#1BHINNEKA TUNGGAL IKA Republic of Indonesia Strengthening Policy Synergy to Maintain Stability and Recovery amid Lower Global Growth and Heightened Uncertainty March 2023#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, Ministry of Investment, Financial Services Authority, Ministry of State-Owned Enterprises, and The Committee for Acceleration of Priority Infrastructure Delivery. IRU also convenes an investor conference call on a monthly 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#3Highlight of the Month What's New Economic Recovery Program and Its Updates ...page 4-10 Fiscal & Financing Policy Update ...page 82-102 Bank Indonesia Board of Meeting Decision ...page 104 Prudent Pandemic Management and Continued Economic Recovery Big but measured steps including a strong vaccination program Synergy between institutions nationwide Responsive and flexible Government Budget Resilient economic performance Continued National economic recovery momentum, reflected by 5.31% (yoy) economic growth in 2022, endured on the back of stronger domestic demand and persistently solid exports. Affirmation of Investment Grade Sovereign Credit Rating Rating Agencies Fitch Ratings Rating (Outlook) MOODY'S S&P Global BBB (Stable) Baa2 (Stable) BBB (Stable) Sources: Fitch, Moody's, S&P Investment grade ratings affirmed by Fitch on December 14, 2022 recognizing macro stability and optimism on the growth prospect, as well as policy credibility in handling COVID-19 pandemic. 2#4Overview A 1 Economic Recovery Program and Its Updates External Factor: Improved External Resilience Accelerated Reforms Agenda Supported by Fiscal Performance and Flexibility: 2 Institutional Improvement and Progressive Infrastructure Development 5 Strong Commitment in Maintaining Fiscal Credibility Economic Factor: 3 Improved Growth Prospects Supported by 6 Continued Economic Recovery Momentum Monetary and Financial Factor: Credible Monetary Policy Track Record and Favorable Financial Sector 3#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IKA#6Indonesia's Economic Improvement Trend Continues GDP Growth (%YoY) PMI Markit Indonesia Total Investment (DDI+FDI) Rp Trillion 10 60 55 Expansion >50 350 5 50 51,3 300 0 250 45 200 -5 40 150 -10 100 CCI & Retail Sales 150 20,0 314,80 130 10,0 0,0 110 -10,0 90 -20,0 70 -30,0 35 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Contraction <50 50 30 0 2019 2020 2021 2022 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Consumer Confidence Index (CCI) Total GDP 25 Household Consumption GFCF 2019 2020 2021 2022 Retail Sales-g (rhs) Current Account of GDP (%) Trade Balance (Billion USD) 12000 80,00 10,00 1,30 2,00 60,00 12500 8,00 13000 1,00 13500 40,00 6,00 14000 0,00 20,00 4,00 14500 -1,00 0,00 2,00 15000 -2,00 -20,00 0,00 15500 16000 -3,00 -40,00 -2,00 16500 -60,00 -4,00 -4,00 17000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2018 2019 2020 2021 2022 1 59 1 5 91 59 1 5 9 1 2019 Sources: CEIC, BI, BPS, Bloomberg (as of 25 December 2022) 2020 2021 2022 2023 Balance (Billion USD) Export-g (% YoY)-rhs Import-g (% YoY)-rhs 1/16/2020 5/16/2020 The Indonesian Rupiah and JCI 7500 Net Capital flow (Million USD) 8000 7000 6000 4000 6500 2000 0 6000 -2000 5500 -4000 -6000 5000 -8000 -10000 4500 -12000 4000 1/1/2021 1/1/2022 1/1/2023 9/16/2020 1/16/2021 5/16/2021 9/16/2021 1/16/2022 5/16/2022 9/16/2022 1/16/2023 IDR/USD JCl-rhs Equity Flow (ytd) Bond Flow (ytd) Total 5#7The Government Commit To Provide Assistance To The Most Vulnerable Populations The National Economic Recovery Program 2022 Realization 2022: IDR396,7 Trillion Health Treatment (IDR61.3 T) Shopping Handling Covid- 19 Incentives/Compensation for Central and Regional Health Workers ☐ Health Tax Incentives • Regional budget support for handling Covid in the regions Social Protection (IDR152.0 T) Direct Cash Assistance for Fuel ■ Family Hope Program (PKH) ☐ ◉ ☐ Cash Assistance to Street Vendors, Stall, and Fishermen (BT-PKLWN) Cash Direct Assistance of Cooking Oil Direct Village Fund Assistance Pre-Employment Card Non-cash food aid recipients (Sembako Card) Strengthening Economic Recovery (IDR183.4 T) Labor Intensive Program ■ Food security ◉ MSME support Business/Tax Incentives The Direction of the National Economic Recovery Policy for 2023: As the Covid-19 Pandemic is under control and the Activity Restriction (PPKM) ends, implementation of Health Management, Social Protection, and Economic Recovery Programs in 2023 will be according to the duties of each Ministry/Agency. The government will strengthen the Adaptive Social Protection Program through various database improvements and program enhancements to anticipate the impact of economic turmoil and potential disasters that will occur in the future. CO 6#8Age Pre-employment Card Is Committed To Boost Skill Development Program Achievements Outcome >45.1 mio Verified applicant registered on the Kartu Prakerja database 16.425.420 Total Beneficiaries (Batch 1-47) IDR37.96 trillion Disbursed incentive fund 38 Province 514 District/City 18... 27% 26... 34% 36... 21% 46... 13% >55 5% A. Improving Working Skills and Entrepreneurship Opportunity 87,2% The training help to improve skills and competence* *** 56% 39,8% Who previously unemployed are now getting jobs* B. Accelerating Financial Inclusion 47% Beneficiaries who previously did not have access to financial services are now have bank account or e-wallet. 74% C. Improve Purchasing Power and SMES % beneficiaries used the cash incentives for 95% 70% 61% Statistical Demography Residency Village 64% City 36% Education Staple Food Electricity/Water Business Capital Mobile Data Bachelor 11% Diploma 4% High-School 49% Middle-... 17% Elementary... 19% Governant prokerja 64% Fuel 55% Transportation | "Kartu Prakerja is the most extensive G2P (Government to Person) Program" Source: Project Management Officer Program Kartu Prakerja, Dec 2022 7#9From Semi-bansos Scheme To Normal Scheme In 2023, the Government will implement a normal scheme that focuses more on improving skills, through offline, online or mixed training. Thus, the Pre-Employment Card is no longer semi-social assistance SEMI-BANSOS SCHEME The membership requirements are the same as before TRAINING MODE ONLINE HOWEVER, SOCIAL ASSISTANCE RECIPIENTS/ GOVERNMENT ASSISTANCE ALLOWED TRAINING BUDGET LIMIT MAX. Rp 1.000.000 NORMAL SCHEME* TRAINING MODE ONLINE - MIX - OFFLINE TRAINING BUDGET LIMIT MAX. 3.500.000 POST TRAINING INCENTIVES & SURVEY 4x Rp 600.000 & 3 x Rp 50.000 POST TRAINING INCENTIVES & SURVEY 1 x Rp 600.000 & 2x Rp 50.000 *AMOUNT OF AID AND TRAINING MODES HAVE BEEN DETERMINED IN KEPMENKO 251/2022 DATED DECEMBER 2, 2022 * TOTAL TARGET RECIPIENTS: 1,000,000 PEOPLE The allocated budget for FY 2023 is 2.67 T for 595 thousand beneficiaries So that an additional budget of 1.7 T is needed for 405 thousand beneficiaries Regarding preparations for the implementation of the Normal Scheme, MPPKP has also coordinated with the relevant Ministries/Institutions to involve higher education institutions and K/L Training Institutions that have the potential to join the Pre-Employment Card Program 8#10KUR Program to Increase Access to Finance for Entrepreneurs and SMEs The 2023 KUR ceiling is IDR 450 trillion or adjusted to the adequacy of the KUR subsidy budget in the 2023 State Budget, accompanied by the addition of new debtor targets and KUR distribution graduation target debtors KUR Policy Returns to Before the COVID-19 Pandemic 1. KUR interest rate returns to 6% without additional KUR interest subsidy/margin of 3% 2. 3. 4. The target for KUR distribution in the production sector is again set at 60%. the The total return of accumulated Small KUR ceiling is a maximum of IDR 500 million Extending the KUR restructuring policy until March 31, 2024 (according to POJK) UMKM Indonesia KUR Policy Encouraging Graduation of KUR Debtors Reduction the Super Micro KUR interest rate from 6% to 3% Maximum limit for Micro KUR access: Non-production sectors and non- agricultural production sectors, plantations, livestock and fisheries: a maximum of 2 (two) times Micro KUR access a ➤ Agricultural, plantation, livestock and fisheries production sectors: maximum of 4 (four) Micro KUR access Micro KUR and Small KUR interest rates/margins increase in stages (KUR interest subsidies slide/decrease in stages) KUR Policy to Expand Distribution and Encourage an Increase in KUR Debtors Confirmation of the implementation of KUR without additional collateral for the KUR ceiling up to. IDR 100 million by imposing non-payment sanctions and/or returning interest subsidies/margin subsidies. Affirmation of the requirements for prospective KUR Recipients to never receive commercial investment/working capital loans (except consumer loans which are excluded). Changes in provisions related to Employment BPJS, Small KUR Recipients and Special KUR with a ceiling of more than IDR 100 million have changed the phrase from before it can become mandatory to become BPJS Employment participants. Adding subrogation cooperation to the PKS online KUR guarantee system. The addition of new debtor targets and KUR distribution graduation target debtors, with a 2023 KUR ceiling of IDR 450 trillion or a ceiling according to the adequacy of the 2023 State Budget. Additional GWM incentives for KUR distribution#11Fiscal Incentives Policy to Boost the Economy The government facilitates fiscal incentives to create a conducive investment climate, especially for industry players. Through increased investment, it is hoped that it can strengthen the domestic industrial structure TAX HOLIDAY & MINI TAX HOLIDAY TAX ALLOWANCE INVESTMENT ALLOWANCE SUPER DEDUCTION TAX • • • The criteria are new investment, taxpayers including pioneer industries, and income received from the main business activities carried out. There are 18 eligible pioneer industries that consist of 169 KBLI. Pioneer industries are defined as industries possessing broad linkages, giving added value and high externality, introducing new technology, as well as possessing strategic value for the national economy. Income tax reduction are 100% & 50% (mini tax holiday) during the next 2 (two) years subsequent to the end of the CIT reduction periods above, the taxpayers are eligible for half of the CIT reduction percentages As of December 2022 year to date): Total Investment: Rp146.5 Trillion Tax Payer: 20 Tax Payer Location: 10 provinces Origin of investment: domestic and 6 countries Source: Coordinating Ministry for Economic Affairs • To increase direct investment activities for certain business fields and / or in certain areas. • The facilities • include a and imposition of reduction in net income of 30% of the total investment for six years, accelerated depreciation amortization, income tax on dividends paid to foreign tax subjects of 10% or lower and compensation for losses of up to 10 years. The criteria are having a high investment value or for export, a large absorption of labor; or have a high local content. . Tax Payer: 16 Tax Payer Total Investment: Rp14.3 Trillion Approval: 19 Minister of Finance Decree Source: OSS December 2022 • • To encourage investment in labor-intensive industries, support programs for job creation and absorption of Indonesian workers. ⚫ Deduction from net income, of 60% of the amount invested in tangible fixed assets, including land, that are used for the taxpayer's main business activities. The deduction is spread over six years (10% annually), starting from the fiscal year the commercial production commences • There are 45 labor-intensive industrial sectors and employ an average of 300 workers in 1 tax year. Total Investment: Rp368,3 Billion Investment: 2 activities Tax payer: 2 tax payers Source: OSS December 2022 Super Deduction Vocational • Engaging industry in vocational activities to provide knowledge and encourage the transfer of knowledge • A maximum reduction of 200% gross income from costs in the context of providing work practice, apprenticeship, and / or learning activities. • As per September 2022, there are 186 agreement for vocational activities (ytd) R & D Super Deduction • • Increase the role of industry in fostering innovation and the use of the latest technology in the production process Maximum gross income deduction of 300% over R&D costs carried out in Indonesia research As per December 2022, there are 18 proposal for and development activities (ytd), with estimated RnD cost up to Rp110.4 billions#12Section 2 Accelerated Reforms Agenda Supported by Institutional Improvement and Progressive Infrastructure Development BHINNEKA TUNGGAL IKA#13A Well Maintained of Indonesia's Sovereign Credit Rating in The Midst of Economic Recovery BBB+ BBB BBB BB+ BB BB- Investment Grade Fitch Ratings R&4 JCRA S&P Fitch Moody's BBB / Stable December 2022, Rating Affirmed at BBB/Stable "Indonesia's rating balances a favourable medium-term growth outlook and low government debt/GDP ratio against weak government revenue and lagging structural features, such as governance indicators, compared with 'BBB' category peers. B+ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 S&P Global Ratings BBB / Stable April 2022, Outlook Revised To Stable; BBB Ratings Affirmed "The stable outlook reflects our expectation that Indonesia's economic recovery will continue over the next two years, supporting the government's continued fiscal consolidation efforts. We expect the pace of the recovery to accelerate further this year." MOODY'S Baa2 / Stable February 2022, Rating Affirmed at Baa2/Stable "The affirmation of the rating is supported by continued economic resiliency and Moody's expectations that monetary and macroeconomic policy effectiveness will be maintained, containing risks as global interest rates rise. Moody's expects economic activity to revert to its historical average in 2023, with growth sustaining at those rates thereafter." BBB+ / Stable R&I July 2022, Rating Affirmed at BBB+/Stable BBB+ / Stable JCR "In R&l view, Indonesia's economy that plunged in 2020 will likely return to a pre- coronavirus growth level in one to two years. The government's structural reform efforts are also expected to boost growth potential in the medium to long term. Despite the pressure on the fiscal side caused by policy responses, the government debt ratio remains relatively low. The economic resilience to external shocks is maintained thanks to flexible policy responses by the government and the central bank and ample foreign reserves". July 2022, Rating Affirmed at 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 accumulation of foreign exchange reserves. JCR holds that the debt will gradually decrease as the fiscal balance improves mainly increased revenue from economic growth and higher commodity prices". 12#14Structural Reform Towards "Indonesia Maju 2045" and Out of the Middle-Income Trap 2024 will be the fifth year of implementation of the 2020-2024 RPJMN. To achieve the 2045 vision, economic transformation is carried out supported by downstream by utilizing 1) Human Resources Development, 2) Infrastructure Development, 3) Regulatory Simplification, and 4) Bureaucratic Reform. And 2024 is encouraged for a High Recovery Acceleration. RPJMN 2020-2024 be the starting point 2036 23.199 achievement of the Vision in 2045 EXIT MIDDLE INCOME TRAP 2019/2020 Become Upper Middle Income Country 8.804 6.305 4.546 3.377 2015 5,2% 2020 6,0% PRE COVID Source: Coordinating Ministry for Economic Affairs 2025 6,2% 2030 5,9% 12.233 POST 2035 5,6% 16.877 2040 5,4% 2045 GDP per Capita (USD) Average Growth 13#15Indonesia Vision 2045: "Indonesia Maju" A Developed Country GDP Per capita (USD) Medium Term Dev. Plan (RPJMN) 2020-2024 2036 Exit from the Middle Income Trap (MIT) 12.233 8.804 6.305 4.546 16.877 23.199 GDP Real 5.7% GDP Real /Capita 5.0% Year 2045 Target Developed economy and largest GDP rank-5 (USD 7,4 Trillion) Contribution from eastern part of Indonesia % Economic Transformation must start in 2020-2024 to provide a foundation for an Advanced Indonesia (Indonesia Maju) 2015 2020 2025 2030 2035 2040 2045 5.2% 6.0% 6.2% 5.9% Economic Growth in Average Source: Bappenas: Medium Term Development Plan, 2020-2045. 5.6% 5.4% 14#16Indonesia's Grand Strategy in Encouraging Sustainable Economic Growth Indonesia's economic fundamentals are solid and have been able to return to pre-pandemic levels, in line with increased mobility and leading indicators that show bright prospects. ☐ Furthermore, the government will continue to encourage accelerated growth with various strategies to achieve sustainable growth. Current Conditions: Solid Economic Fundamentals Grand Strategy Indonesia's economy is growing strong and has reached pre-pandemic levels Population mobility is starting to increase, in line with the controlled Covid- 19 cases Leading indicators indicate a convincing economic outlook Resilient external sector SME Government and Society Prepare to Live With COVID-19 ☐ Fiscal Policy as Shock-Absorber ☐ Price Stabilisation Omnibus Law on the Job Creation Act, including IKN development ☐ Downstreaming and industrialization of natural resources □ Optimization of clean energy sources and green economy □ Legal, social, political and economic protection for the people MSME'S LEVEL UP Goal Achieving Sustainable Economic Development 15#17Indonesian Digital Economy Development Framework Concept (2021-2030) The contribution of the Internet Economy reaches IDR 2,711 trillion Increase Efficiency & Productivity (Accelerate) Accelerating the digitization of the economic sector VISION Become a Digital Economy Powerhouse to Realize Inclusive, Connected and Sustainable Economic Growth POTENTIAL ACHIEVEMENTS 2030 The e-Commerce market reaches IDR 1,815 trillion Creating Jobs 35 Million MSMES digitized GOAL Encouraging Innovation STRATEGY (Create) Creating diverse and equitable digital economic opportunities 250 million digital literacy 2 times the worker Creating Inclusivity productivity ratio vs. cost Achieving Digital Economy (Encourage) Encouraging cross- sector/stakeholder coordination MAIN PILLAR 1 2 3 4 5 6 Infrastructure Human Resources Kesearch, innovation & Policies/Regulations Business Development Data Governance & Cybersecurity Funding & Investment Digital Economy Development Program Agriculture & PRIORITY Industry 4.0 Trade Fisheries Source: Coordinating Ministry for Economic Affairs Education Finance Health tourism and creative economy MSME 16#18The Framework of Job Creation Law COMPANY INVESTMENT AL New Business Creation GREENFIELD 1111 Business Development Supply Brownfield PRODUCTION HOUSEHOLD Demand JOB CREATION LAW New Job Creation Welfare Creation JOYLARE CONSUMPTION Increased Purchasing Power Increased Income Source: Coordinating Ministry for Economic Affairs 17#19Perppu No. 2 of 2022 Concerning Job Creation Law Is An Improvement of The Previous Regulation Constitutional Court The Constitutional Court (MK) stated that the Job Creation law was conditionally unconstitutional. ☐ The Job Creation law is still valid and asked the government to complete the revision within two years. Follow-up 1. Setting the omnibus method in the Law on the Formation of Legislation (Law Number 13 of 2022) 2. Improvements to the Job Creation Law: • Use of the omnibus method . • Meaningful increase in participation Substantial study results: employment, land, environment and base Emergency Regulation It is urgently needed to anticipate global and domestic conditions. PERPPU NO. 2 OF 2022 (30 December 2022) The contents of the Job Creation Perppu are generally the same as the contents of the Job Creation Law, however there are some major improvement to the content Several Major Improvement are Related To Employment Regulation, Halal Certification, and Water Resource Management Employment Regulation Halal Product Assurance (Halal Management of Water Resources Implementation of water sources in Certification) 1. Refinement of the setting of 1. Development of the BPJPH 1. Regency/City Minimum Wage. organization in the regions as the form of diversion of river channels 2. Changes to the formula for needed. based on approval by the calculating the Minimum Wage 2. which takes into account certain variables of Economic Growth, Inflation and Indices The Halal Certificate is valid since issuance and remains valid as long as there is no change in the composition of the ingredients and/or PPH. Government 2. Criminal sanctions for intentionally violating water source activities include diverting the river channel without approval. 3. Halal certification for MSEs through a halal statement is free of charge. 3. Imposition of administrative sanctions in the form of administrative fines.#20Job Creation Law As A Tool For Long-term Structural Reform PROGRESS OF THE JOB CREATION LAW With the Omnibus Law method, 79 laws were revised and simplified to become the Job Creation Law (Law Number 11 2020) was promulgated on November 2, 2020 Clusters in the Job Creation Law 1. Improving the Investment Ecosystem and Business Activities Employment 2. 3. 4. Ease, Protection, and Empowerment of Cooperatives and MSME Ease of Business 5. Research and Innovation Support 6. Land Procurement 7. Economic Zone Derivative regulations of 54 Government Regulations/Presidential Regulations The decision of the Constitutional Court on November 25, 2021 On June 16, 2022, Law No. 13 of 2022 concerning Amendments to Law No. 12 of 2011 concerning the Establishment of Legislation The government prepares improvements to the job creation law following the decision of the Constitutional Court, which involves the technical formation of the job creation law but does not change its substance. Preparation of academic manuscripts and draft law manuscripts It has expected to be completed in 2022. Source: Coordinating Ministry for Economic Affairs • • 8. Central Government Investment and Acceleration of National Strategic 9. Projects Implementation of Government Administration 10. Imposition of Sanctions a) Revising Law 12/2011 to accommodate the Omnibus Law method b) Change the Job Creation Law based on the revision of Law 12/2011 within two years c) Review the substances that objection to the community The subject matter in the revision includes: a) Omnibus method; b) Strengthen community involvement and meaningful participation; c) Regulatory digitalization d) Improve the technical error of writing in the draft law either that has been agreed upon or after the President receives the bill The Job Creation Law and its implementing regulations are still in effect and no material on the Law has been annulled by the Constitutional Court. Thus, the implementation of the Job Creation Law, which concerns, among others, Business Licensing and OSS, Employment including provincial and district/city minimum wages, and facilities for MSMEs, still applies. 19#21The Job Creation Law Encourages Employment and Facilitates New Business Opening While Recovering the Post-Pandemic Economy Under the Omnibus Law, 77 Indonesian Laws have been revised through a single law which regulates various sectors. Has simplified into Job Creation Law 186 Article dan 15 chapter S Investment Ecosystem and Business Activities Business Licensing Employment SME and Cooperatives 11 Cluster Research and Innovation Land Acquisition Economic Zones Ease of Doing Business *The UUCK has been in effect since its promulgation on November 2, 2020. The Constitutional Court Decision No. 91/PUU XVIII/2020 dated November 25, 2021 which states that the Law of Job Creation is unconstitutional with the condition: remains in effect operational but must be formally revised within 2 years. The issuance of Ministerial Regulations/Regional Regulations/Regional Head Regulations which are technical in nature, operational can still be carried out, and the OSS System will continue to run as should be. Source: Ministry of Investment (BKPM) Government Investment & National Strategic Project (PSN) Public Administration Imposition of Sanctions 20 20#22The Government Focuses On Regulations And Procedures For Ease of Doing Business Improvement of regulations in the context of structural reforms to the Job Creation Law and its derivative regulations can provide legal certainty to business actors. Streamlining Administrative Procedures and a Positive Investment Climate FDI Realization (IDR Tn) Ease of Doing Business Policy Law No. 11 of 2020 About Job Creation Latest update PERPPU 2 of 2022 concerning Job Creation has been issued Impact on ease of doing business 644,2 454,0 Providing legal certainty to business actors 423,1 412,8 2019 2020 2021 2022 Government Regulation No 5 of 2021 NIE OSS RBA System Source: Coordinating Ministry for Economic Affairs Revision of the Legal Draft and Appendix I/II Assistance in conformity evaluation between Regulation and System Improving risk- based licensing procedures (NSPK) and harmonization with other PPS Better and smoother Business Licensing Services Unemployment Rate (%) 7,07 5,86 Feb-22 Feb-21 Feb-20 Feb-19 Feb-18 Feb-17 Feb-16 Feb'15#23More Business Fields Are Open for Foreign Investment >> Further provisions regarding investment requirements are regulated in a Presidential Regulation Number 10 Year 2021 Jo. 49 Year 2021 Pres. Regulation 44/2016 "Investment Negative List" Pres. Regulation 10/2021 Jo. 49/2021 515 Business Fields Business Restriction oriented Source: Ministry of Investment (BKPM) STOP "Investment Business Fields" More Attractive and The Regulation has come into force since 4 March 2021 (30 days after the regulation enacted) (Article 15 Pres. Regulation 10/2021) Competitive Encouraging the Development of Priority Business Fields Mandate of Law Number 11 of 2020 concerning Job Creation Artide 77 Number 2 (Amending Law Number 25 of 2007 concerning Investment Artide 12) 22 22#24The Latest Investment Business Field Arrangements Presidential Regulation No. 44/2016 "Investment Negative List" Presidential Regulation No. 10/2021 Jo. 49/2021 "Investment Business Fields" " 0 Attachment I PRIORITY Priority Business Fields* 246 Business Fields *Equipped with Tax Holiday, Tax Allowance, and Investment Allowance Business Fields Closed for Investment 20 Business Fields Attachment II Business Lines Reserved for or Required for Partnerships With Cooperatives and SME 145 Business Fields/KBLI % Business Fields Opened with Conditions 350 Business Fields Source: Ministry of Investment (BKPM) Attachment III % Business Lines Allocated for or Required for Partnerships With Cooperatives and SME 182 KBLI in 106 Business Groups Business Fields Opened with Conditions 37 Business Fields 23 23#25Investment Focus Sectors Sector Industry Sector Industry Downstream Natural Resources Nickel, Copper, Coal Smelting Import Substitution Iron and Steel Export Oriented Industry EV Battery, Automotive Infrastructure Toll road, AilDRorts, Seaports Human Resources Development/ Education Vocation, Higher Education/University Tourism Tourism operator, tourism supporting services, 10 new Bali Labour Intensive Industry Furniture, Electronics, Textile, SME's Digital Economy BKPM Promotion 1 Encouraging Collaboration of Local Entrepreneurs with Foreign Investors Strategy 2 Encouraging Equitable Investment outside Java 3 Providing easy incentives based on investor needs Source: Ministry of Investment (BKPM) Data center, Start-ups, marketplace, e-commerce wwwwww % 24 24#26Encouraging Investment Through Priority Sectors That Have Value Added R 柯 7 Export Oriented - Labor Intensive industries Pharmaceutical and Heath Equipment Automotive Industries Infrastructure R Я Source: Ministry of Investment (BKPM) Electronic Indutries Energy, especially renewable energy Mining, That creates added value products 25#27Investment Policy Direction 2020-2024: Improving Investment Quality To Promote Inclusive and Sustainable Economic Growth Job Creation/ Encouraging investment in labor-intensive business fields and developing business fields that involve the community by utilizing existing human resources Labor intensive Encouraging downstream products and increased use of domestic products Encouraging increased Optimizing the use of natural resources and domestic production investment in business sectors categorized as green investment and having a large positive social impact Environmental and Social and equitable investment Equality (ESG) throughout Indonesia Direction of Investment Policy: Quality Investment 2020-2024 Encouraging investment in export-oriented industries and industries that substitute imports Export Oriented and Import Subtitution Sumber: Strategic Planning of Ministry of Investment/ BKPM (Renstra) 2020 - 2024 Increase Productivity Encouraging increased company efficiency (i.e. Industry 4.0) and improvements to the Incremental Capital Output Ratio (ICOR) Transfer of Knowledge and Technology Encouraging human resource development and increasing R&D in an effort to master technology Improve Competitivenes s and Market Access Encouraging increased perceptions and opening up a wider market for national companies and MSMEs through business partnerships 26 26#28Investment Realization Target 2020 to 2024 With the direction of President Jokowi to improve the economic growth, the investment realization target will be increased from IDR900T in 2021 to IDR1,200T in 2022 No Strategic Goals and Key Performance Index BKPM 2020-2024 Units 2020 2021 2022 2023 2024 1 Investment Realization Rp Trillion 817.2 858.5 968.4 1,099.8 1,239.3 2 Investment Realization in Secondary Sector Rp Trillion 227.2 268.7 352.5 483.9 646.1 3 Quality Investment Distribution (outside Java) % 48.3% 49.0% 49.7% 50.6% 51.7% 4 Investment Contribution from DDI including SME's Total Investment Realization Year 2015 to 2019 Rp. 3,381.9 T Source: Ministry of Investment (BKPM) 47,3% Jo % 48.8% 49.7% 50.3% 51.9% 53.1% Investment Realization Target Year 2020 to 2024 Rp. 4,983.2 T The increase in investment targets from President Jokowi is expected to come from quality investments, such as processing industries that provide added value 27#29Risk-Based Licensing Approach Risk Level PREPARATION OPERATIONAL COMMERCIAL NIB as the single license for preparation, operational, and commercial stages Low ⚫ Business actors are still required to comply with the implementation of K3L standards NIB ⚫ For Micro & Small Businesses, guidance is carried out by the Government in the implementation of K3L standards Low Middle Upper Midle SS*: self declaration SS**: verification result NIB and Standard Certificate (SS) as the license for preparation, operational, and commercial stages Notes: NIB+SS NIB+SS* Standard Certificate in the form of self-declaration to meet business activity standards Business actors are required to meet business standards Supervision is carried out to ensure that business actors meet business standards • Standard Certificate in the form of self- declaration to meet business activity standards ⚫NIB + SS* as the license for preparation stage. verification SS** SS ** is issued after verification of compliance with business standards by the Government NIB + SS ** as a business license is valid for operational and commercial stages High NIB NIB as the business license for the preparation stage NIB + LICENSE Companies must meet all the requirements before license is issued. NIB + Permit as business license for the operational and commercial stages Source: Ministry of Investment (BKPM) 28#30Risk-based Business Licensing Deregulation Measures To Encourage FDI Ex-ante Licensing (satisfying all requirements in advance) is effectively replaced by ex-post licensing (the requirements are checked afterward), which will be particularly advantageous for low- and medium-risk businesses. Starting a Business Doing Business RISK-BASED TARGETING - Optimizing Effectiveness and Cost of Monitoring: The Government implemented OSS-RBA on August 9, 2021, based on Regulation 5 of 2021. • Low Risk Medium Risk High Risk • Focus on critical hazards that are more likely to arise NIB Issued = 3.719.750 • Period August 4, 2021 - February 28, 2023 Based on Business Based on Based on Business Actor: Investment Type: Scale: Business Entity FDI = 13.366 = 487.986 DDI = Individual = 3.231.764 Short Medium-term . . - 3.706.384 Micro = 3.531.836 Small 138.235 = Medium 18.269 Large 31.410 = Action Plans Accelerate the reduction of Ex Ante licenses toward Ex Post compliance (Risk-Based Approach) • Towards technical regulations for risk management - Third Party System Establish OSS as a national portal for business licenses with legal security Long-term Speed up better development approach (e.g., climate change, etc.) Source: Coordinating Ministry for Economic Affairs Resource and time limitations Consider random inspections because blanket inspections are not appropriate, resulting in excessively costly (for countries. and businesses) INSPECTION: . • Based on the risk Inspection is carried out to ensure the implementation of operational and commercial activities according to business standards exception in the implementation of supervision for Micro and Small Enterprises implementation of inspections can be carried out by certified professionals (third parties). The Progress of Development Monitoring/Inspection Subsystem Of the 44 modules in the monitoring (inspection) subsystem: • 36 modules have been completed/embedded in the OSS RBA (go-live) • 8 modules are still in the process of User Acceptance Testing (UAT) 29#31Implementation of Risk-Based Business Licensing Government Regulation Number 5 of 2021 To Start and Carry Out Business Activity Basic Requirement for Business Licensing Prior to Law 11/2020 Location Permit Environmental Permit Building Permit (IMB) and Building After Law 11/2020 Suitability of Space Utilization Activities (KKPR) Environmental approval Building Approval Function Certificate (PBG) and SLF (SLF) Risk Based Business Licensing (KBLI) Risk-Based Business Licensing based on KBLI regulated in PP 5/2021. The fulfillment of provisions, requirements and obligations is based on the Sector PP, Presidential Regulation, and Permen/Perban* derivatives of PP 5/2021. Business Licensing to Support Business Activity (PB UMKU) Previously (OSS 1.1) was known as Commercial/Operational License PB UMKU services are carried out entirely through the OSS system • PB UMKU is in the process of finalizing the system with Line Ministries and there is an agreement: • if the nomenclature and services have been accommodated in the line ministries system, first the system integration will be carried out, however, if it has not been accommodated by the line ministries system, the priority is immediately planted in the OSS system. *) Various requirements are regulated in 22 Candy/Bandages that must be accommodated and planted in the OSS system Source: Ministry of Investment (BKPM) 30 30#32Risk Based OSS System: Users and Features OSS KEMENTERIAN INVESTASI/BKPM OSS System is Mandatory Business/ Investor Line Ministries Regional Government SEZ KPBPB SME 18 Line Ministries 34 Province 19 SEZ 5 KPBPB Non SME Source: Ministry of Investment (BKPM) 416 Regency 98 City Features in OSS Information Business License and Facility Monitoring 31#33Architecture of OSS System Investor 2. SUB SYSTEM OF LICENSING & FACILITIES Basic Requirements Business Activities/KBLI Investment List Scale of Business INVESTMENT FACILITIES 2.c. OUTPUT BASIC LICENCES RISK-BASED BUSINESS LICENCES (PB) Low Risk: Business Identity Number (NIB) Lower-Middle Risk: NIB+ Standard Certificate (SS) Upper-Middle Risk: NIB+ Verified SS High Risk: NIB+ License (+Verified SS*) SUPPORTING BUSINESS LICENCES (UMKU)) *) As required. 3. SUB SYSTEM OF SUPERVISION Regular Supervision Incidental Supervision Annual Supervision Schedule Assignment Letter Supervision Report/MoS Profile of Investor Imposition of Sanctions 2.a. VALIDATION 2.b. SMART ENGINE Profile of 1. SUB SYSTEM OF INFORMATION General Information on Business Licensing KTP - Dukcapil Investor Requirements/ Obligations Paspor-Imigrasi Durations/SLA Akta - AHU Complaint Services Authority NPWP-DJP OSS Dictionary Other Criteria Investment OSS User Manual KKPR Darat - ATR/BPN Risk Parameters Risk Valuations RISK MANAGEMENT ENGINE FAQ Business Licensing Simulation Source: Ministry of Investment (BKPM) KKPR Laut - KKP KBLI/ Business Activities- based Risk Matrix: - Risk Assessment from related Ministries Land Area Building Details Other Criteria Input/Evaluation/ Site Visit Verification & Notification Central/Regional Government based on Authority (+Supporting IT System) 32 32#34Ease of Business Licensing and Investment Facility through the OSS System LO Incentive 2 Validation 3 Basic Requirement KTP/ID - Dukcapil 1 Right of Access for Pasport-Imigration Business Akta -MOLHM Spatial Conformity (PKKPR) Enviromental Approval Building Permit & Certificate of Properness Peta Digital-ATR/BPN 4 Risk Based Approach Tax Holiday Low Risk NIB Medium - Low Risk NIB + Standard Certificate(SS) Medium - High Risk NIB + SS (Verified) High Risk NIB + License (+ SS) Tax Allowance Import Duty Investment Facility in SEZ Source: Ministry of Investment (BKPM) 33#35Positive Investment List: Improving the Investment Ecosystem in Indonesia Changes in the licensing process and expansion of business fields for investment will be a game changer in accelerating investment and opening new jobs INVESTMENT Changes in the Regulation of the Investment Business Field Presidential Regulation No 44 of 2016 "Indonesia Negative Investment List" List of Business Fields Closed to Investment 20 business activities Business Activities Allocated for or Requiring Partnership with Cooperatives and MSMEs 145 business activities Business Activities that are Open with Certain Requirements 350 business activities Presidential Regulation No. 49 of 2021 (PR 49/2021), which amends PR 10/2021 "Investment Business Field" Priority Business Activities 246 business activities Business Activities Allocated for or Requiring Partnership with Cooperatives and MSMEs 182 business activities Business Activities that are Open with Certain Requirements Source: Coordinating Ministry for Economic Affairs 37 business activities In principle, all business fields are open to investment, except for business fields that are declared closed for investment or activities that the Central Government can only carry out. • Investment value for PMA > IDR 10 billion excluding the value of land and buildings. However, to encourage technology- based startups in the SEZ, the investment value of PMA can be <= IDR 10 billion, excluding the value of land and buildings Priority Business Activities with the following criteria: National strategic project/program Capital intensive Labour intensive High technology Fiscal Incentives 1. Tax Incentives: • Tax Allowances . Tax Holidays • Investment Allowances 2. Customs incentives in the form of import duty exemption for import of machinery and goods for industrial development and expansion Pioneer industry Export oriented Oriented in research, development, and innovation activities $ Non-Fiscal Facilities 1. Ease of obtaining business licenses 2. Provision of supporting infrastructure 3. Guarantees on availability of energy 4. Guarantees on materials 5. Immigration 6. Manpower availability of 7. Other non-fiscal supports 34#36Investment Realization in 2022 Rp 1,207.2 Trilion (YOY: 34.0%) Achieving Target of 1200 T (100%) from President FDI O DDI DDI (Rp 552.8 T) 45.8% (YoY: FDI 23.6%) (Rp 654.4 T) 54.2% (YOY: A 44.2%) Source: Ministry of Investment (BKPM) Indonesian Labor Absorption: 1,305,001 people JAVA OUTSIDE JAVA OUTSIDE JAVA (Rp 636.3 T) 52.7% (YoY: 35.9%) JAVA (Rp 570.9 T) 47.3% (YoY: 31.9%) A 35#37Investment Realization in 2022 (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD billion) Singapore China 8,2 Hong Kong 5,5 13,3 DDI By Region in IDR Trillion Riau 82,5 East Java 110,3 Central Sulawesi 111,2 Special Territory of Jakarta 143 West Java 174,6 FDI Metal, Metal Goods, Except Machinery, and Equipment Industry US$ 11.0 B - (24.0%) Transportation, Warehouse, and Telecommunication Rp 75.1 T- (13.6%) Japan 3,6 Housing, Industrial Estate, and Office Building Rp 66.2 T- (12.0%) Mining Rp 62.5 T- (11.3%) Malaysia 3,3 Source: Ministry of Investment (BKPM) Mining Food Industry Food Crops, Plantation and Livestock Rp 54.9 T- (9.9%) Chemical and Pharmaceutical Industry Transportation, Warehouse, and Telecommunication Electricity, Gas and Water Rp 38,9 T- (7.0%) Supply US$ 5.1 B- (11.3%) US$ 4.5 B- (9.9%) US$ 4.1 B- (9.0%) US$ 3.8 B- (8.3%) 36#38National Strategic Project (PSN) list was established in 2016, and have undergone several amendments until recently stipulated under Coordinating Minister Regulation No.21/2022 Pres. Regulation No. 58/2017 Pres. Regulation No. 3/2016 2016 225 Projects 1 Program USD 168,58 Billion PSN List Evaluation 2017 245 Projects 1 Program USD 283,06 Billion Evaluati Pres. Regulation No. 56/2018 2018 223 Projects 3 Programs USD 265,91 Billion Eval Pres. Regulation No. 109/2020 2020 201 Projects 10 Programs USD 308,7 Billion PSN Lis Evaluation Coord. Minister Regulation No. 7/2021 2021 208 Projects 10 Programs USD 365,13 Billion PSN List Coord. Minister Regulation No. 9/2022 Evaluation 2022 200 Projects 12 Programs USD 351,22 Billion PSN List Evaluation 2022 210 Projects 12 Programs USD 383,09 Billion Project included in the PSN List Proposed project is evaluated by KPPIP and approved through High level Limited Meeting (Ratas) Ongoing project from the previous list and being pushed by the government The project has been declared Complete and there are no issues that need to be resolved The project no longer requires PSN facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) || || 0 0 Project excluded from the PSN List 37#39Since 2016, 141 National Strategic Projects have been fully operational, and most of the projects have been expedited to move from preparation phase 1st PSN List Amendment: Addition of 55 projects + 1 Aero Industry program 2016 20 Projects USD 2,32 B 2nd PSN List Amendment: Addition of 2 projects + 1 Economic Equity Program 3rd PSN List Amendment: Reduction of 9 projects + 1 program Addition of 88 projects + 5 programs 2019 4th PSN List Amendments: Addition of 7 projects 2021 2020 2017 2018 128 Projects USD 49,94 B 92 projects USD 32,52 B 104 Projects USD 41,09 B 30 projects USD 6,59 B 62 projects USD 21,02 B 37 projects + 32 projects + 28 projects + 24 projects + 26 projects + 1 program 2 programs 2 programs 5 programs 7 programs 96 projects +1 Electricity Program 100 projects 95 projects 99 projects + 89 projects 119 projects 1 program 5th PSN List Amendments: Addition of 13 projects + 2 programs 6th PSN List Amendments: Addition of 10 projects 2022 150 Projects USD 68,87 B 27 projects + 9 programs 83 projects -85% of projects have moved from preparation phase 6 projects 10 projects 4 projects 13 projects 6 projects 6 projects 53 projects + 1 aero industry program 36 projects + 1 aero industry program 47 projects + 4 projects 46 projects + 3 programs 66 projects 3 programs 81 projects 59 projects + 1 aero industry program + 4 programs 15 projects 29 projects 9 projects + 1 Program Completion Oparated Partly Construction TIMO Preparation Project weduced from 38 PSN et#40All National Strategic Projects have been given a special facility to ease each of the project's implementation as stipulated in the Pres. Regulation No. 109/2020 PSN Facility Land transfer fee waiver for PSN Local content utilization Electronic permit licensing Government guarantee Spatial planning IT Monitoring system by KPPIP Land aquisition Existing New norm on Presidential Regulation No. 109/2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) SOE appointment Debottlenecking Procurement acceleration Law settlement assistance Project acceleration for private investment 39#41Currently, there are 210 Projects and 12 Programs under the National Strategic Project list in which more than 60% of total investment value are expected to come from private sectors 45 Projects Sumatera USD 55,61 Billion * Est. 1USD=15.000 IDR 13 Projects Kalimantan USD 15,8 Billion 1 Program Projects 83 Jawa USD 135,14 Billion 11 11 ProgramsProjects Nasional $ Est. Total Investment Value USD 110,16 Billion USD 383,09 Billion* 25 Projects Sulawesi 13 Projects Maluku & Papua USD 39,78 Billion USD 23,5 Billion 18 Projects Bali & Nusa Tenggara USD 3,03 Billion PSN list covers 14 sectors on project level and 12 Program level State Budget 13% 20% SOE 67% Budget Private *Include potential tennant investment in Industrial Estate A Road 53 Projects 000 Dams & Irigation Ind. Estate Railway Plantation 56 Projects Cleanwater, Energy 24 Projects 14 Projects 1 Project 14 Projects Ports Wastewater, Sea Wall Airport Tourism Education Technology 16 Projects 16 Projects 6 Projects 1 Project 1 Proyek 6 Proyek Housing SEZ 2 Proyek Program Sugar & Palm Program Smelter Program Superhub Program Electricity Program Economic Dev. Program Toll Road Access Program Food Estate Program Strategic Tourism Program Waste to Energy Program Border Dev. Program 40 40#42Highlighted PSN Projects which aligned with recent National ESG (Environment - Social - Governance) Agenda (1/2) Electricity Program with focus on Renewables 1 Electricity Infrastructure Development (PIK) (which contains projects listed in RUPTL 2021-2030); Electricity Program 2 National Rooftop Solar Power Plant 3 Large-scale Solar Power Plant in Riau Islands 41#43Highlighted PSN Projects which aligned with recent National ESG (Environment - Social - Governance) Agenda (2/2) EV Battery end-to-end Development Plant The Electric Vehicle Battery Industry is one of the Government's priorities In the next five years, the President's direction is that the government wants to focus on the downstream industry of nickel ore, considering that Indonesia has the largest reserves in the world. Electric Battery Development Program as part of new PSN List in 2022 Loc #2 #pc 1. Nickel Smelter in East Halmahera PT Indonesia Battery Corporation in East Halmahera A joint venture project with the LGES consortium to support the supply of nickel for the electric vehicle battery industry in Indonesia at the Batang Integrated Industrial Estate Sorowa St Pomalia, m East Sul ueadp Cara Sulawes 2. PT Vale Indonesia Integrated Smelter Development Project in Pomala Contributing the downstreaming of electric battery precursor products up to 40,000 tons/year 42#44Highlighted PSN Projects which provide substantial benefit to private investor - Special Economic Zones Development (KEK) on 18 Location in Indonesia North Aoch & Lhokseumawe, Auch Government Regation No 05/2017 February 20121 Operating in December 2018 Primary Activities Energy industry Petruchard art or chami houstry Palm Country -Logging industry -Log Se Marghe SEZ Simungen, North Sumatera 10overnment Pegation No 29/2012- Fanuary 20121 Operating in January 2015 11. One SEZ Gresik, East Jove 19 SEZS AND ITS PRIMARY ACTIVITIES Dr Regulation o 71/2001 June 2021: Primary Activites Mesa Industry Cooper and sles Energy Industry -Electronic Industry -Chenical industry -Logistic SLOC Malacca 12. Singawan SE2 Myang, East 48/2019-September 2019 Primary Actinties -unsh -Dial Techolog 13 Mavidku Sez Central Lombok, NTB Government Regulation No. 62/2014 June 2014 Operating in October 2017 Primary Aves: Tous 54. NBTK SEZ Ea Kutal, East Kainarton Comment Regulation No 05/2014 October 2014 Operating in Acril 2019 Primary Activities: Pam Of Industry Erary Industry -Logic Palu, Central Sutaw Kovantment Regation No 31/2014 May 20141 Operating in Septem Primary Activities -Base Metal Industry -Logisti 16. Uking SE2 North Ninaha North Suma Government Regulation No 84/2019 December 2011 Primary Actes: Tour Bhung Norm Sulawes 10overnment Rogation No. 32/2014 May 2014 Operating in April 2019 Primary Activities -Coconut Processing try -Fishery sty Investment Realization (IDR Trillion) 2019-2021 Primary Acti Falm oil industry -Rubber Industry Logolic Data Aero Technic SEZ Belum lands ment Regulation No. 67/2021 June 20711 Primary Actiatio MRO Industry Maintenance, Repair Overha Hong SEZ Batam, Kepulauan R Government Regulation No. 41/2021- June 20011 Pomery Activities IT- Tourism ALK-1 ALK-I ALKI- Marota Islands, North Maluku Government Regulation No. 50- June 2014 Operating in April 2019 Primey Actieties Foy incustry -Legiti 19.Sorong S2 Sorong, West Pe (Govement Regulation No. 31/2016 Aug 2016 Operating in Detaber 2019 Primary Acties: -Nicked Smeer industry -PO4 Industry Forestry Sol duitry Bas, Riu isik Government Region 42/2017 October 2017 Operating in December 2018 Primary Activities Baste Industry -Logist & ASEZ Bonyuasin South Sumatera Government Regulation No $1/2014-June 2014 Primary Acties Fir Okintuntry Rubber try Petrochemical industry -Logistic 7 Tarjung Kalayang GEZ Baltung Gongcs Del hung Govenment Regulation No. 06/2016- March 2015 Operating in March 2019 Primary Act: Tourm Tanjung SEZ Pandeglang, Bartos Government Fegration No 26/2012 February 2012 Operating in February 2015 Primary Activities Tourm Bogor, West Je Governmart Regulation o 69/2021-June 2021 Primary Activitie Taurium Creative incudry 10 Honda Kendal Cenral Java Government Regulation No 35/2012 December 2019 Operating in May 2021 Primary Activities Teate and Clothing ndustry Furniture and Tiry Incastry Food and beverage industry Automatas inntry Electronic Industry Lug SUMMARY OF THE 19 SPECIAL ECONOMIC ZONES PERFORMANCE *) 2019 2020 2021 26.86 42.98 Investment Commitment IDR 116.4 Trillion 27,800 Numbers of Employment 13.21 IDR 5.2 Trillion Export Value in 2021 IDR 64.8 Trillion Investment Realization (Tenant & Developer) *) up to December 2021 Increasing Export Focusing on industries which have GVC (fashion, automotive, furniture, etc.) Speed Up Development of Industry 4.0 Focusing on industry with automation MAIN TARGET OF SEZS Developing Under- Developed Regions Giving added value to raw materials such as mining or farming Develop Potential Service Industry Development industry in the field of IT, financial services, education & healthcare Improve Indonesia Balance of Trade Import substitution Industries, such as chemical, pharmaceutical, machinery & electronics 43 3#45Highlighted PSN Projects which provide substantial benefit to private investor Various facilities and Modalities for SEZ investors 1 Investment Opportunities as Tenant ■ Invest in SEZ Business Sectors (Industry: palm oil, rubber, petrochemical, agro, fishery, manufacturing, logistic, tourism, etc) Investment Opportunities as Developer Investment Opportunities as Infrastructure Provider INVESTOR Joint Venture with the SEZ Provide SEZ Infrastructures: Developer in operating and I On-site infrastructure (power plant, Coenz thar managing SEZ I water treatment plant, waste water TAX HOLIDAY (10-20 YEARS) I treatment plant, etc) (In line with SEZ theme) Yes No TAX ALLOWANCE (Other than designated SEZ theme] One-Stop-Services Controlled goods regulation not applied Negative List Not Applied Indonesia National Standard Not Mandatory Environmental License by Developer Building Permit by Developer No export obligation Property Ownership for Foreigner Special Tripartite Forum VOA could be extended 5 times Land Title for 80 years 50% reduction for Local Taxes Zero percent custom tax for production goods with 40% local content Entering Domestic Market Free luxury tax for property sales (only in SEZ with tourism themes IMPORT: • Foreign ownership limitation not applied Import duty exemption for machinery & capital goods (up to 5 yrs) Transaction inside the SEZ: value added tax (VAT) and luxury sales tax (LST) are not collected INCOMING GOODS Deferred import duty ⚫VAT & LST ro: collected FROM DOMESTIC TARRIFAREA: •VAT & LST rot collected EXPORT: OUTGOING PRODUCTS • Normal Regulation TO DOMESTIC TARRIF AREA ⚫If Local Content> 40%, Import Duty are exempted 44#46Government of Indonesia has set various initiatives to drive private sector participation in Infrastructure sector especially for National Strategic Projects 1 боло 2 3 4 I Public Private I Partnership (PPP) Limited Concession Scheme (LCS) Land Value Capture (LVC) Other Creative I Financing for I Infrastructure 45#47Government of Indonesia has conducted institutional reforms to establish a conducive PPP ecosystem... 1 Public Private Partnership (PPP) Institutional Reforms for PPP Implementation KPPIP: kpop Coordinating unit in decision-making processes and debottlenecking efforts for infrastructure acceleration Indonesia Infrastructure IIGF Guarantee Fund: Provides guarantee and supports project preparation ♥SMi KANTOR BERSAMA KPBU REPUBLIK INDONESIA PPP Joint Office: Information center for policy coordination and capacity building to encourage the use of PPP schemes Sarana Multi VSMI Infrastruktur: Facilitating infrastructure financing, preparing project, and serving advisory PPP Guarantee As a Single Window Institution to provide Government guarantee for PPP infrastructure projects Presidential Regulation 78/2010; MCF Regulation 8/2016 PPP Project Development Facility Provide project preparation and transaction advisory services for PPP projects assigned by the Minister of Finance (MoF). MoF Regulation 180/2020 National Strategic Project (PSN) Guarantee Project Guarantee against Political Risks that can result in delays in the implementation of PSN and unfavorable financial impact on Business Entities implementing PSN. MoF Regulation 30/2021 SOE Credit Guarantee Credit guarantee against of State Owned Enterprises /SOE default risk on loans and bond issuance to finance infrastructure project MoF Regulation 101/2018 National Economic Recovery Program Corporate Credit Guarantee Credit Guarantee for Corporate working capital as part of National Economic Recovery Program MoF Regulation 98/2021 Credit Guarantee for State- owned Enterprises/SOE involved in National Economic Recovery Program MoF Regulation 211/2021 Government Commitment through Fiscal Support o0oll Project Preparation Commitment Viability of Project Project Development Facility (PDF) Contracting Agency (CA) Commitment Viability Gap Fund (VGF) Availability Payment (AP) MoF assigns SOE to assist Through conversion CA in PPP project preparation and transaction from State Budget to PPP financing scheme MoF provides support resulting a more viable project to be offered to market MoF provides periodic payment scheme for non- commercial projects that greatly needed by public Bankability Sovereign Guarantee and Long-Term Financing MoF established SOE in order to provide sovereign guarantee and long-term financing support Land Support MoF established dedicated unit that settle land acquisition payment to be used for strategic infrastructure projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 46#48Under National Strategic Project (PSN) there are 214 projects identified to be delivered through Public Private Partnership (PPP) with various project' scales and sectors 1 PPP Projects under National Strategic Projects (PSN) - incl. PSN Programs (Updated on September 2022) Public Private Partnership (PPP) SIL 200 projects under 14 sectors PSN Program #10 Regional Development Program 31 Projects 56 Projects (USD 52,47 Bil) 6 Projects (USD 0,87 Bil) (USD 7,37 Bil) 49 Projects (USD 16,33 Bil) 214 PPP Projects PSN Projects Waste to Energy Programs Central Java Projects 72 Projects (USD 9,12 Bil) East Java Projects West Java Projects Total 41 out of 56 projects have passed the preparation stage 33 out of 56 projects are from Toll Road Sectors Highlighted Projects Kediri Airport PPP Unsolicited - Initiated by Private 30% of the projects are small scale PPP projects initiated by the Regional Government, with investment value under USD 15 Million. Investment Value USD 607 Million (incl. land acquisition) Project Scope ⚫ Design - Build - Finance - Operate - Maintain - Transfer (DBFOMT) • 50 years concession ⚫ User Charge Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 47#49Government of Indonesia has stipulated Limited Concession Scheme as an asset recycling scheme for brownfield infrastructure asset 2 Limited Concession Scheme (LCS) Limited Concession Scheme (LCS) is a concession agreement, that includes asset operations and development, between Government and Private Entities for 20+ years of concession period. LCS Concept 000 ARA Government can get: • • • Upfront payment that can be received at the time of Financial Close, and/or Annuity payment during the concession period Additional incentives in the form of revenue sharing All future CAPEX will be borne fully by the concessionaire, thus easing the burden of Government's budget Government guarantees the issuance of permits and licenses Flexible operations allow private sector to innovate and increase revenue LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOES to private sector to operate, maintain, and develop the assets; As the rewards, Government and/or SOE will receive upfront payment or annuity payment during the concession period Future CAPEX during the concession period will be borne by the concession holder to ease the Government and SOE budget burdens Technical Criteria for the LCS assets The asset has been fully operated for minimum 2 years The asset needs to improve operation efficiency based on international standard Asset's useful life minimum is 10 years For the SOE's asset, the asset must have positive cash flow for minimum 2 years in a row and has been audited at least 3 years in a row For Government asset (BMN), the asset should be on the Ministry Financial report that has been audited based on the Government Accountancy Standard in the previous period Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 48#50Government of Indonesia try to implement LVC Scheme in order to alleviate government burden on infrastructure development 3 "A policy approach that enables communities to recover and reinvest economic value increases and increases in economic productivity that result from public investment and other government actions. (Lincoln Institute of Land Policy) www Land Value Capture (LVC) Open Housing & Settlement Keep Investing- network Grows 0000000 Human Settlement Improvement Tax based LVC Land and Property Tax Value Uplift Betterment Levies and Special Assessment Development Based LVC Land Sale and Rent Air Right Sale Tax Increment Financing (TIF) Joint Development Land Readjustment Retain a Portion Creating Fiscal Space LVC Benefit 1. Local revenue from tax and levy I Better city planning and development 1. Regional growth I. |⚫Distributed development in urban area Triple Win LVC Better Urban Mobility Reducing Subsidy Source: KPPIP, Kemenko Perekonomian, Desember 2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 1995 49#51Government of Indonesia is exploring the potential of pilot project on LVC to encourage Regional Government in implementing LVC Scheme 3 ww Land Value Capture (LVC) Coordinating Ministry of Economic Affairs in partnership with The World Bank and DFAT- Australia has formulated Piloting Project study (Demo Project) for Land Value Capture initiatives in 5 Cities. MRT Station Harmoni, DKI Jakarta Value Capture Instrument: FAR (Floor Area Ratio) Compensation Betterment Lovy TOD Jurangmangu, Tangerang, Banten Value Capture Instrument: Concession Fee Betterment Levy Gedebage Area, Bandung, Jawa Barat Value Capture Instrument: Betterment Levy TOD Tawang Station, Semarang, Jawa Tengah Value Capture Instrument: Concession Fee Betterment Levy Sekanak Lambidaro Area Development, Palembang, Sumatera Selatan Value Capture Instrument: Betterment Levy Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 50#52SDG Indonesia One is launched by PT SMI as an integrated funding platform for private investor Other Creative' Financing for Infrastructure Profile of PT SMI • PT SMI is a SOEs' non-bank financial institution with 100% of its shares owned by the Indonesian government. • The first financial institution in Southeast Asia accredited by Green Climate Fund (GFC THE WORLD BANK AllB TITLE SDGs Initiative • The platform was launched in October 2018 • The Pipeline Projects comprise public transportation sector, health care, renewable energy, tourism and drinking water supply system Impact toward SDGs: Increase funds availability for infrastructure projects and project appropriateness. ADB gef AFD CTH KFW Development Partners USD 700 min Offshore Loan Syndication Capital Market Bank Loan VSMI MUFG CTBC BANK Maybank HSBC Standard DBS mandin UOB Chartered BCA Denson ⚫EMTN Program USD 2 billion Shelf Registration Conventional Bonds I Rp 30 tron Shelf Registration Conventional Bonds II Rp 25 trilion use Shelf Registration Sukuk Mudharabah Rp 3 trillion Shelt Registration Green Bonds Rp 3 trillion sh MTN Rupiah Rp 850 tie hoo • MTN USD 300 mio M Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Infrastructure Projects Source: PT SMI, 2019 MOT JUICE 2000 + 7124 13 16 CO Focuses on 15 out of 17 components in SDGs which are related to infrastructure development 51 5557#53Other Financing Scheme and Modality - Indonesia Investment Authority (INA) as an Alternative Source of Economic Development Financing Legal basis Other Creative' Financing for Infrastructure Development ⚫PP Number 73 of 2020 concerning Initial Capital for indonesia Investment Authority ⚫PP Number 74 of 2020 concerning Indonesia Investment Authority •PP Number 49 of 2021 concerning Tax Treatment of Transactions Involving Indonesia Investment Authority and/or Entities Owned ⚫PP Numbers 110 and 111 of 2021 concerning the Addition of PMN to the Capital of Investment Management Institutions ⚫The Supervisory Board has been formed based on Presidential Decree No. 6/P of 2021 •The Board of Directors has been formed based on the Decree of the INA Council Number 1 of 2021 ⚫An initial capital of IDR 15 T has been allocated in 2020, and an additional capital of IDR 15 T from PMN and from the transfer of shares amounting to IDR 45 T ⚫There have been discussions with more than 50 companies to become strategic partners, and several countries have expressed a desire to partner with INA Main Sectors of Investment Health Services Seaports Toll Airport Road Industrial Area Digital Infrastructure Renewable Energy Traditional Energy Plantation Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Development of INA's Progress The total investment opportunity commitment received up to June 2022 reached >USD 20 billion. At least two investment opportunities are expected to be closed in 2022-2023: Toll Road and Seaport. Current cooperation agreements secured are: •Toll Road: Investment platform with ADIA, CDPQ, and APG for USD 3,75 billion. Hutama Karya's opportunity is expected to close in December 2022, while ADIA is reevaluating the Waskita Karya opportunity. • Seaports: Alliance agreement with DP World to develop ports and support infrastructure amounting to USD 7.5 billion throughout the concession period. ⚫General: USD 10 billion investment framework agreement with ADG for various sectors in Indonesia Investment opportunity that has been completed: Digital infrastructure: Mitratel's IPO with ADIA, ADG, and GIC for a total of USD 770 million 52 52#54Other Financing Scheme and Modality - Capital/Secondary Market that have contribution as an alternative infrastructure financing instrument (example) Example on RDPT Financing Summary of TPJT Ownership Structure Other Creative! Financing for Infrastructure Limited Mutual Fund (RDPT - Reksadana Penyertaan Terbatas) Recent Progress • Capital Market Instrument in a form • of Mutual Fund that is offered to limited investors Since 2018, there are already more 1 TPJT is located at East Java where it connects the area of Pasuruan and Probolinggo. The Toll Road will potentially attract traffic from western part of Java going across Surabaya, Probolinggo and Banyuwangi for tourism. TPJT is a subsidiary of PT Waskita Transjawa Toll Road ("WTTR"). Location: East Java RDPT 60.5% WTTR 99.9% bars-jawa работа Jalan toi Tall Road 39.50% than 50 products of RDPT with approximate value of IDR 16 Trillion 2 and USD 125 Million • Most of the sector offered is on Toll Road Sector Waskita Toll Road Raih Rp550 M dari Emisi RDPT Infrastruktur MARKET-Donald Barjamahor, CHBC Indonesia ww 1700 Summary of KKDM KKDM was established on December 20, 1996. KKDM obtained the Toll Road Concession Rights for Bekasi-Cawang- Kampung Melayu Toll Road section ("Becakayu") with concession period of 40 years (start concession period: 2016). It is planned to connect to Jakarta Inter Urban Toll Road ("JIUT"). Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Location: Greater Jakarta Ownership Structure RDPT Toll Road JASAMARGA 27.90% 71.80% 0.3% TIKKDM JALAN TOL RECAKAVU 53 33#55Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Government Guarantee Program Credit Guarantee Business Viability Guarantee (BVG) PPP Guarantee Political Risk Guarantee Power (Electricity) - Full credit guarantee for PT PLN's debt payment obligation under FTP 1 10,000MW and 35GW programs*. Clean Water - Guarantee for 70% of PDAM'S debt principal payment obligations. Toll road Full credit guarantee for PT Hutama Karya's debt payment obligations for the development of Sumatra Toll Roads. Infrastructure Full credit guarantee on SOE's borrowing from international financial institution & guarantee for PT SMI's local infrastructure financing. Public Transportation (Light Rail Transit) Full credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. ⚫ Power (Electricity) - Guarantee for PT PLN's obligations under Power Purchase Agreements with IPPS (off-take and political risk) under FTP-2 10.000MW and 35GW programs* - Infrastructure Guarantee for Government- related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements Infrastructure Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees Source: Ministry of Finance Contingent Liabilities from Government Guarantee as of Q4 2022** No. Central Government Guarantee for Infrastructure Guarantee Programs Document SS Credit Outstanding /Investment Exposure (billion)* USD 0.28 5 USD 0.00 11 USD 2.58 1 Coal Power Plant 10,000MW Fast Track Program 5 2 Clean Water Supply Program 3 Direct Lending from International Financial Institution to SOES 4 Sumatra Toll Road 10 USD 2.78 5 Renewable energy, Coals & Gas Power Plant 7 USD 4.00 10,000 MW (FTP 2) 6 Public-Private Partnerships (PPP) 7 USD 6.32 7 Regional infrastructure financing 1 USD 0.19 8 9 Public Transportation (Light Rail Transit) Electricity Infrastructure Fast Track Program (35 2 USD 0.91 6 USD 6.23 Total 54 USD 23.29 From 2008 to Q3-2022**, the government has issued 94 guarantee documents with total value of USD41.59 billion, there were 40 guarantee documents worth USD9.20 billion have been expired. The Maximum Guarantee Limit for the period 2022-2025 is set at 6% of GDP. Starting from 2008 the Government has allocated a contingent budget with respect to these guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund. This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees. *) MOF provides both credit guarantees and BVGs for 35GW program **) Currency conversion of IDR15,247.00/USD1 and IDR14,716.42/EUR1 (as of end September 2022) 54#56The Domestic Component Level (TKDN) Implementation "Domestic Component Level (TKDN) represents the quantity of domestic components in goods, services and combination of goods and service" The Domestic Component Level (TKDN) Electronics ICT Medical Devices L TKDN Value (goods) consist of: Raw materials; Direct Labor; • Factory overhead Government Procurement ☐ State budget ☐ Regional budget State-owned company ☐ Regional-owned company • TKDN Value (services) consist of: • Labor; • Working ⋅ Facility/Machinery; General Services WTO Rules (Compliance) Government procurement by the Government for electronics, ICTS and medical device prioritize domestic product with minimum TKDN + Company Benefit Weight (BMP) > 40%. Government procurement is funded by state budget, regional budget, state-owned company budget, and regional-owned company budget. Non Government ✗ Procurement Non-governmental procurement is not prioritizing product's TKDN The government constitutes the Increased Use of Domestic Products (P3DN) National Team P3DN Team tasks: a. coordinate, supervise, and evaluate the implementation of Increased Use of Domestic Products (P3DN) in their respective environments; b. provide a final interpretation of the dispute of the TKDN value between the producer of the goods/services provider and the goods/services procurement team; c. Other tasks and liaisons related to P3DN 55#57Improving National Logistics System Resiliency: "Key Priorities In Encouraging The Investment" The government established an integrated logistics system through The National Logistic System Development Policy (SISLOGNAS). This system aims to facilitate the flow of goods to fulfill the community's basic needs and increase the competitiveness of national products. LOGISTICS PROGRAM FOR 2022-2024 1 Increasing national logistics efficiency, focusing on food and health products This focus aims to ensure the availability and reliability of logistics services to support the smooth distribution of goods at the district and city levels. Increasing efficiency and effectiveness of export/import flows of national leading products and imports of priority industrial raw materials. This focus aims to improve the smooth flow of exports and imports, both goods and documents, to increase Indonesian products' competitiveness in the global market. 2 3 1. Specify a specific commodity. Commodity-based improvement framework 2. 3. Identify demand patterns, supply patterns and logistics costs. Set logistics efficiency targets for these commodities, for example: a. Lead time for domestic goods delivery; b. Lead time at the port for import-export goods. Strengthen Key-Enabler 1. Mapping and collaborating stakeholders and off-takers to implement the action plans. 2. Establish a responsible organization to ensure the implementation of action plans to support the achievement of logistics efficiency targets. Organizing action plans based on 6 key drivers Preparing action plans based on the six key drivers to achieve efficiency in national logistics and the effectiveness of export/import flows. 6. Regulations, Rules and Legislation 5. Human Resource Managemen 4. ICT 3. Logistics Service Provider 1. Main Commodity t 2. Transportation Infrastructure Competitiveness and Social welfare Sources: RPJMN 2020-2024; Presidential Regulation No.26/2012 Concerning Blueprint of National Logistics System Development Key Drivers: Logistic Action Plan Transportation Infrastructure → There are +90 projects of infrastructure development spread across Indonesia, such as toll roads, ports, airports and railways, to support the improvement of the logistics process Logistics Service Provider → Through Government 5/2021, of the total 81 standard classifications of business field in overall logistics sectors, 72 (around 89%) required NO LICENSE but only identification business number and/or standard certificate. Furthermore, through Presidential Regulation 10/2021, there are relaxations toward foreign investment requirements. In the logistics sectors, the relaxations take form in the allowability of foreign investment equity to fully own a business. ICT NLE is a system to provide one-stop services for the transmission of data, trade logistics documents, and secure and reliable information to serve G2G, G2B, and B2B transactions for domestic and international trade Human Resource Management → Some programs include (a) The establishment of the National Occupational Map for Logistics and Supply Chain (b) Legalization of the Indonesian National Occupation Competency Standards#58Government Continues to Support the Development of Downstream Industries Indonesia's Coal Gasification Roadmap until 2045 <-2021 ♦2025 2030 2035 2045 • 2021-2025 Establishment of 3 · Gasification Plants for DME and/or Industry • Import of LPG has decreased by 3,51 million tons by DME substitution Infrastructure and Product Distribution Channel for Coal Upgrading Phase-1 has been built Establishment • • . 2026-2030 Increased capacity of the Gasification Industry to meet the demand for DME and Industry Establishment of 2 Coal to SNG plants in Sumatra. Establishment of a bio-coal briquette factory and implement the use of bio- coal briquettes. of Coke Coal Upgrading industry Factory for Metallurgy • Increased value-added of around 19.6 million tons of coal in the Coal Downstream Industry. started operation. • Increased value-added of around 22.7 million tons of coal in the Coal Downstream Industry. 2031-2035 Increased capacity of the Gasification Industry to meet the demand for DME and Industry • Establishment of 2 Coal to SNG plants in Sumatra & 1 plant in Kalimantan. Establishment of the Coal Liquefaction Industry to substitute gasoline • Establishment industry imported of REE and Advanced Materials, Agri-Industry, Materials from coal. • Increased value-added of around 28.7 million tons of 2036-2045 • Increased capacity of the gasification industry to meet the demand for 19.81 million tons of Methanol for DME and Industry • Increased capacity (optimization) in each Coal Downstream Industry There has been an • increase in value-added of around 40.7 million tons of coal in the Coal Downstream Industry. Source: Ministry of Energy and Mineral Resources coal in the Downstream Industry. Coal 40 57#59Encouraging The Downstream Industry To Increase Value-added Commodities Downstream Industry Policy Acceleration of Economy Growth Strengthen and deepen industrial Structure through R&D, product innovation, brand, and design. Number of Smelter Commodity Total Number and Investment Smelter 2021-2024 Investment Realization Total Investment Existing Plan TOTAL (mn $) (mn $) Nickel 11 19 30 7619.3 5508.4 Broaden Working Bauxite 2 6 8 7138.9 2979.5 Opportunity DOWNSTERAM Iron 1 1 2 53.7 47.2 INDUSTRY Acceleration of Copper 2 2 4 4693.3 1046.9 Country foreign Industrial Mangan 1 1 2 23.9 12.5 exchange reduction with Deployment which Lead and Import Substitution 0 2 2 28.8 22.0 covers NKRI territorial Zinc TOTAL 17 31 48 19557.9 9616.6 Increase Local Added Value Increase foreign exchange revenue through Export Supporting Policy For Downstream Industry Provide Industrial Infrastructure / Development of sufficient Industry Area or SEZ (port, energy, land, natural gas, etc.) Create a conducive industrial business environment (Job Creation Law, risk-based business licensing, OSS, etc.) Fiscal incentive and disincentive Technology provision, building advanced human resources, and industrial machinery. Source: Coordinating Ministry for Economic Affairs Coal Development Project The development of the Coal to DME Project aims to increase national energy security by reducing LPG imports. The project in Tanjung Enim will become a Special Economic Zone (SEZ) so that facilities and incentives will support it. With 6 million tons of coal annually, this project can produce 1.4 million DME to reduce LPG imports by 1 million tons annually. Source: Ministry of Energy and Mineral Resources, 2022 Bukit Asam PERTAMINA PRODUCT 80 COAL TO DME PLAN COAL 6 MTPA Gasification. Tanjung Enim SYNGAS METHANOL DME 1,4 MTPA 58#60Indonesia Encourages Downstreaming of Commodities One of which is Encouraging the Development of Nickel-Based Industries to Become a Global Battery and EV Supplier 1. Potential: Indonesia's Nickel Reserves Are Abundant 2. Strategies Global Nickel Reserve A. The ban on nickel ore exports maintains the availability of raw materials for downstream industries INDONESIA 21,0 M Export Value (Million USD) Australia 20,0 M Commodity 2019 2020 2021 Indonesia and the Main Exporting Country Brazil Other 16,0 M 14,0M 1.097 Prohibited →0 Prohibited → 0 Russia 6,9 M Nickel Ore (HS 2604) 600 1.056 1st Cuba 5,5 M Philippines 4,8 M Also rich in other battery materials reserve South Africa 3,7 M China 2,8 M Canada 2,8 M Guatemala 1,8 M Madagascar 1,6 M 1.2 billion ton 51 million ton 43 million ton Aluminium Copper Manganese Colombia 0,4 M US 0,1 M Cobalt Lithium Graphite B. Invest in End-to-end EV Battery value chain development Estimated total investment of USD 15.3 Billion*) to build End-to-end value chain EV Batteries with a capacity of 140 GWh C. Supporting Regulation Presidential Decree No. 55 of 2019 to Accelerate the Use of Battery Electric Vehicles (BEV) on the Road & Government Regulation No. 74/2021- Accelerated Development of BEV 3. Benefits and Added Value of Nickel Downstream Value added process Indonesia's nickel reserves are the largest reserves in the world reaching 21 million nickel ore or with a share of 23.7% of all world reserves. Source: Coordinating Ministry for Economic Affairs Input Nikcel Output Batter Value-added 90 to 150 times 59#61Economic Transformation from Primary Sector Industries to Value-Added Industries Export Ban of unprocessed minerals Nickel (2020) Bauxite (2022) Copper (2023) Tin (2023) Focus on Natural Resources, such as nickel Natural Resources Based (primary) Economy Source: Ministry of Investment (BKPM) Value-Added Based Economy Focus on Downstream Industries 60 60#62The Benefit of Downstreaming on Nickel Product Added Value Export of Nickel Derivative Products USD Export of Nickel Derivative USD 3,3 Products 20,9 2017 Billion Nickel Export Ban (2020) 2021 Billion Source: Ministry of Investment (BKPM) Added Value of Nickel Derivative Products x 37,5 x 19,4 x 11,4 x67,7 Nickel Sulfate Precursor Cathode Battery Cells 61#63Nickel Downstreaming makes Indonesia the World Production Hub for Electric Vehicle Investment Plan: Implementation of the Second Phase of the Electric Battery Industry Batang, 8 June 2022 LG CATL Foxconn Integrated Battery Industry US$9,8 Billion Integrated Battery Industry US$5,2 Billion Electric Battery Industry, Electric Vehicle Industry (4wheel, 2wheel, E-Bus), and Supporting Industry (including charging station, R&D, and training) US$8 Billion BritishVolt: Battery and electric vehicle industry, US$2 Billion In addition to downstreaming, investment also creates big impact: through collaboration with SOE (MIND ID, Pertamina, PLN), national entrepreneurs, especially MSMEs, high use of domestic component (TKDN), and large absorption of local manpower. Indonesia will become an exporter of high value-added commodities LG Energy Solution CATL BRITISHVOLT ⑧ Source: Ministry of Investment (BKPM) ◉-BASF FOXCONN We create chemistry HYUNDAI 62#64Natural Resource Downstreaming Has Become a Value-Added Commodity Processing of Nickel to make the battery for electric vehicles Investment Collaboration with State-Owned Enterprise and National Private Sector in the precursor, cathode, and electric batteries industries Location: Central Sulawesi, North Maluku, Central Java Commodity: Gasification of Coal into Dimethyl Ether (DME) Investment plan in collaboration with State-owned And National Private Sector in Coal gasification industry and its derivatives Location: Tanjung Enim, South Sumatra Commodity: Processing natural gas into methanol and Fertilizer State-owned and National Private Sector investment in the natural gas processing industry into Methanol and Fertilizer in Fakfak, West Papua and Bojonegoro, East Java Location: West Papua and East Java Commodity : Industrialization Downstreaming for Food Sector The food sector is able to create many new jobs and also create new economic growth areas. Location: Eastern Indonesia Commodity : Nickel Source: Ministry of Investment (BKPM) Food Coal Natural gas 63 33#65Visioning Nusantara - New Capital City Of Indonesia Vision The National Capital City (IKN) is a milestone in a new era of regional development and new economic centers in the Regions, as well as a symbol of a big push strategy to accelerate growth and equal distribution of the national economy. Recent Progress 1. The financing for land acquisition proposed by the Minister of PUPR is IDR9.09 T until 2023, where in 2022, it was allocated through DIPA PUPR of IDR 500 M. 2. 3. 4. The Minister of Finance requested that the 2023 land procurement proposed by PUPR of IDR8.45 T be accommodated through LMAN. The DJA has approved the construction budget from PUPR for 2022 of Rp. 5 trillion. The need for the 2023 Construction budget is IDR23.6 T, including proposals from 5 Ministries / Agencies. New Capital City Planning Scheme K-IKN Kawasan IKN Area 56181 ha KIPP Kawasan Inti Pusat Pemerintahan Area: 6,856 ha KP-IKN Kawasan PerluasaniKN Area, 256, 142 72 ha Zona K-IPP K-KN KP-IKN 256.142 Area (Ha 6.856 56.181 Target Populasi 2045 jiwa 280.000-300,000 1.700.000-1.900.000 The IKN proposal as National Strategic Project (NSP) is approved and included in the Regional Development Program as a Subprogram. The inclusion of IKN as NSP will refer to the Presidential Decree No.63/2022 and the draft One Map - One Planning - One 64#66New Capital City of Nusantara Development The Important Role of Establishment of IKN In February 2022, the Government of Indonesia enacted Law Number 3 of 2022 concerning the State Capital. The relocation of the National Capital City is based on the concentration of economic activities in Jakarta and Java Island, so it causes economic disparities between Java and Outside Java. Indonesia's New Economic Driver Indones New Capla City GDP of USD180 Billion 3 Million New Jobs 7+ Million Residents of IKN, Balikpapan, and Samarinda Composition of Financing for the Capital of the Archipelago Funding for the Development of the Capital of the Archipelago (IKN) is obtained from the State Budget, PPP, SOES, and Private Investment. Private Investment Cooperation Government buildings and Government worker housing Education and Health Facilities (Hospitals, Schools) Commercial area (café and restaurant, hotel) Tourism area, industrial area, innovation and technology center Smart city Area operational 65% of the total estimated need for facilities and infrastructure in 2022-2024* will be implemented through the PPP scheme. State Budget Palace, basic infrastructure (non- cluster), defense and security, costs of transferring Government worker reforestation, costs of operating authority Composition of Financing schemes 4% 65% 31% Source: Coordinating Ministry for Economic Affairs ■ Private/SOE ■State Budget 65 PPP#67Development Stages of the National Capital City 2020-2024 Initial transfer to IKN 2025-2035 Building IKN as a Resilient Area 2035-2045 Building the entire infrastructure and ecosystem of 3 cities to accelerate the development of East Kalimantan 2045-onwards Strengthening reputation asa "World City for All" Critical basic infrastructure is completed and • operational (eg water, energy, rail) for residents in the initial stages Build central infrastructure (e.g. Presidential Palace, MPR/DPR Building) and housing in the Main IKN area Transfer of early-stage ASN (eg TNI, Polri, K/L ASN) Initiation of priority economic sectors Source: Coordinating Ministry for Economic Affairs Developing the next phase of the city (e.g., innovation and economic centre) • Completed the transfer of • the IKN government centre Develop priority economic sectors Implement an incentive system for priority economic sectors Achieving the goals of the Sustainable Development Goals (SDGs) • Expand urban development and complete connectivity between and within cities FDI Destination No. 1 for priority economic sectors in Indonesia Top 5 top destinations in Southeast Asia for global talent Encouraging sustainable utility networks by implementing circular economy enablers Developing a center for innovation and talent development To be the leading city in the world in terms of competitiveness Top 10 livable cities in the world Achieving net zero- carbon emissions and 100% renewable energy at installed cap a city - the first city in the world with >1 million inhabitants to reach this target 66#68Section 3 Economic Factor: Improved Growth Prospects Supported by Continued Economic Recovery Momentum BHINNEKA TUNGGAL IKA#69Conducive Environment Underpinning Improved Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia Manageable Inflation Rate 4th Most Populous country in the World; 64% in productive age Rising Middle Class and Affluent Customers From commodity-based to manufacturing and service sectors via infrastructure development From consumption-led to investment- led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Tax base to be broadened from one reduce dependency on commodities Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration New Economic Structure High Infrastructure Investments Fuel subsidies significantly reduced and spending redirected to more productive allocation Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 68#70National Economic Recovery Continue to Accelerate 8,0 Strong GDP Growth¹ 6,0 4,0 2,0 3,827 3,7431 QoQ -YoY 7,07 5,02 5.01 5,05 4,01 4,01 4,21 4,20 3,14 3,19 3,09 3,06 B.31 1,5506 7388,36) (1,816,30) (1,788,41) (1,68) 52 (1,742,41) (0,42 0,96) 0,04 0,0 -2,0 (2,07) (1,73) (0,16) -4,0 -6,0 -8,0 Q1 Q3 Q1 Q3 Q1 Q3 2014 2015 2016 Q3 2017 (419) 3,72 (0.96) 5,72 5,01 1,81 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 2018 2019 2020 2021 2022 Favourable GDP Growth Compared to Peers² 10,00 % yoy 7,40 6,70 Indonesia's economic recovery momentum has continued in 2022, with the economy growing 5.31% (yoy), up significantly from 3.70% (yoy) in 2021. Solid economic growth in 2022 was supported by improving domestic economic activity along with the increase in social mobility which further boost consumption and investment, as well as strong export performance. Looking ahead, robust economic growth in 2023 is projected in the 4.5-5.3% range on the back of increasing domestic demand in the form of household consumption and investment. The latest projection is in line with increasing public mobility after the Government fully repealed community activity restrictions (PPKM), a promising business outlook, increasing foreign direct investment inflows, as well as the ongoing completion of national strategic projects. 0,36 In terms of spending, solid economic growth was supported in the reporting period by nearly all GDP components. Household consumption grew 4.93% (yoy) in response to greater mobility compared to 2021 (2.02% yoy). after the Government gradually eased the community activity restrictions (PPKM). Export growth remained strong at 16.28% (yoy) compared to 17.95 growth in 2021, driven by continued strength of demand from Indonesia's major trading partners, notwithstanding the limited effect of geopolitical tensions between Russia and Ukraine. In the meantime, investment growth has slowed by 3.07% year on year due to a decline in building investment, despite strong non-construction investment performance. Economic improvements remained strong in nearly all economic sectors in 2022. The growth is primarily driven by the Manufacturing Industry, Transportation and Warehouse, as well as Wholesale and Retail Trade. Spatially, solid national economic growth in 2022 was supported by all regions, led by Sulawesi-Maluku-Papua, followed by Java, Bali-Nusa Tenggara, Kalimantan and Sumatra. 5,80 5,00 5,30 2023 Growth Projection *) 0,00 3,20 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Institutions GDP growth -5,00 2023 Budget 5.3 Bank Indonesia 4.5-5.3 -10,00 Bulgaria India Colombia Indonesia Consensus Forecast (March 2023) 4.5 -15,00 Philippines World Bank (GEP, January 2023) 4.8 2. 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption Source: World Economic Outlook Database - July 2022; * indicates estimated figure *) Consensus Forecast number will be given later IMF (January 2023) 4.8 ADB (Asian Development Outlook, December 2022) 4.8 69#71GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY) 1 Economic Growth by Expenditure 2018 2019 2020 Total Total Total 2021 2022 Share Q1-2021* Q2-2021* Q3-2021* Q4-2021* Total Q1-2022** Q2-2022** Q3-2022** Q4-2022** Total (%) GDP Growth (% yoy) 5,17 5,02 (2,07) (0,69) 7,08 3,53 5,03 3,70 5,02 5,46 5,73 5,01 5,31 Private Consumption 5,14 5,16 (2,67) (2,25) 5,92 1,06 3,55 2,01 4,37 5,49 5,40 4,50 4,94 53,04 Household Consumption 5,05 5,04 (2,63) (2,21) 5,96 1,02 3,56 2,02 4,34 5,51 5,39 4,48 4,93 51,87 NPI Serving Households Consumption 9,15 10,62 (4,21) (3,65) 4,06 2,87 3,20 1,62 5,90 5,02 5,97 5,70 5,64 1,17 Government Expenditure 4,82 3,27 2,12 2,57 8,22 0,65 5,29 4,24 (6,62) (4,63) (2,55) (4,77) (4,51) 7,66 Gross Fixed Capital Formation Building 6,68 4,45 (4,96) 5,41 5,37 (3,78) (0,21) 7,52 3,76 4,49 3,80 4,08 3,09 4,98 3,33 3,87 29,08 (0,74) 4,36 3,36 2,48 2,32 2,58 0,92 0,07 0,11 0,91 21,49 Nonbuilding 10,44 1,83 (8,44) 1,44 18,50 4,96 10,40 8,42 8,63 9,71 19,32 12,11 12,53 7,60 Export Import 6,51 12,14 (0,48) (8,42) (7,13) (17,60) 2,17 28,41 20,74 22,24 17,95 14,22 16,40 19,41 14,93 16,28 24,49 5,21 33,20 31,08 32,61 24,87 16,04 12,72 25,37 6,25 14,75 (20,90) ** Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption GDP Growth by Sector (%, YoY) Economic Growth by Sector 2018 Total 2019 2020 2021 2022 Share Total Total Q1-2021 Q2-2021* Q3-2021* Q4-2021* Total Q1-2022** Q2-2022** Q3-2022** Q4-2022** Total (%) Economic Growth (% yoy) 5,17 5,02 (2,07) (0,69) 7,08 3,53 5,03 3,70 5,02 5,46 5,73 5,01 5,31 Agriculture, Forestry, and Fishery Mining and Quarrying 3,88 3,61 1,77 2,16 1,22 3,48 0,56 1,44 2,33 1,87 1,16 1,68 1,95 4,51 2,25 12,40 (1,95) (2,02) 5,22 7,78 5,15 4,00 3,82 4,01 3,22 6,46 4,38 12,22 Manufacturing 4,27 3,80 (2,93) (1,38) 6,58 3,68 4,92 3,39 5,07 4,01 4,83 5,64 4,89 18,34 Construction 6,09 5,76 (3,26) (0,79) 4,42 3,84 3,91 2,81 4,83 1,02 0,63 1,61 2,01 9,77 Wholesale and Retail Trade Transportation and Warehousing Information and Communication Financial and Insurance Services Other Services 4,97 4,60 (3,79) (1,28) 9,50 5,12 5,54 4,63 5,73 4,43 5,37 6,55 5,52 12,85 7,05 6,38 (15,05) (13,09) 25,10 (0,72) 7,93 3,24 15,79 21,27 25,80 16,99 19,87 5,02 7,02 9,42 10,61 8,72 6,90 5,54 6,24 6,82 7,15 8,06 6,95 8,75 7,74 4,15 4,17 6,61 3,25 (2,97) 8,33 4,29 (2,59) 1,56 1,64 1,50 0,87 3,76 1,93 4,13 6,18 6,66 (1,24) (2,51) 9,83 (0,84) 3,43 2,35 3,33 4,03 7,88 4,95 5,04 16,75 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 70#72Economic Performance Improved In Almost All Regions Strong domestic economic growth in 2022 in line with increasing public mobility.. Realization of PDRB Quarter IV 2022 (%, yoy; compared to Quarter III 2022) Sumatra ACEH 5.60 4.85 North Sumatra 7.95 5.26 -0.80 3021 5.29 4.56 4.56 4.73 4.06 3.80 T 2001 Kalimantan 6,27 5,71 5.97 4.65 4,53 3.48 " North Kalimantan 6.17 . " 6.04 3.46 Sulampua 5.00 6.25 8,06 6,88 6.79 RIAU 4.10 West Sumatra Riau Islands 6.40 West Kalimantan 5.01 East Kalimantan 6.47 4.15 JAMBI 5.22 South Babel Islands 4.44 Central Kalimantan 5.70 Sumatra South Kalimantan 5.32 West Sulawesi 2.53 Central Sulawesi 18.96 GORONTALO 3.98 North Sulawesi 5.20 North Maluku West 17.75 Papua -0.37 BENGKULU 4.75 5.23 South East Sulawesi LAMPUNG DKI South Sulawesi 5.57 MALUKU 5.73 5.11 5.05 4.85 BANTEN 4.03 West Java 4.61 West Nusa Central Java East 5.24 Java 4.76 BALI 6.61 Tenggara 7.04 DIY Java 5.53 East Nusa Tenggara 3.45 Balinusra 4.80 5.06 5.45 5.75 4.78 3.08 " JQ4'22>Q3'22 Q4'22-Q3'22 Source: BPS, calculated Source: Central Bureau of Statistics of Indonesia (BPS), calculated Q4'22<Q3'22 3.76 2011 -0.09 " 2022 PAPUA 2.70 6.73 6.01 4.05 3.50 1.32 2012 71#73% 100,0 Source: Central Bureau of Statistics of Indonesia (BPS), calculated Taxes Transportation and Warehousing Mining and Quarrying 2010 2011 2012 2013 2014 2015 Agriculture, Forestry, and Fishery Other Services Wholesale and Retail Trade 2016 2017 2018 2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 Financial and Insurance Services Construction 2020 13,93 13,51 13,37 13,36 13,34 13,49 13,48 13,16 12,81 12,71 12,84 15,44 14,67 11,97 13,70 13,23 14,29 14,32 11,39 13,28 12,57 13,08 13,00 11,00 12,40 Q1-2021 Q2-2021 Q3-2021 Q4-2021 2021 Q1-2022 Information and Communication Manufacturing 90,0 17,5 17,6 17,88 18,0 18,20 18,64 18,6€ 18,47 18,35 18,68 19,10 18,88 19,16 19,87 19,2 18,5 18,54 17,08 18,18 18,0 17,0 16,66 16,19 17,09 16,75 80,0 70,0 3,49 3,46 3,72 3,88 3,86 3,73 3,60 3,57 3,50 3,53 3,57 3,93 4,42 4,03 3,61 3,63 3,52 5,02 60,0 13,46 13,61 13,21 13,21 13,43 13,30 13,19 13,02 13,02 13,01 13,19 50,0 9,13 9,09 9,35 9,49 9,86 4,19 4,20 4,15 4,24 3,62 3,78 3,77 5,20 5,41 5,38 4,70 4,44 4,32 4,56 4,51 4,58 4,41 4,26 4,12 4,34 4,34 3,96 4,25 4,66 4,56 4,51 4,58 4,43 4,37 4,57 4,41 4,28 4,16 4,35 4,12 4,00 4,05 4,13 4,02 4,13 4,15 5,57 5,17 3,57 4,39 4,47 4,27 4,21 3,90 4,67 4,56 4,24 4,62 4,82 5,03 5,56 5,02 12,81 12,80 12,91 13,07 13,07 13,00 12,84 12,71 12,96 13,10 12,76 12,79 12,77 12,85 10,21 10,38 10,38 10,53 10,75 10,70 10,55 10,59 10,95 10,70 10,79 10,11 10,38 10,48 10,44 10,43 9,18 9,49 10,01 9,77 40,0 22,04 21,76 21,45 21,03 21,08 30,0 20,99 20,52 20,16 19,86 19,70 19,97 19,85 19,84 19,80 19,87 19,82 19,28 19,14 17,92 17,97 18,79 19,24 19,21 18,32 18,34 20,0 10,46 11,81 11,61 11,01 9,83 7,65 7,18 7,58 8,08 7,26 6,27 6,82 6,15 6,48 6,43 7,64 8,09 9,55 10,43 8,97 10,37 12,64 13,03 12,65 12,22 10,0 Indonesia's GDP Share (%) Economic Performance in Most Sectors Continue to Improve In terms of production, Indonesia's economy is mainly supported by services sector, manufacturing, and primary sector. Services sector (wholesale and retail trade, information and communication, financial and insurance service) has expanded the last five years, while primary sector (mining and quarrying) has benefited from higher commodity prices in 2022. Q2-2022 Q3-2022 Q4-2022 2022 72#74Stronger Fundamentals Facing the Headwinds Inflation Rate (%) Inflation above the target range, but below the 1998 projection 2008 12,1 Feb 2023 5.47 (yoy) IDR Movement (%) IDR depreciated year-to-date Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 6.0 months of import and external debt repayment 1998 -197 82,4 1998 2008 -35 2008 15 Mar 23 1.32 (ytd) Feb 2023 -300 -200 -100 0 1998 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 30 2008 3,8 Jan 2023 2.59 0 5 10 15 20 25 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 30 30 35 40 17,4 50,2 140.3 More Liquid Market (%) In the markets, the IndONIA rate is in line with the higher BI7DRR and strengthening the monetary operations strategy of Bl Government Debt/GDP Consistently well-maintained 62 10,5 5.53 1998 2008 15 Mar 2023 External Debt/GDP Significantly lower than 1998 crisis 116.8% 8.6x 3.1x 2.89x 100.0% 27.4% 39.09% 33.2% 30.08% 2008 Jan 2023 2008 Feb 2023 2008 Q4-2022 1998 1998 1998 73#75Outlook of Domestic Economy Remains Robust ...the domestic economic recovery is continued to strengthen in 2023 2023 Economic Outlook • Bank Indonesia projects economic growth in 2023 continue to accelerate to the range of 4.5-5.3% in 2023. Bank Indonesia is confident core inflation will remain at the 3.0%±1% target during the first semester of 2023 and CPI inflation will return to the 3.0%±1% target in the second semester of 2023 Bank Indonesia projects BOP outlook for 2023 is good, with a manageable current account maintained in the range of a 0.4% of GDP surplus to a 0.4% of GDP deficit Bank Indonesia projects credit growth in 2023 will accelerate to 10.0-12.0% 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 2020 -2.07% 1.68% 0.4% -2.4% Realization 2021 3.69% 1.87% surplus 0.3% 5.24% Realization 2022 5.31% 5.51% Realization surplus 1.0% 11.35% 2023 4.5-5.3% 3.0±1% surplus 0.4% - 10-12% deficit 0.4% Source Bank Indonesia 74#76Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#77External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid US$bn Current Account Overall Balance 20 15 10 5 0 -5 -10 -15 Current Account Recorded Surplus 2017: 2019: 2020: (US$4.4bn) 2021: 2022: CA Surplus CA Surplus CA Deficit CA Surplus US$3.5bn US$13.2bn 2015: 2016: 2018: CA Deficit CA Deficit CA Deficit CA Deficit (US$17.5bn) (US$16.9bn) (US$16.2bn)(US$30.6bn) (US$30.3bn) Capital and Financial Account Reserve Asset (rhs) US$bn 160 137,23 US$bn 120 20 4,73 Goods 4,26 15 Primary Income 10 80 5 40 (0,43) (5) (10) 0 (15) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 2015 2016 2017 2018 Source: Bank Indonesia Trade Balance Surplus Continues 2017: 2018: Surplus Deficit US$11.83bn US$bn (US$8.65bn) 15 10 5 0 -5 2019* 2020* 2021* 2022** 2019: Deficit (US$3.24bn) 2020: 2021: 2022: Surplus Surplus Surplus (US$21.81bn) (US$33.8bn) (US$54.52bn) OG Non-OG Total Services Secondary Income 1,30 321 16,96 1,93 (1) (9,39) (3) (5,24) (5) བྱགྱི@ཧྥེ (2) (4) (6) 4Q1Q2Q3Q4 2021* 2022** ----------- 01020304010203040102030401020304010203040102 Q1Q2Q3Q4Q1Q20 2015 2016 2017 Source: Bank Indonesia 2018 2019* 2020* Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of February 2023: US$140.3bn (Equiv. to 6.0 months of imports + servicing of government debt) Month of Import & Debt Service (RHS) US$bn FX Reserves (LHS) 150 140 130 120 6,7 110 5,5 100 90 80 70 ח 60 -1,22 50 1 3 5 7 9 1 3 5 7 9 1 3 5 7 9 11 11 11 2018 2019 2020 2017 Source: BPS 2018 Preliminary Figure 2019 2020 Very Preliminary Figure 2021 2022 2023 Source: Bank Indonesia Month DECUTI287654 14 13 12 10 1 3 5 7 9 1 3 5 7 9 12 11 2021 11 2022 2023 76#78Exchange Rate In Line with Fundamentals Movement of Rupiah 15-Mar-23 14120 14893 14669 14064 14219 Rupiah Exchange Rate Volatilty 25,85 22,02 15,73 10,209,77 8,14 15568 16.000 14935 15.500 14566 14373 15365 14157 14339 14399 15.000 14259 14344 13.500 13.000 17.000 16.500 14.500 14.000 25 20 10 10 Rupiah stability has been maintained in line with BI stabilisation measures against a backdrop of increasing global financial market uncertainty. Consistent with broad-based currency depreciation triggered by rising global financial market uncertainty, the Rupiah slightly depreciated by 0.75% (ptp) in value as of 15th March 2023 compared with the level at the end of February 2023. Year-to-date, however, the Rupiah gained 1.32% on the level recorded at the end of December 2022, thus exceeding Rupee appreciation of 0.16%, as well as the depreciation experienced by the Baht (-0.04%) and Ringgit (-1.80%). Moving forward, Bank Indonesia expects to maintain Rupiah stability in line with the robust domestic economic outlook, low inflation, a current account surplus and attractive yields on domestic financial assets for investment. Furthermore, Bank Indonesia will continue strengthening Rupiah stabilisation policy to control imported inflation and mitigate the contagion effect of global financial market uncertainty on Rupiah exchange rates. Rupiah stabilisation policy has also been strengthened by DHE management through the implementation of foreign currency term deposits (TD) in accordance with market mechanisms. as of 15 Maret 2023 % 30 Jan-23 23,80 ■Feb-23 21,92 17,46 ■Mar-23 17,11 14,69 13,65 15 11,82 10,72 7,81 9,71 77791 8,15 6,91 7,54 8,00 5,53 9,08,70 3,99 4,44 3,21 2,02,43 I 5 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Source: Reuters, Bloomberg (calculated) 77#79Ample Lines of Defense Against External Shocks Ample Reserves • Ample level of FX reserves to buffer against external shock FX Reserve Swap Arrangement Bilateral Japan Singapore China Malaysia Australia • FX Reserves as of of February 2023: US$140.3 bn Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2021 The facility is available in USD and JPY Renewed a 1 year SGD/IDR swap arrangement with the size up to SGD 9.5 bn / IDR 1000 tn (equivalent) in November 2022 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 250 bn / IDR 550 tn (equiv.) in January 2022 Established a 3 year RM/IDR swap arrangement with a size up to RM 8 billion / IDR 28 trillion (equiv.) in September 2022 Renewed a 3 year A$/IDR swap arrangement with a size up to A$10 billion or IDR 100 trillion in February 2022 Regional Global Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Source: Bank Indonesia Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement Came into effect in 2010 with a pool of US$120 bn ● Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem · Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) 78#80Healthy External Debt Profile The Structure of External Debt is Dominated by Long-Term Debt External Debt Structure Private External Debt ■Public External Debt 100% 90% 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 2011 2013 2015 External Debt Remains Manageable Million USD 2017 Q1-2019 Q3-2019 Q1-2020 Q3-2020 Jan-21* External Debt External Debt Growth (yoy) - rhs 450.000 17,1 400.000 Mar-21* May-21* Jul-21* Sep-21* Nov-21* Jan-22* Mar-22* May-22* Jul-22* Sep-22* Jan-23** 80%- 50,3 70% 60%- 50% - 40%- 30% 49,7 20% 10% 0% % % 20,0 240 32,99 34,34,7 36,1 36,06,36,536,B6,1 220 31,8 15,0 200 26,5 350.000 11,5 11,32,0 29,1 27,4 25,00 10,2 10,1 10,0 180 300.000 250.000 200.000 150.000 100.000 50.000 0 6,5 176,1 5,9 5,0 160 3,0 2,9 2,6 2,1 0,8 0,71,2 1,3 -1,0 -0,10,41,20,60,6 1,60 00 140 0,0 139,5 120 3,9 123,1 -5,0 121,8 100- 114,9 113,8 101,0 -10,0 80 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 Q3-2019 2019 Q1-2020 Q2-2020 Q3-2020 2020 Q1-2021* Q2-2021* 2021** Q1-2022* Q2-2022* Q3-2022* Q4-2022* Source: Bank Indonesia, External Debt Statistics of Indonesia 2009 2011 *Provisional Figures 2013 2015 2017 Q1-2019 Q3-2019 **Very Provisional Figures Q1-2020 Q3-2020 Q1-2021* Q3-2021* 168,4 1681821684287,0 177,2 2009 2011 2013 2015 2017 Q1-2019 Q3-2019 External Debt to GDP Ratio & Debt to Export Ratio Q1-2020 Q3-2020 Jan-21* Mar-21* May-21* Jul-21* Sep-21* Nov-21* Jan-22* Mar-22* Jul-22* May-22* Sep-22* Short Term External Debt Long Term External Debt 83,2 16,8 Jan-23** 37,38,1 39,39,0 37,437,0 40 40 34,4 34,933,6 35 31,830,30,1 30 214,6 206,9 208,8 25 197,2 189,2 183,3 175,3 20 156,6 15 145,1 External Debt/Export Ratio (rhs) 131,6 10 1211318,8 5 External Debt/ GDP Ratio Q1-2022* Q3-2022* 0 2022** 79#81Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Uruguay Hedging Ratio* Philippines Panama Mexico Kazakhstan Indonesia Colombia 邀 5,9106 3436,6 67,7 79.4 87,2 279 corporate s (11.1%) 2022 2021 2020 42,7 81,3 88,9 96,2 313339, 53492 37,2 Source: Moody's Credit View Fundamental Data, September 2022 Regulation on Prudential Principle in Managing External Debt Regulation Key Points Object of Regulation 1 Jan 17 & beyond Governs all foreign currency Debt Hedging Ratio ≤ 3 months > 3-6 months Liquidity Ratio (≤ 3 months) Credit Rating Hedging transaction to meet hedge ratio Sanction 25% 25% 70% Minimum rating of BB- (State-owned Enterprises) Must be done with a bank in Indonesia Applied Source: Bank Indonesia ≤ 3 months 2236 corporates (88.9%) Liquidity Ratio* 323 corporates (12.8%) 147 corporates (5.8%) > 3-6 months 2368 corporates (94.2%) 2192 corporates (87.2%) ■Comply Not Comply *Data as of Q3-2022, with total population 2,515 corporates Source: Bank Indonesia 80 60#82BHINNEKA TUNGGAL IKA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#83Fiscal Policy Works Hard, Responsive, and Flexible During Pandemic Covid-19 measures, accelerating recovery, and supporting reforms 2020 EXTRAORDINARY POLICY . • Law No. 1/2020 → Law · No.2/2020 Stimulus for handling Covid-19 and the PEN Program • The Fiscal deficit widened by 6.34% of GDP Budget Deficit 2020 (% GDP) • 2021 PANDEMIC HANDLING & RECOVERY Focus on handling the pandemic (vaccination and health protocols) Economic recovery, flexible and accountable PEN Momentum of reform (Tax Reform, Financial Relations between the Central and Budget Deficit 2021 • 2022 ACCELERATE RECOVERY & REFORM POLICY . Strengthening pandemic handling (accelerating vaccination to • 2023 HIGH QUALITY FISCAL CONSOLIDATION Returns a maximum deficit of 3% of GDP achieve communal immunity) Accelerating economic recovery (PEN sustainability) • Reform effectiveness • • . Primary balance towards positive Debt ratio is attempted to decrease Debt controlled risk Budget Deficit 2023 Budget Perpres no .54 Perpres no.72 Realization Draft Budget Budget Deficit 2022 Perpres no.98 0 Budget Budget Realization Realization (Preliminary) Budget 2 0 -2 -2 -1.8 -2 -4 -2,4 -3 -4 -6 -6 -5,1 -6 -4,6 -4,9 -4,5 -8 -6,3 -6,1 -8 -5,5 -5,7 -8 2,8 PEN Program (IDR T) 405.1 695.2 575.9 403.9 744.8 655.1 396.7 FISCAL DISCIPLINE FOR LONG TERM SUSTAINABILITY Source: Ministry of Finance 82 80#842023 Budget Increasing productivity for an inclusive and sustainable economic transformation Macroeconomic Assumption for 2023 Budget 2023 Development Target Description (IDR Trillion) Budget 2023 A. State Revenue 2,463.0 Economic Growth 1. Tax Revenue 2,021.2 5.3% ICP US$90/barrel Unemployment rate Human Development Index 5.3-6.0 73.31-73.49 2. Non-tax Revenue 441.4 3. Grants 0.4 B. State Expenditure 3,061.2 Inflation 3.6% Oil Lifting 660 thousand barrel/day 1. Central Government Expenditure 2,246.5 16 Gini Ratio 0.375-0.378 Poverty Level 7.5-8.5 2. Regional Transfer & Village Fund 814.7 C. Primary Balance (156.7) Exchange Rate IDR14,800/USD 31 D. Surplus (Deficit) (598.2) 105-107 Gas Lifting 1,100 thousand barrel of oil equivalent/day Peasant Exchnage Rate Fisherman Exchnage Rate 107-108 % of GDP (2.84) 10Y T-Bonds Rate E. Financing 598.2 7.90% Source: Ministry of Finance 33 83#85Fiscal Policy Focus 2023 Human Resources Infrastructure The 2023 State Budget supports consolidation to maintain fiscal sustainability 2019 (348,7) (73,1) 2020 (947,7) (2,20) (6,14) 2021 2022 2023 (328,4) (431,6) (590,2) (633,6) (732,2) (775,1) (156,8) (2,84) (3,92) (4,57) Deficit (trillion rupiah) Primary Balance (trillion rupiah) Deficit of GDP (&) Source: Ministry of Finance 6½ Bureaucratic Reform Industrial Revitalization Green Economy Strengthening the Role of the APBN and Continuing Quality Fiscal Consolidation Revenue Mobilization Quality Expenditure Innovative Financing 84#86Government Maintains Focus on Priority Spending Central Government Spending Health Spending Food Security Spending IDR Trillion, Growth % IDR Trillion, Growth % 71,2% 1,7% 19,2% -24,8% -34,0% 69,6% 14,2 11,0 11,1 0,0% 1,8% 39,5% 19,9% 20,1 (4,2) 6,0 3,3 15,1 2,7 11,7 11,9 10,0 2,0 1,1 1,2 179,7 182,6 172,2 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 161,7 145,7 Social Protection Spending Subsidy Spending 82,7 106,2 77,8 93,6 IDR Trillion, Growth % IDR Trillion, Growth % 74,5 23,9% 24,9% 24,1% -8,0% 75,3 -29,9% 19,7 2,3 12,7 12,1 48,9 42,9 39,4 34,3 34,3 97,0 83,9 78,6 76,4 71,2 2019 2020 2021 2022 Non-Line Ministries Spending (IDRT) Line Ministries Spending (IDR T) -Growth (%) 21,7 24,3 10,7 11,0 12,4 2023 2019 2020 2021 2022 2023 2019 2020 2021 2022 2023 85#87February 2023 State Budget Surplus Reflects Strong Revenue And Positive Spending Trends 2022 2023 Account (IDRtn) Real. % to Revised Budget Growth Budget Real. as of as of % to Budget Growth (%) 28 Feb (%) 28 Feb A. Revenue 302.6 13.4 37.8 2,463.0 419.6 17.0 38.7 I. Tax Revenue 256.2 14.4 41.0 2,021.2 333.2 16.5 30.1 1. Tax 199.5 13.4 36.5 1,718.0 280.0 16.3 40.4 2. Custom & Excise 56.7 19.0 59.3 303.2 53.3 17.6 (6.1) II. Non-Tax Revenue 46.3 9.6 22.8 414.4 86.4 19.6 86.6 B. Expenditure 282.7 9.1 (0.1) 3,061.2 287.8 9.4 1.8 I. Central Government 172.2 7.5 (4.2) 2,246.5 182.6 8.1 6.0 1. Line Ministries Spending 78.6 8.3 (19.0) 1,000.8 76.4 7.6 (2.8) 2. Non-Line Ministries 93.6 6.9 13.2 1,245.6 106.2 8.5 13.4 II. Regional Transfer & Village Funds 110.5 13.7 7.1 814.7 105.2 12.9 (4.8) C. Primary Balance 61.9 (14.2) 370.1 (156.8) 182.2 (116.2) 194.3 D. Surplus (Deficit) 19.9 (2.4) (598.2) 131.8 (22.0) 562.2 % to GDP 0.10 (2.84) 0.63 E. Financing 84.0 10.0 598.2 182.2 30.5 Source: Ministry of Finance. 98 86#88Budget Outturn Up To February 2023 Showed Promising Sign Positive Growth in Main Sector Tax Revenue Tax Performance (cumulative growth y-o-y) Jan-Feb 23 Jan-Feb 22 ■Feb-23 Jan-23 Sem2-22 Sem1-22 Share 30.4% Manufacturing Manufacturing 18,9% 42,7% 65,1% 3,4% 38,4% 51,6% 14,8% Trade 23.6% 24,5% 33,3% Trade 15,4% 51,3% 67,2% 30,5% Financial 11.1% 41,5% 53,1% Financial Services Services -2,6% 13,4% 16,1% 30,5% 7.5% 51,8% Mining 69,3% Mining 25,1% 191,5% 293,2% Construction & Real 5.2% 37,5% Construction & Real Estate 22,7% 50,2% -31,4% Estate 9,3% 15,5% 58,2% 60,5% Transportation 62,5% 4.7% Transportation 32,1% 2,8% 17,0% 32,7% 69,7% 54,0% Business Services 3.8% Busines Services 15,2% 14,4% 18,1% | 2,9% 3.3% Information & 5,2% Communication 70,1% Information & Communication 6,9% 0,4% 12,3% 87 2#89Customs And Excise Revenues Are Slightly Slow But On-track Excise Revenue Import Duty Revenue Export Duty Revenue Due to deased export duty receipts, although import duty and excise revenues still showed positive performance. 50,69% 54,08% 18,22 27,46 -0,01% 42,28 42,27 37,10% -5,43% -9,67% 15,64% 7,88 6,82 5,51 4,97 -21,68% 0,49 6,57 380,42% 176,80% -69,01% 2,37 2,04 Jan-Feb 2020 Jan-Feb 2021 Jan-Feb 2022 Jan - Feb 2023 Jan-Feb 2020 Jan Feb 2021 Jan-Feb 2022 Jan Feb 2023 Growth Growth Excise (IDR Trillion) Influenced by tariff policies, the overflow effect of repayment of tobacco products produced in December 2022, and the effectiveness of supervision Source: Ministry of Finance I Import Duty (IDR Trillion) Driven by extra effort in January, the dollar exchange rate increased compared to last year and Vehicle Import Duty Jan Feb 2020 Jan-Feb 2021 Jan Feb 2022 Jan-Feb 2023 Export Duty (IDR Trillion) Growth Affected by the moderated price of CPO and the decline in the export volume of mineral commodities 88#90Realization Of Non-tax Revenue Continues To Increase 126,8 (1,6) 5,3 19,5 (59,2) Non-Tax Revenue Mainly Driven by from Natural Resource Revenue, SOE's profit, and Public Service Agency Revenue, and Other Non-Tax Revenue 86,6% Oil & Gas Revenue 15.9 T T 15,5 T 18,6 T 2019 2020 2021 2022 2023 Gas Oil -O-Growth (%) 269,3 (0,7) (24,5) 28,2 50,7 29,6 T 86,4 Non-Oil & Gas 5,5 T 8,0 T 4,1 T 5,3 T 22,8% Revenue 2019 2020 2021 2022 2023 Non- Mineral&Coal Mineral& Coal Growth (%) 4.562,3 (94,3) 840,1 (96,0) 2,1% -3,6% -2,8% SOE's 4,6 T 0,0 т 0,0 т 0,0 т 0,0 т 46,3 Revenue 2019 2020 2021 2022 2023 40,3 38,8 37,7 SOE's Profit BI's Surplus -Growth (%) 49,6 12,1 49,0 (0,4) Other Non- Tax Revenues 16,2 T 16,T (23,0) 18,6 T 2797 T 2019 Mining Product 2020 2021 2022 2023 DMO Line Ministries Revenues Growth (%) Jan Feb 2019 Jan Feb 2020 Jan Feb 2021 Jan Feb 2022 Jan Feb 2023 Non Tax Revenue (IDR Trillion) Growth Public Services 200,1 61,5 43,1 (24,5) (19,7) 2,3 T 19T 1,9T 4,2 T 6,0 T Agency (BLU) Revenue Source: Ministry of Finance, YTD 28 February 2023 2019 2020 2021 2022 2023 Public Service Growth (%) Agency 26#91The Performance Of Transfers To The Region Requires Improvement 2023 2022 (January-February) Revenue Sharing (DBH) ■General Allocation (DAU) ■Physical Special Allocation (DAK Fisik) Non-Physical Special Allocation (DAK Non Fisik) Incentive for Local Gov't (DID) ■Special Autonomy & Privilege Allocation for Yogyakarta ■Village Fund Transfer to Region Fund IDR 105.2T (12.9% from budget) IDR110.5 T (13.7% from budget) The distribution of transfers to regions in the Indonesian government budget decreased by 4.8% in nominal terms as of February 28, 2023. The total disbursement was IDR 105.2 T (12.9%), slightly lower than the disbursement in FY 2022 of IDR 110.5 T (13.7%). Some of the Transfer to Region funds have not been disbursed yet due to waiting for the submission of disbursement requirements from the Regional Government. Local Government Performance REVENUE Regional Tax performance in 0,23 3.33 5,09 0,72 0,82 5,90 6,58 1,41 1,16 10,20 10,07 0,66 SPENDING February 2023 grew Up to Feb, local Gov't 9.7% (y.o.y), driven by 25,85 23,57 spending grew by 4.0% growth in the realization (yoy) contributed by 25,95 27,36 of consumptive taxes, indicating that the economic activities of the people in the regions are continuing to improve. Source: Ministry of Finance, YTD 28 February 2023 Return of Local Gov't Other Revenue Personnel and Other Spending. 2022 ■Local Tax 2023 ■Retribution 2022 2023 Personnel Spending Material Spending ■Capital Spending Other Spendings#922023 Financing Policies Our Debt financing policies encourage flexible and sustainable debt management to support economic transformation. Amidst increasing global risks, fiscal pressures, and moderating domestic SBN demand, we will optimize non-debt financing sources considering the high financing needs and choosing the right timing for issuance. General debt policy direction Management of prudent and sustainable debt financing by controlling debt risk at a safe and credible level Prioritizing domestic sources of financing to increase financial independence Procurement of foreign debt as an effort to mitigate the crowding out effect. Flexibility in debt financing, both in terms of timing and composition, to obtain the most favorable costs and risks for the government. Utilizing cash loans within the framework of financing flexibility to ensure the fulfillment of financing, while the choice of cash loan currency takes into account cash requirements and debt portfolio management Source: Ministry of Finance 91#932023 Financing Needs Financing Needs Financing Sources Budget Deficit (2,84% GDP) Foreign Loan Foreign Currency 15%-25%) Local currency (75%-85%) Domestic Loan o Investment financing o Lending Foreign Denominated Bonds Domestic GS ○ Liabilities o Other financing o Matured debt Gross GS 2023 Matured (Auction & non- auction) T-Bills Issuance Sukuk 30-36% GDS 70-64% Source: Ministry of Finance 92 22#94Budget Financing Apply Prudent, Flexible, and Opportunistic Principle 92.9 67,7 Financing Realization Up To 28 February -12.8 186.9 • 177,7 9,2 Domestic Loan (Nett) IDR (0.18 T) Foreign Loan (Nett) IDR 9.35 T Domestic Loan Withdrawal (Gross) IDR 0.02T Domestic loan principal installment financing IDR (0.2T) Foreign Loan Withdrawal (Gross) IDR 16.91T Foreign loan principal installment financing IDR (7.56T) 2022 Loan (nett) 2023 Securities (nett) PLAN & REALIZATION OF INVESTMENT FINANCING AS OF 28 FEB 2023 FLPP Housing Financing Liquidity Facility IDR 85.8T* IDR 6T disbursement for The Low Income People's Housing Financing 16,647 Housing under FLPP financing valued at IDR 1,85T Source: Ministry of Finance Education Fund Agency (LPDP) Management Financing LPDB by IDR 15T LDK International Development Cooperation Fund (LDKPI) IDR 8T* PI Financing LDKPI by IDR 2T IDR 134.1T* 36#95DEBT FINANCING As of Feb 28th, 2023 Budget Financing continues to well risk-controlled, among others through optimal composition, good related to currency, interest rates, and maturity Government Securities Rp 177.7 (88.9%) (Net) Debt Financing Realization Rp 186.89 (26.8%) Note: 1. 2. Loan (Net) all numbers in trilliun Rupiah The percentage is the percentage of budget ceiling from National Budget year 2023 Source: Ministry of Finance Rp 9.2 (11.1%) Foreign Loan (Net) Rp3.7 (100%) 94 44#96Source: Ministry of Finance GS Financing Realization 2023 (Trillion IDR) Realization (ao. Feb 28, 2023) 198,35 Government Securities (GS) Nett Government Securities (GS) Gross IDR Denominated GDS 230,40 Government Debt Securities (GDS) - Coupon GDS - Conventional T-Bills 175,95 128,97 89,90 15,30 - Private Placement (+ Voluntary Disclosure Program) - Retail Bonds Foreign Denominated Bonds 1,59 22,18 46,97 - SEC USD-EUR ( - Buyback LM) 46,77 - Samurai Bond - SDG Bonds - Valas Voluntary Disclosure Program 0,00 0,00 0,21 Sovereign Sharia Securities (Sukuk) 54,46 Domestic Sovereign Sharia Securitoes 54,46 - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk 54,00 - Retail Sukuk 0,00 - Private Placement 0,46 Global Sukuk 0,00 95 95#97Primary Market Performance 2022- 2023 Government Securities (GS) 300 Incoming Bids Awarded Bids 4,00 3,56 ---2022 Avr Incoming Bids --2022 Avr Awarded Bids 250 3,11 Bid to Cover Ratio [RHS] 3,50 200 150 100 50 2,73 2,45 2,24 2,25 2,14 2,62 2,60 1,96 IDR32.25 tn per auction IDR12.46 th per auction 1,81 1,78 3,00 2,40 2,50 2,15 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Source: Ministry of Finance 2,00 1,50 1,00 In 2023: 0,50 . average incoming bid IDR39.90 tn/auction average awarded bid = IDR17.69 tn/auction = 96#98Ownership Of Tradable Domestic Government Securities Description Banks* Dec-19 Dec-20 Dec-21 Dec-22 581,37 21,12% 1.375,57 35,54% 1.591,12 34,01% 1.697,43 31,97% Feb-23 1.807,00 33,24% Portion of foreign 66.10 ownership in the mid Govt Institutions (Bank Indonesia**) % 262,49 9,54% 454,36 11,74% Bank Indonesia (gross) 273,21 9,93% 874,88 22,60% 801.46 17,13% 1.220,73 26,09% 1.020,02 19,21% 950,80 17,49% GSused for Monetary Operation 10,72 0,39% 420,51 10,86% 419,27 8,96% Non-Banks 1.908,88 69,34% 2.040,83 52,72% 2.286,40 48,87% 1.453,58 27,38% 433,57 8,17% 2.591,98 48,82% 1.428,71 26,28% Mutual Funds 130,86 4,75% 161.32 4,17% 157,93 3,38% 145,82 2,75% 477,91 8,79% 2.678,90 49,27% 159,82 2,94% DR 1,092.02 T Insurance Company and Pension Fund 471,67 17,13% 542,82 14,02% 655,24 14,00% 873,03 16,44% 894,57 16,45% & long term sector (≥ 5 years) on January 24, 2020, foreign holders reach a record high in nominal terms Foreign Holders 1.061,86 38,57% 973.91 25,16% 891,34 19.05% 762,19 14,36% 804,32 14,79% Foreign Govt's & Central Banks 194,45 7,06% 178,31 4,61% 233,45 4,99% 203,11 3,83% 206,43 3,80% Individual 81,17 2,95% 131.21 3,39% 221,41 4,73% 344,30 6,48% 344,86 6,34% Others Total 163,32 5,93% 231,57 5,98% 360,47 7,70% 2.752,74 100% 3.870,76 100% 4.678,98 100% 466,65 8,79% 475.33 8.74% 5.309,43 100% 5.425,54 100% 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 Govt Institutions; 17,49% Banks; 33,24% Non-Banks; 49,27% Insurance and Foreign Pension Fund, Holders, 16,45% 14,79% Others, 8,74% Individual, Mutual 6,34% 2,94% Funds, 97 97#99Holders of Tradable Central Government Securities Balanced Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities Foreign Ownership of Gov't Domestic Debt Securities by Tenor 23,9% 22,5% 20,3% 23,4% 21,1% 32,0% 34,0% 35,5% 33,2% 29,6% 29,8% 30,0% 27,89% 28,4% 26,9% 27,1% 24,2% 24,27% 24,19% 24,80% 25,60% 23,72% 37,8% 39,9% 36,8% 42,0% 40,3% 34,8% 36,2% 36,9% 39,5% 39,55% 40,08% 39,83% 39,15% 42,62% 38,52% 38,4% 37,8% 36,7% 39,3% 46,9% 53,7% 52,0% 21,8% 22,1% 22,3% 22,8% 22,33% 22,17% 21,39% 20,93% III 23,8% 23,1% 18,7% 19,87% 20,90% 18,97% 18,82% 38,2% 39,8% 37,5% 37,7% 38,6% 17,57% 17,03% 16,56% 16,09% 15,65% 15,24% 14,31% 13,90% 14,27% 14,36% 14,79% 25,2% 19,0% 14,4% 14,8% 10,3% 10,14% 10,2% 9,9% 8,7% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Feb-23 5,3% 2,9% 5,1% 4,1% 4,3% 3,59% 4,8% 8,6% 9,29% 9,15% 9,04% 8,76% 8,04% 4,9% 5,0% 5,0% 4,57% 4,41% 4,95% 5,56% 4,72% Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Nov-22 Dec-22 Feb-23 ■Foreign Holders Domestic Non Banks Domestic Banks Source: Ministry of Finance 10-1 1>1-2 >2-5 >5-10 >10 % Foreign Ownership of Total 98 88#100Disciplined and Advanced Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt / GDP (%) 1.177 878 659 9.000,00 39,36% 40,73% 39,57% 39,09% 45% 442 446 358 8.000,00 40% 7.000,00 27,46% 28,34% 29,40% 29,81% 30,18% 887,04 871,07 35% 53 14 1 30 6.000,00 819,86 30% 852,91 (20) (56) (57) 5.000,00 25% (269) 4.000,00 764,48 810,74 3.000,00 734,85 746,32 755,12 2.000,00 2.410,01 2.780,86 3.248,93 1.000,00 2015 2016 2017 Bond Loan Weighted Average Debt Maturity 2019 2020 2021 Debt to GDP 3.612,69 4.014,80 5.221,65 6.091,85 6.846,89 6.990,24 (341) (9)(35) (349) (36) (7) (105) 20% (464) -2,50% -1,80% -2,20% -2,38% 15% (775) 10% -6,14% (948 -4,57% 5% 2017 0% 2018 2022 Feb-23 2018 Non-debt (net) Deficit/GDP (RHS) 2019 2020 2021 2022 Government Securities (net) Domestic & Offshore Loan (Net) Surplus (Deficit) Well Diversified Across Different Currencies 9,39 % of Yearly Issuance 9,13 100% 1% 1% 9% 9% 2% 5% 3% 4% 5% 4% 8,68 80% 8,6 8,52 8,5 30% 27% 23% 20% 20% 20% 8,37 8,27 60% 8,17 40% 58% 62% 66% 70% 71% 71% 20% 0% 2015 2016 2017 2018 2019 2020 2021 2022 Feb-23 2018 2019 2020 2021 Dec-22 Feb-23 ■ATM IDR USD EUR JPY OTHER Source: Ministry of Finance 99 99#101Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks (%) Declining Exchange Rate Risks (%) 28,0 25,5 26 50,0 44,6 22,0 42,6 20,7 21,0 41,3 41,0 23,0 19,2 19,7 37,9 40,0 17,5 33,5 16,1 18,0 30,0 29,2 28,5 30,0 13,0 10,6 10,5 8,9 6,6 20,0 12,2 12,1 12,1 12,2 13,2 8,0 11,4 12,2 11,6 11,1 13,7 12,1 10,6 10,6 10,0 9,8 3,0 7,6 7,4 8,2 8,4 0,0 (2,0) 2015 2015 2016 2017 2018 2019 2020 2021 2022 Feb-23 VR Prop N on SKB VR Prop SKB Refixing Proportion 2016 2017 2018 2019 2020 2021 2022 Feb-23 ■FX to GDP Ratio FX Proportion Debt Maturity Profile IDR tn 800 700 600 500 159 400 300 200 384 100 Upcoming Maturities (Next 5 Years) 50,0 ■IDR Denominated (Triliun Rp) 180 207 174 199 Other Currencies (Triliun Rp) 40,0 34,7 36,0 175 125 127 122 30,0 485486513507 7424, 111 74 36 329274347278203230 44 111165 104 143 21,4 22,7 20,0 8,4 9,9 10,6 15 33 10,0 6,5 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 204700 204800 2049-2071 203 129 0,0 2015 2016 2017 2018 2019 2020 ■1 Year 3 Year 5 Year 2021 2022 Feb-23 39,3 40,4 41,0 39,6 40,1 42,5 42,8 25,0 25,5 24,3 22,8 22,8 24,6 25,2 8,1 7,8 6,4 7,5 7,9 100#102Republic of Indonesia USD3 bn Global Bonds Issuance Issuer Issuer Rating Format Pricing Date Settlement Date Issue Size Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Negative) BBB Fitch (Stable) SEC-Registered Notes Offering January 5, 2023 March 11, 2023 USD3 bn Tenor Maturity 5year January 11, 2028 10year January 11, 2033 Tranche Size USD1,0 bn USD1,25 bn 30year January 11, 2053 USD750 milion Coupon (p.a.) 4.550% 4.850% Price 98.900% 98.061% Yield (p.a.) 4.800% 5.100% 5.650% 98.678% 5.750% JLM Listing Use of Proceeds BofA Securities, DBS Bank Ltd., HSBC, Mandiri Securities and Standard Chartered Bank Singapore, Frankfurt Stock Exchange Net proceeds from the sale of the Bonds will be used for the general purposes of the Republic Source: Ministry of Finance Transaction Highlight . The first Emerging Asian sovereign issuer in 2023 and marks the Republic's thirteenth successful SEC-registered US$ transaction since 2018. A low new issuance concession for the transaction, which was also one of the lowest amongst the transactions launched on the same day Investor Breakdown by Region 30% 28% 33% 41% 5-year 10-year 3156 37% 30% 44% 30-year ■ Asia 26% EMEA US Investor Breakdown by Investor Type 1% <1% 8% 45-year 68% 10% 6% 67% 10-year 1% 19% 17% 17% 30-year 69% Asset Managers / Fund Managers Central Banks / SWFs Private Bank Banks Insurance / Pension Fund 101#103Section 6 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#104Bank Indonesia's Policy Mix Synergy Maintaining Stability and Strengthening National Economic Recovery B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Source: Bank Indonesia Monetary policy towards maintaining stability •⚫ Policy rate increase as a follow-up step to ensure continued lower expected inflation and inflation in a front-loaded, pre-emptive, and forward- looking measure to maintain core inflation within the range of 3.0±1% • Strengthening rupiah stabilization policy as part of measures to control inflation, primarily imported inflation Issuing new foreign exchange monetary operation instruments to boost placement of Export Proceeds, domestically by banks and exporters to strengthen stabilization, including Rupiah exchange rate stability and national economic recovery Continue buying/selling SBN in the secondary market to strengthen transmission of the BI7DRR by increasing the attractiveness of SBN yields for foreign portfolio investment inflows to strengthen exchange rate stabilization measures ■ Accommodative macroprudential policy stance to reignite bank lending to the corporate sector and drive the national economic recovery, while maintaining financial system stability Incentivize banks to disburse financing to priority sectors and promote inclusive financing ■ Strengthen implementation of macroprudential Inclusive Financing Ratio (RPIM) to increase economic inclusion, unlock financial access, while strengthening MSME's contribution to the national economic recovery ■ Accommodative macroprudential policy stance, among others by: relaxing LTV/FTV, relaxing down payment requirement, CCB 0%, Macroprudential Intermediation Ratio (MIR) 84-94%, Macroprudential Liquidity Buffer (MLB) at 6% with 6% repo flexibility, Sharia Macroprudential Liquidity Buffer (SMLB) at 4.5% with repo flexibility at 4.5% Accelerating payment system digitalization to stimulate economic recovery and implementation of the Indonesia Payment System Blueprint 2025 Strengthen and expand digitalization through social programs, e-payment for Government Increase the number of participants, expand services and garner greater acceptance of BI-FAST for more efficient transactions between banks and members of the public Expanding cross-border QRIS by, among others, accelerating implementation, piloting local currency settlement (LCS) with other Asian countries and organising National QRIS Week to achieve the target of 15 million new users Money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference fo the exchange rate in the FX market Accelerate key infrastructure development, including Electronic Trading Platforms (ETP) and a Central Counterparty (CCP) Continue to develop the Money Market Development Blueprint 2025 Promote inclusiveness and the green economy in finance Controlling inflation through Inflation Control Team in national and regional level, and accelerating implementation of the National Movement for Food Inflation Control (GNPIP) Support the national economic recovery program through cooperation and collaboration with the MOF Strengthening the coordination with the Government and related authorities to revive bank intermediation function Strengthening policy coordination with the Government and Financial System Stability Committee to maintain macroeconomic and financial system stability 3 5 103#105Bank Indonesia Policy Mix: March 2023 BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 15th and 16th March 2023 to hold the BI 7-Day Reverse Repo Rate at 5.75%, while also maintaining the Deposit Facility (DF) rate at 5.00% and Lending Facility (LF) rate at 6.50%. % Hold the BI 7-Day Reverse Repo Rate at 5.75% Strengthening monetary operations to increase the effectiveness of monetary policy transmission. Source: Bank Indonesia Rp •Strengthening Rupiah stabilisation policy as part of the measures to control inflation, particularly imported inflation, through foreign exchange market intervention, including spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as buying/selling government securities (SBN) in the secondary market. to • Continuing the twist operation by selling short-term SBN in the secondary market to increase the attractiveness of SBN yields for foreign portfolio investment inflows strengthen Rupiah stabilisation measures. •Strengthening the management of foreign exchange proceeds of exports (DHE) through the foreign exchange monetary operation instrument in the form of foreign currency term deposits (TD) as an instrument for exporters to place foreign exchange proceeds of exports through banks to Bank Indonesia in accordance with market mechanisms, effective from 1 Mar 2023. Continuing prime lending rate (PLR) transparenc y policy with a focus on bank profitability and the policy rate impact on lending rates • Strengthening payment system digitalisation policy to improve transaction efficiency as well as the economic-financial digital ecosystem by: (i) fostering payment system innovation, which includes expanding (bank and non-bank) participation, the delivery channels (direct debit, bulk credit, requests for payment), as well as BI-FAST acceptance amongst the public, and (ii) continuing the Regional Payment Connectivity (RPC) initiative by expanding cross-border QRIS and implementing Fast Payment Interconnectivity. Strengthening payment system policy ahead of the holy fasting month of Ramadan and Eid-ul- Fitr 1444 H by: (i) safeguarding the availability and reliability of the BI and industry payment systems, which includes monitoring the reliability of participants' systems to provide payment system transaction services, and (ii) ensuring the availability of Rupiah currency fit for circulation throughout the territory of the Republic of Indonesia, particularly ahead of Ramadan and Eid-ul-Fitr, through the SERAMBI program 2023, while providing Rp195 trillion of additional currency in circulation. Strengthening international cooperation with other central banks and authorities in partner countries, while promoting trade and investment in priority sectors in synergy with relevant institutions. In addition, Bank Indonesia is continuing to collaborate with relevant government ministries/agencies to ensure a successful ASEAN Chairmanship in 2023, particularly in terms of the finance track. 104#106Monetary Policy will focus on stability to stabilize Rupiah and manage inflation towards the target corridor, as part of mitigation measures against the impact of global spillovers. MITIGATING THE IMPACT OF GLOBAL SHOCK SPILLOVER STAGNATION - RECESSION- HIGH INFLATION GLOBAL POLICY RATE "HIGHER FOR LONGER STRONG US DOLLAR AND WEAKENING CURRENCY ACROSS THE WORLD MONETARY POLICY TRILEMMA POLICY RATE FOR INFLATION Monetary Policy "Pro Stability": Front Loaded, Pre-emptive, Forward Looking HIGH RISK PERCEPTION AND "CASH IS THE KING" TARGET Policy Rate B17DRR Exchange Rate Stabilization 1 CORE INFLATION WITHIN TARGET 3+1% ON THE FIRST HALF OF 2023 AND RUPIAH EXCHANGE RATE STABILIZATION POLICY On a front loaded, pre-emptive and forward looking basis to lower inflation expectation and core inflation ealier, in the first half of 2023 Stabilization of Rupiah exchange rate to control inflation, particularly imported inflation, through spot intervention, DNDF and SBN transaction in secondary market SBN sale/purchase in secondary market to maintain the attractiveness of 58N yield to draw foreign portfolio investment in order to strengthen the stabilization of Rupiah exchange rate 2 COORDINATION WITH GOVERNMENT 1. Inflation control with TPIP/TPID and GNPIP 2. Fiscal-Monetary coordination 3. Development of priority sector BB Twist Operation RUPIAH STABILIZATION FOREIGN EXCHANGE RESERVE ADEQUACY STRENGTHEN THE STRATEGY OF INTEGRATED MONETARY POLICY MANAGEMENT OPTIMIZATION OF FOREIGN EXCHANGE RESERVE MANAGEMENT RUPIAH AND FOREIGN CURRENCY MONEY MARKET DEEPENING Source: Bank Indonesia SYNERGY AND COORDINATION 105#107Well Maintained Inflation Ensured Price Stability Manageable Monetary Environment amid Heightened Global Uncertainty Strengthened Monetary Policy Framework 20 (%) 8,00 ICPI (%, yoy) rhs Core (%, yoy) - Ihs 19 August 2016 12,24 LF Rate 7.00l 7,00 15 BI Rate: 6.50 Volatile Food (%, yoy) - Ihs2 6,00 Administered (%, yoy) - lhs 10 7,62 5,00 5 H 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 Feb-23 2,00 3,09 4,00 5,47 3,00 The New Monetary Operation Framework Jan-16 May-16 Q3-2016 Q3-2017 Credit Growth Profile Q3-2018 Q3-2019 TTT Mar-20 Rupiah Exchange Rate Fared Relatively Well Compared to Peers TRY -11,46 -1,45 % yoy 20,0 ZAR -7,08,42 INR 0,23 -4.24 15,0 IDR 1,32 -2,33 CNY 0,02 -1,40 10,0 PHP 1,13 -0,56 JPY -2,87 point-to-point average -0,55 5,0 BRL 0,50 -0,29 MYR -1,69 0,42 EUR 0,21 2023 vs 2022 (YTD) 1,82 KRW 15-Mar-23 -2,94 1,82 SGD -0,29 3,47 THB 0,08 -10,0 3,67 -14,0 Source: Reuters, Bloomberg (calculated) -12,0 -10,0 -8,0 -6,0 -4,0 -2,0 0,0 20 2,0 4,0 40 00 6,0 0,0 Total Growth -5,0 Jan-15 Investment Loans LF Rate: 6.50 BI 7Day RR Rate: 5.75 DF Rate: 5.00 Jul-20 Nov-20 Mar-21 LL Jul-21 Nov-21 LL Mar-22 Jul-22 Nov-22 Mar-23 Working Capital Loans Consumption Loans Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 13,01 9,86 9,66 10,64 Nov-22 Jan-23#108-5% -10% 15% 10% 5% 0% Jan-19 Apr-19 Jul19 Source: Financial Services Authority (OJK) Oct-19 Jan-20 20% Apr-20 YOY 8% ོ ༈ སྨྲ ༄ ⌘ ཊཿ ° ལྕ * ¥ ༔ 14% 12% 10% 4% 2% 0% -2% -4% -6% Jan-19 Apr-19 Loan LOAN In January 2023, bank loans grew by 10.53% (yoy), while Third-Party Funds (Total Deposits) grew at a slower pace by 8.03% (yoy). Banking Intermediation Despite the challenging conditions in the global economy, bank loans continued to grow, driven by Investment and Corporation loans, while the funding side grew relatively steady. Jul-19 Oct-19 Jan-20 Apr-20 Jul20 Oct-20 Jan-21 Apr-21 Jul-21 YOY MSMEs Consumption Jul-20 Oct-20 Jan-21 Apr-21 Third-Party Fund (Deposits) Loan growth by segmentation continued to improve in January 2023, driven by Corporation loans, which grew by 12.33% (yoy). Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 Corporation - - Total YOY 30% 12,33% 25% 10,53% 10,47% 20% 9,39% 15% 10% 5% Jul21 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 0% -5% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 LOAN -10% YOY 20% 10,53% 15% 8,03% 10% -5% 0% Jan-19 5% Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Deposits Demand Deposits Jul-20 07-20 Working Capital Majority types of loans continued their positive trend, particularly Investment loans, which grew by 12.61% (yoy) in January 2023 Jan-2 Consumption Jul21 Oct-21 Third-Party Funds (Total Deposits) grew at a slower pace in January 2023, mainly supported by Demand Deposits growth, which increased by 16.86% (yoy), respectively. Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Savings Third-Party Fund 16,86% 8,03% 5,62% 3,71% Jan-22 Apr-22 Jul22 Oct-22 Investment ---Total Jan-23 12,61% 10,53% 10,03% 9,39%#109*) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Source: Financial Services Authority (OJK) 3 2 1 Jan-19 Apr-19 Jul-19 4 Oct-19 % Jan-20 Apr-20 Jul20 Oct-20 NPL Net ■NPL Gross Banking Risk Profile and Profitability The banking industry has ample liquidity, robust capitalization, and manageable credit risk. Profitability is consistently maintained at a steady level. The banking NPL ratio continued to further decline to 2.59% gross and 0.76% net as of January 2023, significantly below the threshold. The Capital Adequacy Ratio (CAR) of the banking sector was steadily high with a value of 25.93% and Tier-1 capital stood at 25.40% as of January 2023.*) Jan-21 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 0,76 2,59 20 10 15- % 25 CAR Liquid Assets to Non-Core Deposits and Liquid Assets to Third-Party Funds (Total Deposits) remained well above the thresholds. *) The banking industry's Net Interest Margin and Return on Assets remained steady at 4.89% and 3.02%, respectively, as of January 2023. % 180 160 140 12 0 Liquid Assets/Non-Core Deposit (LA/NCD) Liquid Assets/Third-Party Fund (LA/TPF) (rhs) 29,13 30 129,64 20 40 ~ W№ 6 4 2 threshold LA/TPF (rhs) = 10% 10 10 100 80 60 threshold LA/ NCD= 50% 40 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 0 Jan-19 Net Interest Margin Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Net Open Position was maintained well below the maximum limit of 20% and stood at 1.51% in January 2023. % 5 1 dis 4 3 2 -O Jan-19 Apr 19. Jul-19 Oct-19- Jan-20 Apr-20 Jul-20 Oct-20 1,51 % Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Return on Assets 4,89 Apr-22 Jul22 Oct-22 Jan-23 3,02 Tier 1 25.93 25,40 108#1101 2 3 4 0 Multi-finance Companies 109 The performance of multi-finance companies continues to improve, as shown by growing financing, a manageable Non- Performing Financing (NPF) ratio, and a stable gearing ratio. In January 2023, net financing increased to IDR420.60 Tn and continued its positive growth at 14.57% yoy. IDR tn Net Financing 500 400 300 Growth (rhs) YOY 14,57% 15% 10 6 10% 420,6 5 5% 4 0% 200 3 -5% 2 100- -10% -15% 1 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 The gearing ratio of multi-finance companies stayed below the threshold and stood at 2.03 times in January 2023. *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Source: Financial Services Authority (OJK) Jul22 Oct-22 Jan-23 2,03 200 150 о 50 100 250 Jan-19 Apr-19 Jul-19 Oct-19 -20% IDR Trillion Jan-20 Apr-20 Jan-19 Apr-19 Jul-19 Oct-19 % Jan-20 Apr-20 Jul-20 The NPF ratio of multi-finance companies improved to 2.40% in January 2023, well below the 5% threshold.*) Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Multi-finance companies' exposure to domestic debt foreign debt continued its declining trend in January 2023. *) Domestic Debt Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Jan-22 Apr-22 Jul-22 Oct-22 Foreign Debt 195,32 58,09 Apr-22 Jul-22 Oct-22 Jan-23 Jan-23 2,4#1119 7 8 9 5 As of 20 March, 2023 Jan-19 Mar-19 May-19 - 6ւ-որ Sep-19 Source: Financial Services Authority (OJK) Yield (%) 10 Nov-19 Jan-20 Mar-2 Mar-20 Maxzo May-20 Jul-20 Sep-2 Nov-20 Jan-21 Mar-21 Max21 May-21 Stock Index Performance as of 20 March 2023 (compared to 30 Dec'22) US 80 00 14,83% S KOR 7,03% 7500 CHIN 4,71% 7000 EU 3,45% JPN 3,26% 6500 WORLD 2,42% 6000 PHIL -1,76% SIN -3,43% 5500 IN DO -3,48% 5000 HKN -3,95% 4500 MAL -6,26% THAI -6,78% 4000 (% YTD) BRAZ -8,03% 3500 TURK -9,69% 3000 -15% -10% -5% 0% 5% 10% 15% 20% 5-yr Yield 20-yr Yield Domestic Capital Market Performance Indonesia's capital market proved to be resilient, supported by positive external performance and growing domestic demand. 10%0 As the global banking crisis weighed on the movement of global stock indices, most emerging markets fell into the negative territory. The domestic capital market showed a mixed performance with composite bond maintained its positive trend since the beginning of the year. Comp Stock Index (rhs) Comp Bond Index Government bond yields remained competitive, followed by a stable rupiah as the risk premium was maintained. Juba Jul21 Sep- Nov-21 Jan-22 Mar-2 Mar-22 May-22 Jul22 Sep-22 Nov-22 Jan-23 Mar-23 10-yr Yield USD/IDR ...... IDR (rhs) 700 18.000 600 500 14.000 400 10.000 300 200 6.000 100 2.000 0 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 IDR Tn The Net Asset Value (NAV) of equity mutual funds was stable with low volatility, reflecting a steady movement in the capital market. NAV Equity Mutual Funds Mar-21 May-21 Jul21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Dec-21 Mar-22 Jun-22 As of 20 March, 2023 Sep-22 - JCI (rhs) 8.000 7.000 6.000 5.000 4.000 3.000 2.000 As of 17 March, 2023 1.000 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 0 Dec-22 T Mar-23 200 220 240 260 360 340 320 300 280#112Domestic Capital Market Performance (ctd) Several capital market indicators recorded positive performance and remained stable. Non-resident portfolios of equity and government bonds recorded a net buy of IDR47.13 Tn (YTD), while equity market recorded a net buy of IDR3.54 Tn (YTD) as of 17 March 2023 ■Gov't Debt Securities IDR Tn 80 60 40 20 0 -20 -40 -60 As of 17 March, 2023 -80 -100 -12 0 -140 Jan-19 Mar-19 May-19 Jul-19 Juriy Sep-19 Sep-19 Nov-19 Nov-19 Jan-20 Jan-20 Mar-20 May-20 Jul20 Sep-20 Nov-20 Jan-21 Mar-21 Source: Financial Services Authority (OJK) 8 10 12 May-21 Jul-21 ■ Equity Sep-2 Nov-21 Jan-2 Mar-2 May-22 Jul22 Sep-22 Nov-22 Jan-23 Mar-23 Total securities issuance reached IDR45.96 Tn (YTD) as of 20 March 2023. IDR Tn IPO Rights Issue Corporate Bond & Sukuk 220 200 As of 20 March, 2023 180 160 140 120 100 80 60 40 21,84 12,32 11,8 20 0 2016 2017 2018 2019 2020 2021 2022 2023* Capital Market Investors continued to grow to 10.62 million by the end of February 2023, representing a 31.10% (yoy) increase. Total Investor (million) 6 3,88 4 2,48 1,62 2 1,12 0 2017 Aug-21 Dec-21 Apr-22 Aug-22 Dec-22 Feb-22 10,48 10,62#113Source: Financial Services Authority (OJK) 10 10 Jan-19 Apr-19 20 Jul-19 30 Oct-19 50 40 IDR Tn 60 Jan-20 Apr-20 Jul-20 Oct-20 Outstanding Loan LOAN The outstanding loan of P2PL Fintech remained steady and stood at IDR51.03 Tn or grew by 63.47% (yoy) as of January 2023. Jan-21 Growth Fintech (Peer to Peer Lending and Securities Crowdfunding) Peer to Peer Lending (P2PL) Fintech intermediation grows with a manageable NPL ratio and Securities Crowdfunding fundraising continues to rise. Apr-21 Jul-21 Oct-21 The total number of investors and issuers in Securities Crowdfunding increased and stood at 142,738 and 361, respectively, as of 28 February 2023. Jan-22 Apr-22 Jul-22 YoY 10% 200% 51,03 8% 150% 63,47% 100% 6% 50% 4% 0% 2% -50% -100% 90 0% Oct-22 Jan-23 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 In January 2023, the Non-Performing Loan ratio of P2PL Fintech improved as indicated by a decline from 2.78% to 2.75%. Peer to Peer NPL Ratio IDR Bn Total Fundraising Number of Investors Number of Issuers 900 160.000 *As of 28 February 2023 800 *As of 28 February 2023 140.000 780,75 640,58 700 120.000 142.738 600 100.000 500 413,19 80.000 138.208 400 60.000 300 40.000 20.000 1.380 5.063 93-777 184,90 51.414 200 64,15 100 6,47 14 49 127 195 340 361 0 T 0 2018 2019 2020 2021 2022 2023* 2018 2019 2020 2021 2022 2023* Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Continuing the positive trend, the total value of SCF fundraising stood at IDR780.75 billion as of 28 February 2023. Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 2,75%#114The Indonesian Financial Services Sector Master Plan (2021-2025) Enhancing Financial Services Sector's Resilience and Competitiveness STRENGTHENING RESILIENCE AND COMPETITIVENESS Strengthening capital and accelerating consolidation of Financial Services Institutions (FSI) Strengthening governance, risk management and market conduct Synchronize FSS regulations and supervision by referring to the best practices and/or international standards Strengthening Integrated Supervision of Financial Conglomerates and Cross Cutting Issues The 2021-2025 MPSJKI DEVELOPMENT OF FINANCIAL SERVICES SECTOR (FSS) ECOSYSTEM Increasing the role of the FSS in supporting priority economic sectors, MSMEs, job creation and regional development Establish FSS integration to add value of Sharla Finance in the development of halal industry and sharia economic ecosystem Expand the financial access and foster public financial literacy Strengthening consumer protection in the FSS Accelerating financial market deepening Supporting FSI business expansion to carry out multi-activities business Increase the role of financial services in the sustainable finance to achieve the SDGs DIGITAL TRANSFORMATION ACCELERATION Support FSS digital transformation innovation and acceleration Developing regulatory framework which supports digital financial sector ecosystem Improving human capital capacity in the financial services sector in line with the development of the digital industry Strengthening the role of research to support FSS digital innovation and transformation Accelerate the implementation of IT-based supervision (Suptech) in OJK and use of Reetech by FSS Perform Business Process Reengineering to increase the quality of licensing, regulation and supervision Source: Financial Service Authority (OJK) COLLABORATION AND COOPERATION AMONG STAKEHOLDERS (ENABLER) 113#115Macroprudential Policy remains accommodative in 2023 to increase bank lending to support the national economic recovery, while maintaining financial system stability MACRO-FINANCIAL LINKAGES: OPPORTUNITIES AND CHALLENGES ECONOMIC GROWTH AND INFLATION- PERFORMANCE OF CORPORATE AND HOUSEHOLD MACROPRUDENTIAL POLICY TRILEMMA BALANCED INTERMEDIATION NORMALIZATION OF FISCAL AND MONETARY POLICY EXCHANGE RATE VOLATILITY AND FOREIGN DEBT INCREASE OF SBN YIELD AND MARKED MACROPRUDENTIAL POLICY "Pro Growth" Balanced Intermediation, Sound and Resilience Financial System, Economic-Financial Inclusion TARGET Accomodative Macroprudential Policy Macro systemic surveillance on financial system stability Economic and Financial Inclusion Policy 1 CREDIT GROWTH AT 10-12% MAINTAINED FINANCIAL SYSTEM STABILITY'S RESILIENCE AGAINST RISKS, AND GROWING MSMEs Loosening all instrument of macroprudential policy and providing incentive on credit/financing provision to bankes Strengthening systemic surveillance on banks' resilience against liquidity risks, market risks jexchange rate and SBN yiek), and credit risks Expanding MSMEs Go Export and Go Digital program, as well as Strengthening financial literacy and consumer protection on products under Bank Indonesia's licensing TO MARKET BALANCE SHEET 2 FINANCIAL SYSTEM STABILITY COMMITTEE (KSSK) 1. Strengthening resilience and financial system stability risk's prevention 2. Increasing credit/financing to real sector 3. Financial sector reform B OK MAINTAINED FINANCIAL STABILITY ECONOMIC AND FINANCIAL INCLUSION Source: Bank Indonesia CREDIT SUPPLY SANK 미미미미미 MIR MPLB CCyB RR Incentive Transparency of SBDK LTV & DP CREDIT DEMAND RPIM Policy Synergy F ㅁㅁㅁ FINANCING 114#116Bank Indonesia's Comprehensive Financial Deepening Program Strengthening the Effectiveness of Monetary Policy Operations and Transmission, integrated with the modern and efficient money market to support the financing of the economy STRENGTHENING INTEGRATED MONETARY OPERATION STRATEGY OPTIMIZATION OF FOREIGN EXCHANGE RESERVE ASSET MANAGEMENT MONEY MARKET AND FOREIGN EXCHANGE MARKET SINERGY & COORDINATION DEEPENING Money Market Deepening Policy "Pro-Growth": Integrated, Modern, Efficient 3 BPPU MAIN 2025 TARGET INITIATIVES PARTICIPANT PRODUCT PRICING INFRASTRUCTURE 1 INTEGRATION OF MODERN AND EFFICIENT MONEY MARKET WITH MONETARY MANAGEMENT TO IMPROVE MONETARY OPERATION TRANSMISSION AND ECONOMIC FINANCING Consolidation of monetary operation participants and market participants having classification primary dealer (PD) into systemic, critical, and general in line with SIFIs, cross-border and future "wholesalers Accelerating the development of strategic money market instrument for effective monetary policy instrument, rupiah stability, hedging and short term financing Developing efficient market mechanism to support interest rate structure formation (IndONIA and Repo), exchange rate (DNDF), and hedging (interest rate swap and exchange rate) Infrastructure of monetary operation, money market and payment system which are 31 (integrated, interoperable. Interconnected) as pre-requisite for CBDC 2 COORDINATION FORUM FOR DEVELOPMENT FINANCING THROUGH FINANCIAL MARKETS (FK-PPPK) 1. Stabilization of Financial Market 2. Development of Economic Financing Instruments 3. Financial Literacy and Consumer Protection Bak LPS Source: Bank Indonesia 115#117Bank Indonesia's Continue to Expand Payment System Digitalization in 2023 ..to accelerate payment system digitalization for further integration in the national economic-financial digital ecosystem, developing Digital Rupiah, as well as expanding cross-border payment system cooperation. NATIONAL DIGITAL FINANCE AND ECONOMY: OPPORTUNITIES AND CHALLENGES CLEAR VISION AND POLICY ON THE DIGITALIZATION OF THE NATIONAL PAYMENT SYSTEM POLICY TRILLEM PAYMENT SYSTEM SOUND, COMPETITIVE AND INNOVATIVE ROMENT SYSTEM INDUSTRY PAYMENT SYSTEM INDUSTRY 1 3 SOUND EFFICENT, AND FAIR MARKET PRACTICE 2 ACTIVE INDUSTRY PARTICIPATION IN THE DIGITALIZATION OF FINANCIAL SERVICES AND PAYMENTS TO CONSUMERS 31 ENTEGRATED INTERORABLE, INTERCONNECTED SAFE AND ROBUST PAYMENT SYSTEMS INFRASTRUCTURE ACCELERATION OF PUBLIC ACCEPTATION OF FAST, CONVENIENT, AFFORDABLE SECURE, AND RELIABLE DIGITAL PAYMENT TRANSACTIONS DIGITAL TECHNOLOGY SPACE VS HIGH INVESTMENT COSTS, HUMAN RESOURCE SCARCITY. AND CYBER RISK "Pro-Growth" Payment System Policy: National Digital Economic-Financial Integration, Digital Rupiah TARGET Strong, Competitive, and Innovative of Payment System Industry 31 Payment System Infrastructure (Integrated Interoperable Interconnected Efficient, Healthy, Transparent of Payment System Pricing Policy Digital Rupiah Design, Process & Technology 1 ACCELERATION OF NATIONAL DIGITAL ECONOMIC-FINANCE INTEGRATION RUPIAH DIGITAL DEVELOPMENT INTERNATIONAL PAYMENT COOPERATION Acceleration of regulatory reform and end-to-end consolidation of the payment system industry to build indonesian unicorns that are strong, competitive, innovative, and ready to become Digital Rupiah wholesalers Development of 21 grated, Interoperable, Interconnected retall and wholesale payment system infrastructum to accelerate national digital economic-nancial Integration and Digital Rupiah Issuance Efficient, pro-business, and transparent payment system Pricing Polley accordance with payment service clusters to support national interests, consumers, and industrial mpetitiveness nationally and regionally Finalization of conceptual design, development of business models and wholesaler participants, development of the Digital Ruplah technology platform PENETRATION OF GLOBAL DIGITAL FINANCE PLAYERS, THE NEEDS FOR INTERNATIONAL COOPERATION 2 SYNERGY AND COORDINATION L BANK INDONESIA-GOVERNMENT: ELECTRONIFICATION OF SOCIAL ASSISTANT AND GOVERNMENT FINANCE 1. BANK INDONESIA-INDUSTRE IMPLEMENTATION OF BSPL 2023 AND RUPIAH DIGITAL DEVELOPMENT S. BANK INDONESIA-QUIC STRENGTHENING OF ITSK REGULATION AND SUPERVISION (DIGITAL FINANCIAL INNOVATION BANK INDONESIA-INTERNATIONAL: INTERNATIONAL PAYMENT COOPERATION AND DEVELOPMENT OF CEOC 5 Initiatives Indonesia Payment System Blueprint 2025 BSPI 2025 Source: Bank Indonesia Open Banking Retail Payment System Financial Market Infrastructure Data Regulatory, Licensing, and Supervisory 116#118Tanjung Kelayang, Bangka Belitung Province f indonesia.travel @indtravel indonesiatravel @indtravel www.indonesia.travel wonderful indonesia