#1BHINNEKA TUNGGAL IRA Republic of Indonesia Synergy to Drive National Economic Recovery, Mitigating Covid-19 Risk December 2020#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, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit - Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: 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 8-21 Fiscal Policy Update ...page 60-66 Japan Credit Rating Agency Affirms Indonesia's Sovereign Credit Rating - at BBB+/Stable Outlook ...page 25 Updates on Job Creation Law ...page 27-33 Bank Indonesia Board of Meeting Decision ...page 95-96 2#4Overview 1 Economic Recovery Program and Its Updates 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility Institutional and Governance Effectiveness: 2 Accelerated Reforms Agenda with 6 Institutional Improvement Economic Factor: 3 Stable Growth Prospects 7 Amid Temporary Moderation External Factor: 4 Improved External Resilience 8 Commitment to Sustainability and Climate Change Mitigation Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision 13#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IRA#6Concerted Efforts to Mitigate Covid-19 Risk General Measures 1 Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. 80 2 Extension of the emergency status for COVID-19 until 29th May 2020. 9 3 Permission for civil servants to work from home, while maintaining the continuity of public services. 10 Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. 4 Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds. 11 Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations. 12 Establishment of Contingency Plans in the regions level. 5 Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols. 13 6 Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities. 7 Conducting Rapid Test in 17 provinces with positive patients of Covid-19. 14 Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production. Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel. Source: Bank Indonesia 5 LO#7Government Measures to Mitigate Covid-19 Risk Fiscal and Non Fiscal Stimuli Fiscal Stimuli Phase 1 Fiscal Stimuli Phase 2 1 Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. 1 Relaxation of Income Tax (PPh Article 21). Increased disbursements of the Noncash Food Assistance 2 Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. 2 Relaxation of Income Tax on Imports (PPh Article 22). 3 Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion. 3 Relaxation of Income Tax (PPh Article 25). 4 4 Provided incentives for domestic and international travellers. Relaxation of Value Added Tax (VAT) Restitution. 5 Reduced the air passenger service fee (PSF) by 20% for March-May 2020. 6 Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020. 7 Non-Fiscal Stimuli 1 Reduce and simplify restrictions on export activities to maintain export performance and competitiveness. Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities. Source: Bank Indonesia 2 Reduce and simplify restrictions on import activities to ensure the availability of raw materials. 6#8Bank Indonesia's Measures to Mitigate Covid-19 Risk To maintain Monetary and Financial Market Stability 1 Measures Launched on March 2, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms Reducing the foreign currency reserve requirement ratio for 2 conventional commercial banks from 8% to 4%, effective 16th March 2020. Reducing the rupiah reserve requirement ratio by 50bps for 3 banks engaged in export-import financing activity in coordination with the Government. Expanding the types of underlying transactions available to 4 foreign investors as hedging alternatives against rupiah holdings in Indonesia. 1 2 Measures Launched on March 18-19, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- 3 month tenors from three times per week to daily auctions in order to ensure adequate liquidity. 4 Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market. Expediting the enforcement of domestic vostro rupiah accounts 5 for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings. 6 Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors. 5 Global investors may utilise global and domestic custodian banks for investment activity in Indonesia. 7 Source: Bank Indonesia Strengthening payment system policy to support COVID-19 mitigation efforts. 7#9Committee's Priority Policies/Program Main Key 1. Healthy Indonesia Public trust → Activity increases → Public consumption increases 2. Working Indonesia Driving investment Capacity utilization increases Purchasing power of the middle to lower class increased → Public consumption increases Creating jobs Driving investment ← Capacity utilization increases 3. Growing Indonesia Socio-economic Transformation. Don't waste the opportunity to carry out this post-pandemic transformation Source: Coordinating Ministry for Economic Affairs 8#10Illustration of Health And Economic Recovery In One Wheel Brake ➤ Health Safety Net Need to step on the brakes to suppress (contain) the covid-19 contagion Need: Brake fluid ➤ Medicine Health Workers ➤ Vaccine R Strong Brake SEATBELT: Driver safety while driving Financial Sector Safety Nets Source: Coordinating Ministry for Economic Affairs Gas Pedal ➤ Social Safety Net ➤ Real Sector Safety Net Oil/Gas ➤ Source of funding ➤ Make sure the drain is smooth and doesn't leak Step on The Gas! 9#11Economic Recovery and Covid-19 Handling Requires a Medium-Term Plan (up to 2023/2024) COVID-19 Cases Pre- Covid The spread of COVID-19 will keep increasing until the vaccine is found and distributed month 12-18 months of 2020 SURVIVE vaccines invented and distributed → MAINTAIN LIVELIHOOD A period of endurance and stress Adapt & Adjust Economic Condition Source: Coordinating Ministry for Economic Affairs month of 2021 12th month of 2021 Transformation Period Goal/Minimum Target: Recover to Pre-COVID condition 2022 2023 medium term Plan 2024 10#12Covid-19 Vaccination as Game Changer for National Economic Recovery The amount of vaccine needed (181,5 million people) Health workers and public workers will receive first priority vaccination Wave I: vaccination period January-April 2021 Wave II: vaccination period April 2021-March 2022 1 2 Health Workers Public Workers 3 Vulnerable People Vaccinations are carried out for health workers in 34 provinces 17,4 million people in areas with a high risk of transmission The elderly* 21,5 million 63,9 million 1,3 million *) Age 60 and over will be vaccinated after receiving vaccine safety information for that age group Source: Coordinating Ministry for Economic Affairs 4 Other Communities with a cluster approach according to vaccine availability 77,4 million 11#13Government Measures to Mitigate Covid-19 Risk Government Regulation In UU 2/2020, Previously Perppu No.1 2020 Regulates two topics: (1) State Financial Policy (2) Stability of Financial System State Financial Policy Stability of Financial System 1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Providing loans to the Indonesia Deposit Insurance Corporation ("IDIC") 5. Issuance of Government bond can be purchased by Bank Indonesia, SOES, corporate investors and/or retail investors 6. Use of alternative budget sources for example ASL, education endowment funds, and funds managed by the Public Service Agency. 7. Taxation Policy: a) Decrease in Corporate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19. 1. Improved Coordination among The Financial System Stability Committee ("FSSC") members 2. Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys government bond on the primary market, lending to "IDIC" and "FSA" may request a merger or consolidation of Financial Services Institutions. Foreign exchange management (LLD) management for residents 3. 4. Increase public confidence without causing moral hazard. Source: Coordinating Ministry for Economic Affairs 12#14Government Measures to Mitigate Covid-19 Risk Budget Refocusing Policy I. Presidential Regulation (Perpres) No 7/2020 on Taskforce to Manage COVID-19 Outbreak → Renewed through Presidential Regulation (Perpres) No 9/2020 II. III. 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources Presidential Instruction (Inpres) No 4/2020 concerning Refocusing of Activities, Reallocation of Ministry/Agency Budget, and Procurement of Goods and Services in the Framework of Mitigating COVID-19 Outbreak and Ministry of Finance Circular (SE) No 6/2020 on Refocusing Activity and Reallocation of Ministry/Agency Budget in the Framework of Mitigating COVID-19 Outbreak 1. Minister Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak in accordance with COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly, simply and accountably) Policy to support efforts to adjust regional allocations and relax transfers for handling Covid-19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation (Permendagri) 20/2020 on acceleration of COVID-19 Mitigation in the Scope of Regional Government IV. Government Regulation Number 23 of 2020 for Implementation of the National Economic Recovery Program in the Context of Supporting State Financial Policies for Handling Corona Virus Disease 2019 (COVID-19) and / or Facing Threats that Harm Nation Source: National Development Planning Agency 13#15Covid-19 Handling Fund and National Economic Recovery Health Sector (COVID-19 Handling) Comittee (Chairman: Coordinating Minister for Economic Affairs) Economy Sector (National Economic Recovery/PEN) Reducing the Spread of Covid-19 Government Responsibilities: 3T • • • Test of Covid-19 for Public Tracing for Every Positive Result, and Treat Every Case Well Community Responsibilities: 3M • Mask Awareness, • Make Sure to Wash Hand Regularly, and Make Sure to Maintain Social Distancing Reducing COVID-19 Death Rate Vice Chairman • Coord. Minister for Maritime and Investment • Coord. Minister for Politics, Law, and Security • Coord. Minister for and Culture PEN and Covid-19 Vice Chairman 2020 2021 Stimulus • Minister of Health Budget Minister of Home Affairs • Exceutive Secretary I • Exceutive Secretary II TOTAL IDR 695,2 T IDR 372,3 T Human Development 1. Health IDR 87,55 T IDR 25,40 T Minister of Finance Vice Chairman + Executive Team Leader 2. Social Safety net IDR 203,90 T IDR 110,20 T Minister of SOES 3. Business Incentives IDR 120,61 T IDR 20,40 T Government Responsibilities: • Optimizing Health Facilities (Public Health COVID-19 Task Center& Hospital) . Supporting Health Workers Force (Chairman: Chairman of BNPB) PEN Task Force (Chairman: SOES Vice Minister) 4. SME's Support IDR 123,46 T IDR 48,80 T 5. Corporate Financing IDR 53,57 T IDR 14,90 T COVID-19 Vaccines Provision Presidential Law No. 99/2020 as Vaccination Roadmap Health and Economic Policies need to Integrated to Encounter Covid-19 6. Sectoral Institution/Mini stry and Regional Government Support for Source: Coordinating Ministry for Economic Affairs Economy IDR 106,11 T IDR 152,4 T 14#16The Government of Indonesia's Relief Program Budget To deal with health, social protection, and support of MSMEs, the business world, and local governments Health IDR97.26 tn To address the pandemic by ensuring the quality of treatment and accelerating the containment effort Expenditure for Covid-19 Handling ■Incentives for Paramedic Death Compensation ■National Health Insurance Fee Covid-19 Task Force ■Tax Incentives in Health ■Reserve for Health Care and Vaccines ■ Vaccine and Social Assistance in 2021 Source: Ministry of Finance National Economic Recovery Programs (PEN) IDR695.2 tn Social Protection IDR234.33 tn To protect the poor and the vulnerable as the most impacted group during pandemic: ■ Conditional Cash Transfer Program ■Non Cash Food Assistance Social Assistance ■ Pre-Working (unemployment benefit) Electricity Discount Cash Transfer through Village Fund ■Internet Subsidy Sectoral & Regional Gov't IDR65.97 tn To empower sectoral and regional governments in responding COVID- 19 pandemic Line Ministries labor Intensive Program Housing Incentives ■Tourism Regional Incentive Fund Business Incentives IDR120.61 tn To provide cushion for impacted businesses through for example fiscal incentive ■Individual income tax article 21 borne Gov't; ■Import Tax Exemption on Import ■ Tax Deduction VAT Return ■Reduction of Physical Special Allocation Fund Income Tax Regional Loan Facility Assistance for Islamic Boarding Schools Installment SMEs IDR114.81 tn To maintain sustainability of MSME as critical part of economic recovery ■Interests Subsidy ■Fund Placement ■Guarantee Return Working Capital Guarantee (Stop Loss) ■Government-Borne Final Income Tax ■Investment Financing to Cooperatives Corporate Financing IDR62.22 tn To ensure the financing availability for economic recovery phase ■Labor Intensive- Fund Placement ■ State Equity Participation ■ Working Capital Investment Rp29.65T 15#17National Economic Recovery Program (PEN) Realisation Acceleration of Realization and Implementation of the COVID-19 Relief Package Budget IDR 695.2 Tn PEN Realization as of 23th Dec 2020 (%) Health Social Protection Sectoral and Regional Government Business Incentives Support for Corporate MSME Financing Realization 54.1% 95.0 % 88.0% 45.0% 93.% 13.0% IDR 502.7 Tn (72.3% of budget) Monthly Trend of PEN Fund Absorption (IDR tn) 29.4% 502.7 Growth 437.58 366.62 318.48 att 124.62 193.85 T A 48.15 T Δ A 70.87 T A 65.12 T 1st Semester Q3 October November 23-Dec Source: Ministry of Finance Despite just starting in April, the absorption of National Economic Recovery (PEN) has reached 72.3% The realization The social protection and support for MSME realization have been effectively executed. The government will accelerate the PEN progress to reach 100% realization. ■ The PEN program drives the accelerated government spending in Q4. State Equity Participation (PMN) disbursement and SOEs' Loans will encourage the realization of PEN at the end of the year#18• • National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 சச AA INDUSTRIAL CONDITIONS Require to deepen Industrial Structure Necessary to be independent on raw materials and production Unsupportive regulations and incentives The P3DN Program is not yet optimal 7 SECTORS FOCUS Food and Beverage Textiles and Clothing STRATEGIC STEPS Import Reduction through Import Substitution in Industries with Large Import Value Encouraging the Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Source: Ministry of Industry Automotive Deepening of Industrial Structure Chemical Electronic Utilisation 60% (2020) Utilisation Utilisation 75% 85% (2021) (2022) Pharmacy Medical Devices • Absorption of workers affected by layoffs Increased domestic spending capacity • Increase in the export market 17#19Fiscal Incentives: Super Deduction For Research & Development The Government developing a super deduction tax scheme to provide businesses with incentives to conduct research and development in the hopes of spurring innovation Object Certain R&D activities in Indonesia, the costs of which are charged within a certain period. Subject Domestic corporate taxpayers| who carry out certain research and development (R&D) activities in Indonesia. Amount of facilities (proposed) Real Cost Additional: Commercialisasion Stages RPMK 100% 100% Registration of Intellectual Property Rights (IPR) in the form of Patents or Plant Variety Protection Rights (PVT) in the country 50% Registration of IPR abroad / product innovation 25% Collaboration with government / private R&D institutions 25% Total 300% Source: Coordinating Ministry for Economic Affairs Income Tax Law (Law No.7/1983 jo. Law No. 36/2018) Article 35: Matters that have not been sufficiently regulated by law are further regulated by Government Regulation Article 29C: Law No. 45/2019 Facility for reducing gross income for domestic taxpayers conducting certain research and development activities in Indonesia ■ The maximum gross income reduction facility is 300% of the cost Further arrangements through regulations Technical Regulations (RPMK) technical In the process of coordinating the drafting of the Minister of Finance Regulation (IDRMK) with the Ministry of Finance, the Ministry of Research and Technology, and the Ministry of Industry#20Government 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 1 ASSET QUALITY MSMEs CREDIT RESTRUCTURING ASSESSMENT According to POJK 2 WORKING CAPITAL CREDIT POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES 3 KUR Super Mikro: Loan up to IDR 10 million • 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): 4 Quality No. 11/POJK.03/2020 & 14/POJK.05/2020 Asset LOW INTEREST Placement of IDR30 Trillion Government Funds at Bank Himbara GUARANTEE Arrangement: Loans S IDR 10 billion can be based only on the accuracy of principal interest payments Restructurisation: The credit quality for affected debtors is determined to be current restructuring since The restructuring is carried out without a ceiling limit type of financing Loan up to Rp10 million up to IDR 500 million • Postponement of installments and 6% additional interest subsidy for the period from Apr-Dec 2020 to 0%. Loan > Rp500 million up to IDR 10 billion • • Postponement of installments and interest subsidies from 3% to 3% for the period Apr-Jun 2020 and interest subsidies from 2% to 4% for the period Jul- Sep 2020. 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: Source: Coordinating Ministry for Economic Affairs Additional interest subsidy 3% for 6 months, debtors pays 3% interest. Increase the ceiling of KUR in 2021 to IDR 253 trillion. Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT 5 Income Tax for MSMEs is borne by Government 6 MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE Direct assistance to 12 million Micro- Business Actors in the amount of IDR 2.4 million per recipient 19#21Integration of Various Types of Social Assistance and Financing for Super Micro and MSMEs is Continually Encouraged • • Super micro, micro and small businesses that are un-bankable have begun to be empowered by the Government with the Productive Presidential Assistance & Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR. KUR Super Micro scheme, people enjoy loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and medium enterprises (MSME) is given an additional interest subsidy of 6% until 31 Dec 2020. For 2021, MSME is given an additional interest subsidy of 3% for 6 months, so MSME pays 3% interest. A Commercial Financing Patterns Social Assistance F Unbanked B Fully commercial loan Subsidized loan Special scheme of commercial loan Rolling soft loan C CSR D E Productive Presidential Assistance & Pre- employment Card Partnership and Community Development Program (PKBL) & Private CSR Bankable MSMEs Financing Mekaar UMi BWM LPDB* KUR Super Micro People's Business Credit Commercial (KUR) Regular Facilities Social grants Private PKBL & CSR Funds Interest Subsidy from the Government Government Guarantee Market Mechanism Source: Coordinating Ministry for Economic Affairs Business Ability 20 20#2270 140 130 120 110 100 90 08 SoSourcea BosalBDevelopment Planning Agency 55 50 45 40 35 30 25 27.5 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Economic Activity Has Begun To Improve 009 50 400 200 Although public purchasing power has not returned to normal levels, a number of economic indicators have shown improvement in line with the easing of economic activity Indonesia Manufacturing PM! 0 Jan-19 Feb-19 Mar-19 Apr-19 Jun-19 May-19 Jul-19 Consumer Confidence Index 20.00 Business Activity Survey Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 10.00 0.00 10.00 20.00 -30.00 -40.00 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 -35.8 Q2-2020 Q3-2020 Q4-2020f I Motorcycle Sales (thousand) Car Sales (% YoY) - rhs Vehicle Sales Retail Sales Growth (% YoY) 0.0 15 -20.0 10 -40.0 5 +60.0 0 80.0 -5 100.0 -10 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 -15 -20 -25 -15.7 -20.6 2.2 0 -2 -4 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 4 2 Export, Import, Trade Balance A Jan Mar May Sep Νον Jan Mar May Jul Sep 2019 2020 Trade Balance (Billion USD) Export (% YoY)-rhs Import (%YoY)-rhs 21 24 -50 HAWNLOBY -30 -40 Sep-20 Oct-20 Nov-2#23Section 2 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement BHINNEKA TUNGGAL IRA#24Rank Higher rank is better 20 30 40 50 60 70 80 90 India Indonesia Philippines Worldwide Governance Indicators³ Improving Global Perception ...with recent improvements on governance effectiveness Global Competitiveness Index¹ 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 Ease of Doing Business² 2018* 2019* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0 20 Higher rank is better (rankings at the time of annual report publication) 40 36 41 60 45 50 80 72 73 73 91 100 120 140 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long- term growth. 160 Bulgaria Colombia Indonesia -India - Philippines Bulgaria Colombia Corruption Perception Index4 44 65 55 635 60 Higher score is better 42 53 51 40 45 42 38 38 35 36 28 25 34 43 42 41 41 40 38 37 36 36 34 Higher rank is better 32 15 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 30 Voice and Accountability Government Effectiveness Political Stability/Absence of Violence Regulatory Quality 2012 2013 2014 2015 2016 2017 2018 2019 Rule of Law Control of Corruption ―Indonesia -India - Philippines Bulgaria Colombia 1. Source: World Economic Forum - The Global Competitiveness Report 2019; 2. Source: World Bank - Doing Business 2020 Report; 3. Source: World Bank - The Worldwide Governance Indicators 2020 Update; 4. Source: Transparency International - Corruption Perceptions Index 2019 Report 23 23#25Continuous Improvement of Investment Climate ...another leap on Indonesia's Rank on Ease of Doing Business (EODB)* EoDB 2020 Rank Rank EoDB 2019 Change in Rank EoDB 2020 EoDB 2019 Change in Points Points Points Overall 73 73 0 ( 69.6 68.0 1.6 Starting a business 140 134 6 81.2 81.2 0.0 Dealing with Construction Permits 110 112 2 66.8 66.6 0.2 Getting Electricity 33 33 0 87.3 86.4 0.9 Registering Property 106 100 6 60.0 61.7 1.7 Getting Credit 48 44 4 70.0 70.0 0.0 Protecting Minority Investors 37 51 14 70.0 63.3 6.7 Paying Taxes 81 112 31 75.8 68.0 7.8 Trading Across Borders 116 116 0 67.5 67.3 0.2 Enforcing Contracts 139 146 7 49.1 47.2 1.9 Resolving Insolvency 38 36 ⇓2 68.1 67.9 ↑ 0.2 * Higher rank is better, EoDB 2020 was published in October 2019 Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB Structural reforms will continue including in the budget and real sectors Source: World Bank 24 24#26Indonesia Has Been Rated as Investment Grade Country since 2017 BBB+ BBB BBB- Investment Grade Below Investment Grade BB+ BB BB- Fitch Ratings BBB / Stable JCRA R& August 2020, Rating Affirmed at BBB/Stable S&P Fitch The affirmation of the rating is underpinned by a favorable medium-term growth outlook and a low government debt burden compared with "BBB" category peers. Moody' B+ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 S&P Global Ratings BBB / Negative April 2020, Rating Affirmed at BBB, Outlook Revised from Stable to Negative "The affirmation reflects Indonesia's stable institutional settings, strong growth prospects, and historically prudent fiscal policy settings. The negative outlook reflects S&P expectation that Indonesia faces additional fiscal and external risks related to the COVID-19 pandemic in the next 24 months. MOODY'S "9 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 March 2020, Rating Upgraded at BBB+/Stable JCR BBB+ / Stable "The upgrade reflects the firm implementation of policies to strengthen economic growth potential on the back of a solidified political foundation. As the global spread of the novel coronavirus could strain growth in the Indonesia economy, the government and the central bank are working to shore up the economy and maintain macroeconomic stability. Given the country's underlying economic strength which remains intact, R&I expects the economy to start to recover if the epidemic is brought under control" 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". 25#27Medium-Term National Development Plan (RPJMN) 2020-2024 President's Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation". Strengthening Economic Resilience to Achieve Superior Economic Growth President's Missions Top 5 Presidential Priorities 7 RPJMN Development Agenda 1 Improving the Quality of the Indonesian Labour Force 1 HR Development Achieving Productive, Independent 2 and Competitive Economic Structure 3 Attaining Equitable and Prosperous 2 National Development Infrastructure Development Achieving Sustainable 4 Environmental Climate Developing Cultural Progress 5 Reflecting the Nation's Personality 3 Developing a Dignified and Trustworthy 6 Legal System Free from Corruption 4 Protection of All Nations and 7 Provision of Security to All Citizens 00 Regulation Simplification Simplification of Bureaucracy Attaining Good, Effective, and Reliable Governance Economic 5 Achieving Synergy of Governmental 9 Framework with the Regional Government Transformation Developing More Remote Regions to Reduce Economic Gaps and Improve Equality Improvement of Quality and Competitiveness of the Labour Force Engaging in Mental Revolution and Culture Development Strengthening Infrastructure to Support Economic Development and Improve Basic Services Conservation of Environment, Supporting Climate Change, and Enhancing Disaster Resilience Enhancing Political, Legal, Defense and Stability and Transforming Public Services Source: National Development Planning Agency 26#28Economic Transformation is Required to Recover the Economy and Avoid the Middle Income Trap Bill on Job Creation as a strategic and extraordinary national policy to recover and improve the national economy (Complements UU 2/2020) Bill on Job Creation Economic Transformation National Economy Indonesia Maju 2045 Investment, Business License (80 Articles) Land Procurement (19 ✓ Articles) 督 Gov Investment and Strategic National Project (16 Articles) MSMEs & Cooperative (15 Articles) Ease of Doing Business (11 Articles) ☐ Fundamental Problems Hyper Regulation National and sub-national regulations = 43.604 Competitiveness Less conducive business environment Inefficient bureaucracy High cost economy hampering export Employment Low productivity albeit productive age Unemployed and part-time workforce amounting to 45,8 million people (34,3%) (before pandemic) License and Ease of Doing Business Employment (5 Articles) ☐ Licensing approach Economic Zones (4 Articles) Monitoring and Sanctions (3 Articles) Research and Innovation (1 Article) Source: Coordinating Ministry for Economic Affairs Convoluted and overlapped Difficult to start and operate a business MSME & Cooperative Complex licensing Without legal status Minimum protection and facilitation Legal Certainty Criminal sanction for administrative sanction Growth 0000 Equity Top 5 Global Economy Out of middle- income trap Protection Competitiveness GDP of USD 7.4 trillion Poverty Rate 0% Competitive workforce 27 27#29& The Job Creation Omnibus Law Encourages Employment and Facilitates New Business Opening While Recovering the Post- Pandemic Economy Toko Kuc OTO DATA FACT Labour Market Of the total population aged 203.97 million people, there are 14.28 people affected by Covid-19 1. Unemployment due to covid-19 (2,56 million people) 2. Not labor force due to Covid-19 (0,76 million people) 3. Temporarily not working due to Covid-19 (1,77 million people) 4. Work with shorter hours due to Covid-19 (24,03 million people) MSME BIG 5.550 unit MIDDLE 60.702 unit SMALL 783.132 Unit MICRO 63.5 Juta Unit REGULATION Among the 64.19 million MSES, 64.13 million are Micro & Small Businesses, most of which are in the informal sector, so it needs to be encouraged to transform into formal ones. Complicated licensing issues with abundant central & local regulations (hyper-regulations) that regulate the sector, causing disharmony, overlapping, non- operational and sectoral. SUBSTANCE JOB CREATION LAW 1. IMPROVING INVESTMENT 7. LAND PROCUREMENT BUSINESS LICENSING ECOSYSTEM 8. ECONOMIC ZONE 3. LABOR 4. SUPPORTING MSMES EASE OF DOING BUSINESS. RESEARCH & INNOVATION 9. CENTRAL GOVERNMENT INVESTMENT & 10. GOVERNMENT ADMINISTRATION. IMPOSITION OF SANCTIONS SPEEDING OF STRATEGIC NATIONAL PROJECT BENEFITS 1) Encouraging Job Creation 2 Facilitate New Business Opening 3 Supporting Corruption Eradication Source: Coordinating Ministry for Economic Affairs 28 20#30Framework of the Job Creation Law www COMPANY INVESTMENT AL New Business Creation GREENFIELD (111> Supply Brownfield PRODUCTION Demand Business Development JOB CREATION LAW New Job Creation Welfare Creation CONSUMPTION Increased Purchasing Increased Income Power HOUSEHOLD Source: Coordinating Ministry for Economic Affairs 29 29#31Structures of Job Creation Law 15 Chapters 186 Articles Chapter General Requirements (Article 1) Chapter II Principles, Objectives, and Scope (Article 2 - Article 5) Chapter III Improvement of Investment Ecosystems and Business Activities (Article 6 – Article 79) Chapter IV Labour (Article 80 - Article 84) Chapter V Convenience, Protection, Empowerment of Cooperatives and MSMEs (Article 85-Article 104) Chapter VI Ease of Doing Business (Article 105 - Article 118) Chapter VII Research and Innovation Support (Article 119 - Article 121) Chapter VIII Land Procurement (Article 122 - Article 147) Chapter IX Economic Zones (Article 148 - Article 153) Chapter X Central Government Investment and Ease of National Strategic Projects (Article 154 - Article 173) Chapter XI Implementation of Government Administration to Support Job Creation (Article 174 - Article 176) Chapter XII Supervision and Development (Article 177 - Article 179) Chapter XIII Other Provisions (Article 180 - Article 183) Source: Coordinating Ministry for Economic Affairs Chapter XIV Transitional Provisions (Article 184) Chapter XV Closing (Article 185 - Article 186) 30 30#32Government Supports in Job Creation Law 1 2 3 4 LO 5 6 7 8 9 Support for MSMEs: Business licensing for MSMEs is sufficient only through registration. Support for Cooperatives: easiness in establishing cooperatives by setting a minimum number of 9 people, and cooperatives can apply Sharia business principles, and can take advantage of technology. On the continuity of community plantations in forest areas, the community is given permission (legality) for the use of land sustainability in forest areas, where for community lands located in conservation areas, the community can still utilize plantation products with government supervision. Better policy integration between obtaining business licencing and environmental impact assessment. Policy integration utilise risk based approach, which makes it more uncomplicated to obtain Environmental Approval while still meeting the stipulated requirements. For Halal Certification: The government bears the cost of certification for MSEs, acceleration and certainty in the halal certification process, as well as expanding the Halal Inspection Agency, which can be carried out by Islamic Organizations and State Universities. For Fishermen: Previously, the fishing boat licensing process had to go through several agencies, with the Job Creation Law, it was enough only to be processed at the Ministry of Marine Affairs and Fisheries. For the provision of housing: the backlog of community housing and the construction of houses for Low-Income Communities (MBR) will be accelerated, which is managed by the Agency for the Acceleration of Housing Management (BP3). The Land Bank will carry out agrarian reform and land redistribution to the community Businesses and MSMEs will receive benefits that include: • • • • Ease and certainty in obtaining business licenses, by implementing risk-based licensing & implementing standards. Proper rights and protection for workers/labour will increase competitiveness and productivity. Receive incentives and conveniences, both fiscal incentives and convenience and certainty of services for investment. Wider space of business activities for investment to be entered by referring to the business sectors that are prioritized by the Government. Regarding the imposition of sanctions, administrative violations are only subject to administrative sanctions, while violations that occur due to K3L (Safety, Security and Environment) are subject to criminal sanctions. Source: Coordinating Ministry for Economic Affairs 31#33Synchronised Regulations following Job Creation Law to improve investment quality NO PUBLIC CONSULTATION Implementing Regulations for the Job Creation Law Presidential Regulation draft and Government Regulation draft are available for download from: www.uu-ciptakerja.go.id/category/draft-rpp/ 1 MINISTRIES/GOVERNMENT AGENCIES Coordinating Ministry for Economic Affairs Govt Regulation Draft Presidential Regulation Draft 2 TOTAL 6 80 2 Ministry of Workforce 4 4 3 Ministry of Environment and Forestry 3 3 Ministry Finance 5 5 Ministry Agrarian Affairs and Spatial 5 5 5 Planning/National Land Agency 6 Ministry of Public Works and Public Housing 1 2 7 Ministry of Agriculture 1 1 8 Ministry of Maritime Affairs and Fisheries 1 1 9 Ministry Energy and Mineral Resources 1 Suggestion for the drafts can also 10 Ministry of Industry 1 1 be submitted through above link or be sent to: 11 Ministry of Trade 1 1 12 Ministry of Transportation 1 Job Creation Law mailing: 13 Ministry of Health 1 1 14 Ministry of Cooperatives and MSME 1 1 Kemenko Perekonomian Lt. 6 Kantor Pos Besar Jl. Lapangan Banteng Utara no 1 Jakarta Pusat, 10710 INDONESIA 15 Ministry of Law and Human Rights 3 3 16 Ministry of Internal Affairs 1 1 17 Ministry of Villages, Disadvantaged Regions, and Transmigration 1 1 18 Ministry of Religious Affairs 2 2 19 Ministry of Communications and Informatics 1 1 TOTAL 40 Source: Coordinating Ministry for Economic Affairs 40 4 44 32#34Implementing Regulations for Job Creation Law - Public Consultations (as of December 29, 2020) No Date Draft Government Regulation 1 23-Nov-20 Draft Government Regulation on Job Creation Law for Special Economic Zones 2 23-Nov-20 Draft Government Regulation on Job Creation Law for Special Agriculture Sector 3 23-Nov-20 Draft Government Regulation on Job Creation Law for Maritime and Fisheries Sector 4 23-Nov-20 Draft Government Regulation on Basic capital for companies and micro and small businesses 5 23-Nov-20 Draft Government Regulation on Geospatial Information| on Job Creation Implementation 6 23-Nov-20 Draft Government Regulation on Ease of National Strategic Projects 7 25-Nov-20 Draft Government Regulation on Land Bank 8 25-Nov-20 Draft Government Regulation on the Potential Sector 9 25-Nov-20 Draft Government Regulation on Amendments to the Third Government Regulation on Immigration 10 25-Nov-20 Draft Government Regulation on Basic capital for companies and micro and small businesses 11 25-Nov-20 Draft Government Regulation on Resolving Incompatibility of Spatial Plans with Forest Areas, Permits and / or Land Rights 12 25-Nov-20 Draft Government Regulation on Synchronization of Laws and Regulations Under the Law 13 2-Dec-20 Draft Government Regulation on Cooperatives and Micro, Small and Medium Enterprises 14 2-Dec-20 Draft Government Regulation on Job Creation Law for Public Works and Public Housing Source: Coordinating Ministry for Economic Affairs No Date Draft Government Regulation 15 3-Dec-20 Draft Government Regulation on Job Creation in the Transportation Sector 16 3-Dec-20 Draft Government Regulation on Implementation of Land Acquisition for Development for Public Interest 17 7-Dec-20 Draft Government Regulation on Control of Neglected Areas and Lands 18 7-Dec-20 Draft Government Regulations on Regional Taxes and Regional Levies in the Framework of Supporting Ease of Doing Business and Regional Services 19 13-Dec-20 Draft Government Regulation on the Implementation of Business Licensing in the Regions 20 13-Dec-20 Draft Government Regulation on Job Creation in the Industrial Sector 21 13-Dec-20 Draft Government Regulation on Job Creation in the Trade Sector 22 13-Dec-20 Draft Government Regulation on Environmental Protection and Management 23 13-Dec-20 Draft Government Regulation on forestry 24 13-Dec-20 Draft Government Regulation on Health in Hospitals 25 22-Dec-20 Draft Government Regulation on Energy and Mineral Resources Sector 26 22-Dec-20 Draft Government Regulation on Spatial Planning Implementation 27 28-Dec-20 Draft Government Regulation on the Establishment of Village- Owned Enterprises 33 33#35Strategy to Maintain Investment Climate During COVID-19 Pandemic 1 Investment inquiries facilitation of existing operating companies 2 Investment potential facilitation from existing companies not yet been executed 3 Bring in new investments 4 Providing incentives for existing companies' expansion Source: Investment Coordinating Board (BKPM) 34 ==#36Investment Realization 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 Escorting Existing Investment Realization Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation 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) 00 35#37January - September 2020 Investment Realization (excluding the upstream oil and gas sector and financial services) 2020 INVESTMENT REALIZATION TARGET IDR817.2 T Investment Realization (Jan Sept 2020) Source: Investment Coordinating Board (BKPM) IDR611.6 T 74.8% སྐྱེ Domestic Investment (PDMN) IDR309.9 (50.7%) Foreign Investment (PMA) IDR301.7T (49.3%) Indonesian Workers' Absorption (2nd Quarter 2020) (3rd Quarter 2020) 263,109 295,387 36#38January - September 2020 Investment Realization (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD million) By Geography IDR51.9 T (8.5%) Singapore 7,163.4 34.2% China 16.7% 3,509.3 Hongkong 11.8% 2,480.2 Japan 10.2% 2,134.3 South Korea 5.9% 1,142.4 Others 19.7% 4,524.2 Source: Investment Coordinating Board (BKPM) IDR144.2 T (23.6%) Investment Distribution IDR53.3 T (8.7%) IDR34.6 T (5.6%) Outside Java Java IDR304.1T IDR307.5 T (49.7%) (50.3%) IDR307.5 (50.3%) IDR20.1 T (3.3%) Others IDR306.8 T (50.2%) By Location DKI Jakarta IDR72.5T (11.8%) West Java IDR86.3T (14.1%) East Java IDR66.5T Central Java IDR37.5T Banten IDR42.0T (10.9%) (6.9%) (6.1%) I 34 37#39Investment Realization (Q3-2020) Direct Investments IDR tn Top 8 FDI Realization by Sectors (Q3-2020 vs Q3-2019) Machinery, Instrument, US$282.0 mn 649.2% Metal, Except Machinery, and Equipment Industry US$1,631.5 mn 177.8% Electricity, Gas, and Water Supply US$916.1 mn -41.0% 240 220 FDI DDI TOTAL 200 209.0 180 160 102.9 140 Electronic, Medical 120 100 80 60 106.1 40 20 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2013 2014 2015 2016 2017 2018 2019 2020 Food Industry US$344.9 mn 16.5% IDR209.0tn IDR205.7tn Investment Realization Increasing 1.6% Q3-2019 Q3-2020 IDR106.1tn Investmen IDR105tn Realization (FDI) Increasing Investmen Realization (DDI) IDR100.7tn IDR102.9tn Increasing alloll Q3-2019 Q3-2020 1% compared to Q3-2019 period Source: Investment Coordinating Board (BKPM) 2.2% Q3-2019 Q3-2020 Transportation, Warehouse, and Telecommunication US$994.6 mn 46.0% EXP Investment Realization Chemical and Pharmaceutical Industry US$595.4 mn 88.7% Mining US$569.4 mn 99.4% Housing, Industrial Estate, and Office US$604.4 mn D..::__ 11.4% 38#40Potential Investment Realization Reaches IDR 708 T IDR 708T Potential Investment Realization Rp 410 (58%) The potential value facilitated Companies that had been facilitated: IDR 211.9T LOTTE CHEMICAL IDR61.2T Rosneft IDR38.0T VALE PT VALE NDONESIA Tbk IDR39.2T YTL Power YILGACO- (Tanjung Jati Power) Solving stalled investment issues is one strategy to attract investors HYUNDAI IDR21.7T KOBEXINDO we grow toget Klaten, Central Java Dumai, Riau Indonesian government does not only facilitates large investment issues, but also medium & small investments Source: Investment Coordinating Board (BKPM) NINDYA <tlb IDR9.5T Bengkulu Electric Power (Galempa IDR2.0T Sejahtera ANJ Bersama) Agrit Masdar А МАЗЕВИЦА СОКРИЕ PT Sumber Mutiara Indah Perdana (SMIP) IDR1.8T MALUNDO Minahasa Cahaya Lestari IDR14.0T IDR5.2T IDR1.8T IDR1.8T Others IDR1.4T IDR1.1T 39#41Enhancing 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 A 1 Provide business licensing process assurance in terms of the costs and lead times Overcome the barriers to doing business in Indonesia 2 4 6 3 5 M Source: Coordinating Ministry for Economic Affairs Accelerate the business licensing process Increase coordination & synergy between central & regional government Implement integrated licensing process (single submission) 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 2nd Phase Business license regulatory reforms Implementation of the Single Submission system Note: 1st and 2nd Phase are implemented in parallel 40 40#42Improving Investment Climate ...Bonded Logistic Center launched in 2016 to Improve Indonesia's Competitiveness Bonded Logistic Center (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the implementation of the 1st Economic Policy Package, launched on March 2016 PLB facility aims to to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and To date, 52 Bonded Logistic Center has been launched to support various industries. textile (chemical Food & beverages industry Small and medium industry Oil and gas, and mining industry Personal care/ home care industry Synthetic Auto- motive industry medium industries; increase Heavy Equipment industry Textile (cotton) industry. Aircraft investment; and to make Defence Indonesia to become a logistics hub in Asia Pacific. industry MRO industry industry substances) Source: Coordinating Ministry for Economic Affairs 41#43Improving Investment Climate Online Single Submission (OSS) Has Been Launched in 2018 OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors Environment & Forestry Sector Electricity Sector Public Works & Housing Sector Health Sector Industry Sector Marine & Fishery Sector Medicine & Food Sector Transportation Sector Trade Sector Information & Communication Sector Business licenses can be secured in under an hour Other Sector The Advantage of Using OSS 良 Standardized business licenses are available More practical Source: Coordinating Ministry for Economic Affairs Accessible at anytime and anywhere Ellectronically integrated The whole licensing process is monitored by the Task Force 42 42#44Improving Investment Climate ...revision of the Negative Investment List in 2018 Introduction of New Foreign Ownership Regulation for Strategic Sectors Cold storage Before After Before Sports Center, Film Processing Lab, Crumb Rubber After Restaurants, Bars Pharmaceutical Raw Materials Manufacturing Before After Before After 33% 100% 100% 100% 100% 49% 51% 85% Key Reforms in Negative Foreign Investment List Revision of "Partnership" category to refer to partnership with Micro, Small and Medium Enterprises (MSMEs) Grandfather Law: If a particular sector is tightened in future, existing foreign investor does not need to comply with tighter stake Strengthen implementation of negative investment law through active roles from ministries, agencies and regional governments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) Toll Road Operator, Telecommunication Testing Company Before After Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Conventions Before After 95% 100% 67% 67% 33% 51% Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Telecommunication Provider Before After Consultancy for Construction¹ Before with Integrated Services After Before After 49% 67% 67% 67% 55% 65% 43 33#45Section 3 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IRA#46Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia Manageable Inflation Rate manufacturing 4th Most Populous country in the World; 64% in productive age Rising Middle Class and Affluent Customers Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration and New Economic Structure High Infrastructure Investments From commodity-based to 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 Fuel subsidies significantly reduced and spending redirected to more productive allocation Tax base to be broadened from one reduce dependency on commodities Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 45 45#47National Economic Growth Improved Strong GDP Growth¹ % 7.0 QoQ YoY 5.124.944.935.054.824.744.775.174.925.185.014.945.015.015.065.195.065.275.175.185.075.055.024.97 5.0 3.27 3.31 3.14 3.0 1.0 0.04 4.013.19 3.09 3.06 2.97 5.05 -1.0 (0.16) (0.36) (0.30) (0.41) -3.0 (2.07) (1.73) (1.81) (1.70) (0.52) (1.69) (4.19) (3.49) (1.74) (2.41) (532) -5.0 -7.0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016 2017 Favourable GDP Growth Compared to Peers² % 10.00 5.00 2018 2019 2020 8.80 7.40 6.10 • National economic growth improved in the third quarter of 2020 in response to increasing realisation of government stimuli along with early signs of greater public mobility and stronger global demand. Indonesia's economy grew 5.05% (qtq) in the third quarter of 2020, rebounding from a 4.19% (qtq) contraction in the previous period. Annually, a shallower 3.49% (yoy) contraction pointed to domestic economic improvements after contracting 5.32% (yoy) in the second quarter of 2020. • Domestic economic gains occurred across nearly all GDP components on the expenditure side. Higher realisation of government stimuli, primarily in the form of social assistance disbursements, procurement of goods and services as well as regional transfers and village fund disbursements, raised government consumption significantly in the third quarter of 2020, expanding 9.76% (yoy) after contracting 6.9% (yoy) in the second quarter of 2020. Furthermore, government stimuli and increasing public mobility have reduced the household consumption contraction to 4.04% (yoy). Investment is also performing better, recording a shallower 6.48% (yoy) contraction, primarily on the back of nonbuilding investment. In addition, the export contraction also improved to 10.82% (yoy) in line with increasing public mobility and stronger economic performance in Indonesia's main trading partners, China in particular. • The recent economic gains were felt across most sectors, led by those associated with health as well as work-from-home and school-from-home activities, which maintained positive growth, including Information and Communications, Health and Social Services as well as Education Services. Moreover, greater public mobility has prompted moderate gains in terms of Accommodation and Food Service Activities as well as Transportation and Storage, both of which experienced shallower contractions. In addition, the Manufacturing Industry, Construction and Trade posted gains. 0.00 -5.00 -10.00 -15.00 Bulgaria Indonesia Colombia Philippines India 4.00 2012 2013 2014 2015 2016 2017 2018 ** 2019 2020 2021* 1. Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption Source: World Economic Outlook Database - October 2020; * indicates estimated figure 2. Growth Prospect Institutions 2020 GDP growth (%YoY) 2020 Budget (Presidential Regulation 72/2020) -0,4-1,0 Bank Indonesia 0,9-1,9 IMF (WEO October 2020) -1.5 World Bank (Indonesia Economic Prospects, Dec 2020) -2.5 ADB (ADOS December 2020) -2.2 Consensus Forecast (December 2020) -2.0 46#48GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY)¹ 2015 2016 2017 2018 2019 2020 By expenditure HH. Consumption Non profit HH. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 5.0 5.0 5.0 4.9 5.0 5.0 5.1 Q4 Tot. Q1 Q2 5.0 5.0 5.0 4.9 5.0 4.9 consumption (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 Q3 Q4 Tot Q1 5.0 4.9 5.0 5.3 6.9 8.1 Q2 Q3 Q4 Tot Q1 22 Q2 Q3 Q4 Tot Q1 Q2 Q3 5.2 5.0 5.1 5.1 5,0 5,2 5,0 5,0 5,0 2,8 -5,5 -4,0 8.8 8.6 10.8 9.1 17,0 15,3 7,4 3,5 10,6 -5,1 -7,8 -2,1 Government 2.9 2.6 7.1 consumption 7.1 5.3 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 5.2 6.3 4.6 4.8 5,2 8,2 1,0 0,5 3,2 3,7 -6,9 9,8 Gross Fixed Cap. Formation Exports Imports GDP 1. 4.8 4.7 4.8 5.2 4.9 4.9 Source: Central Bureau of Statistics of Indonesia (BPS), 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 5.2 5.0 4.9 7.3 6.2 7.9 5.8 6.9 3.9 4.5 4.8 5.3 7.1 (1.7) 8.4 2.7 16.5 8.4 8.9 5.8 7.5 8.3 4.6 6.5 -1,6 -1,7 0,1 -0,4 (2.4) 4.8 0.2 15.4 11.9 8.1 12.5 14.9 13.8 7.1 11.9 -7,5 -6,8 -8,3 -8,0 -7,7 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 6.0 6.6 5,0 4,6 4,2 4,1 4,4 44 1,7 -8,6 -6,5 55 -0,9 0,2 -11,7 -10,8 75 5,1 5,1 5,0 5,0 5,0 -2,2 -17,0 -21,9 3,0 -5,3 -3,5 ** Including non-profit household consumption GDP Growth by Sector (%, YoY) 2015 2016 2017 2018 2019 2020 By sectors Tot Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Agriculture, forestry, and fishery 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3.4 4.7 3.6 3.8 3.9 1,8 5,3 3,1 4,3 3,6 to Tot Q1 Q2 Q3 0,0 2,2 Mining and Quarrying (1. 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 2.1 1.8 0.0 0.7 1.1 3) Manufacturing 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.3 4.3 4.3 3.5 Construction 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 6.0 7.0 4.9 4.5 4.3 4.6 7.0 7.2 6.8 7.4 3.9 5.7 2.6 2.7 2.2 2.2 4.4 4.2 4.3 5.8 5.6 6.1 2,3 -0,7 2,3 0,9 1,2 0,4 -2,7 -4,3 A NO 2,1 3,9 3,5 4,1 3,7 3,8 2,1 -6,2 -4,3 5,9 5,7 5,6 5,8 5,8 2,9 -5,4 -4,5 Wholesale and Retail Trade, Repair of Car and 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5.0 5.2 5.3 4.4 5.0 5,2 4,6 44 46 4,4 4,2 4,6 1,6 -7,6 -5,0 Motorcycle Transportation and 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8.5 8.7 5.7 5.5 7.1 5,5 5,9 6,7 7,6 6,4 1,3 -30,8 -16,7 Storage Information and 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 communication Financial service 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 Other Services 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 GDP 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 10. 5 8.9 6.0 5.9 6.1 4.9 4.2 3.5 4.8 5.0 5.0 5.0 5.1 11.1 8.8 8.3 9.6 7.8 5.1 8.1 7.1 7.0 9,1 9,6 3.8 5.5 4.3 6.0 4,6 5.4 5.2 5.1 5.1 5.3 5.2 5.2 6.2 6.7 6.4 6.2 5.2 3.1 3.1 6.2 4.2 7,2 4,5 6,8 7,3 5,1 5,1 5,0 5,0 5,0 9,2 9,7 9,4 9,8 10,8 10,6 6,1 8,5 6,6 10,6 1,1 -0,9 6,4 6,2 6,7 4,6 -6,3 -1,4 3,0 -5,3 -3,5 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 47#49Economic Performance Improved In Almost All Regions REGIONAL GDP Q3 2020 (% YOY) SUMATRA KALIMANTAN 4.63 4.5 4.61 3.23 2019 N 5.21 5.39 5.67 West Kalimantan -4.46 3.55 Aceh-0.11 N.Sumatra -2.60 Riau Island -5.81 Bengkulu -0.09 3.75 2.31 4.34 Central Kalimantan-3.12 South Kalimantan -4.68 2.32 0.65 Riau -1.67 Babel Island 4.38 V East Kalimantan -4.61 -2.22 2020 W. Sumatra -2.87 Jambi -0.79 5.Sumatra -1.40 Lampung -2.41 2019 2020 -4.23 North Kalimantan -1.46 SULAWESI. MALUKU AND PAPUA -1.48 M I 2019 2020 North Sulawesi-1.83 Gorontalo -0.07 Central Sulawesi 2.82 West Sulawesi-5.26 South Sulawesi -1.08 South-East Sulawesi-1.82 RGDP Q III > QI RGDPQ <Q JAVA 5.59 5.51 5.34 3.42 Banten -5.77 Jakarta-3.82 BALI-NUSA TENGGARA 5.69 West Java 4.06 IV 1 Central Java -3.93 4.37 5.34 552 4 2019 2020 East Java-1.73 Yogyakarta-2.84 0.92 -6.32 Source: Central Bureau of Statistics of Indonesia (BPS), calculated IV 2019 2020 -6.3 Bali-12.28 West Nusa Tenggara -1.11 East Nusa Tenggara -1.68 Maluku -2.38 North Maluku 6.66 Papua-2.61 West Papua-3.35 48#50Economic Performance in Most Sectors Have Been Improved The economic gains during third quarter 2020 were felt across most sectors, led by those associated with health as well as work-from-home and school-from-home activities, which maintained positive growth, including Information and Communications, Health and Social Services as well as Education Services. 2.44 2011 2012 2011 2012 2013 2014 2015 2016 2017 2018 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 2013 2014 2015 2016 2017 2018 Q1-2019 Transportation and Warehousing Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Education Services Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q2-2020 Q3-2020 -16.70 Information and Communication 2011 2012 2013 2014 2015 2016 2017 2011 2012 2013 2014 10.61 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 Q3-2019 Accommodation, Food, and Water Supply 2015 2016 2017 2018 Q1-2019 Health Services 2018 Q1-2019 Q2-2019 Q2-2019 Q3-2019 Q3-2019 Q4-2019 Q1-2020 Q2-2020 Q3-2020 Q4-2019 Q1-2020 Q2-2020 Q3-2020 -11.86 Q4-2019 Q1-2020 Q2-2020 Q3-2020 -11.86 49 49#51Stronger Fundamentals Facing the Headwinds Inflation Rate (%) Inflation controlled within the target range 1998 2008 12.1 Nov 2020 1.59 (yoy) 1998 82.4 2008 16-Dec-20 IDR Movement (%) IDR depreciated year-to-date Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 9.3 months of import and external debt repayment -197 -35 (ytd) -1.27 0 -300 -200 -100 1998 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 30 2008 3.8 Oct 2020 3.15 0 5 10 15 20 20 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 25 30 30 35 40 Government Debt/GDP Consistently well-maintained 1998 17.4 2008 Nov 2020 50.2 More Liquid Market (%) Overnight interbank money market rate 62 is relatively lower 10.5 3.2 1998 2008 Nov 2020 133.6 External Debt/GDP Slightly higher than 2008, but significantly lower than 1998 8.6x 3.1x 3.09x 100.0% 27.4% 38.13% 116.8% 33.2% 38.1% 2008 October 1998 2020 2008 1998 November 2020 2008 Q3- 2020 1998 50 50#52Outlook of Domestic Economy Remains Robust ...domestic economic growth is predicted to be moderated in 2020 and rebound in 2021 2020 Economic Outlook • Bank Indonesia projects economic growth in 2020 at the range 0.9%-1.9%, revised down from around 2.3%. Bank Indonesia projects headline inflation in 2020 below the lower bound of the target corridor before returning to the target range of 3.0%±1% in 2021 Bank Indonesia projects a low current account deficit in 2020 at below 1.5% of GDP, which is also expected to remain under control in 2021, bolstered by external sector resilience. Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in 2020 in the 6-8% range, revised down from 9-11% previously, in line with the revised economic growth projection in 2020. الله LOAN π Rp Economic Growth Inflation CAD (% of GDP) Credit Growth 2018 Realization 5.17% 3.13% 2.98% 11.75% 2019 5.02% 2.72% 2.71% 6.08% Realization below 2020 0.9%-1.9% below 1.5% 6.0-8.0% 3.0±1% Source Bank Indonesia 51 5554#53Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#54External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments US$bn 15 10 2505055 -5 -10 -15 Balance Of Payment Remains Solid 135.15 US$bn 160 Current Account Recorded Surplus in Q3-2020 2013: 2014: 2015: 2016: 2017: 2019: 2020: CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit (US$29.1bn) (US$26.7bn) (US$17.5bn) (US$16.9bn) (US$16.2bn) (US$30.6bn) (US$30.4bn) (US$5.6bn) 2018: CA Deficit 2.05 13 Goods мишл 40 40 -2 -7-1 W 120 0.96 8 Primary Income Services Secondary Income Current Account (%GDP) (rhs) 80 3 Q1Q2Q3Q4Q1Q2Q3Q4Q1Q 2Q 3Q 4Q1Q 2Q 3Q 4Q1Q2Q3Q4Q1Q 2Q 3Q4Q1Q2Q3Q4Q1Q2Q3 0.36 1.0 1.37 0.0 9.79 -1.0 1 -2.0 (7.59) -3.0 -4.0 (2.62) -5.0 2013 2014 2015 Current Account Overall Balance 2016 Source: Bank Indonesia Trade Balance Surplus Increases 2017 2018 2019* -12 2020** Capital and Financial Account Reserve Asset (rhs) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3 2013 2014 2015 2016 Source: Bank Indonesia 2017 2018 2019* 2020** US$bn Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of November 2020: US$133.60 bn (Equiv. to 9.5 months of imports + servicing of government debt) Month of Import & Debt Service (RHS) FX Reserves (LHS) Month 130 2.94 120 110 2.61 100 90 80 -0.32 70 60 5132100076543NHI 50 147 1 4 7 10 10 1 4 7 10 147 147 147 10 10 10 1 4 7 1 4 7 10 10 2013 2014 2015 2016 2017 2018 2019 2020 Source: Bank Indonesia 53 33 2013: Deficit (US$4.10bn) 2014: 2015: Deficit Surplus (US$2.37bn) US$7.59bn 2016: 2017: Surplus Surplus US$8.83bn US$11.83bn 2018: 2019: 2020: Deficit Deficit Surplus (US$8.65bn) (US$3.24bn) (US$19.7bn) US$bn 5.00 OG Non-OG Total 4.00 3.00 2.00 1.00 0.00 -1.00 -2.00 -3.00 2013 2014 2015 Preliminary Figure ** Very Preliminary Figure Source: BPS 2016 2017 2018 2019 2020#556-Dec Exchange Rate In Line with Fundamentals Movement of Rupiah a.o 15 Des 20 Quarterly Average Monthly Average IDR/USD 15,711 14,673 14893 15,179 14,530 14,80€ 14,381 14,220 14,232 14254 14,113 14120 13,714 14,855 14,201 14669 14134 14064 14219 14.105 14,141 14,031 14,006 14-Jul 3-Aug 23-Aug 12-Sep 2-Oct 22-Oct 11-Nov 1-Dec 21-Dec 10-Jan 30-Jan 19-Feb 10-Mar 30-Mar 19-Apr 9-May 29-May 18-Jun 8-Jul 28-Jul 17-Aug 14.708 16,500 Supported by Bank Indonesia's stabilisation measures and 17,000 maintained foreign capital inflows to domestic financial markets, rupiah exchange rates have been maintained. As of 16th December 2020, the rupiah strengthened by 0.63% on average despite depreciating by 0.04% (ptp) on the November 2020 level. A surge 16,000 of foreign capital inflows to domestic financial markets in line with 15,500 lower global financial market uncertainty and the positive perception of investors towards the promising domestic economic outlook have 15,000 fed through to a stronger rupiah. Therefore, the rupiah recorded 1.72% (ytd) depreciation as of 16th December 2020 compared with 14.500 the level at the end of 2019. Looking ahead, Bank Indonesia still expects the rupiah to regain lost value as the currency is fundamentally undervalued, supported by a narrow current account deficit, low and stable inflation, attractive domestic financial assets for investment, a lower risk premium in Indonesia as well as abundant global liquidity. Bank Indonesia will continue to hone rupiah exchange rate stabilisation policy in line with the currency's fundamental value and market mechanisms through effective monetary operations and by providing market liquidity. 14357 14120 5-Nov 25-Nov 14,113 14,000 13,500 13,000 15-Dec 30 U u do % 35 Rupiah Exchange Rate Volatilty 2019 YTD 2020 30.6 Average YTD 2020 Avg 2019 a.o 16 Des 20 Rupiah Exchange Rate Fared Relatively Well Compared to Peers YTD 2020 vs 2019 TRY -23.70 -18.65 BRL -23.0420.71 ZAR -5.52 -12.38 INR -3.07 -4.88 23.8 IDR -1-72 25 -2.75 THB --0-83 -0.87 19.3 20 18.1 MYR 1.00 17.0 -1.47 16.0 16.3 SGD 1.26 -1.20 15 JPY point-to-point 4.97 1.96 PHP 5.38 average 4.19 10 KRW 5.69 a.o 16-Dec-20 CNY -1.39 -0.01 6.59 5 EUR 8.09 1.67 -30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 Source: Reuters, Bloomberg (calculated) 15.12 10.2 10.10 7.0 ---7.6 5.4 7.1 6.45.4 6.2 4.7 ZAR BRL TRY IDR THB PHP INR MYR 54#56Ample Lines of Defense Against External Shocks Ample Reserves FX Reserve Ample level of FX reserves to buffer against external shock FX Reserves as of of November 2020: US$133.6 bn Swap Arrangement Japan Bilateral Regional Global South Korea Australia Singapore China Malaysia ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Source: Bank Indonesia Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2018 The facility is available in USD and JPY • Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion IDR 115 trillion in March 2020 • Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018 • Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2020 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in November 2018 Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019 Entitled to a maximum swap amount of USD600 million under ASA The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million Doubled to USD2 billion in 2005 Entitled to a maximum swap amount of US$ 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 and • Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem • Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) 55 555#57100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Healthy External Debt Composition External Debt Structure Private External Debt ■Public External Debt 100% 90% 80% 49.0 70% 60% 50% 40% 30% 51.0 20% 10% 0% 2009 2010 The Structure of External Debt is Dominated by Long-Term Debt Short Term External Debt ■Long Term External Debt 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* Jun 2020* Jul 2020* 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* External Debt 2009 2010 Source: Bank Indonesia, External Debt Statistics of Indonesia 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* External Debt Remains Manageable Million USD 450,000 400,000 350,000 17.1 A 300,000 11.5 250,000 200,000 150,000 100,000 50,000 1.3 12.0 10.2 10.1 10.0 10.2 www. 5.4 5.9 3.0 6.5 8.2 7.5 0.6 Q4-2019* Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* Jun 2020* Jul 2020* Aug 2020* Sep 2020* Oct 2020** External Debt to GDP Ratio & Debt to Export Ratio % % % 36.1 34.3 34.7 36.0 36.8 36.5 36.1 36.1 37.4 38.1 40 34.5 35 207.2 External Debt Growth (rhs) 20.0 220 32.9 30 197.8 18.0 31.8 29.1 200 16.0 27.4 26.5 183.4183.4183.3 177.9 25.0 14.0 180 176.1 12.0 168.4 168.6172.2177.1 160 10.0 5.1 806 8.0 140 139.5 6.0 3.8 120 123.1 4.0 121.8 a 114.9 113.8 100 Q4-2019* Q1-2020* Q2-2020* Q3-2020** 2.0 101.0 0.0 80 2009 2010 2011 2012 2013 2014 2015 *Provisional Figures **Very Provisional Figures 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* Q1-2020* External Debt/Export Ratio (rhs) External Debt/GDP Ratio 21222250 Q2-2020* Q3-2020** 56 Aug 2020* Sep 2020* Oct 2020** 16.1 83.9#58Manageable External Debt Profile Short term non-bank corporate debt (non affiliation) represents only 9.4% of total private external debt 51% External Debt Position US$413.3bn 49% Public Long Term 1 Private Bank Affiliation US$202.6bn or 49 % of Total Ext. Debt US$159.8bn or 75.8% of Private Ext. Debt US$18.5bn or 8.8% of Private Ext. Debt US$12.5bn or 5.9% of Private Ext. Debt External Debt Position as of October 2020 1 Based on remaining maturity 75.8 % US$210.7bn or 51% of total Ext. Debt 24.2% 36.4% US$50.9bn or 24.2% of Private Ext. Debt 38.7% US$32.3bn or 63.6% of Private Ext. Debt 61.3% 63.6% Short-Term¹ Private Source: External Debt Statistics of Indonesia, December 2020 Private Non-Bank US$19.8bn or 9.4% of Private Ext. Debt Non Affiliation 57 44#59Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Hedging Ratio* Uruguay 86.1 93.9 76.2 24.2 Philippines 24.7 22.2 36.3 Indonesia 35.3 361 48.7 Colombia 53 ■2021F 42.7 2020F 53.6 Bulgaria 56.6 2019 56.3 0 20 40 60 80 100 Source: Moody's Credit View Fundamental Data, July 2020 Regulation on Prudential Principle in Managing External Debt Regulation Key Points Phase 1 Jan 1,2015 Phase 2 Jan 1,2016 Dec 31,2015 Dec 31,2016 Phase 3 Jan 1, 2017 & beyond Object of Regulation Hedging Ratio < 3 months >36 months Liquidity Ratio (< 3 months) Credit Rating Hedging transaction to meet hedge ratio Sanction Source: Bank Indonesia Governs all Foreign Currency Debt 20%* 25%** 20%* 25%** 50% 70% Not applicable Minimum rating of BB- not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia As of Q IV-2015 Applied 230 corporates (9.2%) 157 corporates (6.3%) ≤ 3 months 2,257 corporates (90.8%) > 3 - 6 months 2,330 corporates (93.7%) Liquidity Ratio* 294 corporates (11.8%) 2,193 corporates (88.2%) ■Comply ■Not Comply *Data as of Q2 2020, with total population 2..487 corporates Source: Bank Indonesia 58#60Solid Policy Coordination In Managing Financial Markets Volatility The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financial System Stability Committee (KSSK) KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP) Gov't Securities Crisis Management Protocol (CMP) Indicators: - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; Foreign ownership in government securities Policies to address the crisis at every level : - Repurchase the government securities at secondary market Postpone or stop the issuance State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget State's Budget First Line of Defense Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related SOES (min. level Aware) BPJS (min. level Aware) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) CMP BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 59 59#61BHINNEKA TUNGGAL IKA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#62Covid-19 Handling Focus in Indonesia Pushing the economic stability with Protecting people's health and saving lives, maintaining purchasing power, and business continuity The policy measures for handling and recovering the economy are focused at improving the demand side, and many target EXPORT-IMPORT SUPPORTS Tax Incentives Customs and excise incentives Simplification & reduction of ber of import & export restrictions Accelerating the export-import process for Reputable Traders Improvement & acceleration of export- import services and supervision through the National Logistic Ecosystem (NLE) vulnerable communities and MSMEs Maintaining the household consumptions Maintaining MAINTAIN THE PRODUCTIVITY Tax Incentives Customs and excise incentives Providing leniency requirements of credit financing / funding for MSMEs Providing payment relief for MSMEs Decreasing in benchmark interest rates Decreasing in Reserve Requirement Preventing Bankruptcy health/ public safety Source: Ministry of Finance MAINTAIN THE CONSUMPTIONS Additional Groceries (basic food) Additional pre-work cards Electricity tariffs exemption Additional Family Hope Program (PKH) beneficiaries 61#63Amendment of State Budget Posture 2020 As a response to development needs for handling of pandemic COVID-19 2020 PERPPU 1/2020 (Converted To Law 2/2020) The legal basis for the government to flexibly adjust the fiscal policies, including budget and its deficit. Allowing the government to continually refocusing and reallocation budget without parliament approval process ■ The state budget deficit has to be returned to a maximum of 3% in 2023 Budget Deficit to GDP Presidential Regulation (Perpres) No.54/2020 With extraordinary and very urgent conditions, the State Budget deficit policy exceeds the 3% limit, through the enactment of Perpu No.1 / 2020 (converted to Law No.2 / 2020). Prioritized on health and social security spending [Initial Budget] Law No. 20/2019 1.76% Perpres No. 54/2020 5.07% Presidential Regulation (Perpres) No.72/2020 to the Responding development needs of the Covid-19 pandemic handling and to maintain the economy and financial system stability, including running the National Economic Recovery Program (PEN) Perpres No. 72/2020 6.34% Budget Deficit 2020 Financing Need IDR307.2 tn (~USD 21.0) IDR 741.8 tn (~USD 50.6 bn) IDR852.9 tn (~USD 58.2 bn) IDR 1,439.8 (~USD98.3 bn) PERPPU 1/2020 is emergency law issued by government to respond the COVID-19 outbreak IDR1,039.2 tn (~USD 70.9 bn) IDR 1,645.3 (~USD1123 bn) Source: Ministry of Finance Notes: USDIDR exchange rate of IDR14,653. 62 69#64Perppu 1/2020 (Converted To Law 2/2020) as A Legal Basis for Government to Adopt Quick and Extraordinary Steps in Overcoming the Impact of the Covid-19 Pandemic and National Economic Recovery PERPPU 1/2020 (31st March 2020) State Deficit Budget 1.76% PDB 2020 Perpres Deficit Extraordinary Government Policy UU 2/2020 (18th May 2020) The budget has 54/2020 5.07% GDP been revised twice Perpres Deficit to the latest of Presidential Decree 72/2020, which has 72/2020 6.34% GDP incorporated the national economic recovery initiation Legal Basis Perppu 1/2020 concerning State Financial Policy and Financial System Stability for Handling Covid-19 Pandemic and/or in the framework of Facing Threats that Harm National Economy and or Financial System Stability stipulated into Law 2/2020 Undertaking Strategic Policies Refocusing and reallocation policies by suspending non-priority activities, such as official travel and other activities that cannot be carried out in the Covid-19 period. Providing stimulus, both in the form of additional spending, tax incentives, and government investment for handling Covid-19 and the National Economic Recovery Source: Ministry of Finance 63 80#65Strategy to Spur Recovery Through Fiscal Policies Q3 2020 is the key to avoid a recession; Optimizing the role of government is important to stimulate the economy • 1 PEN PROGRAM EXECUTION & ACCELERATION The existing program that already has State Budget Allocation (DIPA) needs to be accelerated and the accuracy of targeting continues to be improved at the next stage of distribution The new program that data and delivery mechanism are available will be executed. New proposed programs that are not supported by valid data, and require complex regulatory changes, should be diverted to existing implemented programs 2 STRENGTHENING GOVERNMENT CONSUMPTION (G) Personnel spending as an instrument to encourage growth: • • Accelerated disbursement of salaries 13 Acceleration spending to support new work patterns (WFH, WFS) Reallocation to support the digitalization of the bureaucracy; Shifting capex that is difficult to execute to a faster disbursement (aim to support the infrastructure for digitalizing public services). Relaxation of goods and services procurement policies • • 3 STRENGTHENING THE CONSUMPTION (C) STRATEGY → Accelerate social assistance spending Modification of social protection spending THROUGH several options: increasing the amount and frequency, and extending period. This can be done through the addition of a social protection program index that is relatively implementable (PKH, Basic Food Aid, Cash Transfer etc.) Source: Ministry of Finance 64#66New Proposal for the Use of Covid-19 Handling Costs As the efforts to boost economic growth in the second semester • Health NEED A JOB! Social Securities 1. Incentives for Medical and Non-Medical 1. The utilization of food reserve/logistic fund 2. Personnel: Incentives extension up to Dec 2020 3. Reward for Incentives for 4. Additional Electricity bill Discount Medical and Non- Medical 2. Support for Hospitals by accelerating the procurement process for medical stuff and claim for hospitalization costs Social Security programs for middle income class period of Electricity bill Discount Extension New proposals that have been budgeted: 1. Islamic Boarding School/ Pesantren assistance for implementation of health protocols and learning online 3. New Normal 2. Socialization Rice aid for Family Hope Program beneficiaries 4. Covid-19 Vaccine 3. Supplies Basic Cash transfer IDR500K for 9Mio Food beneficiaries and non PKH Sectoral & Regional Gov't 1. Support for MSMES (IDR2.4Mio per recipient) 2. Support for worker affected by Covid-19 (IDR600K/month for 4 months for those who registered in BP Jamsostek with salaries below IDR5Mio) 3. Buying Local Product Program for supporting the MSMEs and cashback program for MSMEs' consumers Note: The new proposal programs are funded by expansion reserves and government borne taxes unused Business Incentives 1. Exemption from applying the minimum account provisions for customers with electricity consumption below the minimum account 2. Exemption from social, business and industrial customer expense subscription fees Source: Ministry of Finance 65#67Synergy Between Central Bank and the Government in Accelerating National Economic Recovery The Enactment of Emergency Law No. 1/2020 (becoming Law No. 2/2020) allows Central Bank 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 as backstop buyer in the primary market 2nd Joint Decree between Minister of Finance and Governor of Bl on July 7, 2020 amended with Joint Decree on July 20, 2020 (SKB II) Burden Sharing Scheme 1. Public Goods Covered by Bl with rate based on Bl Reverse repo 3M 2. Non-Public Goods: MSME ■ Corporation on-MSME 3. Non-Public Goods: Others Source: Ministry of Finance Covered by Government with rate BI Reverse repo 3M minus 1%, and Bl covered the remaining difference with market rate Full Covered by Government amounting market rate Issuance specifically to Bl through private placement Issuance through market mechanism (auction, Green Shoe Option, Private Placement according to the SKB on April 16, 2020) Realization of Gov't Securities purchased by Bank Indonesia under SKB I IDR 75,395 tn Outlook until end of 2020: around IDR80-100 tn Public Goods IDR 397.56 T Non-Public Goods IDR 505.90 T COVID-19 HANDLING ALLOCATION IDR 903,46 T Health IDR 87.55 T Social Protection IDR 203.90 T Sectoral K/L, Local Govt IDR 106.11 T Micro small and Medium Enterprises (MSME) IDR 123.46 T Corporation Non- MSME IDR 53.57 T Others IDR 328.87T SBN purchased by BI (SKB II) for Public Goods IDR270,0T or 67,92% from target and issuance of SBN for Non Public Goods reach IDR152,03T 66#683 Financing Strategy 2020 Opportunistic, Measured, and Prudent Financing Strategies to support State Revenue and Expenditure Budget (APBN) 2020 in accelerating the handling of COVID-19 and protecting the economy from the threat of crisis 1 Non Debt Financing Sources 4 Issuance of Foreign Currency Government Bond (SBN) SAL Government Endowment Fund Post Fund sourced BLU 2 Cash Loan Flexibility Upsize Program Loans from Development Partners, both bilateral and multilateral, ex. World Bank, ADB, AFD, KfW, JICA, EDCF and AIIB with low coupon Government Securities Issuance a) Prioritizing the issuance of SBN through market mechanisms (including retail) b) Open opportunity for Private Placement requests from SOE/Institution ex. LPS, BPKH, and others Source: Ministry of Finance 5 Upsize the issuance of Domestic SBN and Foreign Denominated SBN with regard to financial market conditions a) The policy of lowering statutory reserves and increasing the PLM ratio by BI increased liquidity and placed banks on the primary SBN market. b) The government can issue SBN to finance the PEN program purchased by BI 67 40#69Government Securities For 2nd Semester according to Presidential Regulation 72/2020 Auction The government can issue SBN for financing the PEN program purchased by Bank Indonesia in the primary market (Article 21 PP 23/2020). Foreign Denomina- ted GS Retail Government Securities (GS) (gross) IDR 900.4 T SKB between the Government & BI phase I has been agreed and carried out since the SBN auction April 21, 2020. Phase II SKB has been signed, will be implemented in stages according to the real needs of financing Private Placement GS for BI Special Scheme With the purchase of SBN to BI through a private placement of IDR 397.56 T, the supply of SBN to the market in the Second Semester of around IDR 453 T is still quite reasonable: Plans for project foreign activities/ 2020 in the amount of IDR 29.5 T Project loan plans for 2nd semester IDR 24.2 T Planned withdrawal of 2020 program loans totaling USD 7.3 billion. Withdrawal of 2nd Semester program loans in the amount of eqv. USD 5.5 billion. Source: Ministry of Finance 68 88#702020 Budget Realization as of November 2020 2019 Realization Budget of Nov 30 % of Budget Budget Perpres 72/2020 Realization of Nov 30 2020 % of % of Budget Perpres Growth (%) 72/2020 Revenue 2165.1 1676.7 77.4 2233.2 1699.9 1423.0 63.7 83.7 (15.1) Taxation Revenue 1786.4 1312.4 73.5 1865.7 1404.5 1108.8 59.4 78.9 (15.5) Tax Revenue 1577.6 1136.13 72.0 1642.6 1198.8 925.34 56.3 77.2 (18.55) Custom and Excise 208.8 176.2 84.4 223.1 205.7 183.5 82.2 89.2 4.1 Non Tax Revenue 378.3 362.7 95.9 367.0 294.1 304.9 83.1 103.7 (15.9) Grant 0.4 1.6 356.3 0.5 1.3 9.3 1861.4 714.1 498.5 Expenditure 2461.1 2046.6 83.2 2540.4 2739.2 2306.7 90.8 84.2 12.7 Central Government Expenditure 1634.3 1293.6 79.2 1683.2 1975.2 1558.7 92.6 78.9 20.5 Ministerial Expenditure 855.4 718.3 84.0 909.6 836.4 852.2 93.7 101.9 18.6 Non Ministerial Expenditure 778.9 575.3 73.9 773.9 1138.9 706.5 91.3 62.0 22.8 Regional Transfer and Village Fund 826.8 752.9 91.1 856.9 763.9 748.0 87.3 97.9 (0.7) Regional Transfer 756.8 689.2 91.1 784.9 692.7 682.9 87.0 98.6 (0.9) Village Fund 70.0 63.7 91.0 72.0 71.2 65.1 90.4 91.4 2.2 Primary Balance Surplus/(Deficit) (20.1) (102.3) 508.5 (12.0) (700.4) (582.7) 4851.0 83.2 469.8 (296,0) (369.9) 125.0 (307.2) (1039.2) (883.7) 287.6 85.0 138.9 to GDP (1.84) (2.34) (1.76) (6.34) (5.60) Financing 296,0 421.5 142.4 307.2 1039.2 1104.8 359.6 106.3 162.1 Surplus (Deficit) Budget Financing 51.6 221.1 Source: Ministry of Finance 69#71Government Securities Financing Realization (as of Nov 30th, 2020) 98,19% SUKUK 91,32% Government Securities (GS) 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**** SEC USD REG SHELF TAKE-DOWN** - USD Onshore Bonds Special Instrumen (Trillion IDR) Realization (ao. Nov 30, 2020 1,396.13 1,034.96 614.44 454.84 56.61 69.42 33.56 123.49 42.52 13.43 67.54 0.00 297.03 Sovereign Sharia Securities (Sukuk) 361.17 89.14% Domestic Sovereign Sharia Securitoes 325.51 GDS - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk - Retail Sukuk 217.47 43.24 Private Placement Global Sukuk*** 64.80 35.66 * ** *** **** Dual-currency bonds issuance using SEC format amounted USD2 bn and EUR1 bn, settlement on January 14, 2020 (BI mid day exchange rate; 1 USD and 1 EUR = 15,207.83 IDR) = 13,654 IDR Global bonds issuance using SEC format amounted USD4.3 bn, settlement on April 15, 2020 (BI mid day exchange rate on April 15, 2020; 1 USD = 15,707 IDR) Global Sukuk issuance amounted USD2.5 bn on June 16, 2020, settlement on June 23, 2020 (BI mid day exchange rate on June 16, 2020; 1 USD = 14,265 IDR) Samurai bonds issuance using public offering amounted JPY100bn, settlement on July 8, 2020 (BI mid day exchange rate on July 2, 2020 : 1 JPY = 134.34 IDR) Source: Ministry of Finance 70#72Expansive and Consolidative Fiscal Policy Direction in 2021 Responding challenges in the economy, Accelerating Recovery and Strengthening the Reform Effort ACCELERATING ECONOMIC RECOVERY AND STRENGTHENING REFORM EFFECTIVENESS OF CONTROLLING COVID-19 Expansive ACCELERATION ECONOMIC RESTORATION (PEN) EXIT STRATEGY MIDDLE INCOME TRAP Macro Assumption 2021 COVID-19 Handling State Budget Economic Growth (%) Inflation (%, yoy) 5.0 3.0 Exchange Rate (Rp/US$) 10-year Govt Bond (%) 14,600 7.29 ICP (Oil Price) (US$/barrel) 45 Oil Lifting (thousand barrel/day) 705 Gas lifting (thousand barrel equivalent oil /day) 1,007 Source: Ministry of Finance Consolidative ANTICIPATING UNCERTAINTY Economic Growth Driver 2021 FISCAL FLEXIBILITY (PRUDENT & SUSTAINABLE) ■COVID-19 handling including the Vaccine Availability in 2021 Expansive Fiscal to Support Continuation of Economic Recovery Support from demand side by strengthening social assistance and cash transfer ■Support from supply side by focusing on tax incentive, providing credit and guarantee for MSME and corporation Accelerating Reform OL in Job creation: fundamental change by addressing overlapping regulations and improving Indonesia's investment climate Budget Reforms: spending better approach, result oriented, efficiency, as well as risk mitigation ■SWF: The flexibility and ability to setting-up fund in relevant authorities in central government and attracting the investors Global Economic Growth Improving global economic growth particularly major trading partners 71#73Summary State Budget 2021 Accelerating Economic Recovery and Strengthening Reforms 1. The global and domestic economy in 2021 will still be in uncertainty. Pandemic handling efforts and the availability of vaccines will determine the acceleration of economic recovery 2. The 2021 State Budget deficit of 5.70 percent of GDP is aimed at maintaining the momentum of economic growth, as well as avoiding opportunity losses in encouraging the achievement of national development targets 3. The 2021 State Budget will continue the expansionary-consolidative countercyclical policy by taking into account flexibility in responding to economic conditions and encouraging prudent and sustainable fiscal management 4. National development priorities will focus on Health, Education, Information and Communication Technology, Food Security, Social Protection, Infrastructure, and Tourism. Source: Ministry of Finance 72#74Macroeconomic Assumption and State Budget for 2021 Expansive-consolidative fiscal policy for the acceleration of Economic Recovery and strengthening the reforms DEVELOPMENT TARGET MACRO ASSUMPTION STATE BUDGET 2021 In IDR trillion Poverty level 9.2 - 9.7% Growth: 5.0 % Inflation: Grant 0,9 Non tax Revenue 298.2 3.0% Unemployment Exchange rates: IDR 14.600/USD Rate 7.7-9.1% Tax Revenue 1,444.5 REVENUE 1,743.6 10-year Gov't Bond: 7.29% ICP (Oil Price): GINI Ratio (Rp) 0.377 -0.379 US$45 per barrel Oil Lifting: 705 thousand barrel/day HDI 72.78-72.95 DEFICIT (1,006.4) FINANCING Gas Lifting: 1,006.4 (5.70% PDB) 1,007 thousand barrel (equal oil per day) Source: Ministry of Finance EXPENDITURE Central Government Spending 1,954.5 2,750.0 Regional Transfer and Village Fund 795.5 73#75State Budget 2021 Comprehensively Designed To Support The Acceleration of National Economic Recovery And Anticipate An Economic Slowdown Due To The Covid-19 Pandemic State Revenue: IDR 1,743.6 trillion • Supporting national economic recovery by providing tax incentives selectively and prudently calculated Budget Deficit • Cutting the red tape to accelerate national economic recovery •Improving public services to optimize non-tax 2020 Pres Reg. 2021 2015 2016 2017 2018 2019 72/2020 Budget ว 00 revenue -298.5 142.5 -308.3 -125.6 -341 -124.4 -269.4 -11.5 Expenditure: IDR 2,750.0 trillion •Handling COVID-19 and supporting health programs Financing: IDR programs • Continuing social •Expanding access to Supporting safety net to lay a capital for MSMEs solid foundation of and cooperatives inclusive economic through interest recovery • Supporting the restructuring of SOES, PSA, Sovereign Wealth Fund (SWF) 1,006.4 trillion subsidy -200 -400 -2.49 -2.59 -2.51 activities for -600 impacted sectors (e.g. Tourism) -800 -348.7 -1.82 -2.20 -1,039.20 -700.4 -1,006.40 -633.1 -01 -02 -03 -04 -05 • Increasing access to financing for MSMEs and housing for low-income household • Continuing to support higher -1000 education,, -06 -5.70 -6.34 -1200 -07 research and cultural activities Deficit (Rp Trillion) I Primary Balance (Rp Trillion) % Deficit to GDP (RHS) Source: Ministry of Finance#76State Budget 2021 as the Economic Driver In the Midst of Uncertainty Comprehensively Designed to Support the Acceleration of Economic Recovery and to Anticipate the Prolonged COVID-19 Pandemic 2020 2021 Priorities in 2021 (in IDR trillion) A. State Revenue I. Domestic Revenue 1. Tax Revenue Pres. Decree APBN Growth 72/2020 1,699.9 1,743.6 2.6% 1,698.6 1,742.7 2.6% competences 1,404.5 1,444.5 2.8% 2. Non-Tax Revenue 294.1 298.2 1.4% II. Grant 1.3 0.9 -30.8% B. State Expenditure 2,739.2 2,750.0 0.4% I. Central Government Expenditure 1,975.2 1,954.5 -1.0% procurement 1. Line Ministries 836.4 1,032.0 23.4% 2. Non Line Ministries 1,138.9 922.6 -19.0% II. Regional Transfer and Village Fund 763.9 795.5 4.1% 1. Regional Transfer 692.7 723.5 4.4% 2. Village Fund 71.2 72.0 1.1% C. Primary Balance (700.4) (633.1) -9.6% D. Surplus/(Deficit) (1,039.2) (1,006.4) -3.2% % to GDP E. Financing (6.3) (5.7) 1,006.4 -3.2% 1,039.2 Health (IDR169.7T) Accelerating health recovery, National Health Insurance (JKN) reforms, vaccine Social Protection (IDR421.7T) social Supporting protection reform and comprehensive social protection Tourism (IDR15.7T) National Economic Recovery Program in 2021 IDR 372.1 T ICT (IDR29.6T) Optimizing the use of ICT to support and improve the quality of public services Infrastructure (IDR413.8T) Provision of infrastructure for basic services, improving connectivity, and supporting economic recovery, and continuing pending priority programs Food Security (IDR104.2T) Increase food production and revitalizing the national food system and developing Food Estate Education (IDR550.0T) Strengthening the education and quality of teacher and Encouraging the recovery of the tourism sector Health IDR 25.40T Source: Ministry of Finance Social Protection MSME Support Business Sectoral & Incentive Regional Govt IDR 110.2T IDR 48.8 T IDR 20.4 T IDR 152.4 T Corporate Financing IDR 14.9 T#77Strategic Policy in 2021 Supporting the accelerated recovery and the economic transformation 1 2 3 to EDUCATION (IDR550.0T) Strengthening the quality of education through increasing PISA scores and strengthening Early Childhood Education (PAUD) administration and increasing teacher competences HEALTH (IDR169.7T) Accelerating health recovery due to Covid- 19, implementing National Health Insurance (JKN) reforms and preparing Health Security Preparedness SOCIAL PROTECTION (IDR421.7T) Supporting social protection reform → comprehensive social protection system based on the life cycle and anticipating the aging population INFRASTRUCTURE (IDR413.8T) Provision of infrastructure for basic services, improving connectivity, and supporting economic recovery, and continuing pending priority programs 5 6 7 FOOD SECURITIES (IDR104.2T) Increase food production and support economic recovery through revitalizing the national food system and developing Food Estate Source: Ministry of Finance TOURISM (IDR15.7T) Encouraging the recovery of the tourism sector with a focus on 5 areas and developing a PPP scheme ICT (IDR29.6T) Optimizing the use of ICT to support and improve the quality of public services (efficiency, convenience and acceleration) 76#78GS Primary Market Performance 2019-2020 Through Auction [IDR Trillion] 400 350 300 250 50 200 3.11 2.80 150 2.11 100 2.12 2.15 Bid 2019 = IDR35.48T/ auction Average Awarded Bid 2019 IDR14.14T /auction 5.1 2.97 2.59 Jan-19 Feb-19 Mar-19 Apr-19 Average incoming bid in 2020 Source: Ministry of Finance May-19 Jun-19 Jul-19 3.35 2.97 3.01 3.14 2.44 2.34 1.97 1.98 Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) Average 7.00 6.50 Average Incoming Awarded Bid 2020 = Bid 2020 IDR54.21T/ = IDR15.85T/ 6.00 auction Average Incoming auction 4.24 3.91 4.00 5.00 3.00 Aug-19 Sep-19 Oct-19 = Nov-19 2.45 2.00 IDR54.17 tn/auction while average awarded bid in 2020 = IDR15.59 tn/auction Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 1.00 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 77#79Republic of Indonesia - USD3.1bn Equiv. Dual-Currency Offering On January 7, 2020, the Republic of Indonesia priced a transaction comprising EUR1 bn and USD2 bn in senior unsecured notes. Issuer Issuer Rating Exp. Issue Rating Issue Aggregate Size Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Stable) BBB Fitch (Stable) Baa2 (Moody's) / BBB (S&P) / BBB (Fitch) U.S. SEC-registered shelf takedown Fixed rate senior unsecured notes EUR 7-year February 14, 2027 EUR1,000 mm Maturity Tranche Size Coupon Reoffer Price Reoffer Yield Benchmark (Yield) 0.900% p.a. (ACT/ACT) 99.638% 0.953% p.a. €MS (- 0.077%) DBR 02/15/27 (- 0.446%) USD3,100 mm equiv. USD 10-year February 14, 2030 USD1,200 mm 2.850% p.a. (30/360) 99.737% USD 30-year February 14, 2050 USD800 mm 3.500% p.a. (30/360) 99.077% 3.550% p.a. 2.880% p.a. UST 10 (1.828%) Old UST 30 (2.311%) Transaction Highlights Leveraged a brief market window of stability to price inside fair value levels by 1 bp for the EUR tranche and at a de minimis concession inside 1 bp for the 10- and 30-year USD tranches Record-low yields, spreads, and coupons by EUR and USD financing by the Gol in each tenor High-quality and price-insensitive demand allowed compression of 27 bp for the EUR tranche and 25 bp and 20 bp for the 10- and 30-year USD tranches, respectively Harnessed a particularly strong bid for duration to price benchmarks which prompted a rally in the long-end of Indonesia's curve once the new bonds were freed to trade TotalIndications. TotalAlecadens Mumber al EUR 7-year ELA3,920 ELA1,000 Chaplin Ally Go 17% 20% 3 זיו W USD 10-pr 509 800 UBO 200mm 3d IFE WE Fad and A 20% UBC 30-your J8DQ 100mm US 134 2la Spread to Benchmark Denominations €MS + 103 bp DBR + + 105.2 bp + 123.9 bp Allocation by Typ: EUR100k /EUR1k Listing Law law Use of Proceeds 239.9 bp USD 200k/1k Singapore, Frankfurt Open Market listing / New York For general purposes, including to partially fund general financing requirements USD 200k/1k Source: Ministry of Finance 15 15 5% ■ MoreS B 11% 15 31% 60% W4 21% Pension Fics Wouds Pivot Bank and 78#80Republic of Indonesia - USD4.3bn Global Bonds Issuance On April 7, 2020, the Republic of Indonesia priced a transaction comprising USD4.3bn in senior unsecured notes Investor Breakdown by Region Issuer Issuer Rating Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Stable) BBB Fitch (Stable) Investor Breakdown by Investor Type RI1050 RI1030 9% RI1050 Exp. Issue Rating Format 2% Baa2 Moody's / BBB S&P / BBB Fitch U.S. SEC registered 21% 45% 26% Issue Pricing Date 52% 25% Settlement Date 20% 18% RI0470 Aggregate Size 44% 38% Maturity Tranche Size Coupon (p.a.) Reoffer Price Long 10.5-year Oct 15, 2030 USD1,650 mm 3.850% Senior unsecured fixed rate notes April 6, 2020 April 15, 2020 USD4,300 mm Long 30.5-year Oct 15, 2050 USD1,650 mm 4.200% Long 50-year Apr 15, 2070 RI1030 10% 1% 4% 1% 1% 2% 3% 1% 22% 20% 64% 71% 1% 1% 1% 1% 11% RI0470 99.573 US ■ Europe ■Asia ex-Indonesia ■Indonesia Reoffer Yield 3.900% 99.150 4.250% (p.a.) Listing Law USD1,000 mm 4.450% 99.009 Asset Managers 4.500% ■Insurance/Pension Fund ■Central Bank/Sovereign Wealth Fund ■ Banks 85% Transaction Highlights Use of Proceeds Singapore, Frankfurt Open Market For general purposes of the Republic of Indonesia, including financing COVID 10 olief and ■ Private Banks ■ Others ☐ Net proceeds will be used for general purposes of the Republic, including financing COVID-19 relief and recovery efforts for the Republic to contain the virus and mitigate its impact on Indonesia. □ The Republic's fiscal policy amidst volatile market conditions includes support for healthcare, the social safety net, and small and medium enterprises. The debut 50-year offering on strong demand in the long end of the curve. ☐ The transaction is the largest global offering by the Republic and demonstrates the Republic's ability to respond swiftly to markets and capture favorable issuance windows. Source: Ministry of Finance 79 New York#81Republic of Indonesia - USD0.75bn Green Sukuk Global & USD1.75bn Sukuk Global Bonds Issuance Investors by Geography Issuer Issuer Rating Republic of Indonesia Baa2 Moody's (Stabil) BBB S&P (Negative) BBB Fitch (Stabil) 144A Reg S, Senior, Unsecure, Wakala US$ Trust Certificate ("Sukuk") issued under a USD$2.5 billion Trust Certificated Issuance Programme 5Y Green Sukuk June 23, 2025 USD0,75bn 2.3% Fiixed UST +195.3bps June 16, 2020 June 23, 2020 USD2,5bn 10Y Sukuk USD June 23, 2030 USD1bn 2.8% Fixed UST +204.7bps 30Y Sukuk USD June 23, 2050 USD0,75bn 3.8% Fixed UST +227.7bps USD 200k/ik denoms, English/Indonesia Law Singapore Stock Exchange and NASDAQ Dubai (dual listing) 12% 11% 5-year 40% USD 18% 8% 32% 34% 12% 10-year USD Format 33% 30-year 44% USD 31% Asia (ex-Indonesia) Indonesia ME/Islamic Europe US 10%5% Pricing Date Settlement Date Aggregate Size Investors by Type Green Investors Non-Green Investors 1% 15% Maturity Tranche Size Coupon 34% 5-year USD 54% 5-year USD Reoffer Spread 66% Others Details 15% 10-year USD 54% 30-year USD Listing 73% Transaction Highlights Asset Managers Banks Central Banks/SWFS Private Banks/Others Insurance / Pension Source: Ministry of Finance □ Second ROI transaction priced since COVID-19 pandemic The transaction is the lowest ever 5-year and 10-year yield achieved by the Government across both conventional and Sukuk issuances in the US$ market. The transaction is the first ever 30 year Sukuk issuance by the Government with the lowest coupon ever of Global Sukuk issuance in the world and the largest ever 30 year Sukuk from Asia. The transaction has oversubscription of 6.7 times. With the size of orderbook, Government can press the pricing down by 70 bps from the initial price guidance (IPG) and well below its indicative fair value. 80 60#82Republic of Indonesia - JPY100bn Samurai Bond Others City Bank 28% Others 43% Pension Fund Regional Back 6% Shinkin, etc 8% Others 35% LOY Source: Ministry of Finance AM 23% Others 50% CyBank Issuer Bond Rating Format Pricing Date Settlement Date AM 37% Deal Size Shinkin, etc Republik of Indonesia Baa2 Moody's, BBB S&P, BBB Fitch Samurai Bond (Public Offering), Reg S only July 2, 2020 3Y FXD 5Y FXD July 8, 2020 JPY100bn 7Y FXD 10Y FXD 20Y FXD Maturity Tranche Size JPY 50.7bn Coupon Reoffer Spread 20Y Lead Managers AM 65% Proper insura noe 100% O July 7, 2023 July 8, 2025 July 8, 2027 July 8, 2030 July 6, 2040 JPY13.4bn JPY1.5bn 1.59% JPY10.1bn 1.48% JPY24.3bn 1.13% 1.35% YSO+110bp YSO+130bp YSO+140bp YSO+145bp Daiwa MUMSS / Nomura / SMBC Nikko 1.80% Transaction Highlights First Sovereign Samurai issuance in 2020 and the first issue from Asian after the pandemic declaration and part of the proceeds will be allocated to various projects in response to COVID-19 Rol's achievements of successful pricing of benchmark sized transaction while significantly reducing average premium over its US dollar secondary curve across tenor, contributed to encourage the market and proved strong presence of Rol as a leading Samurai bond issuer. 81#83Disciplined and Sophisticated Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn 6,000.0 Government Debt / GDP (%) 38.13% 40.00% 500 442 446.3 0.0% 407 414.52 5,000.0 4,000.0 3,000.0 2,000.0 27.43% 28.33% 29.40% 29.81% 30.18% 825.6 362 35.00% 400 -0.5% 24.74% 764.5 30.00% 300 810.7 746.2 25.00% 200 -1.0% 734.8 20.00% 755.1 100 5,085.0 19 677.6 1,000.0 1,931.2 2,410.0 2,780.6 3,248.6 3,612.7 4,014.8 15.00% 0 10.00% -100 5.00% -200 0.00% 2014 2015 2016 2017 2018 2019 Nov-20 *) -300 -2.5% -2.5% -2.6%298 -400 (308) 2015 2016 2017 -1.8% 14 11111 2018 (269) -1.5% (9)(35) -2.0% -2.2% -2.5% (341) (349) -3.0% 2019 Bond Loan Debt/GDP Ratio [RHS] Note: *) as of end of December 2019, **) Preliminary number using GDP assumption Weighted Average Debt Maturity of ~8.58 Years GS Nett Non-Debt Loan Nett Well Diversified Across Different Currencies Surplus (Deficit) Budget 9.6 9.39 9.4 9.13 9.2 9 8.8 8.6 8.4 8.2 8 7.8 2015 % of Yearly Issuance 100% 1% 1% 1% 1% 1% ATM 7% 6% 4% 9% 50% 5% 5% 80% 31% 29% 30% 27% 23% 60% 8.68 8.58 8.52 40% 8.37 57% 59% 58% 62% 66% 20% 0% 2016 2017 2018 2019 Nov-20 2016 2017 2018 2019 Nov-20 Source: Ministry of Finance ■IDR USD EUR ■ JPY ■ OTHER 82#84Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks Declining Exchange Rate Risks 45 25 20.65 20 20 17.52 50.00 ■VR Proportion Refixing Proportion 44.55 42.57 41.26 FX to GDP Ratio 41.03 ■FX Proportion 19.22 19.74 19.63 37.86 40.00 33.96 16.13 15 13.72 12.14 10.57 10.57 9.75 30.00 12.57 20.00 10 12.23 12.06 12.13 12.23 12.95 11.43 10.00 5 0 2015 Debt Maturity Profile 0.00 2016 2017 2018 2019 Nov-20 2015 2016 2017 2018 2019 Nov-20 Upcoming Maturities (Next 5 Years) IDR tn 600 500 400 158 18475182 129 174 300 1343290 96 52 200 314 302131297 19 241 100 2220207982432 27 45 39.29 40.4 41.03 40.07 40 35.98 34.67 ■IDR Denominated (Triliun Rp) 35 Other Currencies (Triliun Rp) 30 25.01 25.5 24.34 25 22.69 23.38 21.4 20 15 10 I 2020 套 2026 2027 2028 2029 2030 2031 2032 วกวา 2033 2034 2035 2036 2038 00 2037 WN 35 9 32 95112591098 27 87 61 681 38 39 38 30 2041 2044 2045 2046 2047 NW 2048 0 2049-2070 N 5050 9.92 10.63 8.35 8.07 8.12 6.46 2015 2016 2017 2018 2019 Nov-20 1 Year 3 Year 5 Year Source: Ministry of Finance 83 83#85Holders of Tradable Central Government Securities More Balance Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities 100% Foreign Ownership of Gov't Domestic Debt Securities by Tenor 100% 26.0% 80% 38.2% 37.5% 37.7% 39.8% 38.6% 80% 36.0% 37.0% 34.8% 33.03% 38.6% 44.7% 60% 60% 35.0% 39.0% 37.4% 35.6% 36.8% 34.1% 35.23% 37.8% 39.9% 40% 36.8% 42.0% 40.3% 40% 37.7% 38.6% 38.2% 37.5% 39.8% 26.02% 20% 39.0% 20% 17.8% 17.3% 22.0% 22.19% 18.4% 23.9% 22.5% 23.4% 20.3% 21.1% 11.8% 5.3% 5.1% 6.7% 4.19% 0% 1.3% 0% 3.5% 5.0% 2.4% 5.37% T T T T Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Nov-20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 30-Nov-20 >10 >5-10 ■Foreign Holders Domestic Non -Banks ■Domestic Banks >2-5 ■>1-2 Source: Ministry of Finance 84#86Ownership of IDR Tradable Central Government Securities (as of Nov 30th, 2020) Govt 6,77% Institution • 38,96% 54,27% NON-BANK Description Banks* Dec-16 Dec-17 Dec-18 399.46 22.53% 491.61 23.41% 481.33 20.32% BANK Govt Institutions (Bank Indonesia**) Bank Indonesia (gross) 134.25 7.57% 141.83 6.75% GS used for Monetary Operation Non-Banks 253.47 10.70% 262.49 9.54% 217.36 9.18% 273.21 9.93% 157.88 8.90% 179.84 8.56% 23.63 1.33% 38.01 1.81% -36.11 -1.52% 10.72 0.39% 1,239.57 69.90% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% (IDR tn) Nov 30,2020 1,453.38 38.96% 252.48 6.77% 772.18 20.70% 519.70 13.93% 2,024.13 54.27% Dec-19 581.37 21.12% Mutual Funds MUTUAL FUND 4,18% INSURANCE & PENSION FUND FOREIGN 14,34% 26,02% Insurance Company and Pension Fund Foreign Holders 85.66 4.83% 325.52 18.36% 665.81 37.55% Foreign Govt's & Central Banks Individual INDIVIDUAL OTHERS 3,92% 5,81% Others Total 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% 120.84 6.81% 146.88 6.99% 163.76 6.91% 194.45 7.06% 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95% 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93% 1,773.28 100% 2,099.77 100% 2,368.45 100% 100% 2,752.74 155.89 4.18% 534.88 14.34% 970.51 26.02% 183.94 4.93% 146.07 3.92% 216.78 5.81% 3,729.99 100% IDR 1.092,02T on January 24, 2020, foreign holders reach a record high in nominal terms. 66,89% Portion of foreign ownership in the mid & long term sector (≥ 5 years). 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 85#87Section 6 Commitment to Sustainability and Climate Change Mitigation BHINNEKA TUNGGAL IKA#88Commitment to Sustainability and Climate Change Mitigation Republic of Indonesia's Commitment to Sustainability Including Climate Change Mitigation Commitment to Sustainability Commitment to implement the United Nation's ("UN") Sustainable Development Goals ("SDG") in order to achieve the 2030 development agenda introduced by the UN. Through Presidential Regulation No. 59/2017 relating to the implementation of SDGs in Indonesia, the National Development Planning Agency was instructed to present a roadmap to implement the SDGS COMIC GROWTH Background Forefront of Environmental Protection Indonesia's Environmental Law was enacted in 2009 based on the concept of sustainable development, prevention, precaution and a "polluter pays" principle. To better address environmental issues, the Ministry of Environment and the Ministry of Forestry were merged to become the Ministry of Environment and Forestry in October 2014 11 13 Indonesia's Environmental Commitment and Objectives SUSTAINABLE 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 DEVELOPMENT GOALS Mitigation Adopted the National Action Plan for Greenhouse Gas Emission Reduction in 2011. Focuses on reducing greenhouse gas emission through a National Determined Contribution with an unconditional reduction target of 29% by 2030 compared to the 2010 baseline. An additional 12% reduction is conditional on technology transfer, capacity building, results for payment and access to finance. Environmental Fund Management Agency (BPLDH): established in October 2019 with the vision to create a trusted institution to attract national and international donors as well as effectively mobilize public and private fund in order to support protection programmes. Source: Green Sukuk Report 2020, Bank Indonesia, Ministry of Finance Adaptation National Action Plan on Climate Change Adaptation: National framework for adaptation initiatives mainstreamed the National Development Plan. into Medium Term Development Plan 2020-2024 (RPJMN): reflects Indonesia's strong commitment to shift to a low carbon development based approach to economic development and a more climate resilient path. Includes key priorities such as renewable energy and energy efficient development, forest conservation and reforestation, waste management, land intensification, food security as well as governance and institutionalization of investment and regulation. Biodiversity Indonesia is an archipelago made up of 17,504 islands with unique ecosystems containing a large number of diverse species. Indonesian Biodiversity Strategy and Action Plan 2015-2020: launched to provide an outline on how biodiversity could be utilized sustainably to improve economic development opportunities. and 87#89Indonesia'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 Project Evaluation and Selection Management of Proceeds of Green Bond and Green Sukuk 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 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 88#90Indonesia'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 Dark Green second-party opinion Renewable Energy The Framework Excluded Use of Proceeds for Resilience to Climate Change for Highly Vulnerable Areas and Sectory/Disaster Risk Reduction Medium to Dark Sustainable Transport Waste and Waste to Energy Management Green Tourism Sustainable Agriculture Light to Medium Light Green Energy efficiency Green Building Sustainable Management of Natural Resources New Fossil Fuel-Based Electric Power Large Scale Hydropower Plants > 30 MW Nuclear Assets Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) 89#91Indonesia's Green Initiatives: Financing Green Projects Development of Indonesia's Green Projects Financing The Republic of Indonesia has issued two sovereign global Green Sukuk, consecutively in February 2018 and 2019, with the total amount of USD 2 Billion 2019 Issuance USD 750 million 2018 Issuance USD 1.25 billion (or IDR 16.75 trillion) 29% allocated to Green investors* (or IDR 11.25 trillion) 29% allocated to Green investors* Each issuance comprised of: and 49% financing new projects Indonesia has continued to develop the Green market through the introduction of the first Retail Green Sukuk in the world (Savings Retail Sukuk, ST006) in November 2019. The ST006 is an investment instrument based on Sharia principles issued and sold to individual Indonesian citizens in the domestic market with an online platform. Allocation and impact of the Retail Green Sukuk is not included in the Green Sukuk Issuance Allocation and Impact Report issued in February 2020 2019 Issuance Allocation by Sector 2018 Iosuance 51% refinancing existing projects 040794 48% 772805.20 62% Allocation by Sector 202718.715 27% 200818,2018 1262.073 6%0 30.217.15b 11% 3918770 9%6 102,518472 0% $2,596,28 73,167 388 17% 7% 6% Renewable energy Resilience to Climate Change for Highly Vulnerable Arcas and Sectors/Disaster Risk Reduction Frergy efficiency GE 00 Waste and Waste to Energy Management Managed by 3 Ministries: Sustainable Transport 00% Ministry of Transnation Ministry of Energy and Mineral Arnarby Ministry of Puble: Warks and Housing 2010 Issuance magation adaptation Allocation by Activity 11% B3% 2018 Issuance mbcation adaption Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC. Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project *These statistics are based on the HSBC's in house assessment of investor ESG/SRI appetite and sophistication, which is developed from Market Intelligence and our own understanding from client conversations. A green classification is assigned to investors taking into account whether they have Green/SRI fund and/or strategy, whether they are signatories of a variety of SRI initiatives and with awareness to their broader activities/public announcements in the SRI market. Classifications evolve over time 17% 00 90#92Indonesia's Green Initiatives: Projected Environmental Benefits Environmental Benefits Arising from Indonesia's Green Sukuk Issuance CO 3,218,014.41 tonnes CO2e emissions reduced, towards a low carbon future + 1,319,620.41 355,394 1,319,620.41 1,543,000 SUSTAINABLE DEVELOPMENT GOALS INDUSTRY, INNOVATION 9 INFRASTRUCTURE 11 Breakdown by Sector AFFORDABLE AND CLEAN ENERGY DECENT WORK AND ECONOMIC GROWTH SUSTAINABLE CITIES AND COMMUNITIES 13 CLIMATE ACTION D 691.4 km of railway constructed, linking the nation 7,429 kWh of additional power generation capacity 2,056,200 of households benefitting from improved waste management Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) = 91#93Tangible Results from Indonesia's Green Sukuk Initiatives Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Target Impact / Emissions Reduction (2017) Renewable Energy Resilience to Climate Change Across the country Across the country Waste and Waste to Energy Management Across the country USD4.31 mil USD39.62 mil 134,872.41 tonnes of CO2e USD96.57 mil USD10.83 mil USD63.13 mil In order to achieve 48,000,000 tonnes target set in RAN-GRK Project Examples Financed Refinanced Planning, Development and Supervision of New, Renewable Energy and Energy Conservation Infrastructure (Refinancing and Financing) Construction of new and renewable energy infrastructure, with a focus on areas outside current electricity coverage. The project aims to improve the electrification ratio in off-grid areas across the country. Power generation is sourced from solar, mini hydro, and micro hydro power plants*. Locations spread across 19 provinces in 2017 (Refinancing) and the 2019 development of such infrastructure are spread across all provinces (Financing) • Construction of Flood Control Facilities (Financing) of Construction retention ponds/polders, flood canals, dikes, checkdam, and river maintenance and normalization. It aims to reduce the risk of flooding due to increased rainfall intensity and land use changes. Locations: West Java, Central Java, Yogyakarta, North Sumatera, West Sumatera, South Sulawesi, Maluku, Bali • Improvement of Municipal Solid Waste Management System (Refinancing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal sites. Locations: All provinces except East Kalimantan Improvement of Municipal Solid Waste Management System (Financing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal site. Locations spread across 11 provinces *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 (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the amount spent on each project 22 92#94Tangible Results from Indonesia's Green Sukuk Initiatives (Cont'd) Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance Proceeds from Indonesia's Green Sukuk Initiative has been Successfully Deployed to a Range of Eligible Green Projects Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Target Impact / Emissions Reduction (2017) Project Examples Financed / Refinanced in 2019 Sustainable Transport Jakarta, Sumatera, Java USD288.77 mil USD77.95 mil 1,543,000 tonnes of CO2e Development of Jabodetabek Urban Train (Refinancing) Construction of double-double track of the Jabodetabek urban railway network. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Construction and Management of Railways Infrastructure and Supporting Facilities in Sumatera (Refinancing and Financing) Construction of the Trans Sumatera Railway from Aceh to Lampung province. The Trans Sumatera Railway causes a mode shift from road transport to rail transport and logistics Locations: Aceh, North Sumatera, West Sumatera and South Sumatera • Track Infrastructure Supporting (Refinancing Financing) Construction Management of Double Railways and Facilities and and The construction of the double track railway project in the Trans Java railway's northern section, upgrading the single-track railway. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Energy Efficiency Across the country USD202.72 mil 355,394 tonnes of CO2e Installation of Navigation Facilities (Refinancing) Construction, rehabilitation and replacement of marine navigation aids and the installation of solar cells to power marine navigation aids. The shift towards solar powered marine navigation aids reduces the use of fossil-fuel sources of power. Locations: spread across 21 provinces in 2017 Improvement (Refinancing) of Land Transportation Traffic Management System Installation of road traffic equipment such as traffic signs, area traffic control systems (ATCS) and navigation aids for river and take crossings (SBNP) with energy-saving sensors. Locations: Jakarta, West Java, Central Java, Yogyakarta, East Java • Construction, Rehabilitation and Maintenance of Airport Infra-structures (Refinancing) The installation of solar-powered street lights and solar power plants. It improves the energy efficiency of airports and ensure electricity is sourced from renewable sources Locations: spread across 30 provinces in 2017 Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project 93#95Section 7 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#96Bank Indonesia's Policy Mix 2020 Synergy to Build Economic Recovery Optimism 1 1 1 1 1 1 1 1 1 Maintaining accommodative monetary policy stance (lowering policy rate 125bps in 2020). Maintaining rupiah exchange rate stabilisation 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 Controlling inflation thru Inflation Control Team in national and regional level. Supporting the 2020 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 thru Burden Sharing Scheme 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. 1 Monetary Policy Coordination with other Authorities Source: Bank Indonesia $ 2 Macro- prudential Policy 1 Implementing Macro prudential Intermediation Ratio (RIM) Implementing Macro prudential Liquidity Buffer (MLB) 1 Electronification: Social program, e-payment for Government 1 Financial technology National Payment Gateway (NPG) Payment System Policy 1 QRIS Standard) (QR Indonesia 5 4 Financial Market Deepening 1 Developing 1 Expanding National Clearing System (SKNBI) services market instruments for financing infrastructure 1 Developing financial market infrastructures Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS) 1 Domestic non-Deliverable Forward (DNDF) Developing the Commercial Papers (Surat Berharga Komersial) 95#97Bank Indonesia Policy Mix: December 2020 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 16th and 17th December 2020 to hold the BI 7-Day Reverse Repo Rate at 3.75%, while also maintaining the Deposit Facility (DF) rates at 3.00% and Lending Facility (LF) rates at 4.50%. % Rp Strengthening accommodative Strengthening macroprudential money Hold BI7DRR policy to stimulate growth of loans at 3,75% allocated to maintain priority to sectors and Maintaining rupiah stabilization policy inline with fundamental value market deepening market by expanding towards national external economic stability recovery, while strategy maintaining financial system resilience mechanisms, while strengthening monetary operation underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in forex market Promoting lower lending rates through close supervision and public communication coordination with in the Indonesian Financial Services Authority (OJK) in terms of interest rate transparency in the banking industry, while Strengthening integrated bank supervision coordination between BI, OJK and Indonesia Deposit Insurance Corporation (LPS) to maintain financial system stability Accelerating digital transformation synergy strengthen & to economic recovery momentum with robust payment system policy and faster implementation of Indonesian Payment System Blueprint 2025 Source: Bank Indonesia 96 96#98Strengthened Monetary Expansion and Fiscal Synergy PRINCIPLES OF FUNDING AND BURDEN SHARING PRUDENT Maintaining the credibility of Monetary Policy in the effort to Maintain Economic Stability MARKET MECHANISM TRADABLE & MARKETABLE MEASURED LAST RESORT SUN/SBSN tradable maintaining inflation in the target range GOVERN One-off Policy in 2020 Prioritize good governance SUSTAINABLE Source: Bank Indonesia 1(as of 15 December 2020) Bl as the back-stop for Non-public Goods scheme • . Bank Indonesia continues its commitment to funding the 2020 state budget through SBN purchases in the primary market in accordance with Act No. 2 of 2020, through market mechanisms and private placement, as part of the efforts to accelerate the national economic recovery program, while maintaining macroeconomic stability As of 15th December 2020, Bank Indonesia had purchased Rp75.86 trillion worth of SBN in the primary market through market mechanisms pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 16th April 2020, including auction schemes, greenshoe options (GSO) and private placement Meanwhile, funding realisation and burden sharing to fund public goods in the 2020 state budget by Bank Indonesia through private placement in accordance with the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020 currently stand at Rp397.56 trillion overall, therefore, Bank Indonesia has purchased SBN for funding and burden sharing in the 2020 state budget for the national economic recovery program totaling Rp473.42 trillion Bank Indonesia has also realised burden sharing with the Government to fund non-public goods-SME totaling Rp114.81 trillion and non-public goods-corporate totaling Rp62.22 trillion pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020 Through such synergy, the Government can focus on accelerating state budget realisation in order to drive national economic recovery momentum 97#99Further Strengthening of an Accomodative Bank Indonesia's Policy Mix BGM: Lower BI 7-day Reverse Repo Rate Stabilization Of The Rupiah 1. BGM 19-20 FEB, 2 MAR, AND 18- 19 MAR 2020 Lower BI7DRR by 25 bps in February to 4,75%, and other 25 bps in March to 4,50% 2. Lower a 50bps of daily rupiah reserve requirement (RR) for the banks engaged in export-import financing, and expanding rupiah RR cut for SME 3. Lower Foreign Exchange Reserve Requirement from 8% to 4% Money Market & 4. Rupiah Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy Board of Governor Meetin Source: Bank Indonesia accounts (vostro) of foreign BGM 13-14 APRIL AND 18-19 MAY 2020 1. Hold the BI 7-Day Reverse Repo Rate at 4.50% for external stability & stimulate growth 2. Strengthening intensity of intervention policy the triple 3. Providing liquidity for the banking industry on restructuring MSME loans and ultra-micro with formal loans 4. Lower the rupiah RR ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks investors as underlying of DNDF 5. Strengthening Monetary operations and Islamic financial market for deepening through FLISBI, PASBI and SIPA 5. Domestic custodian bank investors global 6. Triple intervention: spot, DNDF, & purchasing SBN in the secondary market 7. Daily FX swap auction and Repo auction of SBN 8. Liquidity injection through monetary operation 9. Relaxation of Macro- prudential Intermediation Ratio campaign to 10. QRIS SME, traditional markets, students and worship places 11. Lower SKNBI cost by 6. Relaxing the additional demand deposit obligations on the MIR 7. Raised the MLB 200bps for conventional commercial banks and by 50bps for Islamic banks 8. Increasing the non-cash payment instruments uptake 9. Strengthening policy mix and coordination with the Government & other authorities 10.Accelerating implementation of digital economy & finance BGM 17-18 JUNE 2020 AND 15-16 JULY 2020 1. Lower BI7DRR to 4,00%, 25 bps in June and 25 bps in July 2. Maintaining Rupiah exchange rate stabilization policy in line with the currency's fundamental value market mechanisms 3. Providing and reserve requirement remuneration of 1.5% per year for banks meeting daily and average rupiah reserve requirements 4. Strengthening a synergized expansive monetary policy response with accelerated fiscal stimuli from the Government: ✓ firmly committed to funding the APBN 2020 through SBN purchases in the primary market to finance the budgets for healthcare, protections, social sectoral government ministries government and agencies & local ✓ Burden sharing with the Government to accelerate MSME and corporate sector recoveries 5. Expediting payment system digitalization to hasten the digital economy and finance implementation as part of the economic recovery efforts BGM 18-19 AUGUST 2020 BGM 16-17 SEPTEMBER 2020 1. Hold BI7DRR at 4,00% 2. Focusing on the quantity channel by providing liquidity to stimulate economic recovery, including supporting Government in accelerating 2020 state budget realization 3. Maintaining rupiah stabilization policy in line with fundamental value & market mechanisms 4. Strengthening MO strategy in order to accelerate monetary policy transmission 5. Accelerating money market and foreign exchange market deepening through infrastructure development, including ETP & CCP 6. Lowering the minimum limit of DP on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles 7. Extending the 50bps lower on rupiah reserve requirements, as an incentive for banks disbursing loans to SMEs and for export-import activity and to non-SMEs operating in priority sectors as stipulated in the PEN, from 31 Dec' 20 previously until 30 Jun'21; of 8. Accelerating development market money instruments to support corporate and SME financing in line with the national economic recovery program 9. Strengthening synergy with the banking industry, FinTech, Government and relevant authorities to accelerate digitalization, amongst others, by supporting SME digitalization and the Made in Indonesia National Movement (GERNAS BBI), and promoting the use of QRIS for e-commerce 10. Expanding QRIS acceptance to bolster economic recovery and accelerate SME by extending 0% MDR for micro-businesses from 30 Sept'20 previously until 31 Dec'20 11. Strengthening policy implementation to stimulate SMEs through corporatization, increasing capacity, access to finance as well as digitalization in line with Gernas BBI 12. Strengthening the digital economy & finance ecosystem through the use of digital payment instruments & collaboration between the banking industry, FinTech & e-commerce to support PEN BGM 18-19 NOVEMBER 2020 1. BI7DRR lower 25 bps at 3,75% for maintain external stability and inflation is predicted to remain low 2. Focusing on the quantity channel by providing liquidity stimulate economic supporting to recovery, including Government in accelerating 2020 state budget realization 3. Maintaining rupiah stabilization policy in line with fundamental value & market mechanisms 4. Strengthening MO strategy to accelerate MP transmission 5. Accelerate the deepening of the development of the foreign exchange market and the domestic financial market through the implementation of BPPU 2025 6. Maintain a CCB ratio of 0%, RIM 84- 94%, PLM 6% as well as 6% repo flexibility and LTF / FTV ratio for property loans. 7. Strengthening macroprudential policy to stimulate inclusive financing, in particular for small and medium enterprises (SMEs) 8. Strengthening payment system digitalization order build economic to in recovery momentum through several digital transformation initiatives, including: expanding access to digital financial economy services for SMES & public, collaboration between banks & fintech; acceptance promoting of digital through the QRIS broader payments 9. Reducing service fees for the BI-RTGS, Extending the period of lower service fees for the SKNBI, & lower payment limit and late payment fees for CC#100Stable Monetary Environment Despite Challenges Well Maintained Inflation Ensured Price Stability 9 (%) 8.00 20 8 18 CPI (%, yoy) rhs I Strengthened Monetary Policy Framework 19 August 2016 The New Monetary Operation Framework Core (%, yoy) - lhs 7 7.00 LF Rate: 7.00 16 14 Administered (%, yoy) - lhs Volatile Food (%, yoy) - lhs2 6 BI Rate: 6.50 6.00 5 12 4 5.00 10 1.59 3 8 2 4.00 6 2.41 4 1 1.67 3.00 2 0.56 0 0 2013 2014 2015 2016 2017 2018 2019 Nov-2020 Rupiah Exchange Rate Fared Relatively Well Compared to Peers *) YTD 2020 vs 2019 TRY -23.70 BRL -23.04 -18.65 20.71 ZAR -5.52 -12.38 INR -3.07 -4.88 IDR -1.72 -2.75 % yoy 18.0 16.0 14.0 12.0 10.0 THB point-to-point -0.83- -0.87 MYR 1.00 average -1.47 SGD 1.26 -1.20 JPY 4.97 1.96 PHP 5.38 4.19 KRW 5.69 a.o 16-Dec-20 CNY -1.39 -0.01 6.59 EUR 8.09 ANO NA O 6.0 2.0 0.0 -2.0 -4.0 1.67 -30.0 -25.0 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 Jan-16 Mar-16 May-16 Credit Growth Profile Jul-16 Q3-2016 Q1-2017 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Total Growth Working Capital Loans Investment Loans Jan-20 Mar-20 LF Rate: 4.50 BI 7Day RR Rate: 3.75 DF Rate: 3.00 May-20 Jul-20 Sep-20 Nov-20 2.0 20 0.1 -2.2 2015 2016 2017 2018 2019 2020 Source: Bank Indonesia *) Source: Reuters and Bloomberg 99999#101Regional Inflation Remains Under Control ...supported by maintained inflation in all regions Inflation remains low on subdued domestic demand and adequate supply, NOVEMBER 2020 (%, YOY) SUMATRA 1,49 MAS NATIONAL INFLATION NOVEMBER 1,59% (yoy) Inf>4% 3% <Inf≤ 4% 2% <Inf≤3% Aceh 2,8 IM Riau Islands 0,8 North Sumatra 1,4 Bengkulu 1,1 Riau 1,9 Babel Islands 0,6 West Sumatra 1,7 Lampung 1,7 South Sumatra 1,3 Jambi 2,6 KALIMANTAN 1,31 221 West Kalimantan 2,3 South Kalimantan 1,3 East Kalimantan 0,8 Central Kalimantan 1,2 North Kalimantan 1,9 SULAWESI 1,29 1.26 1.17 Banten 1,4 DKI Jakarta 1.7 1.84 LA 48 H West Java 2,0 Inf 2% L Source: BPS, calculated JAVA 1,71 Source: Central Bureau of Statistics of Indonesia (BPS), calculated Central Java 1,6 East Java 1,5 DI Yogyakarta 1,3 11.99 Bali 0,8 031 West Nusa Tenggara 0,5 East Nusa Tenggara 0,6 BALI-NUSA TENGGARA 0,69 1.15 Gorontalo 0.5 12P North Sulawesi -0,3 Central Sulawesi 2,0 1.3% 1.38 1.30 108 West Sulawesi 2,2 South Sulawesi 1,6 South-East Sulawesi 1,2 MALUKU-PAPUA 1,20 Maluku 0,7 North Maluku 1,7 Papua 1,3 West Papua 1,6 100#1024 Strategies to Achieve the Inflation Target 2018-2019 Target Achieving inflation at 3,5%±1% Maintaining core inflation Maintaining volatile food stability at 4-5% Controlling administered price inflation 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 101#103Bank Indonesia Policy Mix: May 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Mechanism for Bank Indonesia to purchase SBN in the primary market to finance the State Revenue and Expenditure Budget (APBN) - Above the Line In accordance with the joint decree issued by the Minister of Finance and Bank Indonesia Governor, SUN/SBSN purchases by Bank Indonesia in the primary market are based on general practices through transparent market mechanisms to maintain good governance. The mechanism for Bank Indonesia to purchase SUN/SBSN in the primary market is divided into three stages as follows: (i) Phase I: As a non-competitive bidder, Bank Indonesia can purchase SUN/SBSN in the primary market based on the following provisions: (iii) ■ Yield commensurate with the weighted average yield of the auction on the same day ☐ Maximum SUN bid of up to 25% of the target auction maximum and maximum bid on SBSN > 1 year of up to 30% of the target auction maximum. Phase II: A greenshoe option based on the following provisions: ■ Yield commensurate with the weighted average yield of the auction on the previous day. ■ If the incoming bid is lower than the auction target, the maximum offer is the same as the previous offer. Phase III: Private placements based on the following provisions: Refer to the latest market price published by the Indonesia Bond Pricing Agency (IBPA). ☐ Private placements are implemented if the Government seeks additional financing based on the agreed terms and conditions. Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. SBN purchases by Bank Indonesia in the primary market as a follow-up action to Act No. 2 of 2020 currently stand at IDR23.98 trillion, with IDR166.21 trillion purchased in the secondary market for stabilisation purposes. Consequently, BI holdings of SBN were recorded at IDR443.48 trillion on 26th May 2020. 102#104Bank Indonesia Policy Mix: May 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA National Economic Recovery and state budget financing mechanism - Below the Line Bank Indonesia is providing liquidity to the banking industry through a repo mechanism for SBN in order to fund loan restructuring as part of the national economic recovery. If SBN purchases are insufficient, banks can apply to the government for fund placements, funded through SBN purchases by Bank Indonesia (below the line). □ In accordance with Government Regulation No. 23 of 2020, government fund placements will only occur at participating banks if SBN available for repo to Bank Indonesia are insufficient, provided the participating bank is healthy based on a soundness assessment conducted by OJK and is holding tradeable government securities (SBN), Bank Indonesia certificates of deposit (CD), Bank Indonesia Certificates (SBI), Bank Indonesia Sukuk (SukBI) and Islamic Bank Indonesia certificates (SBIS) that have not been repo totaling more than 6% of third party funds. Liquidity from Bank Indonesia to the banking industry for loan restructuring is provided through the following mechanisms: (i) (ii) (iii) (iv) Phase I: SBN Repo Total SBN held by the banking industry as of 14th May 2020 was recorded at IDR886.0 trillion. After meeting the Macroprudential Liquidity Buffer (MPLB) requirements for the banking industry, approximately IDR563.6 trillion must be repo to Bank Indonesia prior to applying for government fund placements. The current position of repo SBN to Bank Indonesia stands at IDR43.9 trillion. Phase II: Government fund placements in accordance with Government Regulation No. 23 of 2020 Phase III: Repo SBN - Macroprudential Liquidity Buffer (MPLB) ■ Pursuant to Bank Indonesia regulations (Macroprudential Liquidity Buffer - MPLB), banks are required to maintain minimum SBN totaling 6% of deposits (IDR330 trillion) for liquidity management in addition to the 3.5% reserve requirements ■ All SBN, totaling IDR300 trillion, can be repo through monetary operations in accordance with the Bank Indonesia Act before applying for short-term liquidity loan/financing facilities (PLJP/S).Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. Phase IV: Short-term liquidity loan/financing facilities (PLJP/S)in accordance with Act No. 2 of 2020 Banks can apply for the short-term liquidity loan/financing facilities (PLJP/S)if the SBN already repoed are nearly depleted. Pursuant to Act No. 2 of 2020, short-term liquidity loan/financing facilities (PLJP/S) are only available to solvent and healthy banks based on OJK requirements and assessments, with adequate repayment capacity and guaranteed by current loans registered at Bank Indonesia. 103#105Bank Indonesia Policy Mix: April 2020 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 13th and 14th April 2020 to hold the BI 7-Day Reverse Repo Rate at 4.50%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.75% and 5.25%. Rupiah Reserve Requirement Lowered by 200 bps 1) To stabilize and strengthen rupiah exchange rates, Bank Indonesia has strengthened the intensity of triple intervention policy through the spot and Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the secondary market. 2) To support national economic recovery efforts from the deleterious COVID-19 impact, Bank Indonesia will increase monetary easing through quantitative easing as follows: a. Expand monetary operations by providing banks and the corporates a term-repo mechanism with SUN/SBSN underlying transactions of tenors up to one year. b. Lower the rupiah reserve requirement ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. c. Relax the additional demand deposit obligations to meet the Macroprudential Intermediation Ratio (MIR) for conventional commercial banks as well as Islamic banks/Islamic business units for a period of one year, effective from 1st May 2020. 3) To strengthen liquidity management in the banking industry and in relation to the lower rupiah requirements, Bank Indonesia has raised the Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. The banking industry is required to meet the additional MLB through purchases of government issued SUN/SBSN in the primary market. 4) To increase the uptake of non-cash payment instruments in order to mitigate the COVID-19 impact, Bank Indonesia is increasing various payment system policy instruments as follows: a. Supporting government programs to accelerate non-cash social aid program (bansos) disbursements to members of the public in conjunction with payment system service providers by expediting the electronification of relevant social programs, including the Family Hope Program (PKH), Noncash Food Assistance Program (BPNT), Pre-Employment Card and Smart Indonesian Card (KIP). b. Increasing public socialization activities in collaboration with payment system service providers to increase the uptake of non-cash payment instruments through digital banking, electronic money and broader QRIS acceptance. c. Relaxing credit card policy by lowering the upper limit for credit card interest, minimum payment requirements and the penalties for late payments, while supporting credit card issuer policy to extend the due date for customers. 104#106Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate the COVID-19 impact is as follows: 1) Lower the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively; 2) Intensify triple intervention policy in the spot and DNDF markets and purchasing SBN in the secondary market; 3) Reduce the foreign currency reserve requirements for conventional commercial banks from 8% to 4%; 4) Extend the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as well as increase the frequency of FX Swap auctions to daily in order to ensure adequate liquidity; 5) Expand the types of underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia; 6) Lower the rupiah reserve requirements by 50bps for banks that are engaged in export-import financing, as well as the financing of MSMEs and other priority sectors; 7) Loosen the Macroprudential Intermediation Ratio (MIR); 8) Provide hygienic currency fit for circulation, reduce the costs of the National Clearing System (SKNBI), maintain a QRIS Merchant Deposit Rate (MDR) of 0% for micro-merchants, and support non-cash disbursements of various government programs, including the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia Card. Bank Indonesia reiterated that rupiah exchange rates are currently adequate and the outlook scenario formulated for the main macroeconomic indicators is a form of forward-looking anticipatory measure towards prevention through joint efforts, while Bank Indonesia continues to maintain rupiah stability. 105#107Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate the COVID-19 impact is as follows: Bank Indonesia also backs promulgation of the Government Regulation in Lieu of Law in order to relax prevailing laws to mitigate the COVID-19 impact as an anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary measures, unconventional policies and policies that exceed previous jurisdiction. To that end, Bank Indonesia has reiterated its authority in accordance with Government Regulation in Lieu of Law (Perppu) No. 1 of 2020 as follows: 1) Expansion of Bl authority to purchase long-term government securities (SBN) and government Islamic securities (SBSN) in the primary market in order to assist the Government finance the handling of the COVID-19 impact on financial system stability. 2) SBN will be purchased in the primary market by Bank Indonesia as a last resort if the market is unable to fully absorb the SBN issued by the Government. Further provisions will be regulated in conjunction with the Minister of Finance and the Governor of Bank Indonesia based on the following considerations: financial market conditions and the impact on inflation. 3) As an anticipatory measure, Bank Indonesia will purchase repo securities held by the Deposit Insurance Corporation (LPS) in order to finance the handling of solvency issues at systemic and non-systemic banks; 4) Provision of short-term liquidity loan or short-term liquidity financing facilities in compliance with sharia principles to systemic and non-systemic banks; 5) Foreign exchange flow management for residents. The use of foreign exchange by residents, including provisions for the surrender, repatriation and conversion of foreign exchange to maintain macroeconomic and financial system stability as follows: 6) Bank Indonesia would like to stress that this measure is not a form of foreign exchange control but policy to manage foreign exchange applicable only to residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign direct investment (FDI) are still required for the Indonesian economy, thus existing policy permitting the free flow of foreign exchange by foreign investors remains effective. 7) Regulating foreign exchange amongst residents is consistent with international prudential principles for macroeconomic management, particularly under economic distress, such as the current COVID-19 pandemic. 106#108Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission • BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Bank Indonesia has agreed a repurchase agreement line (repo line) with the US Federal reserve worth USD60 billion The agreement may be used by Bank Indonesia to fulfil US dollar liquidity if required. The repo line facility for Foreign and International Monetary Authorities (FIMA) has only been extended to a few central banks, thus indicating confidence in Indonesia's economic outlook and the macroeconomic policies implemented. In addition, Bank Indonesia has also established repo line facilities with several other institutions, namely the Bank for International Settlements (BIS), worth USD2.5 billion, the Monetary Authority of Singapore (MAS), USD3 billion, as well as other central banks in the region valued at USD500 million-USD1 billion. The agreements will strengthen Bank Indonesia's second line of defence, encompassing Bilateral Currency Swap Arrangements (BCSA) with several other central banks, namely the People's Bank of China (PBoC), worth CNY200 billion (equivalent to USD30 billion), the Bank of Japan (BOJ), USD22.76 billion, Bank of Korea, KRW10.7 trillion (equivalent to IDR115 trillion), and the Monetary Authority of Singapore (MAS), USD10 billion. 107#109Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission . B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Bank Indonesia Issued Implementing Provisions for Auction of Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the Primary Market Bank Indonesia issued Board Member of Governors Regulation No. 22/5/PADG/2020 on Auction of Government Debt Securities and/or Government Islamic Securities in the Primary Market to Maintain State Financial Management Sustainability as Implementation of Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management of Corona Virus Disease 2019 (Covid-19) and/or Encounter the Threat to National Economy and/or Stability of Financial Systems. The regulation starts to take effect on 20 April 2020. The regulation serves as a follow-up to Government Regulation in Lieu of Law Number 1 of 2020, granting authority to Bank Indonesia among others to purchase Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the primary market. It is necessary as a funding source for the government to recover the national economy including maintaining state financial management sustainability including SUN and/or SBSN issued in response to COVID-19 pandemic. Purchase of SUN and/or SBSN in the primary market is based on principle that Bank Indonesia is a last resort if the market capacity is unable to purchase them and/or result in high yield increase. Further, this regulation specifies the following: 1) Bank Indonesia holds auction of SUN and/or SBSN and auction of additional SUN and/or SBSN for long-term SUN and/or SBSN in the primary market as a follow-up to the implementation of Government Regulation in Lieu of Law Number 1 of 2020. 2) Provisions for offer quote and participants of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Finance Minister Regulation on auction of SUN and/or SBSN in the domestic primary market. 3) Bank Indonesia may quote an offer to purchase long-term SUN and/or SBSN in auction of SUN and/or SBSN and auction of additional SUN and/or SBSN in the following manners: a. directly without using the main dealer and/or SBSN main dealer; b. non-competitive bid. 4) Implementation of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Bank Indonesia provisions for auction of Government securities in the primary market provided that they are not in contravention of this regulation. 108#110Bank Indonesia Policy Mix: March 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA To strengthen coordination and the various policy measures already taken, Bank Indonesia on March 2nd 2020 introduced a variety of five follow-up policy measures to maintain monetary and financial market stability as well as mitigate the COVID-19 risks 1) Intensify triple intervention policy to ensure rupiah exchange rates move in line with the currency's fundamental value and market mechanisms. To that end, Bank Indonesia will optimize its intervention strategy in the DNDF market, spot market and SBN market in order to minimize the risk of increasing rupiah exchange rate volatility. 2) Lower the FX reserve requirements for commercial banks from 8% to 4%, effective 16th March 2020, which will increase FX liquidity in the banking industry by around USD3.2 billion and simultaneously alleviate foreign exchange market pressures. 3) Lower the rupiah reserve requirements by 50bps for banks financing export-import activity in coordination with the Government. Effective from 1st April 2020 for a period of nine months before a further review, this policy is expected to facilitate export-import activity through lower costs/fees. 4) Expand the range of underlying transactions available to foreign investors in order to provide alternative hedging instruments against rupiah holdings. 5) Reaffirm that global investors can utilize global and domestic custodian banks to conduct investment activity in Indonesia. 109#111Bank Indonesia Policy Mix: March 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Bank Indonesia on the Board of Governors Meeting 18th and 19th March 2020 has reinforced its policy mix towards mitigating the risk of COVID-19 transmission, while maintaining money market and financial system stability and catalyzing economic growth momentum through the following policy measures: 1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market. 2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March 2020. 3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate liquidity, effective from 19th March 2020. 4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes. 5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non- Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than 23rd March 2020. 6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors, effective from 1st April 2020. 7) Strengthening payment system policy to support COVID-19 mitigation efforts by: providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions; encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank Indonesia from IDR600 to IDR1 and from customers to the banking industry from a maximum of IDR3,500 to IDR2,900, effective from 1st April 2020 until 31st December 2020; and supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), Pre-Employment Card and College Smart Indonesia Card. 110#112Principles 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. Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. reserve 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 Effective Date Fixed RR: 5% Fixed RR: 4.5% Average RR: 1.5% RR: 6.5% Average RR: 2% RR: 6.5% 16th July 2018 2.5% (from 1.5% RR) 0% Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% 16th July 2018 Average RR: 2% RR: 8%* 1st October 2018 Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% 1st Average RR: 2% RR: 5%* 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 111#113Relaxing Reserve Requirement Ratios Lower reserve requirements, effective 1st May 2020 Regulation 1 2 3 4 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% Source: Bank Indonesia 112#114Principles 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 113#115Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) 1 MIR Accounting Formula Credit Owned Bond Deposit Issued Bond 2 Rate and Parameters Ceiling 94% • Floor 84% 3 Scope of credit/financing . and deposits to calculate MIR MIR Sharia . MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit Issued Sharia Bond Ceiling 94% • Floor 84% • Minimum • 14% Capital Adequacy Requirement • Minimum Capital Adequacy Requirement 14% Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 Credit: rupiah and foreign currency Deposits in rupiah and a foreign currency: • (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds Monthly Commercial Bank Reports Corporate bonds and/or corporate sukuk • For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank • Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 • Financing: rupiah and foreign currency Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds Monthly Sharia Bank Reports Corporate bonds and/or corporate sukuk • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering 4 Source of Data 5 Criteria for securities held • • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 114#116Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 6 Percentage of the securities held 7 Criteria for securities issued 100% (MTN) medium-term notes (MTN), floating rate notes • sharia-compliant medium-term notes (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering • Equivalent to investment grade rating affirmed by a rating agency 8 88 Securities Reporting 9 Scope of deposits to meet DD MIR /DD MIR Sharia 10 Relaxation of DD MIR/Sharia DD MIR • Administrated by an authorised securities institution Offline delivery mechanism (email) • Average daily total deposits in rupiah at all branch offices in Indonesia . Including rupiah liabilities to a resident and non-resident third-party nonbank, consisting of: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • Average daily total deposits in rupiah at all branch offices and sharia business units in Indonesia Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities • Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation • The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK) • Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 115#117Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backgrounds • • • • In response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. BI relaxed MIR/sharia MIR policy in March 2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity. Considering the potential of bank funding sources that are not included in the MIR ratio, for example the expanding share of loans/financing received by banks, Bl decides to adjust MIR/sharia MIR policy in order to optimize loans/financing received for bank lending. This policy to stimulate credit growth will comply with prudential principles. Therefore, Bl is only encouraging banks with low non-performing loans and adequate capital resilience to expand credit/financing. *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia Main Regulatory Points Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement. Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: Credit + Owned Bond Deposit + Issued Bond + Loan/Financing Received Lower disincentive parameter MIR/sharia MIR RR= Lower Disincentives Parameter X (Lower Bound MIR/Sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 14% KPMM ≤ 19% KPMM 19% Lower Disincentives Parameter 0.00 0.00 0.10 0.15 Upper disincentive parameter MIR/sharia MIR RR= - of 0.2 x (Bank's MIR/sharia MIR Upper Bound of MIR/Sharia MIR Target - ) x Deposit *This disincentive applies for banks with CAR below 14%. The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA). 116#118Principles of Macroprudential Liquidity Buffer (MLB) Regulation 1 Rate 2 Components 3 Calculation Formula 4 Flexibility 5 Sources of Data on Deposits MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks) 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) • Securities denominated in rupiah held by a conventional commercial bank that may be used for monetary operations (including SBI/SDBI/SBN); and • Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits • Monthly Commercial Bank Reports • Rupiah deposits to calculate MLB are the average daily total deposits at all branches in Indonesia • Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • • Monthly Sharia Bank Reports Rupiah deposits to calculate sharia MLB are the average daily total deposits at all branches in Indonesia Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 117#119Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020. Regulation Before After 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% of rupiah deposits 6% of rupiah deposits 2 Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits Regulation Credit card policy, effective 1st May 2020. 1 Lower upper limit on credit card interest 2 Temporary reduction of minimum payment requirements 3 Temporary reduction of late payment penalties 4 Supporting credit card issuer policy to extend the due date for customers Before 2.25% per month 10% 3% or maximum of IDR150,000 After 2% per month 5% 1% or maximum of IDR100,000 Issuer discretion Effective Period 1st May 2020 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 118#120Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection* 1. Increasing opportunities of first time buyers to fulfill their housing needs through housing loan, specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio for property financing as shown in the table below. PROPERTY LOAN & PROPERTY FINANCING BASED ON MURABAHAH & ISTISHNA DEEDS 2. 3. Relaxing the amount of loan/financing facility through indent mechanism to a maximum of 5 facilities without taking account of the orders Adjusting the arrangement of stages and amount of property loan/financing disbursement of indent property: Stage and Disbursement Rate House/Office House/Shop Current Regulation Conditions PROPERTY FINANCING BASED ON MMQ & IMBT DEEDS Current Regulation Current Regulation Relaxation PROPERTY TYPE PROPERTY TYPE Property Loan & (m²) Financing Property Loan & Financing Property Financing Relaxation Property Financing (m²) I Ill etc 1 Il etc etc Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 80% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling etc HOUSE Type >70m² HOUSE 85% 80% 75% 80% Type 22-70m² 85% 80% 85% Type>70m Type 22-70m² 90% 85% 80% 85% 90% 85% 90% Type <=21m² Type <=21m² APARTMENT APARTMENT Apartment Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 70% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of ceiling Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Type >70m² 85% 80% 75% 80% Type>70m² 90% 85% 30% 85% Relaxation Type 22-70m² 90% 85% 80% 85% Type 22-70m² 90% 85% 80% 85% Type <=21m² 85% 80% 85% Type <=21m² 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% 66 "The LTV rate depends on each bank's risk management Stage and Disbursement Rate House Office House/Shop House Max. Cumulative disbursement up to 30% of ceiling Max. Cumulative disbursement up to 50% of celling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia Conditions After loan deeds Footing finished Roof toop finished Letter of acceptance accompanied with deeds of purchase and covernote 119#121Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* 1. 2. 3. Prudential aspects of Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank's risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debtor and developer/seller's bank account. LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. Source: Bank Indonesia 120#122Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. • Policy Backgrounds In response to global and domestic economic developments, Bl is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be given to borrower with strong repayment capacity and low credit/financing risk. Main Regulatory Points 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing. a. Bl decides to relax the LTV ratio for property loans and FTV ratio for property financing by 5% from current ratio as follows: Landed House Type >70 Type >21-70 Type $21 Table 1. Current LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Financing based on Akad Murabahah & Akad 1 Istishna Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad Property Financing based on akad MMQa & akad IMBT 22 Property Financing based on akad MMQ & akad IMBT 1 22 1 Istichna 2 23 1 80% 85% Apartment Type >70 80% Type >21-70 85% Type ≤21 8.5% Office House 85% Landed House Type >70 Type >21-70 Type ≤21 2 23 85% 80% 70% 90% 80% 60% 70% 85% 75% 65% - 80% 70% 85% 80% 70% 60% 85% 75% 65% 85% 90% 80% 70% 90% 80% 70% 85% 80% 70% 80% 70% 85% 80% 70% 80% 70% Table 2. Adjusted LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Property Financing Does Not Meet NPL/NPF Criteria Property Financing Property Financing Financing based on Akad Murabahah & Akad based on akad MMQ & akad IMBT based on Akad Murabahah & Akad based on akad MMQ & akad IMBT Istishna 22 1 22 1 Istishna 2. 23 1 2 23 1 85% 90% 90% 85% 95% 75% 85% 65% 90% 80% 75% 85% 70% 75% Apartment • Bl will regularly evaluate this policy at least once a year. Type >70 85% 90% 85% 75% 65% 90% 80% 70% Type >21-70 90% 90% 95% 85% 75% 95% 85% 75% Type $21 9.0% 90% 85% 75% 85% 75% Office House 9.0% 90% 85% 75% 85% 75% Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 121#123Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Main Regulatory Points 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria standards/certificates Table 3. LTV/FTV Ratio for Green Property Meets NPL/NPF Criteria Property Loan & Property Property Financing Financing based on Akad Murabahah & Akad Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad issued by refers a nationally to the Istishna 1 or Landed House Type >70 Type 21-70 internationally recognized environmental institution. b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows: İ. For buildings 2500m², the bank may conduct a self-assessment using the tools/applications provided by a recognized institution. ■ For buildings > 2500m², the assessment must be conducted by a recognized institution; ■ For new buildings constructed in an area by one developer or group of developers, the assessment must be conducted by a recognized institution and the certificate must be submitted by the developer Additional incentive for green property on LTV ratio for property loans and FTV ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows: Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 Type 121 Apartment Type 70 Type>21-70 Type $21 Office House based on akad MMQ & akad IMBT 22 1 22 1 90% 95% Istishna 23 Property Financing based on akad MMO & akad IMBT 2 23 ד 95% 90% 80% 90%. 70% 95% 85% 75% 80% 90% 80% 90% 95% 90% 80% 70% 95% 85% 75% 95% 9596 90% 80% 90% 80% 95% 95% 90% 80% 90% R0% 95% 95% 00% 80% 90% 80% of Down Payments 3. Adjustment Loans/Financing on Automotive a. Down Payments on Automotive Loans/Financing is adjusted as follows: i. Relaxation on the down payments of automotive loans automotive financing 5%-10% from current regulations; or ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment of down payments of automotive loans/financing in points a and b is as follows: Table 4. Current Down Payment on Automotive Loan or Financing Table 5. Adjusted Down Payment on Automotive Loan or Financing Current Down Payment Adjusted Down Payment Meets MPUMPF Does Not Meet Criteria Does Not Meet MPL/NPF Meets NPL/NPF Criteria NPL NPFC Criteria 2-Wheeled 20% 25% 2-Wheeled 15% 20% 3-Wheeled or more non productive) 3-Wheeled or more aroductive] 253 30% 3-Wheeled or more (non productive) 15% 25% 20% 3-Wheeled or more productivel 10% 15% 122#124Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Main Regulatory Points 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; ¡¡¡. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Table 6. Down Payment on Green Automotive Loan or Financing 2-Wheeled Down Payment on Green Automotive Loan or Financing Does Not Meet NPL/NPF Meets NPL/NPF Criteria 10% 10% 5% Criteria 15% 20% 10% 3-Wheeled or more (non productive) 3-Wheeled or more (productive) Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2nd, 2019 Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 123#125Adjustment 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/FinancingThe 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 124#126Improving the Effectiveness of Monetary Policy Transmission Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars B Reformulation of Monetary Policy Operational Framework Implementation of BI 7 Day Reverse Repo Rate Enhancement of monetary policy signal Implementation of Money Market Deepening Program Enhancement of instruments and transactions Implementation of Reserve Requirement (RR) Averaging Enhancement of banking liquidity management Blueprint for Money Market Development (BPPU) 2025 launched on Dec 14th, 2020 to build a reliable and efficient ecosystem for money market development in Indonesia Initiative I Promoting Digitalization and Strengthen Financial Market Infrastructures (Trading venue, central counterparty, BI-SSSS, BI-RTGS, trade repository) Initiative II Strengthening Effectiveness of Monetary Policy Transmission (Repo, IndONIA and JIBOR, Overnight Index Swap, DNDF, LCS) Initiative III Developing Economic Financing Sources and Risk Management (long-term hedging, sustainability and green financing, investor retail, asset securitization) Blueprint is accessible here: https://www.bi.go.id/en/publikasi/kajian/Pages/Blueprint-Pengembangan-Pasar-Uang-2025.aspx Source: Bank Indonesia 125#127Principles 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 126#128Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: Transaction between: III Bank Customer III Can only be performed to hedge rupiah exchange rate risk. 1. Must have Underlying Transactions: X Including all following activities : a. b. C. Trade of goods and services Investments, loans, capital, and other investements. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excluding following activities: a. b. ن فن d. e. f. g. Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies Intercompany loan Money changer activities. Bank Foreign Party III III 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank - Bank Source: Bank Indonesia 127#129Principles of Domestic Non Deliverable Forward (DNDF) Transaction Source: Bank Indonesia Transaction Settlement • Use Fixing mechanism Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR Settlement currency : IDR Roll over and early termination are not allowed Roll over and early termination for DNDF is prohibited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging Customer/ Foreign Party Overseas Bank Hedging Cover Hedging Bank Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. 128#130Amendment on DNDF Regulation *to provide more flexibility in DNDF transaction *to increase liquidity and efficiency in domestic foreign exchange market BI Regulation No. 20/10/PBI/2018 Article 3 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without underlying documents Article 6 2. DNDF can be terminated (unwind); Article 11 3. Underlying documents must be final (firm) with additional supporting documents 4. Not Regulated; Article 11 *Effective on May 17th, 2019; English version of the regulation is available in Bl website. Source: Bank Indonesia 3. Underlying documents for buy FX/IDR for DNDF is : Final (firm commitment) + Supporting documents 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: . • Final (firm commitment) + Supporting documents Projection (anticipatory basis) + Supporting documents Article 11 5. In using estimate underlying transaction documents in the form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. 129#131Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) As hedging instruments against Rupiah interest rate changes IRS market development OIS market development We're Here 3 IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest Improvement of IRS transaction liquidity rate Encourage price transparency in the rupiah money market * Strengthen monetary policy transmission Provide alternative hedging instruments against rupiah interest rate changes Support securities market deepening in Indonesia 130#132OIS and IRS Transactions: General Provisions Market Players. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Transaction Needs Analysis. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is required to have an analysis on the need of rupiah interest rate derivative transactions. Calculation Base ACT/360 Market Conventions Interest Payment based on Netting OIS Quotation rates based on 2 decimals Market Conventions. When performing IRS and OIS transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Settlement. Settlement can be performed as a netting payment and every transaction has to be settled in Rupiah. Close-out netting can be applied under predetermined conditions. IndONIA Index with 5 decimals Compound Floating Rates (CFR) based on 5 decimals Notional of Net interest payment in IDR with 0 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 131#133Enhancement of Monetary Operations Framework 3 2 STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement. ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties 4 MOVING FROM AXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS PROGRESS • • • PREVIOUS JIBOR Can be traded among contributor banks for 10 minutes. • Up to the amount of IDR10 billion. Up to 1-month tenor. CURRENT JIBOR (as per June 1st, 2016) Can be traded among contributor banks for 20 minutes. Up to a total of IDR20 billion. • Up to 3-month tenor. Source: Bank Indonesia 132#134IDR Tn 180 160 140 120 100 80 60 40 20 0 2017 2016 Source: Financial Service Authority (OJK) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Capital raising through securities issuance reaches IDR 100 Tn as of November-20 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 ΠΙΡΟ ■Rights Issue Corporate Bond & Sukuk May-20 Jun-20 Jul-20 Aug-20 Financial Intermediation Affected Economic Activities Banking intermediation falls to a slight contraction in October 2020 and non-bank financial institutions growth remains negative as the pandemic still affects economic activities... Activity of several industries and banks' focus on restructuring loans pushed credit contracting in Oct-20 by 0.47% Growth of financing distributed by multi-finance companies remains contracting in Oct-20 by 15.7% Bank Loans IDR Tn 6,000 5,000 4,000 3,000 2,000 1,000 Growth (yoy) 5480 YOX% IDR tn Financing Growth (rhs) 4% 500 12% 10% 400 8% 300 6% 4% 200 -0.47% 2% 100 0% -2% YOY 10% 5% 379.9 0% -5% -10% -15% -15.7% -20% 16.9 4.5 -10 2018 2019 until Nov'20 -30 30 78.6 10 10 Jan-19 Feb-19 Mar-19 Apr-19 May 19 50 50 Sep-20 Oct-20 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 As of Oct-20, Life insurance and general insurance premium are contracting by 8.5% and 1.0% respectively -Life Insurance Premium Growth General & Reinsurance Premium Growth 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-20 133 -8.5 -1.0 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20#1352 Jan-19 Feb-19 Mar-19 Apr-19 May-19 4 9 10 15 20 20 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 25 25 Profitability of the banking sector remains high and stable *) Net Interest Margin Return on Assets 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-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Resilient Financial Institutions Domestic financial institutions remains sound and stable, supported by strong capitalization, and leverage amidst hurdles faced due to the pandemic... CAR of the banking sector remains high and stable at 23.74% with Tier-1 capital at 22.10% as of Oct-20 RBC of the insurance industry remains high and well above the minimum threshold (120%) *) ■CAR Tier 1 Life Insurance (Lhs) Aug-20 Sep-20 4 4.41 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Aug-20 Sep-20 Oct-20 2 1.7 1 0 Oct-20 900 23.74 22.1 800 700 600 500 400 300 200 0 100 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 Gearing ratio of multi-finance companies remains steady and below the threshold % 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-20 134 2.28 General Insurance (rhs) 400 337 350 300 539 250 200 150 100 50 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 0#1360 3 2 1 4 5 % 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 0 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 INPL Net Mar-20 Apr-20 Manageable Credit Risks with Adequate Liquidity Financial Institutions are supported with ample liquidity and low credit risk as NPL and NPF remains below the threshold. The ratio of liquid assets to deposit and non-core deposits is growing and maintained well above the threshold following banks' cautious appetite of lending*) Investment adequacy ratio in the insurance industry is steadily maintained above 100% (threshold) *) % 250 200 150 100 50 Life Insurance General Insurance 250 195.8 Life Insurance General Insurance 195.8 200 150 105.6 105.6 100 threshold Investment Adequacy Ratio= 100% 50 threshold Investment Adequacy Ratio= 100% ■NPL Gross May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 NPL ratios are still manageable below the threshold, at 3.15% gross and 1.03% net as of Oct-20 *) Multi-finance companies' NPF is managed below the threshold at 4.7% as of Oct-20*) Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 LO 5 3.15 4 3 1.03 2 1 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 6 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 0 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-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-20 135 4.7#137IDR Tn 1,500 1,200 900 600 300 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 0 Jan-19 Manageable Market Risks Amidst rising global pressure, the risk profile of domestic financial institutions remains manageable 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 Insurance & pension fund investment value is steadily increasing *) Insurance Pension Funds (rhs) Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Net open position in the banking sector is maintained far below the maximum limit of 20% *) Mutual funds' net asset value (NAV) is in a recovery trend with steady growth % 5 IDR Tn 200 NAV Equity Mutual Funds JCI (rhs) 4 3 150 2.31 100 2 50 1 As of 4 Dec, 2020 IDR Tn IDR Tn 400 250 1167.89 200 350 150 300 100 250 50 287.37 0 200 Aug-20 Sep-20 Oct-20 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 0 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- Multi-finance companies' exposure to foreign debt remains stable, while domestic debt is slightly reduced Nov-19 Dec-19 Jan-20 Domestic Debt Foreign Debt Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 136 Oct-20 98.66 142.39 May-20- Jun-20 Jul-20 Aug-20 0 7,000 6,000 5,000 4,000 3,000 2,000 1,000#138-150 -100 Jan-19 Feb-19 -50 0 50 50 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Domestic Capital Market Performance Amid Global Challenges The positive progress of Covid-19 vaccine fuels market optimism for a speedy global recovery and help reduces volatility in financial market... Global indices are rising as investors start to shift their portfolio investments into stock market Global sentiment further strengthening JCI towards the end of 2020 Stock Indices Performance as of 4 Dec'20 vs 4 Nov 20 (MtM) & 7 Dec'20 vs 31 Dec 19 (YtD) Comp Bond Index Comp Stock Index (rhs) 320 7000 310 WORLD THAI 9.3611.89 6500 -8.23 300 18.60 S KOREA 24.93 6000 INDO -5.85 15.87 13.82. 280 HKN -5.97 5500 7.83 -12.33 SIN 12.87 PHIL -7.83 260 5000 10.37. CHIN 5.10. 12.02 MAL 2.15 %YTD 4500 JPN 107.22 5,931 240 %MTM 4000 EU -9.26 12.90 27.06 220 US 5.37 8.51. 3500 BRAZ -1.78 16.23 TURK 200 3000 T Oct-19 -20 -10 0 10 20 30 Dec-19 Feb-20 Apr-20 Jun-20 100 Non-resident portfolios' both of gov't bonds and equity in Nov-20 have recorded a net buy of IDR 15.56 Tn and 3.44 Tn, respectively Gov't Debt Securities ■Equity Aug-20 Gov't bond yields continue to strengthen back to the pre-pandemic level followed by rupiah appreciation against USD Oct-20 Dec-20 Yield (%) 5-yr Yield Source: Bloomberg and Ministry of Finance Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 8 -0.82 7 6 Nov-20 4 Dec'20 5 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 9 Nov-18 Dec-18 Jan-19 Feb-19 10 Mar-19 Apr-19 20-yr Yield May-19 Jun-19 Jul-19 Aug-19 Sep-19 - Oct-19 Nov-19 Dec-19 Jan-20 10-yr Yield USD/IDR IDR (rhs) 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 137#139Stimuli to Support Indonesia's Financial Industry OJK and other government institutions have worked intensively to minimize the impact of COVID-19 on the economy 1 ■ ◉ Maintaining business fundamental of the real BANN secto JK Regulation No. 11/POJK.03/2020: Bank NBFI "National Economic Stimulus as A Countercyclical Policy of The Impacts of COVID-19 Outbreak" Relaxation of credit assessment and credit restructuring to debtors who are affected by COVID-19. Credit assessment (up to IDR10 billion) is based only on the punctuality of debtors to pay their debts and interests. This applies to Commercial and Sharia Banks With maximum 1 year period of credit restructuring *) OJK Regulation No.18/POJK.03/2020: "Written Orders to Handle Bank Problems" ■ merger, Stabilizing financial sector particularly in banking sector amid COVID-19 outbreak by allowing consolidation, acquisition, and/or integration to banks permitted by OJK. *) OJK Regulation No. 14/POJK.05/2020: "Countercyclical Policy as an Impact of COVID-19 for Non-Bank Financial Institution Extendedadline of report submission Relaxation of financing assessment Financing Restructuring - - - - - Regulating loan restructuring, deadline of periodic reports, Conducting fit and proper tests, Determination of asset quality of financing, Calculation of solvency level of insurance companies, Calculation of pension fund quality, and Implementation of asset management provisions. Source: Financial Service Authority (OJK) 2 Maintaining financial market stability OJK Circular Letter No. 3/SEOJK.04/2020: "Other Conditions as Significantly Fluctuating Market Condition on Stock Buyback issued by Issuers or Public Companies" - Prohibition of short-selling Asymmetric Auto Rejection (current auto rejection limits under 7%) 30-minute Trading Halt for 5% decrease in IHSG Negation of trade in the pre-opening session Stock buyback without prior general shareholders meeting *) OJK Regulation No.15/POJK.04/2020: "Plan and Organization of the General Meeting of Shareholders of Public Companies" Aimed to enhance the participation of shareholders in General Shareholders Meeting (RUPS) by allowing electronic authorization to third parties. *) OJK Regulation No.16/POJK.04/2020: "The Implementation of Electronic General Shareholders Meeting (Glating the implementation of electronic corporate decision making by requiring a member of the board director/commissioner in charge of GSM, while other electronic attendances are counted as fulfillment of attendance quorum. *) OJK Regulation No.17/POJK.04/2020: Material Transaction and Changes in Business Activities " Improving the definition and procedure of Material Transaction, as well as the effectiveness of regulation to enhance the protection of public shareholders and the quality of information disclosure in Material Transaction and Business Activities Changes. *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities. of 138#140Further Stimuli to Provide Liquidity and Capital in Banking Industry Relaxation for Conventional and Sharia Banks (Reporting/Treatment/Governance of Restructured Credit/Financing) Adjustment of Banking Provisions Implementation during Relaxation Period Deferral of Basel III Reforms Implementation (valid until 31 December 2022) Relaxation for Rural and Rural Sharia Banks Restructured credit/financing is excluded from the Loan at Risk (LAR) in the assessment of banks performance. Banks are also allowed to approve credit restructuring with several alternative governance by considering the necessary principle. i. Eliminating the obligation to fulfill Capital Conservation Buffer by 2.5 percent of Risk Weighted Assets (ATMR) for BUKU 3 and BUKU 4 banks (until 31 March 2021) ii. Maintaining the obligation of fulfilling Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for BUKU 3, BUKU 4, and foreign banks at a minimum level of 85 percent (until 31 March 2021) iii. Dismissing the quality assessment of Foreclosed Collateral (AYDA) based on the period of ownership (until 31 March 2021) iv. Reducing the obligation of education funds provision to less than 5 i. Precede ferment reforms include Risk-Weighted Assets (RWA) for operational risk, credit risk, market risk, and Credit Valuation Adjustment (CVA) ii. Until then, the Capital Adequacy Requirement still refers to the current RWA standard. i. Relaxing the General Loan Loss Provision (PPAP) to less than 0.5% ii. Exemption of Interbank Placement for Legal Lending Limit (BPMK) and Maximum Limit of Fund Channeling (BPMD) to a maximum 30% of capital iii. Temporary Halt on Foreclosed Collateral (AYDA) calculation based on period of ownership iv. Providing 5% less on Education, Training, and Human Resource Fund from the previous year Source: Financial Service Authority (OJK) 139#141OJK's Role in the National Economic Recovery Program (PEN) National Economic Recovery Program (PEN) PP No. 23/2020 OJK carry out efforts to support the economic recovery, through: Fund Placement Placement of funds by the Government to provide liquidity support to banks conducting loan restructuring and to provide additional creditworking capital financing OJK supports the program through Liquidity Buffer and Credit Restructuring to Banks and Multi-Finance Companies Providing Interest Subsidies for MSMEs Article 20 Paragraph 2 Government Regulations No. 23 of 2020 All debtors with credits up to IDR500 million will be given interest subsidies while debtors with credits up to IDR10 billion will go through the same mechanism with credit restructuring program. The program is eligible for debtors of banks/multi-finance companies with Performing Loan (Kol 1 and Kol 2) before COVID-19, valid from 29 February 2020. • • • Targeted Beneficiaries MSMEs debtors with credits up to IDR10 billion Debtors of housing loans (KPR) up to type 70 Debtors of motorcycle loans for productive activities, including online transportation and informal business OJK's Role Providing necessary information in the implementation of interest subsidies based on the procedure which will be arranged through Joint Decision Letter (SKB) • III Other Requirements Obedient taxpayer Excluded from National Blacklist (DHN) Mechanism The provision regarding the budgeting, implementation, and responsibility mechanism of interest subsidies and debtor requirements are regulated in the Minister of Finance Regulation (PMK) Source: Financial Service Authority (OJK) 140#142Strategic Policies in Financial Sector Providing financing alternatives for Goverment Priority Sectors Providing financial access to MSMEs especially in remote areas Supporting acceleration $ of national economic growth Improvement of business process in the industry Preparing financial services industry to cope with Industrial Revolution 4.0 Source: Financial Service Authority (OJK) 141#143Continuous Program on Capital Market Deepening ...continuously strengthened, including through capital market deepening initiatives Enhancing the supply-side ■ Product: QIB offering and private placements, private fund, asset-backed securities, REITs, infrastructure fund, IGBF (Indonesia Government Bonds Future) & equity crowdfunding. ■ Issuer: Financial conglomerates, big bank debtors, local government, IDX incubators, SMEs, SOES & big tax payers. ☐ ☐ ☐ Strengthening market infrastructure Development of Integrated Licensing (SPRINT). Enhancement of electronic reporting system. Development of electronic public offering. ☐ Integrated data warehouse and supervisory system. ☐ Enhancing the demand-side Enhancing the role of the domestic institutional investors (insurers & pension funds) in capital markets. Development of the domestic investor base (conducting investor education programs). Simplification in opening securities account. Development of regional securities companies. Development of e-bookbuilding. ☐ ☐ Online marketing initiative Strengthening governance & customer protection Development of market players' capacity ■ Enhancement of GCG for publicly-listed companies Establishment of disgorgement fund Source: Financial Service Authority (OJK) 142#144Enhancing Financial Literacy & Inclusion OJK strives to build a strong foundation for financial inclusion programs, to ensure access to financial products & services by Indonesians of all social classes. Such initiatives also include the enhancement of financial literacy and financial consumer protection. Developing financial education models utilizing various delivery channels Enhancing the role of the "Investment Alert Taskforce" Developing micro-credit products with additional business support ("KUR Klaster") Promoting the establishment of Islamic microfinance institutions ("Bank Wakaf Mikro") Strengthening the role of Financial Access Acceleration Taskforce (TPAKD) in local areas The result of OJK's 2019 national survey demonstrated an improvement in financial literacy & inclusion among Indonesians compared to that of 2016. 21.8% 29.7% 38.03% 59.7% 67.8% 76.19% Financial Literacy 2013 2016 2019 Financial 2013 2016 2019 2019 Target: 35% Inclusion 2019 Target: 75% Source: Financial Service Authority (OJK) 143#145A Comprehensive Financial Deepening Program ...strategy to tackle challenges in deepening Indonesia's financial markets In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate "The National Strategy of Financial Market Development" Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR 1 2 STRATEGIC ACTION PLAN 3 ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars RISK MANAGEMENT DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market Bond FX Market Market Stock Market Syariah Market Structure Product Market 7 Elements of Financial Fund Market Infrastructure Regulatory Framework Market Ecosystem Instrument Benchmark Rate & Standardization Coordination & Education Source: Bank Indonesia Intermediaries 144#146BI's Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA) Bl supports government's program of shifting social assistance to targeted non cash social assistance disbursement through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG subsidy. NCSA Programs Family Hope Program (Program Keluarga Harapan -PKH) Smart Indonesia Program (Program Indonesia Pintar-PIP) Pilot Project Source: Bank Indonesia KARTY RELAREA SEMATERA Gradual Implementation Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) I 9876543210 XXYYZZ 12345678 LPG Subsidy 2016-2020 Full Implementation Interconnected & interoperable payment system T T 145#147Progress of NCSA Programs • • Family Hope Program (Program Keluarga Harapan - PKH) The Family Hope Program (PKH) is a program that provides cash to very poor households. IDR1.89 million /year will be granted for each household. PKH will be granted every February, May, August, and November. As of December 2017, PKH has been distributed to 6.0 million households on non- cash basis. • In 2018, PKH has been distributed to 10 million households on non-cash basis. with • In 2019, PKH has been distributed to 9.84 million house hold on noncash basis total realization of IDR32.75T. KARTU KELUARGA SEJAHTERA 126 5678 12345678 AGO RAMANALS 1107 • • Non Cash Food Assistance (Bantuan Pangan Non Tunai - BPNT) BPNT is a poverty alleviation and social protection program that is managed by the central government. It provides subsidized rice and eggs to low-income households. IDR110 thousand month will be granted for each household as BPNT that can be used in certain stores which called e-warong. As of December 2017, BPNT was distributed to 1.2 million households in 44 cities. In 2018, BPNT has been distributed to 10.1 million households (65.1% of the target of 15.5 million households target). . In 2019, BPNT has been distributed to 15 million household on non cash basis with total realization of IDR15.44T Source: Bank Indonesia 146#148Section 8 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA#149The Government has Enacted Various Reforms to Accelerate Infrastructure Provision $ Fiscal Reforms Viability Gap Funding (VGF) Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Availability Payment Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF Reg. No. 190/2015 for Central Gov'r and MoHA Reg. No. 96/2016 for Regional Gov't.) Land Revolving Fund A revolving-fund sourced from State Budget, to accelerate land acquisition (MoF Reg. No. 220/2010) Risk-sharing Guidelines IIGF has issued risk allocation and mitigation guidelines for PPP project Tax Incentives (Tax Holiday) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 20 years depending on the investment value KPPIP Institutional Reforms KPPIP is actively involved in accelerating delivery of priority infrastructure projects PT. Sarana Multi Infrastruktur Merging between PT. SMI and Gov't Investment Center (PIP) to become an infrastructure funding company Indonesia Infras. Guarantee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects PPP Unit Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Indonesia Infrastructure Guarantee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 4/4 Regulatory Reforms Direct Lending Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land Acquisition Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg. No. 148/2015) and land acquisition fee payment for impacted community (Presidential Reg. No.56/2017) Economy Packages Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation 148#150Latest Policy Reforms Policy reforms are aiming to create a more conducive investment climate for infrastructure delivery 光 ED Presidential Reg. No. 20/2018 on Use of Foreign Labor - released on March 2018 This regulation aims at simplifying the permit application process for foreign workers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN - released on June 2017 This regulation allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. MoF Reg. No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation - released on May 2017 The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) - released on April 2017 The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF Reg. No. 209/2019 on Procedures for Land Acquisition for National Strategic Projects and Asset Management of Land Acquisition by State Asset Management Agency - released on December 2019 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) 149#151Some of Most Recent Reforms Policy reforms are aiming to create a more conducive investment climate for infrastructure delivery CO Presidential Reg. No. 32/2020 on Infrastructure Financing through Limited Management Rights - released on Feb 2020 This regulation allows foreign investors to collaborate with national companies when investing in state owned assets and state owned enterprise's assets. Presidential Reg. No. 66/2020 on Land Acquisition Funding for Public Interest Development in the National Strategic Projects Implementation - released on May 2020 This regulation supports acceleration of land acquisition funding by allowing Minister to pay back the National Strategic Project's land acquisition funding with State Revenue and Expenditure Budget Presidential Reg. No. 79/2019 and No. 80/2019 on Acceleration of Economic Development in selected area in Central Java Province - released on November 2019 This regulations aim to increase regional competitiveness which will have an impact on investment growth and an integrated and sustainable national economy. This Presidential Reg. states that the Coordinating Ministry for Economic Affairs (CMEA) will provide assistance for the availability of planning, preparation and implementation documents. MoF Reg. No. 139/2020 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation - released on September 2020 This regulations acts as a guideline for the implementation of Presidential Reg. No. 66/2020 Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) is currently in the process of designing the third amendment to Presidential Decree No.3/2016 on the Acceleration of the Implementation of National Strategic Projects This new regulation change will add new PSN proposals that have been approved, as well as deleting the list of completed projects. The new regulation will consist of 201 PSN projects dan 10 programs. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 150#152Reforms 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 Fund Tax Facilities Availability Payment Land Acquisition Preparation Project A facility with contribution to construction cost to increase development facility contributing to assist GCA on PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI PT IIF, and Ministry of Finance Guaranteeing Govt. contractual obligations under infrastructure concession Bidding Process project financial viability agreements and Mof Regulation Managing Entitiy: Ministry of Finance based on GCA proposal Gov't. commitment: 49% max. Per project cost No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt's comitment: US$ 450 mn Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) MoF Reg. No. 159/PMK. 010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment industries. Sector will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion of an asset. MoF Regulation, and MOHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs Construction A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov't. commitment: US$ 6.7 bn (2016- 2019)* *USD1 IDR13,500 151#153Efforts to Accelerate Infrastructure Provision Regulation improvement to accelerate land procurement process ☐ The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process. For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement. Law No. 2/2012 was successfully applied in: 1. Palembang - Indralaya section of the Trans Sumatera Toll Road Project 2. Java North Line Double Track Rail Project ☐ PLANNING not regulated PREPARATION max 289 days EXECUTION max 257 days ASSIGNMENT OF RIGHTS max 37 days Timetable (working days) with an assumption that there is rejection from land owners TOTAL 583 DAYS Z Without rejection, the estimated completion days can be reduced by 15%-20% of the maximum number of days above Land Procurement Process as Stipulated in Law No. 2 of 2012 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 152#154Efforts 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 Land Acquisition Budgeting Scheme G 1. Unutilized fund can be allocated for the following year Non-project-specific land acquisition fund LMAN at a Glance 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 April 2019, LMAN has disbursed up to US$ 4 billion (IDR 54 Trillion) through bridging finance scheme for 93 toll road projects, and planned to start the implementation of direct payment scheme 2. 3. 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) 153#155Fundamental 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) 154#156National 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 Acceleration of Non- State Budget Settlement of Legal Issues Projects Determination of National Strategic Projects 12 01 Permit & Non- permit Completion 11 Accelerate Goods and PSN Facilities 02 Service Procurement Spatial Planning 10 03 Problems and 09 04 Hindrance Completion Land clearing acceleration 08 05 55 SOE's Assignment 07 06 Local Content Utilization Additional Facilities Projects Monitoring via KPPIP IT System Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Government Guarantee Provision 155#157Under Presidential Reg. No.56/2018, PSN list has been revised into 223 Projects and 3 Programs 53 Projects Sumatra US$43.6 B 17 Projects 27 Projects 12 Projects Sulawesi Kalimantan US$23.4 B US$35.7 B Maluku & Papua US$34.5 B 89 Projects 3 Programs National Java US$72.7 B 12 Projects US$100.7 B 13 Projects Bali & Nusa Tenggara US$0.7 B Exchange rate: US$ 1 = IDR 13,500 PSN includes 15 sectors at project level and 3 sectors at program level Project A Road 69 Projects Dams 51 Projects SEZs & IES 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation Airports 7 Projects 4 Housing Smelter 6 Projects Technology 4 Projects 3 Projects Fisheries/Farming 1 Projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 8 Projects Sea Dike 1 Projects Education 1 Projects Irigation 6 Projects Program Electricity 1 Program Aeroplane Industry 1 Program Economic Equality 1 Program 156#158Progress on 223 Projects and 3 Programs PSN The Estimated Investment Value for 223 Projects + 3 Programs PSN¹ State Budget 10% 5 Sectors with Highest Investment Value Energy 11 Projects US$ 89.8 Bn Private 59% 31% SOES/ RSOES 4 A Electricity 1 Program US$ 76.7 Bn Roads 69 Projects US$ 49.7 Bn Total Investment Value² US$ 307.4 Billion State Budget US$ 31.6 Bn SOES/RSOES US$ 96.6 Bn Private US$ 179.2 Bn Railways 16 Projects US$ 29.2 Bn SEZs and IEs 31 Projects US$ 31 Bn ¹Exclude 7 projects which investment value are still unknown Exchange rate: US$ 1 = IDR 13,500 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 157#159Progress on Projects and PSN Programs as of December 2018 as of September 2019 as of August 2020 3% 14% 24% 23% 21% 3% 15% 13% 18% 22% 3% 28% 33% 12% 13% 12% 44% 32 projects already completed 32 projects, 1 electricity program, and 1 economic equality program in construction and partial-operation phase 48 projects in construction and will start operating in 2019 52 projects in construction and will start operating after 2019 6 projects in transaction 53 projects and 1 Aircraft Industry Program in preparation phase Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 51 projects already completed 1 27 projects, 1 electricity program, and economic equality program in construction and partial-operation phase 22 projects in construction and will start operating in 2019 80 projects in construction and will start operating after 2019 4 projects in transaction 39 projects and 1 Aircraft Industry Program in preparation phase 62 projects already completed 27 projects, 1 electricity program, and 1 economic equality program in construction and partial-operation phase 98 projects in construction and will start operating after 2019 6 projects in transaction 30 projects and 1 Aircraft Industry Program in preparation phase 158#160In 2016 - 2018, 62 PSNs have been Completed with Total Estimated Investment Value of USD23.7 Billion 15 16 26 11 27 29 57 31 58 59 46 30 24 23 54 2162 33 34 35 19 2016 27 36 37 38 39 45 40118120 44 1 Gempol - Pandaan Toll Road, East Java (14km) 2 Sentani Airport. Jayapura, Papua 3 Juwata Airport, Tarakan, North Kalimantan 4 5 Mutiara Airport, Palu B 7 Fatmawati Soekamo Airport, Bengkulu Matahora Airport, Wakatobi, South East Sulawesi Labuan Bajo Airport, Pulau Komodo, East Nusa Tenggara 2017 21 Soreang-Pasirkoja Toll Road, West Java (11km) 22 Mojokerto - Surabaya Toll Road, East Java (36,3km) 23 Tanjung Priok Access Road, DKI Jakarta (16,7km) 24 Raden Inten II Airport, Lampung 25 Jangkrik and Jangkrik North East field dev, E Kalimantan 26 PLBN Nanga Badau, West Kalimantan 29 Tertip Dam, East Kalimantan 32 28 34 Palembang Simpang Indralaya Toll Road, S Sumatera (22km) Pejagan-Pemalang Toll Road, Central Java 35 (57,5km) 38 Solo-Ngawi Toll Road, Central and East Java (90,1km) 37 Pemalang - Batang Toll Road, Central Java (39,2km) 38 Noaw Kertosono Toll Road, East Java (87km) 39 Kertosono Mojokerto Toll Road, East Java (40.5km) 40 Semarang - Solo Toll Road, Central Java (72.6km) 41 Batang-Semarang Toll Road, Central Java(75 km) 42 Gempol Pasuruan Toll Road, East Java (34,2 km) Medan - Kualanamu - Lubuk Pakam-Tebing Tinggi Toll Road, North Sumatera (62 km) 44 Rotklod Dam, East Nusa Tenggara 8 Sockamo Hatta Airport Development (including Terminal 3), Banten 9 Kalbaru Port, DKI Jakarta 10 Belawan-Sei Mengkel Gas Pipe, 75 mmscfd, N Sumatera 27 PLBN Aruk, West Kalimantan 11 PLBN Entikong, Kab. Sanggau, West Kalimantan 28 PLBN Wini, East Nusa Tenggara 12 13 PLBN Mota'ain, Kab. Belu, East Nusa Tenggara PLBN" Motamassin, Kab. Malaka, East Nusa Tenggara 30 Umpu Irrigation System (Way Besar), Lampung 43 14 PLBN" Skouw, Jayapura, Papua 15 Paya Sounara Dam, Sabang, NAD 16 Rajui Dam, Kab. Pidie, NAD 17 Jatigede Dam, Kota Sumedang, West Java 18 Bajulmab Dam, Banyuwangi, East Java 19 Nipah Dam, Madura, East Java 20 Titab Dam, Kab, Buleleng, Bali 32 Raknamo Dam, East Nusa Tenggara Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 31 Prabumulih Kertapati Railway (32 km)- part of Trans 2km)-part Sumatera Railway Network 46 Integrated Marine Affairs and Fisheries Center Development, Talaud, North Sulawesi 47 SHIA Express Railway (Soekamo Hatta Sudirman) 33 Tanju Dam, NTB 48 Sel Mangkel Special Economic Zone 2018 45 Logung Dam, Central Java 49 Tanjung Lesung Special Economic Zone 50 Palu Special Economic Zone 51 Lhokseumawe Special Economic Zone 52 Mandalika Special Economic Zone 53 Tanjung Buton Industrial Estate 54 Kendal Industrial Estate 55 Java Integrated Industrial Port Estate (JIIPE), Gresik 56 Dumail Industrial Estate 57 Ketapang Smelter 58 Morowali Smelter 59 Konawe Smelter 60 Bantoeng Smelter 61 Ahmad Yani Airport 62 Leuwigoong Imigation 14 159#161From 2016 - June 2020, there were 92 projects¹ completed with total estimated investment value of US$ 35.9 Billion 15 16 51 18 32 48 26 56 11 27 O Completed 2016 20 Projects (US$ 2.5 Bn) • 7 Airports 3 25 15 29 41 57 31 46 14 National 16 4 58 17 59 61 49 54 17 62 33 34 35 55 $19 22 1 10 36 38 39 40 18 20 45 43 4 28 13 . 1 Seaports 1 Toll Road • 1 Gas Pipe • 6 Dam • 4 National Border 13 2 14 Completed 2017 10 Projects (US$ 4.5 Bn) Completed 2018 32 Projects (US$ 15.4 Bn) . 2 Toll Road . 1 Access Road 3 National Border 1 Dam 2 Railway • 1 Airports • 4 Dam • 4 Industrial Zone . 1 Airports • 1 Irrigation • 1 Irrigation • 4 Smelter • 1 Gas Facility 10 Toll Road 5 SEZ • 1 Fishery Center • 2 Smelter Completed 2019 30 Projects (US$ 12.2 Bn) • 4 Airports 9 National Road . 6 Industrial Zone Completed until June 2020 2 Projects (US$ 1.3 Bn) 1 Railway (LRT South Sumatera/Palembang) 1 Airport (Yogyakarta International Airport) • 4 Dam • 2 Technology ¹In cumulative, including projects that are already taken out in 2016 and 2017 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) • 2 railways 1 seaport Exchange rate: US$ 1 = IDR 13,500 160#162Progress on 37 Priority Projects From the revised National Strategic Projects, the Government has selected a list of 37 Priority Projects to be the focus of infrastructure provision. 24 22 14 24 27 23 24 4 22 23 22 22 24 27 24 4 11 23 36 7 24 3 13 9 23 24 15 2 18 24 23 18 24 30 12 23 24 18 18 18 27 25 18 31 24 18 18 37 18 18 24 1234 1. # New Priority Projects # Existing Priority Projects Balikpapan-Samarinda Toll Road 37 35 21 20 37 12 16°33 10 1? 27 19 32 20 24 29 26 27 6 28 37 37 24 37 5 24 24 26. 13. LRT of DKI Jakarta 2. Manado-Bitung Toll Road 14. Kuala Tanjung International Hub Seaport 27. 3. Panimbang-Serang Toll Road 15. Bitung International Hub Seaport 4. 15 Segments of Trans - Sumatera Toll 16. Patimban Port 28. Road 17. 56∞ 5. - Probolinggo Banyuwangi Toll Road 18. Inland Waterways Cikarang-Bekasi-Laut (CBL) Palapa Ring Broadband 29. Tuban Oil Refinery RDMP/Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) Abadi WK Masela Field Unilization Field Has Jambaran-Tiung Biru 30. 6. - Yogyakarta Bawean Toll Road 19. Batang, Central Java Power Plant (CJPP) 31. Indonesian Deepwater Development (IDD) Tangguh LNG Train 3 Development 7. SHIA Express Railway 8. MRT Jakarta South-North Line 20. Central West Java Transmission Line 500 kV 32. 21. Indramayu Coal-fired Power Plant 33. West Semarang Drinking Water Supply System Jakarta Sewerage System 9. Makassar-Parepare Railway 22. 10. Light Rail Transit (LRT) of Jakarta- 23. Depok-Bogor-Bekasi Sumatera 500 kV Transmission (4 Provinces) Mulut Tambang Coal-fired Power Plant (6 Provinces) 34. 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) 161#163Progress on 37 Priority Projects Progress of 37 Priority Projects (as of June 2020) 11% 8% 5% 60% 16% 4 project is completed 6 projects in construction and partial operation phase 22 projects in construction and I will start operating after 2019 3 projects in transaction 2 projects in preparation Recent Milestones A Palapa Ring West package has been fully operasional since April 2018. A Trans Sumatera Toll Road Segment of Pekanbaru-Dumai (131,5Km) has been operated on Sept 26th, 2020. West Semarang Water Supply System: On March 2018, pre-qualification stage has resulted 4 shortlisted bidders Funding Scheme of 37 Priority Projects 8% O 26% 66% Total Investment Value US$ 183.9 Billion US$120.7 billion from Private/ PPP US$47.7 billion from SOE/ Regional SOE US$15.5 billion State/ Regional Budget (including G-to-G loan) Exchange rate: US$ 1 = IDR 13,500 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) ធៈ០ Mass Rapid Transit (MRT) Jakarta South-North Allocation of repayment liability on additional-loan for Phase | and Phase II has been decided in the KPPIP Ministerial meeting - 49% will be borne by Central Government and 51% will be borne Provincial Government of DKI Jakarta. Patimban Port Loan Agreement has been signed on 15 November 2017. Note: This data is still going to be verified by The Executive Office of President (KSP) and Indonesia's National Government Internal Auditor (BPKP) 162#164Energy Sector: the Progress of 35.000 MW Program Average economic growth of 6.7% requires 7,000 MW / year or 35,000 MW 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024) Debottlenecking through regulation: 1. Regulation No.1/2015 concerning electricity supply cooperation & joint utilization of the electrical network among license holders. 2. Regulation No.3/2015, concerning Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection & Appointment. Cabinet Meeting Progress of 35,000 MW Launching 35.000 MW by the President in Goa Beach Sanden DIY 17 Dec '14 Jan '15 Cabinet Meeting "There's electricity crisis in Indonesia, requires construction of large capacity plant " Jan '15 35,000 MW Program Distribution Update Electricity Supply Business Plan (RUPTL) 2019-2028) 16 Mar '15 4 May '15 Kalimantan (4,477 MW) Sulawesi (2,570 MW) 1. Op. 904 MW 1. Op. 1,146 MW 2. 2. Cons. 785 MW Cons. 963 MW Maluku-Papua (877 MW) The progress so far: 1. 3. PPA 1,413 MW 3. PPA. 76 MW Op. 437 MW Aug 20 2. Cons. 54 MW 4. Proc. 218 MW 4. Proc. 235 MW 3. Sumatera (9.410 MW) 5. Plan. 158 MW 5. Plan. 150 MW PPA. - 4. Proc. 160 MW No Phase MW % 12345 1. Op. 1,302 MW 5. 2. Cons. 4,248 MW Plan.-225 MW 3. PPA 3,555 MW 4. Proc. 85 MW 5. Plan. 85 MW Jawa, Madura & Bali (18,399 MW) Nusa Tenggara (812 MW) 1. Op. 4,184 MW 2. Cons. 12,730 MW 3. PPA. 1,485 MW 4. Proc. - 5. Plan. - 1. Op. 427 MW 2. Cons. 274 MW 3. PPA. 4. Proc. 5 MW 5. Plan. 106 MW 1234 Operating Construction 8,400 24 19,055 54 Signed Power-Purchase Agreement 6,528 18 4 Procurement 839 5 Planning 724 2 Source: PLN Note: Progress of 35,000 MW Electricity Program as of August 2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 163#165Energy Sector: the Progress of 35.000 MW Program December 2016 November 2017 December 2018 December 2019 August 2020 2% 16 % 28 % 9% 6% 3% 3% 8% 2% 19 % 3% 19 % 5% 18 % 2% 2% 24 % ooooo 30 % 24 % 38 % 44 32 % % 52 % 57 54 % % MW 706 operating phase 10,141 MW in construction phase 8,478 MW signed Power-purchase Agreement 10,560 MW in procurement phase 5,824 MW in planning phase in 998 MW in operating phase 15,676 MW in construction phase 13,782 MW signed Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2,899 MW in operating phase 18,207 MW in construction phase 11,467 MW signed Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 6,811 MW in operating phase 20,168 MW in construction phase 6,678 MW signed Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase 8,400 MW in operating phase 19,055 MW in construction phase 6,528 MW signed Power-purchase Agreement 839 MW in procurement phase 724 MW in planning phase 164#166Acceleration of 35.000 MW Program The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects Government Support (outside Guarantee) • Provision of Primary Energy Provision of Renewable Energy Simplicity of Permits and non-Licensing Spatial Planning Land acquisition Resolution on Legal Matters Government Assignment Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content. 1 EPC Powerplant and Transmission PT PLN Provision of Electricity 2A 2B 23 PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance Independent Power Producer Direct Lending PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter Strengthen Equity Strengthen PLN's Balance Sheet Loan from independent lenders Equity Injection by the Government Refinancing Hedging Bond issuance by PT PLN Asset Revaluation Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 165#167Significant Progress on Infrastructure Projects Roads Won FON FR OPBY Trans-Sumatra Toll Road Dams Merah Putih Bridge, Ambon Drinking Water Processing Jatigede Dam (Operational) Umbulan Drinking Water Provision System, East Java Transportation Jakarta MRT Project² Terminal 3 Ultimate Soekarno-Hatta² New Tanjung Priok Port Project² Nop Goliat Dekai, Papua Improving Monitoring System on Infrastructure Projects¹ KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects' latest status which can be effectively utilized for monitoring and decision-making purposes. Database Project information such as map, track, existing study and latest project status. 2 Platform data outlook that is efficient and functional using a user-friendly framework. 12 1 An integrated IT system with monitoring capacity for stakeholders, so that they can have real time data. 3 Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 166#168Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth 1 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) Broad Objective Core Mandates 1 1 245 National Strategy Projects under National Medium Term Plan for 2015 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn) 1 37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion) Additional Mandates 1 - Majority of 37 priority projects are expected to commence commercial operation by 2018 2022 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 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 Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity Source 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 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) 167#169Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Government Guarantee Program Contingent Liabilities from Government Guarantee as of Q3 2020 ** Credit Guarantee Business Viability Guarantee (BVG) PPP Guarantee Political Risk Guarantee I Toll road Full credit guarantee for PT Hutama Karya's debt payment obligations for development of Sumatra Toll Roads. 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 Documents Exposure/ Outstanding (USD bn) - Clean Water Guarantee for 70% of PDAM'S debt principal payment obligations. 1 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) 15 1.28 - 2 Clean Water Supply Program 6 the 0.01 3 Direct Lending from International Financial Institution to SOES 7 1.80 4 Sumatra Toll Road 10 2.90 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 7 3.88 6 Public-Private Partnerships (PPP) 7 4.85 7 Regional Infrastructure Financing 1 0.18 8 Public Transportation (Light Rail Transit) 1 0.39 9 Electricity Infrastructure Fast Track Program (35GW) 6 4.49 Total 60 19.79 Infrastructure Full credit guarantee on SOE'S borrowing from international financial institution & guarantee for PT SMI's local infrastructure financing. Public Transportation (Light Rail Transit) Full credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. Power (Electricity) Guarantee for PT PLN's obligations under Power Purchase Agreements with IPPS (off-take and political risk) under FTP-2 10.000MW and 35GW programs* - Infrastructure Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements 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 Q3-2020 **, the government has issued 89 guarantee documents with total value of USD39.87 billion, there were 29 guarantee documents worth USD3.99 billion have been expired. The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. Beginning in 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. **) As of end September 2020; ; currency conversion of IDR14,918.00/USD1 and IDR17,527.17/EUR1 168#170Government Financial Facilities for PPP Projects Financial Facilities to Attract More Private Participation More Funding Schemes are on the Pipelines Viability Gap Fund (VGF) Project Development Facility (PDF) LCS (Limited Concession Scheme) Government Guarantees (directly by MoF or through IIGF) Availability Payment Schemes Financing from PT. SMI and PT. IIF PINA (Non-Government Budget Infrastructure Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: Financing) Source: Ministry of Finance Project Financing funded by the private sector through the granting of concessions for an operating asset owned by the Government/SOE (based on the policy of the Government) to the private sector to be operated & managed. • • Scheme Characteristics Asset is owned by public sector Operating asset, not greenfield project Records positive cash flow for the last several years Predicted revenue Project Financing funded by any source of funds other than Government's budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas. . Scheme Characteristics Asset is owned by private sector Greenfield brownfield / operating projects 169#171Progress of PPP Infrastructure Projects Successful Projects Reaching Financial Close in 2016 and 2017 No Project Name Project Cost (IDR tn) Financial Facilities 1 Central Java Power Plant 40 Guarantee (MoF & IIGF) 2 Palapa Ring West Package 1.28 3 Palapa Ring Central Package 4 Palapa Ring - East Package LO 5 Umbulan Water 1.38 5.13 2.1 PDF, IIGF Guarantee & AP PDF, IGF Guarantee & AP PDF, IIGF Guarantee & AP PDF, VGF & IIGF Guarantee Signed PPP Projects in 2016 and 2017 No Project Name Project Cost Financial Facilities (IDR tn) 1 Batang-Semarang Toll Road 11 IIGF Guarantee 2 Manado-Bitung Toll Road 5.1 IIGF Guarantee 3 Samarinda-Balikpapan Toll Road 9.9 IIGF Guarantee 4 Pandaan-Malang Toll Road 5.9 IIGF Guarantee 5 Serpong-Balaraja Toll Road 6.0 6 Jakarta-Cikampek Elevated Toll Road 14.8 Co guarantee (MoF & IIGF) 7 Krian-Legundi-Krian Toll Road 9.0 Co guarantee (MoF & IIGF) 80 Serang-Panimbang Toll Road 9 Cileunyi-Sumedang-Dawuan Toll 5.3 8.2 Co guarantee (MoF & IIGF) Co guarantee (MoF & IIGF) Road Source: Ministry of Finance, as of July 2017 Status FC on June 6th, 2016; Construction 30%; COD Target: May 2020 FC on August 11th, 2016; COD target: February 2018 FC on September 29th, 2016; COD target: March 2018 FC on March 29th, 2017; COD target: September 2018 FC on August 30th, 2016; COD target: July 2019 Status PPP & guarantee contracts signed on April 27th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP contracts signed on June 8th, 2016 PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 PPP & guarantee contracts signed on February 22nd, 2017 PPP & guarantee contracts signed on February 22nd, 2017 170#172New Guarantee Schemes for Non-PPP Projects Guarantee on SOE Direct Lending from International Financial Institutions (IFIs) The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing, State finance soundness Guarantee for Regional Infrastructure Financing Provision with 3 main principles: Fiscal sustainability Best practice of fiscal risk management Based on Government Regulation No. 95/2015 and Ministry of Finance Regulation No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried out by PIP (Government Investment Center). The Government had issued Ministry of Finance Regulation No 174 of 2016 to provide guarantee to PT SMI on the assignment of regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. The objective is to give stimulus to the acceleration of local infrastructure development through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in order to meet local infrastructure development needs and to reduce reliance on state/local budget. 171#173www.indonesia.travel wonderful indonesia f indonesia.travel @indtravel gindonesiatravel @indtravel