.5 8,5 8,7 5,7 5,5 7 5,4 5,9 6,7 7,6 6,4 1,3 -30,8 -16,7 -13,4 -15,0 -13,1 25,1 -0,7 11.1 8.8 3.8 5.5 4,3 3,1 8.3 9.6 7,8 5,1 8,1 7,1 3,1 7 9,1 9,6 9,2 9,8 9,4 9,8 6,2 4,2 7,2 4,5 6,2 8,5 6,6 10,8 10,7 10,9 10,6 8,7 10,6 1,1 -0,9 2,4 3,2 -3,0 6,9 5,5 8,3 4,3 6.0 4,6 5,4 6,2 6,7 6,46,2 6,8 7,3 6,4 6,2 6,7 4,6 -6,2 -1,4 -1,7 -1,2 -2,6 9,8 -0,8 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) *Other services consist of 10 sectors (according to Standard National 2008) 46#48Economic Performance Improved In Almost All Regions Regional GDP of The Third Quarter of 2021 (%, yoy) Aceh 2.8 SUMATRA 5.28 3.78 KALIMANTAN 6.29 432 North Sumatra (0.86) (226) (221) M W 3.7 -2.24 2,8 +421 M North Kalimantan 5.2 IV A 2003 3311 2001 2021 Riau 4.1 West Sumatra Riau Islands 3.0 West Kalimantan 4.6 East Kalimantan 4.5 3.3 Jambi 5.9 KEP. BABEL 6.1 Central Kalimantan 3.6 Bengkulu 2.5 South Sumatera South Kalimantan 3.9 DKI 2.4 (191) 3820 NATIONAL 7.07 Gorontalo 3.0 North Sulawesi 3.2 North Maluku 11.4 (0.71) (2.19) (3.49) N 1 2000 2021 West Sulawesi 2.5 Central Sulawesi 10.2 West Papua -1.8 4.8 South Sulawesi 3.2 South-East Sulawesi 4.0 Papua 14.5 Maluku 4.2 Lampung 3.0 Central East Java Java West 2.6 3.2 Banten Java Bali -2.9 4.6 3.4 West Nusa Tenggara 2.4 DIY JAVA 7.92 2.3 (2.60) 10.92 " 2021 3.03 Source: BPS, calculated Source: Central Bureau of Statistics of Indonesia (BPS), calculated East Nusa Tenggara 2.4 BALINUSRA 3.77 512 4,85 Q III'21 > QII'21 Q III'21< Q II'21 2920 3019 0,09 SULAMPUA 8.62 136 -3.05 M AVE 3.51 3.79 3,29 47#49% 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 Q3-2020 Q4-2020 Information and Communication Manufacturing 2020 Q1-2021 90.0 17.55 17.6 17.88 18.03 18.20 18.64 18.6€ 18.47 18.35 18.49 18.52 18.33 19.37 18.68 19.08 18.82 19.10 19.8 19.22 18.46 18.49 17.0 80.0 70.0 3.73 3.57 3.60 3.53 3.50 4.42 3.49 3.46 3.72 3.88 3.86 4.03 4.19 4.34 3.61 4.20 4.15 4.10 4.18 3.57 3.52 3.62 3.78 3.95 3.77 3.63 3.93 3.89 3.95 5.02 5.20 5.41 5.38 5.53 5.57 5.54 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 4.34 4.04 5.63 4.24 4.70 4.44 4.32 3.96 4.66 4.25 4.56 5.57 5.17 3.58 4.40 4.57 4.51 4.57 4.68 4.58 4.58 4.51 4.47 4.27 4.21 4.42 4.26 4.37 4.44 3.90 12.95 13.01 13.20 12.83 12.83 12.93 13.09 13.08 13.03 12.85 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 10.56 10.75 10.70 10.60 10.71 10.80 10.12 10.39 11.26 10.96 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 7.65 7.18 7.58 8.08 7.39 7.77 6.28 6.95 6.16 7.26 6.82 6.44 7.64 8.09 9.55 6.98 6.48 10.0 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 48#50Stronger Fundamentals Facing the Headwinds 1998 Inflation Rate (%) Inflation controlled within the target range 2008 12.1 Nov 2021 1.75 (yoy) 1998 1998 82.4 2008 15 Dec 21 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 2008 3.8 Oct 2021 3.22 0 5 10 15 20 25 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 30 30 30 35 40 IDR Movement (%) IDR depreciated year-to-date Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 8.1 months of import and external debt repayment -197 -35 1998 17.4 2008 -1.97 (ytd) Nov 2021 -300 -200 -100 0 Government Debt/GDP Consistently well-maintained More Liquid Market (%) Overnight interbank money market rate is relatively lower 62 10.5 2.79 1998 2008 Nov 2021 50.2 External Debt/GDP Higher than 2008, but significantly lower than 1998 145.9 8.6x 3.1x 2.90x 100.0% 27.4% 39.84% 116.8% 33.2% 37.0% 2008 Oct 2021 2008 Nov 2021 2008 Q3-2021 1998 1998 1998 49#51Outlook 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 2021 and 2022 to remain under control and within the 3.0%±1% target corridor. • Bank Indonesia projects a lower current account deficit in 2021 in the range of surplus 0.3% to deficit 0.5% of GDP and remain manageable in the range 1.1-1.9% of GDP in 2022, thus supporting external sector resilience in Indonesia. Bank Indonesia projects credit growth in 2021 will be around 4.0-6.0% and increase to 6.0-8.0% in 2022 LOAN 元 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 Realisation -2.07% 1.68% 0.4% -2.4% surplus 0.3% 2021 3.2-4.0% 3.0±1% 4.0-6.0% to deficit 0.5% Source: Bank Indonesia 50 50#52Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#53External Sector Remains Resilient ... Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid US$bn 20 15 10 525252525 -5 -10 -15 Current Account Recorded Surplus in Q3-2021 2013: 2014: 2015: 2016: 2017: 2018: 2019: 2020: 2021: CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Surplus (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$4.5bn) US$bn US$bn 160 18 146.87 13 10.69 120 8 6.09 3 4.47 80 -2 -7 40 -12 0 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03|04|01|02|03 2013 2014 2015 Current Account Overall Balance 2016 2017 2018 2019* 2020* 2021** Capital and Financial Account Reserve Asset (rhs) Source: Bank Indonesia Trade Balance Surplus Continues 1.49 2.0 1.0 ཅ་བས་།---སོ་ན་ 15.030.0 -1.0 1.42 -2.0 (8.34)-3.0 (3.63) 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 2013 2014 Goods Secondary Income 2015 2018 2016 2017 2019* 2020* 2021** Services Primary Income Current Account (%GDP) (rhs) -4.0 -5.0 Source: Bank Indonesia Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of November 2021: US$145.9 bn (Equiv. to 8.1 months of imports + servicing of government debt) FX Reserves (LHS) Month of Import & Debt Service (RHS) US$hn Mont 150 140 5.2 130 120 3.51 110 100 90 80 -1.69 70 60 ADDELL987654327 13 12 11 10 50 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 11 11 11 1 3 5 7 9 1 3 5 7 9 11 11 11 2016 2017 2018 2019 2020 2021 2016: 2017: Surplus Surplus US$11.83bn US$8.83bn 2018: Deficit (US$8.65bn) 2019: Deficit (US$3.24bn) 2020: 2021: Surplus Surplus (US$21.81bn) (US$32.81n) US$bn 8 OG Non-OG Total 6 4 2 0 -2 -4 13579113579 2016 Preliminary Figure Source: BPS 2017 АА ** Very Preliminary Figure 57913 2018 2019 2020 9113 2021 Source: Bank Indonesia 52 62#54Source: Reuters, Bloomberg (calculated) 28-Jan 22-Feb 19-Mar 13-Apr 8-May 2-Jun 27-Jun 22-Jul 16-Aug 10-Sep 5-Oct 30-Oct 24-Nov 19-Dec 13-Jan 7-Feb 3-Mar Movement of Rupiah a.o 15 Des' 21 Quarterly Average Exchange Rate In Line with Fundamentals Monthly Average IDR/USD 15,711 14,673 14893 14,494 15,179 14,5 14,800 14,381 14,22 14,232 14254 14,113 14120 13,714 14,855 14,708 1437 - 14157 14320 14,529 14399 14,387 14,180 15,000 14,25 14.2 14,366 14,500 14332.5 14,201 14754 14134 140641421 14,105 14,12 14,141 14,023 14,031 14,006 14,044 14,378 14254 28-Mar 22pr 17-May 11-Jun 6-Jul 31-Jul 25-Aug 19-Sep 14-Oct ΛΟΝ-8 3-Dec 28-Dec 22-Jan 16-Feb 13-Mar Apr May 27-May 21-Jun 16-Jul 10-Aug 4-Sep 29-Sep 24-Oct 18-Nov 13-Dec Rupiah Exchange Rate Fared Relatively Well Compared to Peers YTD 2021 vs 2020 TRY -50.15 -19.80 THB ZAR JPY EUR BRL KRW PHP point-to-point average MYR INR As of 15-Dec-21 SGD IDR CNY -60.0 -50.0 -10.37 -2.03 -8.53 11.28 -9.51 -2.59 -8.94 3.66 -8.74 -4.74 -8.40 3.22 -4.64 0.78 -4.57 1.37 -3.84 0.22 -3.07 2.66 -1.97 1 1.60 2.45 6.93 Rupiah Exchange Rate Volatilty a.o 15 Dec 2021 % 100 90.28 80.93 Oct-21 90 Nov-21 80 Dec-21 25.21 26.94 1610116.42 3.51 11.10 5.01 11.12 5.23.12 5.7379.25 3.08.28393 5.04 232 70 60 50 40 30 13.586 20 3.34.592.9.21 10 -40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP 17,000 16,500 16,000 15,500 14,000 13,500 13,000 In response to external sector resilience and Bank Indonesia's stabilisation measures, rupiah exchange rate movements remain under control despite continued global financial market uncertainty. As of 15th December 2021, the value of the rupiah depreciated slightly by 0.07% (ptp) and 0.70% on average compared with the November 2021 level. The weaker rupiah stems from foreign capital outflows despite a maintained domestic supply of foreign exchange and the positive perception of investors concerning the promising domestic economic outlook. Compared with the level at the end of 2020, therefore, the rupiah has depreciated by 1.97% (ytd), which is relatively lower than the depreciation experienced in several other developing economies, namely India (3.93% ytd), the Philippines (4.51% ytd) and Malaysia (4.94% ytd). Bank Indonesia continues to strengthen rupiah exchange rate stabilisation policy in line with the currency's fundamental value and market mechanisms through effective monetary operations and adequate market liquidity. 53 33#55Global Regional Ample Lines of Defense Against External Shocks Ample Reserves FX Reserve Swap Arrangement Bilateral • Ample level of FX reserves to buffer against external shock FX Reserves as of of November 2021: US$145.9 bn Japan Singapore China Malaysia ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement 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 CNY 200 bn / USD 30 billion in November 2018 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 IMF Global Financial ⚫ Safety Net - GSFN Source: Bank Indonesia 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) 54#56Healthy External Debt Profile External Debt Structure Private External Debt ■Public External Debt 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 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* Jan-21* Q4-2020* Feb-21* Apr-21* Mar-21* May-21* External Debt Remains Manageable Million USD External Debt External Debt (rhs) 450,000 17.1 400,000 350,000 300,000 12.0 115 10.2 10.1 250,000 11.3 8.0 200,000 6.5 5.9 150,000 100,000 50,000 2009 2010 Source: Bank Indonesia, External Debt Statistics 0 2011 2012 5.4 2013 O 2014 > 2015 2016 2017 3.0 2018 Q1-2019 502-2019 Q3-2019 9.9 10.2 7.5 0.3 4.8 The Structure of External Debt is Dominated by Long-Term Debt Short Term External Debt ■Long Term External Debt 100% 90% 80% 50.7 70% 60% 50% 40% 30% 49.3 20% 10% 84.7 15.3 0% Jun-21* Jul-21* Aug-21** Sep-21* Oct-21* 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* Jan-21* Feb-21* Mar-21* Apr-21* May-21* Jun-21* Jul-21* Aug-21** Sep-21* Oct-21* % % 20.0 240 32.9 18.0 External Debt to GDP Ratio & Debt to Export Ratio 34.334.7 36.036.736.536.136.1 36.1 220 31.8 29.1 16.0 27.4 200 26.5 25.0 14.0 180 12.0 10.0 160 6.8 8.0 140 139.5 6.0 120 3.7 3.3 3.6 121.8 4.0 114.9 100 1.7 2.0 80 88 Q1-2021* Q2-2021* Q3-2021* 0.0 *Provisional Figures 2009 2010 2011 2012 2013 2014 2015 123.1 113.8 101.0 2016 2017 2018 Q1-2019 Q2-2019 **Very Provisional Figures % 37.338.1 39.439.1 37.537.0 40 34.4 35 214.8 30 206.9 208.9 197.2 189.5 176.1 168.4 168.672.268.472.0 183.3 77.0 177.2 175. 20 Q3-2019 Q4-2019 Q1-2020* Q2-2020* Q3-2020* Q4-2020* Q1-2021* Q2-2021* Q3-2021* External Debt/Export Ratio (rhs) External Debt/ GDP Ratio 122250 Q4-2019 Q1-2020* 02-2020* Q3-2020* Q4-2020* 55#57Strengthened 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 Philippines Panama Mauritius Kazakhstan 83.5 86 89.7 259 corporates (10.1%) Hedging Ratio* 146 corporates (5.8%) 25 26.2 27.2 56.3 54.9 56.3 35.2 36.5 38 37.7 39.2 39.4 80.8 86.7 95.4 ≤ 3 months I 2022F Indonesia Colombia 0 20 40 56.1 53.3 57 60 80 100 2021F 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 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 56#58Solid 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 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 Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget CMP Implementing Crisis Management Protocol (CMP) 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) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 57 40#59Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility BHINNEKA TUNGGAL IKA#60Indonesia Quick and Responsive Policy During COVID-19 Pandemic Flexible fiscal policy to support pandemic handling and recovery to pave way toward economic transformation Responsive Fiscal Policy 2020 EXTRAORDINARY POLICY Immediate response to Covid-19: Protecting People, and Business 2020 President President APBN Regulation Regulation No.54 No.72 Realization -1,76 2021 PANDEMIC HANDLING & RECOVERY POLICY Vaccination and health measures, Social Protection, Fiscal Stimulus support Economy Fiscal Deficit Dynamic For COVID-19 handling and economic recovery 2021 Note of KEM-PPKF* -3,21 -4,17 KEM Proposed PPKF Budget APBN Outlook 2022 2023 RECOVERY & REFORM Ⓒ FISCAL Stronger Recovery, Accelerating growth, and Reform Implementation CONSOLIDATION RAPBN 2022 FISCAL DISCIPLINE TOWARDS LONG TERM SUSTAINABLE BUDGET Deficit 3% of GDP in 2023; Manageable debt risk -5,07 6.34 -6,14 STRONG AND CONTINOUS ECONOMIC RECOVERY EFFECTIVE COVID-19 PANDEMIC HANDLING Mass Vaccination 5M Internalization 3T Implementation Source: Ministry of Finance -4.7 -5.5 -5.7 -5.8 4,85% ECONOMIC JUMP START Tax Incentives • • Financing and Guarantee Program Integrated Policy Packaged from Financial Sector Stability Committee • Fiscal Reform • STRUCTURAL REFORM Omnibus law on job creation (including INA, OSS) Financial Sector Reform 59#61PEN 2020 1st case in Indonesia Mar-20 MAR-APR Apr-20 May-20 Jun-20 JUNE confirmed and Large social President announces restriction was 'new normal' 100,000 cases declared phase confirmed Jul-20 Aug-20 Sep-20 JUL-DES Oct-20 Nov-20 Flexible State Budget to Respond The Uncertainty As countercyclical instrument to respond to COVID-19 development as well as to stabilize and stimulate economy recovery Several region loosened the mobility restriction Dec-20 1st stage of vaccination rolled out and PPKM was imposed IDR 46.5 T Government announced measures to mitigate pandemic risk on domestic economy IDR 695.2.4 T National Economic Recovery Program (PEN) was enacted through PP 23/2020 while the budget 2020 was revised IDR 575.2 T Reallocating and refocusing budget between cluster to finance urgent programs. At the end of year, some of health measures budget for vaccination are carried forward to 2021 IDR 403.94T The budget was decided in August 2020 to following the slowing down of COVID-19 in Agt - Sept 2020 IDR 699.43T PEN budget was increased due to surging cases of Covid-19 and vaccination program. IDR 744.75 T PEN is strengthened due to the new wave caused by the delta variant. Social restriction (PPKM) has been imposed, social protection has been re- expanded. PEN 2021 JAN Jan-21 Feb-21 Mar-21 FEB-MAR Apr-21 May-21 Jun-21 JUL Emergency PPKM was imposed 'Delta Varian' confirmed in Indonesia Jul-21 Aug-21 Sep-21 Source: Ministry of Finance#62Macroeconomic Indicators Development 2020 INDICATOR Realization State Budget 2021 Latest update -2.07 5.0 Q3: 3.51% (yoy) 3.24 (ytd) Economic Growth (%, yoy) Inflation (%, yoy) Exchange Rates (Rp/US$) 1.6 3.0 14,578 14,600 10-years treasury bond yield (%) n/a 7.29 ICP (Oil Price) 40.4 45 (US$/Barrel) Oil Lifting 706 705 (thousand barrel per day) Gas lifting 975 1,007 (thousand barrel - equal oil per day) Source: Ministry of Finance 1.30 (ytd) 1.75 (yoy) (as of November) 14,343(eop) 14,313(ytd) (as of Dec 17th) 5.99 (eop) 6.35 (ytd) (based on latest auction on Oct 26th) 80.13(eop) 68.07(ytd) (as of November) 631.03(eop) 657.84 (ytd) (as of October) 981 (eop) Economic Indicator Development 2021 Economic growth: GDP for the third quarter of 2021 grew by 3.51% yoy or 3.24% (ytd) Inflation rate: inflation in November was recorded at 0.37% (mtm) due to higher core and administered price inflation along recovery of people's consumption and mobility as the pandemic under controlled amid slower volatile food inflation. Rupiah Exchange Rate: The Rupiah was steady in the mid of December 2021. Up to December 17th 2021, the Rupiah (ytd) depreciated by 2.3% compared to the initial exchange rate in 2021. SBN 10 Years: The weighted average yield of 10-Year Government Securities is 6.35% (ytd). The last auction was on October 26, 2021, with a yield of 5.99%. Indonesian Crude Oil Prices: The ICP price declined due to weak demand along with Covid-19 cases surging in Europe as well as production increase. Oil and Gas Lifting: Oil and gas lifting up to October 2021 is 657.8 thousand bpd and 996 thousand bpd, respectively. 996 (ytd) (as of October) 61#63AS OF NOVEMBER 2021, STATE BUDGET CONTINUES ITS GOOD PERFORMANCE Improved revenue and expenditure signaled that economic recovery continue to take place 2021 2020 Account (IDR T) Budget¹ Realized As of Nov % of YoY Budget Budget (%) Realized As of Nov 30th % of Budget YOY (%) 30th 1,700.0 1,423.1 83.7 (15.1) 1,743.6 1,699.4 97.5 19.4 1,198.8 925.3 77.2 (18.6) 1,229.6 1,082.6 88.0 17.0 Customs & Excise 205.7 183.5 89.2 4.1 215.0 232.3 108.0 26.6 Revenue Tax Revenue Non-tax Revenue 294.1 305.0 103.7 (15.9) 298.2 382.5 128.3 25.4 Expenditure 2,739.2 2,308.2 84.3 12.8 2,750.0 2,310.4 84.0 0.1 Central Government 1,975.2 1,560.2 79.0 20.6 1,954.5 1,599.3 81.8 2.5 Expenditure Regional Transfer & Village 764 748.0 97.9 Funds (0.7) 795.5 711.0 89.4 (4.9) Primary Balance (700.4) (584.1) 83.4 471.1 (633.1) (281.8) 44.5 (51.8) Surplus (Deficit) (1,039.2) (885.1) 85.2 139.3 (1,006.4) (611.0) 60.7 (31.0) % to GDP (6.34) (5.73) (5.70) (3.63) 1,039.2 1,101.5 106.0 161.3 1,006.4 642.6 63.8 (41.7) Financing Note (1) Presidential Regulation 72/2020 Source: Ministry of Finance Outlook for budget deficit in 2021: 5.0-5.2% of GDP served as a soft landing toward fiscal consolidation in 2023 Revenue: As of November 2021, Government revenue continues performing strongly, and each component of revenue recorded strong rebound. Revenue predicted to surpass its target ☐ Expenditure: Government spending improved consistently along disbursement acceleration in previous period. Financing: Efficient budget financing as the financing needs reduced along improved revenue as well as usage optimization of budget surplus. 62#64AS OF NOVEMBER 2021, GOVERNMENT SPENDING HAS SHOWN GOOD PERFORMANCE The hard work of the state budget continue to support the pandemic handling as well as economic recovery 2,000 Accumulative Central Government Spending (IDR Trillion) Transfer to Region (IDR Trillion) 760 1,500 The realization of central 3.9% 750 -0.7% government 740 1,000 budget in 2021 is higher compared 730 to 2019 and 2020 500 720 752.94 Expenditure grew 748.03 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec significantly and 710 brought positive 700 -4.9% 711.04 impact to Transfer to region disbursement in 2021 is lower compared to 2020 Regions need to accelerate meeting the requirement of the disbursement 2019 -2020 2021 Indonesian people 690 2019 2020 2021 Line Ministries' Operational (Goods and Services) Spending Line Ministries' Capital Expenditure Social Protection Budget Health Budget Subsidy (IDR Trillion) (IDR Trillion) 45.2% 24.5% 22.2% -7.7% 328. Line Ministrie S, IDR175 5T Transfer to Region and Village... (IDR Trillion) (IDR Trillion) 61.4% 74.9% -28.3% 15.7% 220. IDR 370.5 6 40... 110.4 160.4 Trillion (100.7% of Budget) 2021 2020 2021 2020 Accelerated payments for vaccines, Covid-19 treatments, assistance for Micro Business Basic infrastructure and connectivity projects still continue dam, irrigation network and connectivity Distribution of PEN Program assistance as a cushion for poor and vulnerable families affected by the Covid-19 pandemic Health spending mainly used for Covid-19 handling: vaccine, patient care, health workers incentives Energy Subsidy Non-Energy Subsidy 2020 Influenced by economic prices and the realization of the distributed subsidized goods Non Line Ministrie S, IDR175. 3T 136. 0.8% 13.3% 4 5 88.6 102.5 61.4 61.9 2020 2021 Source: Ministry of Finance 63#65ECONOMIC RECOVERY DRIVES A STRONG INCREASE IN STATE REVENUE REALIZATION As of November 2021, the revenue shows a strong performance - reconfirm the strong economic recovery 2500 2000 1500 1000 500 ACCUMULATIVE TOTAL REVENUE (IDR TRILLION) 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 2019 ⚫2020 2021 . TAXATION AND NON-TAXATION REVENUE PERFORMANCE Tax Revenue (IDR TRILLION) 232 +26.6% (yoy) Custom & Excise 184 176 383 +25.4% (yoy) Non Tax Revenue 305 363 0 200 400 Jan-Nov 2021 600 Jan-Nov 2020 800 Until November 2021, revenue collection keeps showing improvements and outraced the pre-pandemic level in 2019. • Customs and Excise grew strongly, mainly supported by increased export volume and rising commodity prices. • Non-tax revenue also increased excellently from all the components. Source: Ministry of Finance 1,083 +17% (yoy) 925 1,136 1,000 Jan-Nov 2019 1,200 64#66TAXATION COLLECTION CONTINUES TO WELL PERFORMED Major sources of tax posted positive growth up to November 2021 TAX REVENUE GROWTH BY TYPES (%) Jan-Nov 2019 I Jan-Nov 2020 60 36.6 40 27.0 21.7 16.6 20 10.6 34.6 11.6 3.4 1.75.0 6.7 1.2 0 -20 -5.2 -1.5 -40 -60 -47.9 Income Tax Art Income Tax Art Personal Income 21 22 (Imported Goods) Tax -5.36.9 -36.1 Corporate Income Tax -8.51.0 -1.8 -9.7 -7.9 -19.4 • Income Tax Art Final Income Tax Domestic VAT 26 Import VAT TAX REVENUE GROWTH BY SECTORS (%) 28.3 40 16.9 7.2 2.4 86220276 -3.3 -40 -19.1 -19.5 0.3 -2.4 -1.4 -11.2 -19.7 16.5 59.1 -5.9 -21.0 16.4 Manufacturing Trade Financial Services & Construction & Real Insurance Estate -43.5 Transportation & Warehousing Mining Source: Ministry of Finance . • • As the Covid-19 pandemic has caused a slowdown in economic activities, the government provided fiscal stimulus to protect business through tax cut and incentive, which led to a deep fall in 2020 tax collection. Up to Nov 2021, major taxes has started to show a positive performance and has been consistent with economic recovery trend. Tax receipt booked growth of 17.0% in November (ytd), exceeded the target of 14.7% in the 2021 state budget. The income tax, especially corporate income tax, and tax form import activities grew strongly. Tax collection of most sectors hike, align with the recovering performance of those sectors. Even though few sectors still contracted, the realization up to November was way better compared to in early 2021. 65#67STATE BUDGET REMAINS FLEXIBLE AND RESPONSIVE TO THE DYNAMICS OF COVID-19 As of Dec 24th, the realization of the National Economic Recovery program amounted IDR557.83 T (74.9% of the budget) The allocation of the 2021 The National Economic Recovery program (IDR774.75 T) increased compared to the realization of the 2020 (IDR575.2 T) . • HEALTH SECTOR Budget: IDR214.96 T Realization: IDR164.33T (76.4%) of budget Vaccine Procurement (121.41m Doses) • Medical Facilities and Infrastructure • Treatment costs (580.29 thousand patients) Incentives (1.26 mllion) & death compensation for 446 health workers Health Insurance Aid for Non- Wage Workers (34.71m people) SOCIAL PROTECTION • Budget: IDR186.64 T Realization: IDR162.97T (87.3%) of budget Conditional Cash Transfer (10m families) Staple Food Assistance (17.3m Families) Pre-Employment Card (5.91m People) Cash Transfer (9.99m Families) & Village Fund Cash Transfer (5.62m Families) Internet Subsidy (60.46m recipient) Electricity Bill Discount (32.6m Beneficiary) Wage subsidy (6.65m Workers) MSMES AND FIRMS SUPPORT • Budget: IDR162.40 T Realization: IDR75.84T (46.7%) of budget PRIORITY PROGRAMMES Budget: IDR117.94T Realization: IDR91.53T (77.6%) of budget • Tourism Supports Food Security/Food Estate Loan Facility for Regional Govt IDR10T through PT. SMI . Ultra-Micro business assistance (12.71m businesses) • • Guarantee Fee subsidy for MSMEs (2.24 M recipient) and for firms (36 recipient) . Liquidity support for the banking • sector (IDR 442.19T for 5.43M Debtors) Labor Intensive Program (1.23m workers) • Interest subsidy for MSMEs Other Priority Programs . . credit (6.02m businesses) and non MSMEs credit (7.2M businesses) Capital Injection to HK, Pelindo III and KIW IDR8.39T Street vendors support (554.1 th businesses) • BUSINESS INCENTIVES Budget: IDR62.83T Realization: IDR63.16T (100.5%) of budget Income Tax subsidy for employers (81.980) and MSMES (124,209) Income Tax Exemption on Import (9,490 taxpayers) VAT Refund (2.419 taxpayers) Tax discount for Automotive (6 sellers) VAT discount for property sector (768 sellers) Subsidy on Import Duty (IDRO.15T) Source: Ministry of Finance 66#68POLICY DIRECTION FOR STATE BUDGET 2022 . 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 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. Source: Ministry of Finance Optimum implementation of State Budget 2022 as FOUNDATION for FISCAL CONSOLIDATION in 2022. 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. 67#692022 STATE BUDGET: FISCAL POLICY TO SUPPORT THE ECONOMIC RECOVERY AND STRUCTURAL REFORM 2020 2021 2022 5.0 5.1 5.2 5.0 4.0 Account (IDR T) Audited Growth (%) State Budget Growth* (%) Growth** Budget (%) State Revenue* 1,647.8 (16.0) 1,743.6 5.8 1,846.1 5.6 Tax Revenue 1,285.1 (16.9) 1,444.5 12.4 1,510.0 4.3 -1.82 Non-Tax Revenue 343.8 (15.9) 298.2 -13.3 335.6 11.1 -2.51 -2.2 о State Expenditure 2,595.5 12.4 2,750.0 5.6 2,714.2 (1.3) O (269.4) (341.0) (348.7) -2.1 -6.1 (4.85) (5.70) Central Government Expenditure 1,833.0 22.5 1,954.5 6.63 1,944.5 (0.5) O Regional Transfer & 762.5 Deficit (IDR Triliun) Village Funds (6.2) 795.5 4.33 769.6 (3.4) Economic Growth (%) Primary Balance (633.6) (868.0) --Deficit to GDP (%) (947.7) (1,006.4) Surplus (Deficit) (947.7) 171.8 766.8 (633.1) (1,006.4) (0.1) (462.2) (37.0) 6.2 (868.0) (15.9) 2017 2018 2019 2020 2021 2022 % to GDP outloo APBN Financing (6.14) 1,193.3 196.8 (5.70) 1,006.4 (4.85) (15.7) 868.0 (15.9) k In 2023 fiscal deficit at <3% of GDP according to the mandate of Law 2/2020. MACROECONOMIC ASSUMPTIONS In 2022, the deficit is maintained at around 4.85% Economic Growth Inflation Exchange Rate 10-year T-Bonds Rate of GDP to give smooth trajectory for fiscal consolidation process. ICP (USD/barrel) Oil Lifting ('000 barrels Gas Lifting ('000 barrels oil 5.2% 3% 14,350 6.80% 63 per day) 703 equivalent per day) 1,036 *growth 2021 State Budget to 2020 Audited **growth 2022 State Budget to 2021 State Budget 68 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 • 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 • • jo $ 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 Source: Ministry of Finance 69 69#71Comprehensive Structural Reforms Are Needed To Capitalize Demographic Dividend Fiscal reform will facilitate further structural reforms Human Capital 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) Real Sector Reform through Omnibus Law on Job Creation Deregulation Simplification of Bureucracy Land procurement Transformation of Economy Financial Sector Reform ■ Job Creation ■ Ease of Starting Business ■ Support the Eradication of Corruption • • Investment ecosystem improvement • 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 Source: Ministry of Finance . 70#72Accelerating 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 Economic Growth Decomposition (%) 5.5 5.8 5.0 Structural reforms for improving productivity: Implementation of Job Creation Law, SWF / INA, Risk- Based OSS System 2.6 3.0 2.4 1.0 0.9 0.9 2.2 1.6 1.7 2.1 0.7 Increasing investment & export competitiveness: creating quality jobs and sustainable economic recovery -2.1 Business as usual Reform Scenario -5.0 COVID-19 2021-2025 Projection_ Labor Capital Growth (Average) Structural reforms along with fiscal reforms (APBN) 2010-2019 2020 focus on priority areas: Health, Education, Social Protection, Infrastructure, Tax Reform and Regional Government Revenue Sharing Law (HKPD) Source: Statistics Indonesia, MoF Calculation ■Productivity Source: Ministry of Finance 71#73CONTINUING COMMITMENT TO STRUCTURAL REFORMS Covid-19 as a Momentum to Bolster Fundamental Reform to Accelerate Economic Transformation Towards "Indonesia Maju" (Advanced Indonesia) President's Five Strategic Directions 1 Human Capital Development 2 Infrastructure Development 3 Bureaucracy Reform Structural reform Economic Regulatory 5 Simplification Economic Transformation Fiscal reform Human Capital • Quality and competitive education • Integrated and reliable health system • Lifelong and adaptive social protection Transformation Increasing production capacity and sustainable growth (infrastructure connectivity, mobility and productivity) • Institutional reform (bureaucratic and regulatory reform) Revenue Broadening tax base and increasing compliance Regional Government Revenue Sharing Law (HKPD) Expenditure • Zero based budgeting, focus on priority programs, efficient, synergistic, and results based • • Financing Innovative, prudent, and sustainable financing Strengthening the SWF, PPP scheme, and efficient fiscal buffer Source: Ministry of Finance Government focus in 2021 >> implementation of the HPP Law 72#74Favorable Demographic Changes As An Opportunity For Tax Reform Increasing middle-class group could be capitalized to strengthen government revenues in the future The share of the aspiring and middle-class group continues to increase (%) 7,0 10,2 16,6 22,5% Consumption of the aspiring and middle-class group increases significantly (IDR Trillion) 350 22,5 Share of Middle Income Population in 2018 300 increased 15.5 ppt from total 250 41,2 44,2 44,5 47,0 51,8 45,5 38,5 30,0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Poor and Vulnerable Aspiring Middle Class Middle Class Upper Class population in 2002 Source: Workl Bank (2020) Rp Triliun 200 150 100 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Poor and Vulnerable Aspiring Middle Class Middle Class Through tax reforms, state revenue could be strengthened along with favorable demographic changes. Stronger consumption on the back of rising middle- class group could boost tax revenue, particularly VAT and personal income tax. Source: Ministry of Finance 73#75The Urgency of Tax Reform Stronger and Broader Tax Base Growing consumption Higher Income Per Capita Healthier and Sustainable Budget Stronger State Revenue Low Budget Risk and manageable financing risk High Economic Growth Boost investment and job creation Improve ease of doing business TOWARDS FAIR, HEALTHY, EFFECTIVE, AND ACCOUNTABLE TAX SYSTEM TAX REFORM Policy Reforms Administration Reforms Broadening tax base • Simpler and more efficient tax administration • Enhance competitiveness • Ensuring legal certainty • More efficient and effective tax incentives which are in line with global tax dynamics . Utilizing financial data and information • Tax incentives are more prioritized for high value-added sectors with larger job creation Flexible to changes of the economic structure, business activities including digital economy • Reducing excessive tax exemptions and distortionary effect • In line with global tax changes and best practices • High tax compliance. • Improving tax progressivity. Source: Ministry of Finance 74#76Tax Reform Strengthens The State Budget Function to Enhance Social Welfare The State Budget as an instrument to realize fair and prosperous society $ ALLOCATION Public Goods DISTRIBUTION Income Redistribution STABILIZATION Economic Stability & Growth ■ Over the last 10 years, state revenue has been in downward trend to around 10% of GDP space. limiting fiscal ■ In response to Covid-19 crisis, the state budget is used as countercyclical measures to tackle the health crisis, provide lifeline support to poor and vulnerable family and businesses, and facilitate economic recovery. Fiscal reform is aimed to strengthen long-term fiscal sustainability to facilitate comprehensive structural reforms in order to enhance long- term potential growth. Source: Ministry of Finance 75#77The Law on Harmonization of Tax Regulations (HPP Law) As part of tax reform to increase revenue and achieve the long term sustainable growth POLICY CHANGES IN THE HPP LAW GENERAL PROVISIONS AND PROCEDURES VAT • Integration of the ID Number with the Taxpayer Number, • Appointment of third parties as withholding, collecting, depositing and/or reporting tax (including e-commerce) • • Tax rate hike on VAT from 10% to 11% from 1 April 2022 and to 12% by 2025, reducing the VAT exemptions and facilities, INCOME TAX Introducing of the new bracket for individual with income exceeding IDR 5 billion at 35% tax rate, • Corporate Income Tax in 2022 remains at 22% • Income Tax rate at 0.5% for individual MSME (threshold IDR 500 million) Natura (Employee non-cash benefits) becomes tax object CARBON TAX Introduction of the carbon tax in 2022 through gradual basis according to a roadmap that will consider the development of a carbon market, achievement of NDC targets, sector readiness, and economic conditions. VOLUNTARY DISCLOSURE PROGRAM Offering opportunity to pay the unpaid taxes for assets during 2015- 2020 with imposing tax fine rate. Will be 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 (ultimum remedium) 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. Source: Ministry of Finance 76#78Empty#79EXCISE RATES FOR TOBACCO PRODUCTS Instruments to Improve The Quality of Human Resources 4 Pillars of Tobacco Excise (CHT) Policy 1. Consumption Control The imposition of excise is intended as an effort to control consumption as mandated by the Excise Law. In addition, it is also part of the National Medium-Term Development Plan (RPJMN) 2020-2024 to improve the quality of human resources through reducing smoking prevalence, especially those aged 10-18 years, which is targeted to be 8.7% in 2024. 2. Labor Sustainability The excise policy also considers the impact on tobacco farmers, workers, and the tobacco products industry. 3. Revenue Improvement Excise policy supports national development programs through revenue 4. Supervision of Illegal Excisable Goods The importance of mitigating the impact of policies that have the potential to encourage illegal cigarettes The Main Points of 2022 CHT Policy Changes (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 Source: Ministry of Finance 78#80THE 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 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 Source: Ministry of Finance Supervising, monitoring, and evaluation Competent, professional, and integrity human resources 79#812021 Budget Financing Macroeconomic Economic Growth Inflation Exchange Rate Assumption for 2021 10 years T-Bills Rate 5% 3% Budget 14.600 IDR/USD ICP US$ 45 7.29% per barrel 1,760.7 State Budget (APBN): 1,743.6 1,400.3 Tax Revenue Expenditure Central Govt Expenditure Oil Lifting 705 thousand barrel/day Gas Lifting 1.007 thousand barrel of oil equivalent/day 2,700.3 State Budget (APBN): 2,750 . STATE REVENUE POLICY Supporting national economic recovery by providing tax incentives selectively and prudently calculated Cutting the red tape to accelerate national economic recovery • Improving public services to optimize non-tax revenue 1.929,6 357.7 Non Tax Transfer to Region & Village Fund 770.7 2.7 Grants . EXPENDITURE FOCUS • Handling COVID-19 and supporting health programs Continuing social safety net to lay a solid foundation of inclusive economic recovery • Expanding access to capital for MSMEs and cooperatives through interest subsidy • Supporting programs activities for impacted sectors (e.g. Tourism) APBN & Outlook FINANCING STRATEGY Supporting the restructuring of SOES, PSA, Sovereign Wealth Fund (SWF) • Increasing access to financing for MSMEs and housing for low-income household • Continuing to support higher education,, research and cultural activities 939.6 Financing Deficit State Budget 5,7% PDB (APBN):1,006.4 Source: Ministry of Finance 80#822021 Financing Needs Include National Economic Recovery (PEN) program funding Budget Deficit 2021 APBN: 1,006 T Outlook: 939,6T (APBN & Outlook : 5,7% of GDP) + Investment financing Lending Liabilities Other financing Matured debt Government Securities (GS) Loan Domestic GS 80-85% Domestic Loan IDR2.7 T Foreign 12-15% Foreign Loan - Project e.q US$ 2 bio Denominated Bonds Retail GS 3-6% Foreign Loan - Program e.q US$ 5 - 6 bio GS Policy: Loan Policy: 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 www.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 81#832021 Financing Strategy Opportunistic, Measured, and Prudent Financing Strategies to support counter cyclical policies Debt is used as an instrument to support counter cyclical policy; managed in prudent manner, measurable and opportunistic Debt Policy Overall Funding Strategy 1 Manage debt by maintaining the debt over GDP ratio within the safe limit 1 Non-debt funding source optimization, including SAL utilization 2 To adopt a flexible debt management which is responsive in supporting the countercyclical policy, while prudently manage the cost and risk 2 Targeting Loan Program from Development Partners, for both bilateral and multilaterals, i.e. World Bank, ADB, KfW, JICA, EDFC, and AIIB To achieve an efficient debt cost, by doing market deepening exercises: 3 investor base widening improving the infrastructure in the SBN market 3 debt instrument diversification eg. SDG bond issuance and municipal bond/sukuk issuance 4 To maintain macro stability by managing debt portfolio composition optimally. 4 A well targeted SBN (Government Bond) issuance by optimizing all available sources Targeting domestic/onshore bond issuance (including retail bond) for up to IDR 80 tn Targeting Foreign Currency/Global Bond issuance amount at 12-15% from total SBN funding (subject to market conditions) Private Placement from specific institutions Support from Bank Indonesia as the funding of the last resort / back stop Source: Ministry of Finance 82#84Strengthened Synergy Between Monetary and Fiscal Policy Background Principles 1. 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 Bl 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) 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 83#85Strengthened 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 BI 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 BI contributes all interest costs on the financing for vaccination and healthcare with a maximum amount of IDR58T (2021) and IDR40T (2022), taking into account BI's balance sheet capacity and capability The remaining interest costs for financing other health care as Cluster A 2021 IDR58 T 2022 IDR40 T Cluster A: • Healthcare includes vaccination program and other healthcare financing related to COVID-19 pandemic Interest Rate BI reverse repo 3 Months Tenor BANK INDONESIA 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 Cluster B: Cluster B • Healthcare well as humanitarian handling COVID-19 related pandemic to Interest Rate BI reverse repo 3 Months Tenor will be covered by the 2021 Government with a reference interest rate for BI RR 3M 2022 IDR157 T IDR184 T other than Cluster A •⚫ Humanitarian handling in the form of various protection programs for affected communities/ small businesses (below market rate) Source: Ministry of Finance, Bank Indonesia 84 ==#86Government Securities Financing Realisation (a.o Nov 30, 2021) Source: Ministry of Finance 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 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) Note: including GSO transaction (Trillion IDR) Realization (ao. November 30, 2021) 1,144.65 764.63 649.37 522.03 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 58.00 85#87Republic of Indonesia - Dual Currency USD3bn and EUR1bn Issuer Issuer Rating Exp. Issue Rating Format 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 Issue Pricing Date Settlement Date Currency Size US$1.25bio Tenor Long 10-year January 12, 2021 USD US$1.25bio US$0.5bio Long 30-year Long 50-year Euro €1bio Long 12-year Maturity March 12, 2031 March 12, 2051 March 12, 2071 March 12, 2033 Coupon (p.a.) 1.850% 3.050% 3.350% 1.100% Yield 1.900% 3.100% Price 99.538% 99.020% 3.400% 98.794% 1.174 99.165% 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 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 Ps/Others, CB/SWF 5% Banks, Insurance PF, RIEUR033 Investor Breakdown by Investor Type CB/SWF PB/Others, 3% 19 Banks, 8% Insurance/ PF, 20% RI0351 Banks, 1% PB/Others, 1% PB Others, AM/FM, 75% CB/SWF 80% AM/FM, 68% CD/SWE 6% Insurance/ PF, 24% RI0371 Banks, 26% RI0331 AM/FM, 63% Insurance PF, 2% US, 20% Investor Breakdown by Geography RIEUR0333 APAC, 9% EMEA, 71% EMEA, 30% US, 27% RI0351 AM/FM, 63% US, 20% EMEA, 22% APAC, 43% EMEA, 31% RI0331 RI0371 APAC, 58% APAC, 32% US, 37% 86 98#88Republic of Indonesia - Samurai Bond JPY100bn Issuer Issuer Rating Exp. Issue Rating Format 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 Samurai Bond (Public Offering) May 21, 2021 May 27, 2021 JPY100bn Investor Breakdown by Investor Type Others, 19.6% City Banks, 22.2% Deal Size Shinkin banks/ Regional Size JPY29.0bn JPY46.8bn JPY1.2bn JPY18.2bn JPY2.5bn JPY2.3bn banks, 8.9% Public Funds, Tenor 3-year 5-year 7-year 10-year 15-year 20-year 0.2% Maturity May 27, May 27, May 26, May 27, May 27, 2024 2026 2028 Coupon Re-offer Spread over Yen 0.33% YMS+35 0.57% 0.70% 2031 0.89% 2036 1.17% YMS+56 YMS+65 YMS+76 YMS+90 May 27, 2041 1.44% YMS+105 Central Banks, 4.0% Central Cooperatives 7.0% Mid Swap (YMS) Asset Managers, 31.1% Joint Lead Managers Daiwa/Mizuho/Nomura/SMBC Transaction Highlights Insurers, 7.0% • • 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 87#89Republic of Indonesia - Global Sukuk USD3bn Issuer Issue Format 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) 5-Year USD 7% 10% Investor Breakdown by Investor Type 10-Year USD 12% Issuer Rating Pricing Date Issue Date 27% 35% 02 June 2021 18% 09 June 2021 (T+5) Tenor Maturity 5-year Sukuk 10-year Sukuk 30-year Green Sukuk 33% 6% Trance Size 9-Jun-26 USD1.25B 9-Jun-31 9-Jun-51 16% 29% USD1.00B USD750M Profit Rate 1.5% fixed, semiannual, 30/360 2.55% fixed, semiannual, 30./360 3.55% fixed, semiannual, 30/360 ■ Asia (ex-Indonesia) ▪ Indonesia ■ ME/Islamic - Europe Investor Breakdown by Geography Re-Offer Price 100.00% 100.00% 100.00% 5-Year USD 2% Re-Offer Spread UST +70.4bps Listing UST +95.7bps SGX-ST and Nasdaq Dubai UST +125.5bps 10-Year USD 2% 23% Joint Bookrunners Co-Managers CIMB, Citigroup, Dubai Islamic Bank, HSBC, SCB (B&D) 41% PT BRI Dana Sekuritas, PT Trimegah Sekuritas Indonesia Tbk 40% 12% 5% Transaction Highlights 30% 4% 10% 12% • 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. ■ Fund Managers ⚫ CBS/SWFS ■ Ins/Pension 30-Year USD - US 30-Year USD 1% 19% 34% 6% 8% • The transaction was carried out in line with the 2021 financing strategy, including accommodating the Achievement 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. ■ 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. Banks ■ PB & Others Challenges • Global financial market conditions are very volatile and still affected by the Covid 19 pandemic Performed under WFH conditions Source: Ministry of Finance • No roadshow. 63% 88#90Republic of Indonesia - Dual Currency USD1,65bn and EUR500mio RI0731 Issuer Issuer Rating Format Pricing Date Settlement Date Currency Series Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) SEC Registered July 21, 2021 July 28, 2021 USD RI0351 RI0371 (Reopening) Allocation by Investor Type Allocation by Geography US$ 10 Y Banks 21% PF/INS/ SWF/CB 21% PB/Others 1% EMEA US 23% 19% AM/FM APAC 57% 58% Banks 4% Euro PB/Others EMEA US 1% 21% 28% RIEURO729 (Reopening) US$ Tap of '51s PF/INS/ SWF/CB 49% Issue Size US$600 million US$750 million US$300 million €500 million AM/FM 46% APAC 51% Tenor 10-year 30-year 50-year Maturity 8-year July 28, Banks 1% PB/Others 1% EMEA 32% July 28, 2031 March 12, 2051 March 12, 2071 2029 US$ Tap of '71s PF/INS/ US 46% Coupon (p.a.) 2,150% 3,050% 3,350% 1,000% SWF/CB 10% Yield 2,200% 3,100% 3,350% 1,068% Price Banks 6% PB/Others 99,553% 99,031% 99,995% 99,481% PF/INS/ EUR Listing Singapore, Frankfurt Stock Exchange SWF/CB SY 16% Use of Proceeds General Purposes, Including Covid-19 relief efforts 2% AM/FM 76% EMEA 72% AM/FM 88% APAC 22% US 8% APAC 20% 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 • Achieved negative new issue concessions across all 4 tranches despite UST volatility and a crowded primary market on the day of bookbuild For the USD tranches, garnered total orders of >US$4.7 bn at reoffer - representing oversubscription of 2.8x. For EUR, garnered orders of >€1.2bn at reoffer - representing oversubscription of 2.4x • 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 Source: Ministry of Finance 89#91Republic of Indonesia Sustainable Development Goals (SDG Bond) EUR500mm & Liability Management US$1.25bn Issuer Allocation by Investor Type Allocation by Geography Republic of Indonesia Issuer Rating Format Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) INS/PF 4% PB 1% SEC-Registered Shelf Take-Down Settlement Date September 23, 2021 SWF/CB/SSA 7% EMEA 28% US 35% >US$2.0bn Tranche US$ Tap of '31s US$ 40 Year EUR Long-12 Year US$ Tap of '31s Banks/Broker 20% Currency USD USD Euro AM/FM 68% APAC 37% 3.3x covered across 58 accounts Issue Size US$650 mm €500 million Original Principal Amount $600mm SWF/CB 1% PB 1% Reopening Size $600mm Banks/Broker 9% EMEA 30% US 23% >US$1.3bn Maturity 28 Jul 2031 23 Sep 2061 23 Mar 2034 US$ 4ΟΥ Coupon (p.a.) 2.150% 3.200% 1.300% PF/INS 18% AM/FM 71% APAC 47% 2.0x covered across 89 accounts Yield 2.180% Price Use of Proceeds 99.734% Repurchase certain of its outstanding global bonds pursuant to its tender offer announced on Sep 13,2021 3.280% 98.225% 1.351% 99.419% Listing Invest in projects that may qualify as Eligible SDGs Expenditures Singapore, Frankfurt Stock Exchange SSA/CB INS/PF 7% 6% EUR Long- 12Y Banks/Broker 16% AM/FM 71% EMEA 84% US 3% APAC 13% >€1.2bn 2.4x covered across 80 accounts Transaction Highlights • 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 90#92GS 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] 450 400 350 300 250 200 5.14 150 100 50 6.50 Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) Average Incoming Bid 2020 = IDR54.50T/a uction Average Awarded Bid 2020 = IDR15.85T/ auction 3.91 3.14 3.01 4.24 14.00 12.17 12.00 10.00 8.43 8.00 6.00 4.92 4.00 198 Jan-20 Feb-20 Mar-20 Apr-20 Source: Ministry of Finance May-20 Jun-20 3.35 2.45 2.95 2.16 3.85 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 2.30 2.21 2.96 2.03 2.23 1 5 3.06 3.86 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 a.o Nov 2, 2021 2.00 91#93Ownership of IDR Tradable Government Securities (a.o Nov 30, 2021) Description Banks* Dec-17 Dec-18 Dec-19 491.61 23.41% 481.33 20.32% 581.37 21.12% Govt Institutions (Bank Indonesia**) 141.83 6.75% 253.47 10.70% 262.49 9.54% 454.36 11.74% Dec-20 1,375.57 35.54% (IDR tn) November 30, 2021 1,592.08 35.63% 585.53 13.10% 13.10% Govt Institution Bank Indonesia (gross) 179.84 8.56% 35,63% BANK GS used for Monetary Operation Non-Banks 51,27% NON-BANK Mutual Funds Insurance Company and Pension Fund Foreign Holders Foreign Govt's & Central Banks Individual Others Total 217.36 9.18% 273.21 9.93% 38.01 1.81% -36.11 -1.52% 10.72 0.39% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% 104 4.95% 118.63 5.01% 130.86 4.75% 348.86 16.61% 414.47 17.50% 471.67 17.13% 836.15 39.82% 893.25 37.71% 1,061.86 38.57% 146.88 6.99% 163.76 6.91% 194.45 7.06% 59.84 2.85% 73.07 3.09% 81.17 2.95% 117.48 5.60% 134.22 5.67% 163.32 5.93% 2,099.77 100% 2,368.45 100% 2,752.74 100% 874.88 22.60% 420.51 10.86% 2,040.83 52.72% 1,005.73 22.51% 420.20 9.40% 2,291.27 51.27% 161.32 4.17% 152.79 3.42% 542.82 973.91 178.31 4.61% 14.02% 645.43 14.44% 25.16% 918.45 20.55% 240.87 5.39% 131.21 3.39% 231.57 5.98% 347.80 7.78% 3,870.76 100% 4,468.88 100% 226.80 5.08% MUTUAL FUND INSURANCE & 3,42% 14,44% PENSION FUND FOREIGN 20,55% INDIVIDUAL 5,08% OTHERS 7,78% IDR 1.092,02T on January 24, 2020, foreign holders reach a record high in nominal terms. 68.93% Note: 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance Portion of foreign ownership in the mid & long term sector (≥5 years). 42 92#94Disciplined and Advanced Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt/ GDP (%) 1,500 10% 8,000.00 39.39% 39.84% 45% 1,177 8% 1,000 7,000.00 40% 6% 6,000.00 27.46% 28.34% 29.40% 29.81% 30.18% 823.49 35% 500 362 407 442 358 446 4% 852.91 5,000.00 24.68% 30% 19 14 - 2% 50 25% 4,000.00 764.48 810.74 746.32 3,000.00 2,000.00 67054 1,000.00 734.85 755,12 1,931.22 2,410.01 2,780.86 3,248.93 3,612.69 4,014.80 5,221.65 5,889.73 -58 4 -69 (2056) (66) (9 (35) (36) - 0% 20% 15% (500) -298 (308) (269) (341) (349) -2% -1.8% 10% -2.6% -2.5% -2.2% -2.5% (1,000) 5% 0% -4% 1956) -6% -6.1% (1,500) 2014 2015 2016 2017 2018 2019 2020 Nov-21 2015 2016 2017 2018 2019 -8% 2020 Bond Debt to GDP Loan Weighted Average Debt Maturity of ~8.79 Years GS Nett Loan Nett Non-Debt Surplus (Deficit) Budget -Ratio Deficit to GDP Well Diversified Across Different Currencies % of Yearly Issuance 9.75 1% 1% 1% 1% 1% 1% 100% 9.39 7.6% 6% 6% 5% 9.13 80% 23% 21% 31% 29% 30% 27% 8.79 8.68 60% 8.52 8.5 8.37 40% 57% 59% 58% 62% 66% 69% 20% 0% 2014 2015 2016 2017 2018 2019 2020 Nov-21 2016 2017 ATM ■IDR 2018 2019 USD EUR 2020 Nov-21 JPY OTHER Source: Ministry of Finance 93#95Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks (%) Declining Exchange Rate Risks (%) 44.6 43.4 21.0 42.6 41.3 41.0 19.49 37.9 33.5 31.07 21.0 20.7 19.2 19.7 17.5 16.1 14.8 13.7 12.1 10.6 10.6 9.8 14.2 13.53 13.2 12.2 12.1 12.1 12.2 11.4 12.38 10.7 2014 2015 2016 2017 2018 2019 2020 Nov-21 2014 2015 2016 2017 2018 2019 2020 Nov-21 ■VR Proportion Refixing Proportion ■FX to GDP Ratio ■FX Proportion Debt Maturity Profile IDRtn 700 600 500 180 178 186 161 400 141 111 167 300 141 10806 200 276 3562361319 100 Upcoming Maturities (Next 5 Years) 40.4 41.0 39.3 39.6 40.28 36.0 IDR Denominated (Trilion IDR) 33.9 34.7 34739 30 10 32 312450210 1651 2991115435 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2033 87143 21 35 348 38 301 33 2038 0 2039 2040 w 2041 204200U 20438 2044 2046 2047 Source: Ministry of Finance 25.0 25.5 24.3 22.7 22.8 23.6 21.4 20.1 9.9 10.6 8.4 8.1 7.8 7.7 6.67 6.5 160 ܝܗ 2048 2049-2071 2014 2015 2016 2017 2018 2019 2020 Nov-21 ■1 Year 3 Year 5 Year 94 5#96Holders of Tradable Central Government Securities Balanced Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities 100% 20.6% 25.2% 80% 38.2% 37.5% 39.8% 37.7% 38.6% 60% 37.8% 39.9% 36.8% 42.0% 40.3% 40% Foreign Ownership of Gov't Domestic Debt Securities by Tenor 100% 29.41% 34.8% 33.5% 38.6% H 36.0% 37.0% 80% 44.7% 60% 43.8% 39.3% 34.1% 39.0% 37.4% 36.8% 35.6% 39.51% 35.8% 39.8% 40% 37.7% 38.6% 38.2% 37.5% 25.2% 20.6% 20% 35.5% 35.6% 20% 23.9% 22.5% 23.4% 20.3% 21.1% 22.0% 17.3% 22.1% 17.8% 18.4% 23.46% 11.8% 5.1% 5.3% 1.9% 0% 0% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Nov-21 Dec-15 3.5% Dec-16 5.0% 4.3% 6.7% 2.4% 4.0% 4.6% 4.80% 2.81% T Dec-17 Dec-18 Dec-19 Dec-20 Nov-21 Foreign Holders Domestic Non-Banks Domestic Banks 0-1 >2-5 >1-2 >5-10 Source: Ministry of Finance >10 % Foreign Ownership of Total 95#97Section 6 Commitment to Sustainability and Preserving the Environment BHINNEKA TUNGGAL IKA#98Anticipating the Rise of Emissions After the COVID-19 Pandemic As global economy recovered, the emissions is predicted to increase of 2019 and 2020 (Mt CO2) per day Daily differences between January and October 0 5 -10 -15 Power Ground transport Indus Power Ground transport industry Residential Aviation Shipping -20 Jan. Feb. March April May June July August Sept. Oct. ZE=GE Photo: kanalkalimantan.com & BPBD Prov. Kalsel Photo: Bayu Pratama Source: Ministry of Finance • During the COVID-19 pandemic, global CO2 emissions have contracted due to a decrease in economic activity and human mobility. However, slowly emissions are crawling up as human mobility policies loosen in some countries. • It should be of mutual concern that, in the midst of the challenges facing the COVID-19 pandemic that has not yet ended, the economy is slowly starting to enter the recovery phase and it is pushing back the level of global carbon emissions. • Therefore, the government should not be off guard because the risk of rising carbon emissions can threaten economic sustainability and people's well-being through the impacts of climate change. . Pandemic is not over yet, and Indonesia were faced by flood disasters in several provinces. This disaster needs to be of concern to the central and local governments in managing forest and land areas so that the ecosystem of water absorption areas can be maintained. 46 97#99Climate Change Risk on Indonesia Indonesia is classified as a country that is vulnerable to the impact of climate change Indonesia is an archipelagic country that has >17,000 islands and it is vulnerable to climate change risks such as the sea-level rise From 2010-2018, national GHG emissions experienced an increasing trend of around 4.3% per year.. source Data: KLHK (2020), data diolah Very Vulnerable Wulnerable Intermediate Less Vulnerable Least Vulnerable Unrated Sovereigns Source: Standard and Poor's 2014 CLIMATE CHANGE RISK WATER SECURITY Based on the S&P report (2014), Indonesia is classified as a country that is very vulnerable to the impacts of climate change Increased levels of flooding and severe drought will exacerbate the scarcity of clean water.. FOOD SECURITY Changes in the production of biomes and ecosystems can lead to food scarcity for all creatures.. MHEALTH Floods can cause the spread of vector-borne diseases and death from drowning. Rise in temperature can cause death from heat stroke DESTRUCTION OF LAND, SEA, AND COASTAL ECOSYSTEMS It is scientifically predicted that severe forest fires will occur. This can lead to loss of ecosystems, biodiversity, and changes in Biomass. Rising sea surface temperatures cause the extinction of coral reefs, seaweed, mangroves, some biodiversity and marine ecosystems. Indonesia experienced a sea-level rise of 0.8-1.2 cm/year and around 65% of the population lives in coastal areas Reference IPCC (2014) Second Biennial Update Report, KLHK (2018) Roadmap NDC Mitigasi Indonesia, KLHK (2020) Roadmap NDC Adaptasi Indonesia, KLHK (2020) source: Bappenas (2021) From 1981-2018, Indonesia experienced a temperature increase trend of around 0.03 °C per year source: BMKG (2020) ESTIMATED COST LOSS and MITIGATION COST Scope If each country's NDC target is achieved, the global temperature rise can be limited to below 2.0°C Cost of mitigating climate change to achieve NDC Cost of climate change mitigation to achieve NDC (using mitigation action cost approach) Potential economic losses if not adapting to climate change (sectors analyzed: agriculture, water, health, and energy) Estimated Cost/Impact Continue to suffer economic losses of up to 0.2% -2.0% of global GDP per year Cumulative mitigation costs reach IDR 3,461 trillion by 2030 Cumulative mitigation costs from 2020-2030 reach IDR 3,779 trillion (IDR 343.6 trillion per year) Potential economic losses reach 0.66% 3.45% of GDP in 2030 Source: Ministry of Finance 98#100Global 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- 02 Adapt to protect communities ecosystems 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 • build defences, deforestation warning ⚫developed countries mobilise at least $100bn in climate finance per year by 2020. systems and •International switch to resilient electric vehicles infrastructure financial institutions unleashing ⚫ collaboration between governments, businesses civil society. and encourage and agriculture the trillions in private investment in and public finance sector ⚫ accelerate the phase-out of coal ⚫ curtail speed up the 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 99#101Net Zero Emission (NZE) GHG emissions 2010 البليليك 2°C BUSINESS AS USUAL NET-ZERO 2020 2030 2040 2050 2060 2070 2080 2090 2100 Source: World Resource Institute NET ZERO EMISSIONS ipcc INTERGOVERNMENTAL PANEL ON climate change Net Zero Emission is a more ambitious Long Term Strategy to keep the global temperature rate below 1.5 degrees. 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. 10 Key Solutions to Achieve NZE 2050 PHASE OUT coal plants 6. INCREASE public transport 1. Emissions Reduction 2. Gross Emissions Net Emissions Carbon Removal 3. A 4. 5. PARIS2015 es L L COP21.CMP11 INVEST in clean energy & efficiency RETROFIT buildings DECARBONIZE cement, steal & plastics SHIFT to electric vehicles Sumber: World Resource Institute 7. 28 8.000 9.101 10. DECARBONIZE aviation and shipping HALT deforestation & RESTORE degraded lands REDUCE food loss and waste EAT more plants & less meat 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 100#102Indonesia'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. Source: Ministry of Finance 33,3% of global emissions Source: World Resource Institute 18,8% of global emissions 46% of global emissions Net-zero Target in Law 5 Parties 1,9% of global emissions O Net-zero Target in Policy Document Net-zero Target in Political Pledge 27 Parties 16 Parties No Document Submitted 149 Parties 101#103Paris Agreement & NDC Indonesia Indonesia has ratified the Paris Agreement into UU No. 16/2016 1. <2°C NET ZEND ENIESIONS 2. 3. PARIS2015 COP21-CMP1 2nd ANY UNCE Limiting global temperature rise to below 2 degrees Celsius and achieving net zero emissions by 2050 Increase resilience and adaptation to the impacts of climate change Aligning the world's financial flows with Paris Agreement Goal Emission Reduction Targets by Sector (MTon CO₂e) Emission Reduction Submission of Nationally Determined Contribution (NDC) to UNFCCC Through the NDC, Indonesia is committed to reducing GHG emissions from BaU levels in 2030 by: 29% through national efforts and 41% with International Support Climate Change Mitigation Financing Needs sector Targets FORESTRY Forestry ENERGY & TRANSPORTATION WASTE AGRICULTURE IPPU Energy dan Transportation 29% 497 314 11 9 2.75 IPPU Waste 41% 650 398 26 St 4 3.25 Agriculture source: NDC Indonesia, KLHK (2016) Total Source: Ministry of Finance Second Biennial Update Report (Rp trillion) Roadmap NDC Mitigasi (Rp trillion) 77,82 3.307,20 93,28 3.500,00 40,77 0,92 30,34 181,40 5,18 4,04 3.461,31 3.779,63 source: Second Biennial Update Report (2018) & Roadmap NDC Mitigasi (2020) 102#104Commitment 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 CATE WAITY 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 10 8 13 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 150 FIAT AFTET 17 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 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 into the National Development Plan 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. Note: (1) SDG Indonesia One, PT Sarana Multi Infrastruktur Source: Ministry of Finance 103#105Climate 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 Coordinating Ministries Coordinating Ministry of Economic Affairs Coordinating Ministry of Maritime and Investment Ministry of Environment and Forestry (Focal Point) Ministry of Finance •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 Source: Ministry of Finance 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 104#106Commitment 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 2014 RAN-GRK and RAN-API 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 AGENDA PERUBAHAN IKLIM NASIONAL DAN GLOBAL PENAVEAMIN 13 PRIKLI Preparation of fiscal instruments related to Carbon Tax and Carbon Trading Nationally Determined Contribution (NDC) SDGs 13: Climate Action updating Mitigation Fiscal Framework 085-004 2016 Paris Agreement ratification 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 105#107National Climate Financing GISONS 3065-04 13 PENAVEMAN PERUBAHAN KUV 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 DOMESTIC _ INTERNASIONAL BILATERAL MULTILATERAL • Green Climate Fund ⚫ Global . Environment Facility Adaptation Fund ⚫ MDBs ⚫ IFIS 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. 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. STATE BUDGET 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 • Government • Private Source: Ministry of Finance 106#108State 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 Ministries/Agencies in the future. Waste, 4.94% IPPU, 0.02% Composition of the Climate Change Mitigation Budget by of the 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, Non- Infrastructur e 4.14% 11.9% Composition of Climate Change Budget by Type of Output Infrastructure 88.1% (%) 107#109Role of The Ministry of Finance in Mobilizing Funds From Non-State Budget GREEN CLIMATE FUND SDG Indonesia One bpdlh Ingungents • 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 108#110GCF Approved Indonesian Projects/Programs GCF Readiness GGGI 1 Project Preparation Programs I and II 2 for NDAs and Grants: (PPF) for Bus Rapid Nationally Readiness | USD850.000 Readiness II USD998.000 Transit Development in Semarang 4 Accredited Agencies Geothermal Resource Risk Mitigation Facility (GREM) Funding Scheme (in million USD) Climate Investor THE WORLD BANK One (CIO) ■ GCF - Loan 7.5 60 90 ■GCF - Reimbursable Grant 25 310 ■GCF Grant 2.5 IBRD - Loan 225 GCF Funding: USD100 m; Co-financing: USD310 m. Ministry of Finance/ PT. Sarana Multi Infrastruktur Source: Ministry of Finance Funding Scheme (in million USD) VSMI Result-based Payment UN 3 (RBP) REDD+ Indonesia DP (2014-2016) RBP : Grant: USD103,8 m USD788.000 FMO Celopment Global Subnational Climate Finance (SnCF) Funding Scheme (in million USD) IUCN PEGASUS 100 26.5 ■GCF - Reimbursable Grant 75 ■ Co-Financing - Development Fund (Grant) ■ Co-Financing - CEF Tier 1 (Grant) 600 ■ Co-Financing - 310 CEF Tier 2 (Equity) GCF Funding: USD100 m; Co-financing: USD721,5 m. 18.5 GCF Grant 150 ■GCF - Equity 9.5 ■IUCN - Grant GCF Funding: USD168,5 m; Co-financing: USD609,5 m Pegasus Capital Advisors - - Equity 109#111Achievements 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 Renewable Energy,... Supports Financing, 21% Grants for TA, 79% On-Going Programs Solar Rooftop Urban Program Infrastructure Indonesian SDG Performance One had been supporting the following SDGs Target Program 6 CAM SANITAS AKSES AIR BERSH 7 ENEREL HERS ANTERIANURAU 13 P PEMMEBW 17 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 Disaster Area Rehabilitation Program RENITRAAM LMTEK VENCAPW TURINN 110#112Indonesia 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 gungen CO2 1. Climate change control (including the REDD+ program) 22 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) AJA 空 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 111#113Climate Change Fiscal Framework (CCFF) Indonesia What is CCFF? Framework for formulating fiscal policy options and strategies for mobilizing climate finance The Urgency of CCFF Strengthening the function of fiscal policy in controlling climate change and sustainable development Support national commitments related to climate change (NDC, SDGS, RPJMN) Financing Supply Analyze current spending on climate aclivities from public sector. - NDC sectors - Ministres Non-ministries Financing Needs Financing Gaps Climate Fiscal Strategy Map Text decade need for cimale Founce. Identify total finance gap for all Ipublic and private sectors). Strategy to mobilize public finance Strategy lo mubilize private finance Indonesia Commitment to Climate Change Map current spending on climate activities from private sector. Fiscal and non-fiscal policies affecting climate action Policy and governance of climate finance actors mandates and coordination Icentify barriers. Enabling environments. and innovative public- private financing mechanisms. Improved coordination machanism across actors to deploy climate finance and monitor impact Mobilization of public and private funds that have not been optimal. Strategic Partners giz Deutsche Gesellschatt für Internationale Zusammenarbeit (612) GmbH DP GGGI Strengthening the institutional framework for national climate change funding UN Source: Ministry of Finance Climate Finance Mobilization, Governance and Impact Technical Advisor CLIMATE POLICY INITIATIVE 112 112#114Phasing 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 2025 2030 2040 2045 2050 PLTU PLTGU Nuklir ■PLTA PLTP EBT Lain PLTS + PLTB Skenario Zero Carbon 2060 (TWh) 2060 1800 1600 1400 1200 1000 800 600 400 200 0 2020 2025 2030 2050 PLTU PLTGU Nuklir ■ PLTA PLTP EBT Lain PLTS + PLTB 2040 2045 2060 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 113#115Roadmap 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 Initial phase out until 2025 by replacing diesel plants and PLTGU with RNE Plants. 2nd phase out in 2030 by retiring PLTU operations outside Java. 1. 2. 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) 114#116• • . • • • • Carbon Pricing Policy Carbon Pricing Instruments Emission Trading System CO₂ CARBON PRICING POLICY UNDER DISCUSSION Aims to reduce national GHG emissions. Become a policy intervention to overcome "market failure". The practice of "polluters-pay- principle" Encouraging a low-emissions business and business ecosystem. Can be an alternative source of financing for sustainable development programs. Government, currently, is preparing Regulation on Carbon Pricing. Implementation of international carbon trading will consider the discussion of Article 6 Paris Agreement at COP 26 1 Trading Instruments a. Emission Trading System/ ETS: an entity that emits more buys an emission permit than one that emits less (cap and trade) b. Emission Offset (Crediting Mechanism): Entities undertaking emission reduction activities can sell their carbon credits to entities requiring carbon credits. 2 Non-Trade Instruments a. Carbon tax: imposed on carbon content or carbon emitting activity. b. Result Based Payment: payments are made for the results of emission reductions. BA Erisi Jarraze CAR! First Period Entity A and Entity B have the same allocation at the att beginning. of the period Emission Offset Beas, Nan T End of Period Emission Allocation Certificate Emission Obtained A has an allocation surplus that can be sold to B B Belas Alas Emsi B is a business entity that is subject to a cap C is a business Initial Emission Final Emission Emission Reduction Certificate Emission Obtained C entity that is not subject to a cap Trade Mechanisms Carbon Tax Result-Based Payment Non Trade Mechanisms No carbon credits transfer Carbon content on goods Emitting activity Source: Ministry of Finance 115#117Indonesia'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 AM Water and Sanitation * Urban Transport Gas Distribution + Housing Health Facility Waste Management ப ப 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. 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 PPP Green Project City Street Lighting, Surakarta, Central Java 2 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 116#118The Role of Fiscal Policy in Green Economic Transformation Rp TAX Source: Ministry of Finance 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. 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. 117#119Fiscal Incentives TAX: Several tax incentives to promote green private investment. Fiscal Transfer Strengthening the capacity of sub-national governments in tackling climate change. Profit Sharing Fund on Natural Resources (DBH SDA) Tax Holiday Income Tax Facility VAT Facility Import Tax Facility Property Tax 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. Property tax deduction up to 100% for exploration stage. • 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) DID on Waste Management Source: Ministry of Finance 118#120Fiscal, 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) OK 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 119#121Sustainable Finance Initiatives 330 Br 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' importance of awareness on the sustainable finance Bicuit DOGMASHCAM II หน 13301-37931 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. 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 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. c. In 2020, OJK also issued supervisory guidance and policy regarding incentives for electric vehicle-related financing. Green Taxonomy 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 Guidebook of Credit/Financing/Investment in Sectors National Campaign - Indonesia Sustainability Week Sustainable Finance Inclusion Program Informative Publications for New Investors Awareness Human Resources SUSTAINABLE FINANCE INDONESIA Product • Sustainable Finance Training and Training of Trainers E-learning development Non- Government Support Developing Research Centers Pilot Project on Sustainable Finance Market Infrastructure Coordination among related Ministries/ Institutions Development of Sustainable Finance Information Hub • • Sustainable Finance Taskforce Monitoring and Evaluation of the Implementation of Sustainable Finance Source: Financial Services Authority (OJK) 120#122OJK'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. 121#123Urgency 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) 122#124Green 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. A classification tool for the financial industry (banking) to protect the environment and reduce greenhouse gas emissions. (EU Green Taxonomy, 2019) (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) 123#125Innovative 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% 1 Global Green Sukuk (Mar 2018) USD 1,25 billion 2 Global Green Sukuk (Feb 2019) USD 750 million 8% 6% 5% 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 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 800 27% 17% 11% 62% 49% Energy efficiency Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction 2018 2019 2020 Sustainable Transport 9% 11% 7% 7% Waste and Waste to Energy Management 759 Sovereign green sukuk is Indonesia's main financing instrument for climate actions. • Total global green sukuk financing: USD 3.5 billion 700 568 Est. SDGs Financing Distribution In USD Billion, 2020-2030 Non-Government Government 4,710 588 500 517 500 453 44% 3,030 • Total green sukuk retail financing: IDR 11.88 trillion 396 400 347 302 39% • Green sukuk has financed various projects in 5 sectors and mostly for transportation projects. 404 300 261 227 192 316 343 372 200 • Rol issued its debut SDG Bond in September 2021, which was also the first issuance of sovereign conventional SDG bond in Asia. 100 171188 206 226 247 267 291 56% 61% BAU High 0 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 BAU High Source: Ministry of Finance Sour: APPENAS, DR, 20 124#126Republic of Indonesia Sustainable Development Goals (SDG BOND) EUR500 Million Issuer Republic of Indonesia Issuer Rating Moody's: Baa2 (Stable) / S&P: BBB (Negative) / Fitch: BBB (Stable) Format SEC-Registered September 23, 2021 Settlement Date EUR Long-12 Year EUR €500 million (SDG) Tranche Currency USD Tap of 2031s USD USD 40 Year USD Issue Size $650 million Original Principal $600 million Amount Reopening Size $600 million Maturity July 28, 2031 September 23, 2061 March 23, 2034 Coupon (p.a.) 2.150% 3.200% 1.300% Reoffer Yield 2.180% 3.280% Reoffer Price 99.734% 98.225% Use of Proceeds Listing Repurchase certain of its outstanding global bonds pursuant to its tender offer announced on September 13, 2021 1.351% 99.419% Invest in projects that may qualify as Eligible SDGs Expenditures SGX-ST and Frankfurt Stock Exchange Transaction Highlights ■ Debut Sustainable Development Goals (SDG) EUR issuance by an Asian Sovereign ■ Debut Liability Management transaction and Debut US$ 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 125 125#127Indonesia'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 3 Use of proceeds of Green Bond and Green Sukuk Project Evaluation and Selection Eligible Green Projects must fall into one of the nine eligible sectors Review and approval process by Ministry of Finance and National Development Planning Agency Project selection will utilize the Climate Budget Tagging (CBT) mechanism 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 126#128Indonesia'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 Green Tourism Waste and Waste to Energy Management Sustainable Agriculture Light to Medium Source: Green Sukuk Allocation and Impact Report - May 2021 Energy efficiency Sustainable Management of Natural Resources The Framework Excluded Use of Proceeds for New Fossil Fuel-Based Electric Power Large Scale Hydropower Plants > 30 MW Light Green Green Building Nuclear Assets 127#129Indonesia 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 Sustainable Management of Natural Resources on Ocean* * Eligible SDGs Expenditures with Green focus can be further linked to Blue (ocean related) projects Alignment with the Rol's 2030 SDGs Target FOUTAUTH 6 ULIAN MAIL DECENT AND WEB1 SAUE 11 SURSARIES WIL 12 M CLEAN DHE BUY PESFILL STARMON MAHITIN 13 CIMAIL NATION 14 15 Source: Indonesia SDG Government Securities Framework Со 128#130Indonesia 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 Access to Essential Services Socioeconomic Advancement and Empowerment F Food Security and Sustainable Food Systems Affordable Basic Infrastructure Alignment with the Rol's 2030 SDGs Target 1 נו PJ.ESTY 2 555 FLIEL 3WILTON A 4 5 EDDER LAN MAIL EDUCAT CQUALITY 8 DECENT WORLAND FOOLING GROWTH 9 The Framework Excluded Use of Proceeds for New Fossil Fuel-Based Electric Power Large Scale Hydropower Plants > 30 MW Source: Indonesia SDG Government Securities Framework NAGI MERUES WININGS 10 I 11 IS Nuclear Assets 129 129#131Overview 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 130#132External 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 °C *CICERO Shades of Green IISD International Institute for Sustainable Development Republic of Indonesia BDCs Framework Second Opinion 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". 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 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 131#133Indonesia'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 2020 Issuance USD 750 million 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 and 49% financing new projects 51% refinancing existing projects 7.21% 0.08% Sustainable Transport Note: 10.77% 49.51% 33.02% 27% 22% 8% 8% 11% 5% Renewable Energy 55% 48% Energy efficiency Resilience to Climate Change for Highly Vulnerable Areas and Sustainable Transport Sectors/Disaster Risk Reduction 9% 11% 7% 7% 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 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 Refinancing of Ministry of Public 2018 projects Works and Housing Ministry of Transportation Ministry of Agriculture 36% Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Waste and Waste to 57% Mitigation 6% Energy Management 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 132#134Indonesia'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) SUSTAINABLE DEVELOPMENT GOALS Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction 600 • • • • 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 benefit 2,059,094 households due to the improved waste management NORDABLE AND CLEAN ENERGY 8 ECONOMIC GROWTH DECENT WORK AND 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 11 AND COMMUNITIES 13 CLIMATE ACTION 133#135Tangible 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 Resilience to Climate Change Sustainable Transport Waste and Waste to Energy Management Across the country Jakarta, Java, Banten All provinces except Banten USD 371.3 million Finance 2020 New Projects USD 247.7 million Amount Committed to Refinance 2020 Projects Impacts Social/SDGs SEANCAL USD 0.6 million USD 54.1 million 13 CH USD 80.8 million Project Examples Financed / Refinanced 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 Expansion and Preservation 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 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. Alto 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: *Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW 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 134#136Government 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 (MOF Regulation 62/2017) Goal Fund Manager Total Funds Fund Distribution Financing exploration, exploitation and PLTP PT Sarana Multi Infrastruktur (SMI) IDR 3,1 Trillion (revolving fund) Loans, capital injections, and data provisions Main feature ☐ 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. PISP Co-financing (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 135#137Section 7 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#138Bank Indonesia's Policy Mix Synergy to Accelerate Economic Recovery, while Maintaining Macroeconomic and Financial System Stability 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 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 ● Supporting national economic recovery program in cooperation with the MOF ● 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 1m Macro- prudential Policy Coordination with other Authorities 5 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA 3 4 Financial Market Deepening Payment System Policy 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) Developing Money Market Development Blueprint 2025 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 and other business models securitisation 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 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 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 Implementing the first phase of BI-FAST, starting in the second week of December 2021 Source: Bank Indonesia 137#139Bank Indonesia Policy Mix: December 2021 BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 15th and 16th December2021 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% • • Monetary policy in 2022 will be oriented towards maintaining stability, while pro-growth macroprudential and payment system policies will focus on driving economic growth together with money market deepening as well as an inclusive and green economy and finance. Continuing the strengthening strategy for monetary the operations to reinforce the effectiveness of accommodative monetary policy stance. Maintaining rupiah exchange rate policy to preserve stability in line with the currency's fundamental value and market mechanisms. • Strengthening prime lending rate (PLR) transparency in the banking industry by deepening the assessment of prime lending rate spread against term deposit rates by bank group (Appendix). Maintaining the Rp1 fee charged by Bank Indonesia to banks using the National Clearing System (SKNBI) and Rp2,900 maximum charged by banks to their customers, which was due to end on 31st December 2021, until 30th June 2022 Targeting 15 million new QRIS users in 2022 to boost QRIS transactions through coordination with Payment Service Providers (PSP) and relevant government ministries/agenci es. Promoting trade and investment as well as continuing to socialise Local Currency Settlement (LCS) in conjunction with other relevant institutions. In December 2021 and January 2022, promotional activities will be organised in China and Finland. Source: Bank Indonesia 138#140Liquidity 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 Market Mechanism Purchasing by Prudent Maintaining the Credibility of Monetary Policy and Maintaining Economic Stability Tradable & Measured Marketable Considering the Tradeable SUN/SBSN impact on inflation Govern Uphold Good Governance 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 Rp141.19 trillion in 2021 (as of 14th Dec 2021) Bank Indonesia in 2021 has purchased SBN to fund the 2021 State Revenue and Expenditure Budget (APBN) totalling Rp201.32 trillion, comprising: (i) Rp143.32 trillion through primary auction in accordance with the Joint Decree (KB) issued by the Minister of Finance and Governor of Bank Indonesia on 16th April 2020 and subsequently extended on 11th December 2020 until 31st December 2021, and (ii) Rp58 trillion through private placement in November 2021 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 The expansive monetary policy stance supports very loose liquidity conditions in the banking industry, as reflected in November 2021 by a high ratio of liquid assets to deposits of 34.24% and deposit growth of 10.37% (yoy) Liquidity in the economy has also increased, as indicated by narrow (M1) and broad (M2) money supply aggregates, which grew 14.7% (yoy) and 11.0% (yoy) respectively in the reporting period, primarily driven by outstanding loans disbursed by the banking industry and fiscal expansion Source: Bank Indonesia 139#141Further Strengthening of an Accommodative Bank Indonesia's Policy Mix Lower/Hold BI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market & Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy BGM 20-21 JAN, 17-18 FEB AND 17-18 MARCH 2021 1. Hold BI7DRR at 3.75% in Jan, lower it to 3.50% in Feb and Hold it in March. 2. Accelerating money market deepening by strengthening JISDOR (methodology, transaction monitoring period and publication schedule) as IDR reference rate against USD 3. Relaxing down payment requirements on automotive loans/financing to min 0% for all new motor vehicles and relaxing the LTV/FTV ratio on housing loans/financing to maximum 100% on all residential property for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property. Both effective from 1 Mar until 31 Dec 2021. 4. Publishing the "Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" in February 5. Strengthening Prime Lending Rate (SBDK) transparency in the banking industry, while coordinating with the Government and other relevant authorities to: (i) accelerate monetary policy transmission to lending rates in the banking industry; and (ii) stimulate lending/financing to the corporate sector. 6. Strengthening 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, to stimulate bank lending to the corporate sector and export-oriented businesses 7. Supporting the Regional Digitalisation Acceleration and Expansion Teams (TP2DD) to stimulate innovation, accelerate and expand Electronification of Regional Government Transactions (ETP) and integrate the digital economy and finance. 8. Supporting development of an inclusive and efficient digital economy & finance ecosystem, by: . • Extending the QRIS 0% MDR for micro enterprises until 31st December 2021; Expanding QRIS acceptance to 12mil merchant BGM 19-20 APRIL, 24-25 MAY AND 16-17 JUN 2021 1. Hold BI7DRR at 3.50% 2. Expanding the use of (SukBI) for tenors of 1 week to 12 months, effective from 16th April 2021. 3. Maintaining accommodative macroprudential policy by holding the CCуB at 0%, the MPLB at 6% with repo flexibility at 6%, as well as Sharia MPLB at 4.5% with repo flexibility also at 4.5%. 4. Expanding money market deepening efforts by accelerating the establishment of a Central Counterparty (CCP) as well as standardising repo transactions for clearing via the CCP. 5. Lowering the upper limit on credit card interest rates from 2% to 1.75% per month, effective 1st July 2021 6. Extending the National Clearing System (SKNBI) pricing policy of IDR1 from BI to banks and a maximum of IDR2,900 from banks to customers from 30th June 2021 previously until 31 Dec 2021 7. Extending policy of lower late payment penalties on credit cards at 1% of the outstanding balance, or max of IDR 100,000, until 31 Dec 2021, to encourage the use of credit cards as a private consumption buffer to support the national economic recovery. 8. Strengthening PLR transparency in the banking industry with an emphasis on suppressing higher interest rates on new loans, the affecting factors (increasing risk perception and profit margin) as well as PLR analysis at individual banks 9. Accelerating the money market deepening program by strengthening the corresponding regulatory framework and implementing the Multi-Matching ETP, specifically targeting the Rupiah money market and FX market. 10.Strengthening QRIS policy by: • Raising the QRIS transaction limit from IDR 2 mil to IDR 5 mil, effective from 01/05/21 Lowering the MDR for Public Services Agencies (BLU) and Public Service Obligations (PSO) 0.7% to 0.4% effective from 01/06/21 BGM 21-22 JUL, 18-19 AUG, 20-21 SEP 2021 1. Maintaining rupiah exchange rate policy to preserve stability in line with the currency's fundamental value and market mechanisms. 2. Continuing the strengthening strategy for monetary operations to reinforce the effectiveness of accommodative monetary policy. 3. Nurturing intermediation by strengthening prime lending rate (PLR) transparency with an emphasis on the risk premium and its impact on setting interest rates for new loans across various credit segments (appendix). 4. Strengthening the payment system ecosystem through PBI PJP/PIP implementation to simplify a more efficient licensing/approval process, while fostering innovation in terms of payment system services. 5. Accelerating Quick Response Code Indonesia Standard (QRIS) uptake, including cross-border QRIS, and implementing the National Open API Payment Standard (SNAP) towards broader digital economic and financial integration. 6. Increasing support for a fast, simple, affordable, secure and reliable payment system that underpins government social aid program (bansos) disbursements and online transaction efficiency. 7. Strengthening exports by extending the SPE exemptions that were due to end on 29th November 2020 until 31st December 2022 in order to exploit increasing demand in trading partner countries as well as rising international commodity prices. 8. Promoting trade and investment as well as continuing to socialise the use of local currency settlement (LCS) in conjunction with other relevant institutions. BGM: Board of Governor Meeting Source: Bank Indonesia T40#142Further Strengthening of an Accommodative Bank Indonesia's Policy Mix HoldBI 7- day Reverse Repo Rate Stabilization Of The Rupiah Money Market & Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy BGM 18-19 OCT and 17-18 NOV 2021 1. Maintaining rupiah exchange rate policy to preserve stability in line with the currency's fundamental value and market mechanisms. 2. Continuing the strengthening strategy for monetary operations to reinforce the effectiveness of the accommodative monetary policy stance. 3. Maintaining an accommodative macroprudential policy stance by holding: (i) the Countercyclical Capital Buffer (CCYB) at 0%, (ii) the Macroprudential Intermediation Ratio (MIR) in the 84-94% range with a lower disincentive parameter of 80% (1st September-31st December 2021) and 84% (1st January 2022), and (iii) the Macroprudential Liquidity Buffer (MLB) at 6% with repo flexibility at 6%, and the Sharia Macroprudential Liquidity Buffer (SMLB) at 4.5% with repo flexibility at 4.5%. 4. Maintaining looser downpayment requirements on automotive loans/financing at 0% for all types of new motor vehicle, while applying risk management and prudential principles, effective from 1st Jan 2022 - 31st Dec 2022. 5. Maintaining a looser Loan/Financing-to-Value (LTV/FTV) ratio on property loans/financing to a max of 100% on all property types for banks meeting specific NPL/NPF criteria, while removing regulations stipulating the gradual liquidation of partially prepaid property to revive credit growth in the property sector in line with risk management and prudential principles, effective from 1st Jan 2022 - 31st Dec 2022. 6. Strengthening prime lending rate (SBDK) transparency in the banking industry by expanding the assessment of policy rate transmission to prime lending rates and interest rates on new loans in the banking industry by economic sector/subsector 7. Strengthening prime lending rate (SBDK) transparency in the banking industry by deepening the assessment of the largest banks that dominate 70% of the credit market 8. 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. 9. Implementing the first phase of BI-FAST, starting in the second week of December 2021, based on policies covering participation, provision of infrastructure, maximum transaction value and price schemes, to be announced on 22nd October 2021. 10. Extending credit card policy as follows: (a) Minimum payment equal to 5% of the outstanding balance until 30th June 2022. (b) Late payment penalty equal to 1% of the outstanding balance or a maximum of Rp100,000 until 30th June 2022. 11. Accelerating LCS implementation to facilitate trade and investment with partner countries סנס BGM: Board of Governor Meeting Source: Bank Indonesia 141#143Stable Monetary Environment Despite Challenges Well Maintained Inflation Ensured Price Stability 222 000 + 2 20 18 16 14 12 10 8 Strengthened Monetary Policy Framework (%) CPI (%, yoy) rhs 8.00 Core (%, yoy) - Ihs 7.00 Volatile Food (%, yoy) - Ihs2 LF Rate: 7.00 6.00 BI Rate: 6.50 Administered (%, yoy) - lhs 5.00 3.05 4.00 6 4 0 H 2013 2014 2015 2016 2017 Rupiah Exchange Rate Fared Relatively Well Compared to Peers 1.44 3.00 1.75 2.00 1.69 19 August 2016 The New Monetary Operation Framework Mar-16 May-16 Jan-16 Jul-16 Q3-2016 Q1-2017 2018 2019 2020 Nov-21 Credit Growth Profile % yoy 20.0 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 LF Rate: 4.25 BI 7Day RR Rate: 3.50 DF Rate: 2.75 Dec-21 TRY -50.15 -19.80 THB -10.37 -2.03 ZAR -8.53 15.0 11.28 JPY -9.51 -2.59 10.0 EUR -8.94 3.66 BRL -8.74 -4.74 5.0 KRW -8.40 3.22 5.38 4.73 PHP -4.64 0.78 0.0 ■point-to-point average MYR -4.57 1.37 4.11 Total Growth Working Capital Loans INR -3.84 -5.0 0.22 Investment Loans SGD -3.07 Consumption Loans 2.66 -10.0 IDR -1.97 1.60 CNY As of 15-Dec-21 2.45 6.93 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 Nov-21 Source: Reuters, 18omberg Calculated 40.0 -30.0 -20.0 -10.0 0.0 10.0 20.0 142#144Regional Inflation Remains Under Control ...supported by a well maintained inflation in all regions SUMATRA 2.13 AAR ALR 2.06 1.85 138 Regional Inflation, November 2021 KALIMANTAN 1.97 2.13 Aceh 2.5 Riau Islands 2.7 North Sumatra 2.0 Bengkulu 2.2 Riau 2.1 Babel Islands 3.5 West Sumatra-1.7 Lampung 1.9 South Sumatra 2.0 Jambi 1.9 209 1.97 188 1.54 West Kalimantan 1.5 South Kalimantan 2.6 East Kalimantan 1.7 Central Kalimantan 2.8 North Kalimantan 1.9 SULAWESI 2.12 2.03 NATIONAL INFLATION NOVEMBER 2021 1.75% (yoy) Inf > 4% 3% <Inf≤4% 1G1 1.82 1.58 L.SS " 000 Banten 1.4 1.45. Bali 1.9 2% <Inf<3% 1.34 1.35 1.47 DKI Jakarta 1.3 West Java 1.7 West Nusa Tenggara 1.9 East Nusa Tenggara 1.6 600 0.87 Central Java 1.5 Inf 2% East Java 2.2 Source: BPS, calculated JAVA 1.61 DI Yogyakarta 2.1 BALI-NUSA TENGGARA 1.82 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 1.30 2.01 2.32 Gorontalo 1.9 North Sulawesi 2.1 Central Sulawesi 1.8 West Sulawesi 3.7 South Sulawesi 2.0 South-East Sulawesi 3.0 2.09 1.92 MALUKU-PAPUA 2.09 Maluku 3.1 North Maluku 2.0 Papua 0.9 West Papua 3.2 143#1454 Strategies to Achieve the Inflation Target 2020-2021 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 144#146Principles of Average Reserve Requirement Ratios Improvement • • • Considerations for the Average Reserve Requirement Ratios Improvement Improvement in average reserve requirement is a follow up to the monetary policy operational framework reform implemented by Bank Indonesia since 2016. was Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. The current improvement aims to elevate flexibility in banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness of monetary policy transmission in maintaining economic stability. Substance a. Additional rupiah average reserve requirement for conventional commercial banks b. Annulment of demand deposit renumeration c. Implementation of foreign exchange average reserve requirement for conventional commercial banks d. Implementation of average reserve requirement for Islamic banks Old New Fixed RR: 5% Fixed RR: 4.5% Average RR: 1.5% RR: 6.5% Average RR: 2% RR: 6.5% 2.5% (from 1.5% RR) 0% Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% Average RR: 2% RR: 8%* Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% Average RR: 2% RR: 5%* Effective Date 16th July 2018 16th July 2018 1st October 2018 1st October 2018 * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 145#147Relaxing Reserve Requirement Ratios Lower reserve requirements, effective 1st May 2020 Regulation 1 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 2 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 3 4 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% MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit + Issued Sharia Bond • Ceiling 94% • Floor 84% • Minimum Capital Adequacy Requirement 14% • Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 • Floor 84% • Minimum Capital Adequacy Requirement 14% For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank • Upper disincentive parameter 0.2 3 Scope of credit/financing and deposits to calculate MIR / MIR Sharia 4 Source of Data 5 Criteria for securities held • 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 • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering • 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 • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 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 100% Criteria for securities issued Securities Reporting Scope of deposits to meet DD MIR/DD MIR Sharia 10 Relaxation of DD MIR/Sharia DD MIR medium-term notes (MTN), floating rate notes (FRN) • sharia-compliant medium-term notes (MTN) and/or and/or bonds other than subordinated bonds sukuk other than subordinated sukuk Issued by a nonbank corporation and by a resident • Offered to the public through a public offering • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution Offline delivery mechanism (email) • Average daily total deposits in rupiah at all branch • Average daily total deposits in rupiah at all branch offices in Indonesia offices and sharia business units 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 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, BI decides to adjust MIR/sharia MIR policy in order to optimize loans/financing received for bank lending. This policy to stimulate credit growth will comply with prudential principles. Therefore, Bl is only encouraging banks with low non- performing loans and adequate capital resilience to expand credit/financing. 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 Loans/financing received based on a loan agreement. e. 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 Upper disincentive parameter MIR/sharia MIR RR= Upper Bound of MIR/Sharia MIR Target - ) x Deposit MIR/sharia MIR RR= Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR 0.2 x (Bank's MIR/sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 149 KPMM ≤ 19% KPMM > 19% Lower Disincentives Parameter 0.00 *This disincentive applies for banks with CAR below 14%. 0.00 0.10 0.15 *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia 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) Sheria MIR (SCB and SBU) Regulation MIR (CCB) Sharia MIR (SCB and SBU) and/or corporate sukuk; and residents. Criteria of Securities held In the form of corporate bonds In the form of corporate sukuk; 1.Issued by nonbank corporation 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 authorised to provide securities settlement and custodial services. 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%<KPMM< 14%<KPMM< 3. Rated by a rating agency no lower than investment grade. 4. Administrated by an institution authorised to provide securities settlement and custodial services. <5% 0.00 <5% 0.10 19% 19% ≤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 (MLB) Regulation 1 Rate MLB (Conventional Commercial Bank) 4% of rupiah deposits (including Sharia Business Units deposits) 4% of rupiah deposits MLB Sharia (Sharia Banks) 2 Components Calculation Formula 4 Flexibility 5 Sources of Data Deposits on Securities denominated in rupiah held by a conventional • Sharia-complaint securities denominated in rupiah commercial bank that may be used for monetary operations held by an Sharia bank that may be used for sharia- (including SBI/SDBI/SBN); and compliant monetary operations (including SBIS/SBSN) • Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities held by commercial bank to rupiah deposits an Sharia bank to rupiah deposits 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 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 • 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 After 6% of rupiah deposits 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% 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 Regulation 1 Lower upper limit on credit card interest 2 Temporary reduction of minimum payment 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 requirements 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* Prudential aspects of Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios 1. The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. 2. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. 3. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank's risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the 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. b. C. d. 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 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 EZ Property Financing based 田 New Regulation NPL/NPF Criteria Met Property Loans/Financing Property Financing based on MMQ and IMBT Contracts 22 NPL/NPF Criteria Not Met Property Loans/Financing based on Murabahah and Istishna Contracts Property Financing based on MMQ 12 23 and IMBT Contracts 12 23 Source: Bank Indonesia Facility based on Murabahah and Istishna Contracts 1 22 Property Financing based on MMQ and IMBT Contracts 1 22 based on Murabahah and Istishna Contracts 12 on MMQ and IMBT Contracts based on Murabahah and 1 2 3 Facility 1 Istishna Contracts 22 1 Landec House Type >70 85% Type>21-70 90% 90% 95% 85% 75% 65% 90% 80% 70% 85% 75% 85% 75% Type ≤21 - Landec House Type >70 Type >21-70 Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 95% Apartment 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% 85% 75% 65% 90% 80% 70% 95% 85% 75% 95 % 85% 75% Apartment Type ≤21 90% 90% 85% 75% 85% 75% 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 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100 100 % % 95% 95% Notes: Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 1. denotes LTV ratio policy at bank discretion 2. Based on PB No. 21/13/PB/2019 NPLNPF Criteria 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio on property cans/financing <5% 155#157Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2022) 1 2 23 90% 95% 95% 90% 80% 70% 95 % 85% 75% 90% 80% 90% 80% b. Changes to LTV/FTV Ratio on Green Property Loans/Financing Ketentuan Saat Ini NPL/NPF Criteria Met Property Loans/Financing Facility based on Murabalah and Istishna Contracts 1 22 Property Financing based on MMQ and IMBT Contracts 1 22 Landee House Type >70 Type>21-70 Type $21 NPL/NPF Criteria Not Met Property Loans/Financing based on Murabahah and Istishna Contracts 1 223 Property Financing based on MMQ and IMBT Contracts Ketentuan Baru Property Financing based on MMQ and IMBT Contracts 22 PP Bdsr NPL/NPF Criteria Not Met Property Loans/Financing based on Murabahah and Istishna Contracts Aked MMQ & Akad IMBT 12 23 12 23 Facility NPL/NPF Criteria Met Property Loans/Financing based on Murabahah and Istishna Contracts 1 22 1 Landec House Type >70 100% Type >21-70 Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% 100% 95% 95% 100% 95% 95% Apartment Apartment Type>70 90% 95% 90% 80% 70% 95 % 85% 75% Type >70 100% 100% 100% Type >21-70 95% 95% 90% 80% 90% 80% Type >21-70 Type $21 95% 95% 90% 80% 90% 80% Type $21 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% 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 *NPL/NPF Criteria 2. Based on PB No. 21/13/PBUV/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. Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation 1. Gross NPL/NFF ratio < 5%; and 2. Net NPL/NPF ratio on property loans/financing <5% c. Changes to Indent Regulations Current Regulation up to 30% of ceiling upon completion of loan contract up to 50% upon completion of foundations up to 90% of ceiling upon completion of roof signing of BAST, accompanied by AJB and a cover up to 100% of ceiling upon note. New Regulation 1. 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. Source: Bank Indonesia 156#158Adjustment of Minimum Down Payments on Green Automotive Loans/Financing (Effective 1st October 2020) Bank Indonesia adjusts macroprudential policy in automotive sectors by: (Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles. Main Regulatory Points 1. Adjustment of Minimum Down Payments on Green Automotive Loans/Financing. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. Type of Green Motor Vehicle Current regulation New Regulation *) (PBI No. 21/13/PBI/2019) *) Two-wheel 10% 0% Three-wheel or more (non- 10% 0% commercial) Three-wheel or more 5% 0% (commercial) 1. Applicable to banks with a non-performing loans (NPL) ratio below 5% 2. Effective 1st October 2020 Requirements: 1. Gross NPL ratio on total credit <5%; and 2. Net NPL ratio on automotive loan <5% Source: Bank Indonesia 157#159Adjustment 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. 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). d. The amendment also takes into consideration the contained credit/financing risk in the automotive sector. e. Looser downpayment requirements on automotive loans must comply with prudential principles and risk management. Changes to Down payment Requirements on Automotive Loans/Financing Current Regulation Downpayment Requirements on Non-Green Vehicles Downpayment Requirements on Green Vehicles New Regulation Downpayment Requirements on Non-Green Vehicles Downpayment Requirements on Green Vehicles Vehicle Type NPL Requirements Mer NFL Requirements NFL Requirements Not Met det NFL Requirements Not Met Vehicle Type NFL Requirements Met NPL Requirements NFL Requirements NFL Requirements Not Met Met Not Met Two Wheels 15% 20% 0% 15% Two Wheels 0% 10% 0% 0% Two Wheels of 15% 25% 0% 20% Two Wheels 0% 10% 0% 0% More (Non- of (Non- More Commercial) Two Wheels 10% 15% 0% 10% or More (Commercial) *) previous regulation, PBI No. 21/13/PBI/2019 **) Requirements as follows: Commercial) Two Wheels of More (Commercial) 0% 5% 0% 0% Source: Bank Indonesia 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. 158#160Assessment 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 market. Key Takeaways • The decline in the prime lending rate (PLR) continues, although in a limited scale. The cost of loanable funds (CoLF) remains the primary contributor to lower prime lending rates. On the other hand, profit margins have shown an increase, especially in the national commercial private banks. In line with the decline in the PLR and the improvement in perception of banking risk, interest rates for new loans continue to show a downward trend (year on year). • Big Banks have responded to the reduction in BI7DRR by further lowering new loan interest rates. The decline in interest rates for new BB loans mainly occurred in mortgages, followed by working capital loans and MSME loans. The banking industry has continued to lower prime lending rates (PLR). . • By bank group, the lower PLR was primarily driven by regional government banks, followed by national private commercial banks and foreign bank branches. By component, the cost of loanable funds (CoLF) was still the main driver of the lower PLR, contrasting higher overhead costs (OHC). Pursuant to OJK Regulation (POJK) No. 37/POJK.03/2019 concerning Bank Report Transparency and Publication, the PLR consists of three components, namely; 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. 1 Assessment period until September 2021. Source: Bank Indonesia Prime Lending Rate and Deposit Rate Response to BI7DRR 1 Bank Indonesia has maintained an accommodative monetary and macroprudential policy stance in order to stimulate economic growth. • • 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 17 10 Я 6 4 2 0 2019 Spread (SBDK-BI7DRR) SBDK BI 7 DRR Graph 2. Prime Lending Rates by Bank Group 14 12 12 10.22 5.22 5.22 2020 2021 Spread (SBDK-Sb depo 1 bln) Deposito 1 bulan 8.77 8.75 3.25 5.47 3.50 3.28 Graph 3. Prime Lending Rate Performance by Component 5 10.36 985 59 11 4 521 ย 6.39 2 342 2009 ---H40 же 2021 HAVN RUSH 9-4 Source: OJK 4.19 3.29 3.24 3.73 2.93 2.97 2.14 2.59 2.56 2019 2020 2021 HPDK OHC Margin Keuntungan 159#161Improving 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 Implementation of Money Market Deepening Program Implementation of Reserve Requirement (RR) Averaging Enhancement of monetary policy signal Enhancement of instruments transactions and 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 160#162Principles 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 161#163Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: Transaction between: III 1. Must have Underlying Transactions: 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) - Bank Customer III Bank Foreign Party - Can only be performed to hedge rupiah exchange rate risk. X Excluding following activities: Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; a. b. C. d. e. f. Intercompany loan g. Money changer activities. Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions Source: Bank Indonesia III III Bank - Bank 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions 162#164Principles 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 Mid Rate 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. 163#165Amendment 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 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 Article 3 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. 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. Source: Bank Indonesia 164#166• • 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 Specification Before Implementation 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 Jakarta Time 08.00-16.00 Not changed Not changed Changed JISDOR Publication Time Calculation Method 10.00 WIB Jakarta Time* 16.15 WIB * Changed Weighted average rate of USD/IDR spot transactions traded in interbank market 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 165#167Overnight 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. 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 rate Improvement of IRS transaction liquidity OIS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) Encourage price transparency in the rupiah money market Strengthen monetary policy transmission Provide alternative hedging instruments against rupiah interest rate changes Support securities market deepening in Indonesia 166#168OIS and IRS Transactions: General Provisions Market Players. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions 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 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 167#169Enhancement 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 FIXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS PROGRESS Source: Bank Indonesia 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. 168#1700 IDR Tn 200 180 160 140 120 100 80 60 40 20 2016 Source: Financial Service Authority (OJK) 2017 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 Apr-20 Total of securities issuance reached IDR335.8 Tn (YTD) as of 7 December 2021, indicating a more optimistic signal to economic recovery. 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 ■IPO Rights Issue Corporate Bond & Sukuk 40 30 177.70 20 2018 2019 2020 2021* Jul-21 Aug-21 Sep-21 Oct-21 Signs 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. LOAN In October 2021, Bank loans continued to grow by 3.24% (y-on-y) and 0.08% (m-to-m). Financing growth continued its improving trend in the past few months and grew by -5.50% (y-on-y) in October 2021. YOY IDR Tn 6,000 5,000 4,000 3,000 2,000 1,000 0 Bank Loans YoY Growth (rhs) YOY IDR tn 5657.6 16% 500 12% 400- 8% 3.24% 300 4% 0% 200 -4% 100 -8% 0 Financing Growth (rhs) 10% 5% 359 0% -5.50% -5% -10% -15% -20% 10 97.60 0 60.60 -10 -20 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 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 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 Apr-20 May-20 Jun-20 Life insurance premium recorded a 7.9% growth (y-on-y) while General & Reinsurance premium recorded a 0.2% growth (y-on-y) in October 2021. Life Insurance Premium Growth General & Reinsurance Premium Growth Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 169 0.2 7.9 Jul-20 Aug-20 Sep-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21#171Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 2 Jul-19 Aug-19 Sep-19 4 20 % 26 24 22 20 18 16 14 12 10 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 ■CAR Profitability of the banking industry recorded at steady level, reflected by stable NIM and ROA at 4.52% and 1.92% respectively in October 2021. 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 % 6 Net Interest Margin Return on Assets % 4 4.52 3 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 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 0 Jan-19 2 - 1.92 Feb-19 1- Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Resilient Financial Institutions ■Tier 1 Domestic financial institutions remain sound and stable, supported by strong capitals and leverage amidst hurdles due to the pandemic. CAR of the banking sector indicated ample liquidity with a value of 25.34% and Tier-1 capital at 23.74% as of October 2021.*) A RBC of the insurance industry increased and stayed well above the minimum threshold (120%) with Life Insurance RBC at 605.9% and General Insurance RBC at 352% in October 2021. Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 25.34 23.74 900 800 700 600 500 400 300 200 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 100 0 threshold Insurance RBC (Lhs)=120% Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Life Insurance (Lhs) Gearing ratio of multi-finance companies slightly decreased but remained below the threshold with a ratio of 1.93 times in Oct-21. Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21. Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 170 1.93 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 General Insurance (rhs) 400 352 350 300 250 605.9 200 threshold Insurance RBC (rhs)=120% 150 100 50 0 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21#1720 2 1 3 Manageable Credit Risks with Adequate Liquidity Financial institutions are equipped with ample liquidity while credit risks are maintained at a low level and remain below the threshold. Liquid Assets to Non-Core Deposits and Liquid Assets to Deposits stood at 154.59% and 34.05% respectively in October 2021 or well-above the thresholds. *) In October 2021, General Insurance Investment was recorded a higher growth than last month at 209% while Life Insurance Investment Adequacy Ratio stood at 105.2%, remained above the threshold. % Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs) Life Insurance General Insurance % % 240 209 170 40 220 160 200 35 150 180 140 30 160 130 120 25 140 105.2 120 110 20 100 100 90 80 threshold LA to Deposit (rhs) = 10% 15 80 threshold Investment Adequacy Ratio= 100% 60 10 70 40 60 threshold LA/ NCD= 50% 5 20 50 0 40 0 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Banking NPL ratios stood at 3.22% gross and 1.02% net in October 2021, slightly decreased from the previous month's figure. Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 NPF of multi-finance companies remained below the 5% threshold and stood at 3.89% in October 2021. *) % LO 5 4 T Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 ■NPL Net Nov-19 Dec-19 Jan-20 Feb-20 NPL Gross LO 5 3.22 4 3 1.02 2 1 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 о 6 20 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 T Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 171 3.89#1730 Jan-19 300 Apr-19 Jul-19 600 Oct-19 IDR Tn 1,500 1,200 900 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Insurance 0 Jan-19 Feb-19 % 5 4 3 2 1 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 Insurance investment value rose to IDR1325.64 Tn and pension fund investment stood at IDR312.18 Tn in October 2021. *) Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Pension Funds (rhs) IDR Tn 400 250 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Apr-21 Jul-21 Oct-21 200 200 350 150 300 100 250 о Jan-19 50 60 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Manageable Market Risks Several market risks indicators still show an adequate performance. Net Open Position remained well below the maximum limit of 20% despite slightly increasing to 1.97% in October 2021. *) Net asset value (NAV) of equity mutual funds continues to grow, indicating public optimism towards the capital market. IDR Trillion Jan-21 Apr-21 172 Jul-21 Aug-21 Sep-21 Oct-21 Jul-21 IDR Tn 700 600 500 1.97 400 300 200 100 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- Domestic Debt Multi-finance companies' exposure to foreign and domestic debt remain low amidst financing growth slowdown. *) Oct-21 | Foreign Debt Jul-21- NAV Equity Mutual Funds JCI (rhs) 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 Aug-21- Sep-21 Oct-21- Nov-21 0#174IDR Tn 80 60 40 20 0 -20 -40 -60 -80 -100 -120 -140 Jan-19 Domestic Capital Market Performance Amid Global Challenges Despite the emergence of the Omicron variant, investors are still optimistic for a faster economic recovery and countries are still boosting their vaccination rate. 10%0 Entering the end of 2021, global indices recorded a steady improvement although few countries still face challenges to recover. Stock Index Performance as of 3 December 2021 (compared to 31 Dec'20) JCI's performance continues to recover and has returned to its pre- pandemic level, reflecting positive sentiments from the market. Comp Bond Index Comp Stock Index (rhs) 340 7000 TURK EU 16.26% 320 6500 US WORLD 12.98% 12.06% 6000 300 THAI 9.58% INDO 9.36% 6,538.51 5500 SIN 280 9.08% CHIN S KOR 3.87% 3.30% 5000 260 4500 JPN 2.13% 240 PHIL -1.18% 4000 MAL -7.71% BRAZ -11.72% 220 3500 HKN-12.72% (% YTD) 200 3000 -15% -10% -5% 0% 5% 10% 15% 20% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 As the Omicron variant emerges, non-resident portfolios of government bonds & equity recorded a total net sell of YTD IDR24Tn in Dec 2021. However, the equity market marked a YTD net buy of IDR35.48 Tn as of Dec 3rd 2021. Source: Bloomberg and Ministry of Finance Gov't Debt Securities Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 ■ Equity As of 3 December, 2021 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 8 -4.02 7 LO 5 Jan-19 6 9 Yield (%) 10 5-yr Yield Mar-19 May-19 Jul-19 Sep-19 Government bond yields remain competitive with a slight increase, followed by stable rupiah as risk premium is maintained. 20-yr Yield IDR (rhs) Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 10-yr Yield USD/IDR 18,000 14,000 10,000 Jul-21 Sep-21 Nov-21 6,000 2,000 173#175The 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 Sharla 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) 174#176OJK Policy and Stimulus 2021 Restructuring Policy Extension until March 2023 (Banking) and April 2022 (Multifinance) Debtors can restructure credit/recurring financing during the relaxation period as long as they still have business prospects and without unreasonable/excessive costs. Residentials Loan Down Payent 0-30% (LTV ≥70%) Down Payent 30-50% (LTV 50-70%) Down Payent ≥ 50% (LTV ≤ 50%) RWA35% RWA 25% RWA 20% Source: Financial Service Authority (OJK) LP Market Stabilization Policy Short Selling Ban Trading Halt Auto Rejection Limit Adjustment Share Buyback Without GMS (RUPS) Vehicle Loan Digitalisation of MSME Expanding the MSME digitization ecosystem from upstream to downstream with the UMKM-MU platform, and BWM Mobile 1. 2. RWA (ATMR) for vehicle loan: 100% ⇒ 50% Banks with risk profile 1 and 2 may provide loan for automotive sector: Health Sector Credit 0% Down Payment 3. RWA (ATMR) for credit in health sector: 100% → 50% RWA for battery/electric vehicle manufacturers (KBLBB): 100% ⇒ 50% 175#177Loan Restructuring Extension under POJK No.17/2021 Rationality Σ 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) 176#178Digital 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 Data Protection Data Transfer Data Governance • Technology IT Governance Technology Architecture Emerging Technology & Application Machine Learning . ΑΙ Cloud Computing Open API Block Chain / Distributed Ledger Technology Regtech/Suptech Risk Management Collaboration Institutional Arrangement IT Risk Management Outsourcing Platform Sharing Cybersecurity Cooperation between financial institutions and non-financial institutions Finance & Investment Culture Leadership Organizational Design Talent Customer Customer Engagement Customer Experience Customer Insight Customer Trust and Perception Source: Financial Service Authority (OJK) Customers with Disability 177#179OJK Strategic Policy in 2022 Anticipating the Impact of Cliff Effect Risk from Policy Normalization and Potential Risks of Covid-19 Development Encouraging the Acceleration of Green Economy Transformation and Mitigating Climate-Related Risks Encouraging the Acceleration of Digital Economic Transformation E OJK'S 8 Strategic Policies 2022 Developing an Accountable, Effective and Efficient Organization Accelerating the Supervision Reform of the Non-Bank Financial Industry (NBFI) 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 Improving the Effectiveness of Financial Inclusion and Consumer Protection Programs Supporting National Economic Growth by Strengthening the Islamic Financial Services Sector Source: Financial Service Authority (OJK) 178#180A 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 STRATEGIC ACTION PLAN Sonnen 1 2 ECONOMIC FUNDING & RISK 3 Pilars MANAGEMENT MARKET INFRASTRUCTURE DEVELOPMENT 3 Sannans POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market FX Market Bond Market Stock Market Syariah Market Structure Product Market Fund 7 Elements of Financial Market Ecosystem Instrument Intermediaries Source: Bank Indonesia Market Infrastructure Benchmark Rate & Standardization Regulatory Framework Coordination & Education 179#181BI'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. Source: Bank Indonesia NCSA Programs Family Hope Program (Program Keluarga Harapan -PKH) KARTY REDARBASE MATERA Smart Indonesia Program (Program Indonesia Pintar-PIP) 9876543210 XXYYZZ 12345678 Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) - LPG Subsidy ↑ ↑ 2016-2020 Pilot Project Gradual Implementation Full Implementation Interconnected & interoperable payment system 180#182Progress 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. KARTU KELUARGA SEJAHTERA 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. • In 2019, PKH has been distributed to 9.84 million house hold on noncash basis with total realization of IDR32.75T. Source: Bank Indonesia 294 5478 123142 58.79 DDI KAMALAY • . 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 181#183Section 8 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA#184PIC Institutional Reforms to establish a conducive PPP ecosystem LKI PPP Joint Office: Information center Indonesia Infrastructure Guarantee KANTOR BERSAMA KPBU REPUBLIK INDONESIA for policy IIGF coordination and capacity building to Fund: Provides Institutional Reforms for PPP Implementation kppip Nomite Porcopatan Penyediaan KPPIP: Coordinating unit in decision-making processes and debottlenecking efforts for infrastructure acceleration encourage the use of PPP schemes guarantee and supports project preparation √SMI SMI Sarana Multi Infrastruktur: Facilitating infrastructure financing, preparing project, and serving advisory PPP Stages Project Development Facility (PDF) Outline Business Case Determination of Funding Scheme Tender document + Transaction PPP Agreement Financial Close preparation Final Business Case (FBC) Government Contracting Agency (PJPK) IIGF Veneerian PPM Верди Kementerian PPN/ Bappenas KANTOR BERSAMA KPBU REPUBLIK INDONESIA KANTOR BERSAMA KPBU REPUBLIK INDONESIA kopip Konde Porcepatan Penyediaan kppip Karo Percepatan Penyediaan Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Business Entity Legend W Sapp Ministry of National Development Planning KANTOR BERSAMA KPBU REPUBLIK INDONESIA SMI IIGF Business Entity Lender Ministry of Finance 183#185Reforms Along the Project's Life Cycle ...to encourage and accelerate infrastructure project using PPP scheme Government of Indonesia Project Development Facility (PDF) Viability Funding Gap (VGF) Guarantee Scheme Tax Facilities Availability Payment Land Acquisition Preparation Project development facility assists the Government Contracting Agency (GCA) in PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI and PT IIF, Ministry of Finance 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 Bidding Process 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 (IGF) and MoF. 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 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 184#186Efforts to Accelerate Infrastructure Provision The establishment of Indonesia Asset Management Agency (LMAN) Government has established State Asset Management Unit (LMAN) as a solution to accelerate the land acquisition through the provision of land acquisition fund LMAN at a Glance & Land Acquisition Budgeting Scheme 1. LMAN was established in December 2015 through the issuance of MoF Reg. 219/2015 concerning State Assets Management 2. In 2016, BLU LMAN was mandated to provide land acquisition fund as a support to Ministry of Public Works due to US$ 1,081 Mio shortage of fund to acquire land for priority toll roads 3. The scope of support is broaden for all National Strategic Projects through the issuance of MoF Reg. 21/2017 (j.o MoF Reg. 209/2019 j.o. MoF Reg. 139/2020) concerning land acquisition financing guideline for PSN - 4. In 2016 July 2021, LMAN has disbursed up to IDR 80,17 Trillion through bridging finance scheme for 97 PSN projects, and planned to start the implementation of direct payment scheme 1. Unutilized fund can be allocated for the following year 2. 3. Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the other project Land acquisition fund for PSN projects is managed under one agency This LMAN initiative provides better flexibility, coordination and management of land acquisition fund provision for National Strategic Projects (PSN) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 185#187Efforts to Accelerate Infrastructure Provision Limited Concession Scheme as an Alternative of Infrastructure financing Presidential Regulation No 32/2020 about Infrastructure Financing through Limited Concession Scheme 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 Priority Financing Revenue generated by the LCS will be used to fund the priority infrastructure projects and/or national infrastructure projects strategic Several adjustments on the substance of Presidential Regulation Number 32/2020 will be conducted, by considering the uncertainty conditions of the assets affected by COVID-19 pandemic which causing the LCS quite difficult to be implemented. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOES to private sector to maintain, and develop the assets; operate, 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 186#188Efforts to Accelerate Infrastructure Provision Land Value Capture (LVC) Scheme " 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) Tax Based LVC Land and Property Tax Betterment Levies and Special Assessment Development Based LVC Land Sale and Rent Collaboration in the development of LVC Regulation in Indonesia The implementation of LVC obviously need an intensive cooperation of all related stakeholders, such as: National and Regional Government, SOE & ROE, International Institution, as well as higher education agencies with CMEA as an implementing coordinator. Air Right Sale Tax Increment Financing (TIF) Joint Development Land Readjustment 2019 Triple Win LVC Creating Fiscal Space Better Urban Reducing Subsidy Mobility LVC Benefit Local revenue from tax and levy Better city planning and development Regional growth Distributed development in urban area Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 1 National and Regional Govt SOE & ROE Universit and other higher education agencies LVC Policy Development Timeline • Finalizing Study on National Value Internatio nal Institution Capture Framework in Indonesia 2020 Initiate the LVC policy implementation in the form of legal regulation and pilot projects Conducting socialization and stakeholder capacity development on LVC 2021 . Completing the pilot project modelling process to find the most appropriate LVC scheme to be implemented in Indonesia Completing legal drafting as the regulation on national LVC policy 2022 LVC development and implementation Conducting socialization to Regional Government and SOE 187#189Efforts to Accelerate Infrastructure Provision Sovereign Wealth Fund (SWF) SWF Investment Guide Omnibus Lawmandated 1 the establishment of | Sovereign Wealth Fund as | Gol investment body With goal to . • Increase and optimize asset value in long term To support sustainable development Gol committed to invest IDR 15 Billion as initial capital for SWF/LPI Domesticand International Investor Co-Investor Government of Indonesia Cq. Ministry of Finance Indonesia Sovereign Wealth Fund (Lembaga Pengelola Investasi/LPI) (Minority Shareholder) Direct landing to company/ asset/project Managed fund for Investment Agreement Managed fund for Energy & Natural Resources infrastructure • Toll roads Airports • Seaports • Oil & Gas reserves Management Agreement Master Fund Manager Master Fund/ Manage Fund Principal Investor (ex. ADB, JBIC) Investment Agreement Managed fund for Health Managed fund for Tourism Managed fund for Technology sector • Hospitals • Pharma- ceuticals • Tourism SEZ • Tanamori • Toba . Likupang ⚫ Hotel chain • • Payments Managed fund for New Capital Digital lending • Contractor • Utilities • Land & building • Commerce Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 188#190Fundamental Regulations Initiation to accelerate infrastructure projects delivery Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) 1 2 3 4 5 The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF Reg. No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. Presidential Reg. No. 66/2020 on Land Acquisition Funding for Public Interest in Implementing PSN This Presidential Reg. was issued to accelerate the process of land acquisition funding for PSN as well as replacing the Presidential Reg. No. 102/2016 MoF Reg. No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects (PSN) and Asset Management of Land Acquisition by State Asset Management Agency (j.o. MoF Reg. No. 5/2019, j.o. MoF Reg. No. 209/2019, j.o. MoF Reg. No. 139/2020) The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 189#191National Strategic Projects (PSN) may receive privileges as stipulated in the Presidential Reg. No. 3/2016 j.o. the Presidential Reg. No. 58/2017 j.o. the Presidential Reg. No. 56/2018, j.o Presidential Decree no.109/2020 Project acceleration for private investment Land transfer fee waiver Settlement of Legal Issues Accelerate Goods and Service Procurement Problems and Hindrance Completion New Facilities 12 01 Electronic permit licensing 11 PSN Facilities 02 Spatial Planning 10 03 09 60 08 05 95 07 SOE's Assignment 06 04 Land clearing acceleration Projects Monitoring via KPPIP IT System Government Guarantee Provision Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Local Content Utilization 190#192Job Creation Law's Positive Development on PSN PP No. 40 Year 2021 Government Regulation on the Implementation of Special Economic Zones PP No. 42 Year 2021 Government Regulation on Ease of National Strategic Projects PP No. 21 Year 2021 Government Regulation on the Implementation of Spatial Planning PP No. 43 Year 2021 Government Regulation on Settlement of Mismatches Between Spatial Planning and Forest Areas, Permits and/or Land Rights Derivative of Job Creation Law 11/2020 in supporting PSN Projects PP No. 19 Year 2021 Government Regulation on the Implementation of Land Acquisition for Development in the Public Interest PP No. 18 Year 2021 Government Regulation on Management Rights, Land Rights, Flat Units and Land Registration Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) PP No. 20 Year 2021 Government regulations on Area Control and the Abandoned Land PP No. 23 Year 2021 Government Regulation on Forestry Implementation *) National Strategic Projects (PSN) 191#193Under Presidential Reg. No.109/2020, PSN list has been revised into 201 Projects and 10 Programs 42 Projects Sumatera IDR 773,6 T 82 Program Projects 16 Projects Kalimantan IDR 505,8 T Jawa IDR 1.924,7 T 22 Projects Sulawesi IDR 276,9 T 18 Projects Bali & Nusa Tenggara IDR 33,1 T *Note: The value was calculated at the time of the preparation of Presidential Decree 109/2020 and does not take into account projects and programs, such as the Food Estate Program, the Economic Equity Program and Bali Utara Airport. *) National Strategic Projects (PSN) PSN includes 12 sectors at project level and 10 sectors at program level SEZs & IEs 18 Projects Railway 15 Projects Energy 15 Projects Ports 13 Projects Clean Water & Sanitation 12 Projects Airports 8 Projects Education 1 Projects Technology 5 Projects Housing 2 Projects A Road 54 Projects Smelter Dams 57 Projects до Superhub 1 Programs 1 Program 4 Electricity 1 Program Economic Equality 1 Program Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) C Sea Dike 1 Projects Exit Toll Access 1 Program Food Supply 1 Program Tourism Strategic Zone Waste Processing Installation Border Area 1 Program 192 1 Program 1 Program#194PSN Profile of 201 Projects + 10 Programs The Estimated Investment Value for 201 Projects + 10 Programs PSN State Budget 11% 5 Sectors with Highest Investment Value SOES/ RSOES Private 67% 22% 4 Energy 15 Projects IDR 1.556 Tn Electricity 1 Program IDR 915 Tn Total Investment Value2 IDR 5.607 Trillion State Budget IDR 626 Tn SOES/RSOES IDR 1.100 Tn Private IDR 3.879 Tn *Exclude Food Estate Program, Regional Development Acceleration Program and Bali Utara Airports Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) A Roads 69 Projects IDR 919 Tn Railways 15 Projects IDR 432 Tn SEZs and IES 18 Projects IDR 485 Tn 193#195From 2016 - June 2021, there were 110 projects completed with total estimated investment value of IDR 604 tn Completed 2016 20 Projects (IDR 33,3 T) ⚫ 7 Airports • 1 Toll Road • 6 Dam 1 Seaports • 1 Gas Pipe • 4 National Border Completed 2017 10 Projects (IDR 61,4 T) Completed 2018 32 Projects (IDR 207,4 T) Completed 2019 30 Projects (IDR 165,3 T) • 2 Toll Road • 1 Access Road 1 Airports . 2 Railway • 4 Dam • 1 Irrigation 1 Gas Facility • 10 Toll Road • 3 National Border • 5 SEZ • 1 Dam • 1 Irrigation Completed 2020 12 Projects (IDR 123,1 T) • • 1 Airports 4 Airports • 1 Airports • 4 Industrial Zone • 9 National Road • 1 Railways • • 4 Smelter 6 Industrial Zone • 2 Toll Road 1 Fishery Center • 2 Smelter ⚫ 1 Seaport • 4 Dam • 1 Water Supply System • 2 Technology • 3 Industrial Zone • 2 railways • 3 Dam • 1 seaport Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) National Completed Jan-Jun 2021 6 Projects (IDR 13,5 T) ⚫2 Toll Road • 2 Water Supply System . 2 Dam 194#196Since January 2021, 18 PSN projects completed with 27 projects operate partially and 107 under construction From the list of 201 Projects + 10 National Strategic Project Programs, in June 2021 there was 18 PSN Projects declared Completed, compared to 11 Projects in December 2020 December 2020 11% 47% 7% 33% June 2021 8% 21% 16% 51% 4% 66 Projects + 4 Programs (Super Hub, Food Estate, Exit Toll Road and Regional Development Program) in the Preparation stage. 4 Projects in the Transaction stage. 98 Projects + 1 Programs (Waste Management into Electrical Energy) in the Construction stage. 19 Projects + 5 Programs (Electricity Facility, Economic Equality, Border Area, National Tourism Strategic Area, dan Smelter) are Operated Partially. 12 Projects are Completed. 41 Projects + 4 Programs (Super Hub, Food Estate, Exit Toll Road and Regional Development Program) in the Preparation stage. 8 Projects in the Transaction stage. 107 Projects + 1 Program Programs (Waste Management into Electrical Energy) in the Construction stage. 27 Projects + 6 Programs (Electricity Facility, Economic Equality, Border Area, National Tourism Strategic Area, dan Smelter) are Operated Partially. 18 Projects are Completed. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) *) National Strategic Projects (PSN) 195#197Progress on 37 National Strategic Project (PSN) During 1st Quarter of 2021 (Covid-19 Pandemic Conditions), there were 8 PSN Projects that were declared Partially Operated, and 22 PSN Projects that were successfully pushed through the Preparation Stage to the Transaction and Construction Stage. Successfully pushed PSN Projects pass the Preparation Stage Successfully pushed PSN Projects Start Operated Partially 23% No PSN Projects Investment Value (in IDR Bio) 22 PSN 1 Jalan Tol Serpong - Cinere 2.219 2 Jalan Tol Cimanggis - Cibitung 4.524 77% Penambahan Lingkup Jalan Tol Ngawi - 3 1.783 Kertosono - Kediri 5 Projects exit the Preparation Stage to the Transaction Stage There are 22 PSN Projects with a total investment value of IDR 392.6 trillion which is divided into 8 sectors: • 3 Toll Roads (IDR 62,2 Tn) 17 Projects out of Preparation Stage to Construction Stage 4 Penambahan Lingkup Jalan Tol Depok Antasari 6.600 5 Makassar New Port 3.168 60 Pembangunan Pelabuhan Patimban 43.221 3 Seaports (IDR 1,3 Tn) • 6 Airports (IDR 14,5 Tn) • 1 SEZS and IES (IDR 31,4 Tn) Pengembangan Pelabuhan Terminal Kijing 5.048 Pengembangan Pelabuhan Kupang 223 • 4 Dam (IDR 7 Tn) • 2 Irrigations (IDR 5,7 Tn) • 2 Clean Water & Sanitasionsi (IDR 72,9 Tn) • 1 Energy (IDR 196,9 Tn) Status is a comparison of progress between December 2020 and June 2021 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 8 PSN Projects were successfully pushed to operated partially with estimated investment value IDR 100,8 Trillion *) National Strategic Projects (PSN) 196#198National Strategic Project (PSN) Completed in Q1-2021 33 (16%) PSN Progress Status 201 Projects + 10 Programs (January-June 2021) 18 (8%) 44 (21%) 6 PSN Projects Completed in Q 1 - 2021 Completed (IDR 136,6T) 1 Partially Operated (IDR 2.294,3T) 8 Construction (IDR 1.990,3T) Medan - Binjai Toll Road 2 Cengkareng - Batu Ceper - 3 Kuningan Dam Kunciran Toll Road (4%) Transaction (IDR 365,6T) Preparation (IDR 875,5T) 4 Passeloreng Dam 5 Semarang Barat Water Supply System 6 Umbulan Water Supply System 108 (51%) PSN Investment Contributor Total IDR 5.607 Trillion* State Budget 11% Private 67% SOES/ RSOES 22% * Exclude Regional Development Acceleration Program (Perpres 79 an 80/ 2019) and Bali Utara Airports Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 6 PSN Projects Completed in 1st Quarter in year 2021 with estimated investment value IDR 13,5 Trillion and 25 PSN Projects are partially operated with estimated investment value IDR 394,6 Trillion 197#199Progress on 37 National Strategic Project From the revised National Strategic Projects, the Government has selected a list of 37 National Strategic Project to be the focus of infrastructure provision. 24 22 14 23 24 24 27 15 23 24 24 23 2 18 18 30 12 22 23 24 18 23 18 27 18 25 22 27 24 18 31 24 18 24 24 4 11 23 37 18 18 18 36 New Priority Projects Existing Priority Projects 243 139 10 139 16 33 27 24 13 37 1 37 35 21 20 19 32 20 27 29 26 28 6 37 37 24 37 5 24 24 26. 123456 1. Balikpapan-Samarinda Toll Road 13. LRT of DKI Jakarta 27. 2. Manado-Bitung Toll Road 14. Kuala Tanjung International Hub Seaport 3. Panimbang-Serang Toll Road 15. Bitung International Hub Seaport 28. 4. - 15 Segments of Trans Sumatera Toll Road 16. Patimban Port 29. 5. Probolinggo Banyuwangi Toll Road 17. Inland Waterways Cikarang-Bekasi-Laut (CBL) 30. 6. - Yogyakarta Bawean Toll Road 18. Palapa Ring Broadband Indonesian Deepwater Development (IDD) 7. SHIA Express Railway 19. Batang, Central Java Power Plant (CJPP) 31. 32. 8. MRT Jakarta South-North Line 20. Central West Java Transmission Line 500 kV 33. 9. Makassar-Parepare Railway 21. Indramayu Coal-fired Power Plant Tuban Oil Refinery RDMP/Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) Abadi WK Masela Field Unilization Field Has Jambaran-Tiung Biru Tangguh LNG Train 3 Development Jakarta Sewerage System West Semarang Drinking Water Supply System 34. 10. Light Rail Transit (LRT) of Jakarta-Depok- 22. Sumatera 500 kV Transmission (4 Provinces) Bogor-Bekasi 23. Mulut Tambang Coal-fired Power Plant (6 Provinces) National Capital Integrated Coastal Development (NCICD) Phase A 35. Jatiluhur Drinking Water Supply 11. LRT of South Sumatera 24. PLTGU (16 Provinces) 36. Lampung Drinking Water Supply 12. East Kalimantan Railway 25. Bontang Oil Refinery 37. Waste to Energy Program in 8 cities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 198#200Energy Sector: the Progress of 35.000 MW Program Report on the Progress of the Electricity Infrastructure Development Program (1/2) National 2% 2% 29% 17% 35,8 GW 50% National Capacity 35.823 MW Sumatera Kalimantan Sulawesi 1% 15% 2% 4% 6% 6% 9% 37% 3% 9,5 34% 3,5 47% 2,6 GW GW 40% GW 48% 35% 13% Jawa, Madura, & Bali 10.259 MW Completed 8% 29% 17.970 MW Construction Stage 18,4 GW 6.063 MW PPA has been completed but not yet financial close 839 MW Procurement Stage 724 MW Planning Stage 63% Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Maluku, Papua, & Nusa Tenggara 20% 1,7 51% 10% GW 19% Source: PLN reports May 2021 Procurement stage PPA has been completed Completed Construction stage but not yet financial close Planning stage 199#201Energy Sector: the Progress of 35.000 MW Program December 2019 July 2020 October 2020 May 2021 2% 2% 2% 2% 14% 2% 2% 3% 2% 24% 20% 18% 27% 18% 17% 29% 35,3 GW 35,5 GW 35,6 35,8 GW GW 62% 5.071 MW in COD/SLO/ Commissioning Stage 54% 50% 50% 8.382 MW in COD/SLO/ Commissioning Stage 9.694 MW in COD/SLO/ Commissioning Stage 10.259 MW in COD/SLO/ Commissioning Stage 21.825 MW in Construction Stage 6.878 MW in the contract/PPA stage, but not yet Construction 829 MW in Procurement stage 19.067 MW in Construction Stage 6.528 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 17.853 MW in Construction Stage 6.528 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 17.970 MW in Construction Stage 6.063 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 734 MW in Planning stage 724 MW in Planning stage 724 MW in Planning stage 724 MW in Planning stage ¹COD: Commercial Operation Date; 2SLO: Sertifikat Laik Operasi (Commissioning Certificate) Source: Compile from PT PLN and Ministry of Energy and Mineral Resources Reports 200 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)#202Acceleration 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 PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance 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 Direct Lending Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2B Independent Power Producer PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter 201#203Significant Progress on Infrastructure Projects Roads WITH RECURS 95 Trans-Sumatra Toll Road Merah Putih Bridge, Ambon Dams 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. 4 12 3 An integrated IT system with monitoring capacity for stakeholders, so that they can have Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. real time data. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 202#204Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth Infrastructure Development is a Key Priority Infrastructure Development in order to: 1. Accelerate growth particularly in rural areas 2. Support industrial development and tourism 3. Reduce unemployment and poverty • Infrastructure fundraising needs: $357.9 bn (or equivalent to IDR4, 796.2 tn) • 245 National Strategy Projects under National Medium Term Plan for 2015 - 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn) Broad Objective Core Mandates Establishment of PPP Unit Champion project preparation and acceleration of the PPP agenda in Indonesia Improve quality of project selection under KPPIP - OBC criteria Support project preparation through PDF support and highly qualified transaction advisors Act on behalf the Minister of Finance in providing government support and approvals for projects Coordinate all public finance instruments Provide input for PPP Policy program Development and Regulations Implement capacity building for Govt. Contracting Agency (GCAs) One stop shop for PPP promotion & Information ● 37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion) • Majority of 37 priority projects are expected to commence commercial operation by 2018 - 2022 Additional Mandates Budget Central & regional budget (special allocation fund & rural transfer) ● Primarily to support basic infrastructure projects: Food security: Irrigation, dams etc. Maritime: Seaports, shipyards etc. Connectivity: Village roads, public transportation etc. Public Private Partnership Certain infrastructure projects to be funded and operated through a partnership between the Indonesian government and the private sector Projects ready for auction under the PPP Scheme: Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung Railway projects such as an express line into Soekarno-Hatta International Airport Water supply projects such as the West Semarang Project Various government support for PPP: Project Development Facility (PDF): Helps Government Contracting Agencies (GCAs) in project preparation and transaction Viability Gap Fund: improves financial viability of PPP projects Government Guarantees: Supports PPP projects' bankability by providing sovereign guarantees Infrastructure Financing Fund: Provided through PT SMI and IIGF Availability Payment (AP): GCA pays private partner based of availability of infrastructure services SOE & Private Sector Government to inject capital into SOES: Intended multiplier effect to develop more infrastructure projects • Key focus areas: Infrastructure and maritime development Transportation and connectivity Food security Medium term infrastructure developments to focus on: Water Supply Airports Seaports Electricity and power plants Housing Mining Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity Source Ministry of Finance; Bappenas; KPPIP: "Komite Kebijakan Percepatan Penyediaan Infrastruktur" or National Committee for the Acceleration of Infrastructure Delivery Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 203#205Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Government Guarantee Program Contingent Liabilities from Government Guarantee as of Q3 2021** ⚫ Power (Electricity) - Full credit guarantee for PT PLN's debt payment obligation under FTP 1 10,000MW and 35GW programs*. No. Central Government Guarantee for Infrastructure Programs Guarantee Document Credit Outstanding /Investment Exposure (billion)* - • Clean Water Guarantee for 70% of PDAM's debt principal payment obligations. 1 Credit Guarantee Toll road - Full credit guarantee for PT Hutama Karya's debt payment obligations for the development of Sumatra Toll Roads. 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 Infrastructure Full credit guarantee on SOE's borrowing from international financial institution & guarantee for PT SMI's local infrastructure financing. 4 Sumatra Toll Road 10 USD 3.13 5 Renewable energy, Coals & Gas Power Plant 10,000 MW 7 USD 3.98 (FTP 2) ⚫ Public Transportation (Light Rail Transit) Full credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. 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 Business Viability Guarantee (BVG) Total 58 USD 21.89 PPP Guarantee Political Risk Guarantee ⚫ 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 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. 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) 204#206Government 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 Government Guarantees (directly by MoF or through IIGF) (Limited Concession Scheme) 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 Availability Payment Schemes Financing from PT. SMI and PT. IIF Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: PINA (Non-Government Budget Infrastructure Financing) 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 Source: Ministry of Finance 205#207New 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 Regulation Based on Government 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. 206#208Magelang, Central Java f indonesia.travel @indtravel indonesiatravel@indtravel wonderful indonesia www.indonesia.travel