#1July 2021 BHINNEKA TUNGGAL IRA Republic of Indonesia Promoting Recovery: Policy Synergy to Maintain Macroeconomic Stability and Growth Momentum#2About Investor Relations Unit of the Republic of Indonesia Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Financial Services Authority, Ministry of Trade, Ministry of State Owned Enterprises, and Ministry of Energy and Mineral Resources. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit - Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Rosita Dewi (International Department - Bank Indonesia, Ph.: +6221 2981 8232) Thasya Pauline (Deputy Ministry for Macroeconomic and Finance Coordinator - Coordinating Ministry for Economic Affairs, Ph. +6221 352 1843) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Ph.: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Ph.: +6221 351 0714) E-mail: [email protected] This Presentation Book also can be downloaded from: https://www.bi.go.id/en/iru/presentation/default.aspx 1#3What's New in This Edition 0 Economic Recovery Program and Its Updates ...page 14-26 Commitment to Sustainability and Preserving the Environment ...page 95-113 Investment Realization (Q2-2021 ) ...page 44-46 D Bank Indonesia Board of Meeting Decision Fiscal & Financing Policy Updates ...page 69-93 Progressive Infrastructure Development ...page 172-181 ...page 116-117 2#4Overview 1 Economic Recovery Program and Its Updates 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility Institutional and Governance Effectiveness: 2 Accelerated Reforms Agenda with Institutional Improvement 6 Commitment to Sustainability and Preserving the Environment Economic Factor: 3 Stable Growth Prospects 7 Amid Temporary Moderation External Factor: 4 Improved External Resilience 8 Monetary and Financial Factor: Credible Monetary Policy and Favourable Financial Sector Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision 13#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IRA#6Concerted Efforts to Mitigate Covid-19 Risk General Measures 1 Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. 80 2 Extension of the emergency status for COVID-19 until 29th May 2020. 9 3 Permission for civil servants to work from home, while maintaining the continuity of public services. 10 Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. 4 Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds. 11 Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations. 12 Establishment of Contingency Plans in the regions level. 5 Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols. 13 6 Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities. 7 Conducting Rapid Test in 17 provinces with positive patients of Covid-19. 14 Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production. Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel. Source: Bank Indonesia 5 LO#7Bank Indonesia's Measures to Mitigate Covid-19 Risk To maintain Monetary and Financial Market Stability 1 Measures Launched on March 2, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms Reducing the foreign currency reserve requirement ratio for 2 conventional commercial banks from 8% to 4%, effective 16th March 2020. Reducing the rupiah reserve requirement ratio by 50bps for 3 banks engaged in export-import financing activity in coordination with the Government. Expanding the types of underlying transactions available to 4 foreign investors as hedging alternatives against rupiah holdings in Indonesia. 1 2 Measures Launched on March 18-19, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- 3 month tenors from three times per week to daily auctions in order to ensure adequate liquidity. 4 Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market. Expediting the enforcement of domestic vostro rupiah accounts 5 for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings. 6 Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors. 5 Global investors may utilise global and domestic custodian banks for investment activity in Indonesia. 7 Source: Bank Indonesia Strengthening payment system policy to support COVID-19 mitigation efforts. 6 CO#8Government Measures to Mitigate Covid-19 Risk Fiscal and Non Fiscal Stimuli Fiscal Stimuli Phase 1 Fiscal Stimuli Phase 2 1 Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. 1 Relaxation of Income Tax (PPh Article 21). Increased disbursements of the Noncash Food Assistance 2 Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. 2 Relaxation of Income Tax on Imports (PPh Article 22). 3 Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion. 3 Relaxation of Income Tax (PPh Article 25). 4 4 Provided incentives for domestic and international travellers. Relaxation of Value Added Tax (VAT) Restitution. 5 Reduced the air passenger service fee (PSF) by 20% for March-May 2020. 6 Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020. 7 Non-Fiscal Stimuli 1 Reduce and simplify restrictions on export activities to maintain export performance and competitiveness. Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities. Source: Bank Indonesia 2 Reduce and simplify restrictions on import activities to ensure the availability of raw materials. 7#9Government Measures to Mitigate Covid-19 Risk Government Regulation In UU 2/2020, Previously Perppu No.1 2020 Regulates two topics: (1) State Financial Policy (2) Stability of Financial System State Financial Policy Stability of Financial System 1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Providing loans to the Indonesia Deposit Insurance Corporation ("IDIC") 5. Issuance of Government bond can be purchased by Bank Indonesia, SOES, corporate investors and/or retail investors 6. Use of alternative budget sources for example ASL, education endowment funds, and funds managed by the Public Service Agency. 7. Taxation Policy: a) Decrease in Corporate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19. 1. Improved Coordination among The Financial System Stability Committee ("FSSC") members 2. Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys government bond on the primary market, lending to "IDIC" and "FSA" may request a merger or consolidation of Financial Services Institutions. Foreign exchange management (LLD) management for residents 3. 4. Increase public confidence without causing moral hazard. Source: Coordinating Ministry for Economic Affairs 8#10Government Measures to Mitigate Covid-19 Risk Budget Refocusing Policy I. Presidential Regulation No. 7/2020 on Taskforce to Manage COVID-19 Outbreak →> 9/2020 Renewed through Presidential Regulation No. 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources II. Presidential Instruction No 4/2020 concerning Refocusing of Activities, Reallocation of Ministry/Agency Budget, and Procurement of Goods and Services in the Framework of Mitigating COVID-19 Outbreak and Ministry of Finance Circular (SE) No 6/2020 on Refocusing Activity and Reallocation of Ministry/Agency Budget in the Framework of Mitigating COVID-19 Outbreak 1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak following COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly and accountably) III. Policy to support efforts to adjust regional allocations and relax transfers for handling Covid-19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit-Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation 20/2020 on the acceleration of COVID-19 Mitigation in the Scope of Regional Government IV. Government Regulation No. 43 of 2020 concerning Amendments to Government Regulation No. 23 of 2020 concerning Implementation of the National Economic Recovery Program to support the country's financial policies for handling the 2019 Corona Virus Disease pandemic and/or facing threats that endanger the national economy and/or financial system stability and save the national economy Source: Coordinating Ministry for Economic Affairs 9#11Covid-19 Handling Fund and National Economic Recovery Strategy to accommodate Health Facilities and Economic Recovery by Integrating Health and Economic Policies Health Sector (COVID-19 Handling) Reducing the Spread of Covid-19 Government Responsibilities: 3T • • • Test of Covid-19 for Public Tracing for Every Positive Result, and Treat Every Case Well Community Responsibilities: 3M Put on a mask Comittee (Chairman: Coordinating Minister for Economic Affairs) • Vice Chairman Coord. Minister for Maritime and Investment Coord. Minister for Politics, Law, and Security Coord. Minister for Human Development and Culture Minister of Finance Vice Chairman • Minister of Health Minister of Home Affairs Executive Secretary I Executive Secretary II Economy Sector (National Economic Recovery/PEN) Intensification of National Economic Recovery Program Acceleration of government spending Labor-intensive program and the development of National Strategic Projects Strengthened support for the manufacturing sector Stimulate household consumption • Wash Hands • Keep the distance Vice Chairman + Executive Team Leader Minister of SOEs PEN and Covid-19 2020 Stimulus • • . Vaccination Acceleration Increase the procurement of vaccine supplies Improve vaccinators, cold storage, and vaccination sites Accelerate the vaccination program for the private sector Community Activity Restriction (PPKM) Risk zoning and micro-level monitoring The application of the area is evaluated every two weeks with the addition of provinces. Health and Economic Policies need to Integrated to Encounter Covid-19 2021 (as of 23 April 2021) 2021 (as of 21 July 2021) Budget TOTAL COVID-19 Task Force (Chairman: Chairman of BNPB) PEN Task Force (Chairman: SOEs Vice Minister) Health IDR 695,2 T (Realization: IDR 579,8 T) IDR63,51 T IDR699,43 T IDR744,75 T IDR175,5 T IDR214,95 T Social Protection IDR220,39 T IDR150,88 T IDR187,84 T Business IDR56,12 T IDR56,72 T IDR62,83 T Incentives Support for MSMEs and IDR173,17 T IDR191,13 T IDR161,20 T Corporations Priority IDR66,59 T IDR125,17 T IDR117,94 T Program Source: Coordinating Ministry for Economic Affairs Source: MoF 10#12Illustration of Health And Economic Recovery In One Wheel Brake ➤ Health Safety Net Need to step on the brakes to suppress (contain) the covid-19 contagion Need: Brake fluid ➤ Medicine Health Workers ➤ Vaccine R Strong Brake SEATBELT: Driver safety while driving Financial Sector Safety Nets Source: Coordinating Ministry for Economic Affairs Gas Pedal ➤ Social Safety Net ➤ Real Sector Safety Net Oil/Gas ➤ Source of funding ➤ Make sure the drain is smooth and doesn't leak Step on The Gas! 11#13Economic Recovery and Covid-19 Handling Requires a Medium-Term Plan (up to 2023/2024) COVID-19 Cases Pre- Covid The spread of COVID-19 will keep increasing until the vaccine is found and distributed month 12-18 months of 2020 SURVIVE vaccines invented and distributed → MAINTAIN LIVELIHOOD A period of endurance and stress Adapt & Adjust Economic Condition Source: Coordinating Ministry for Economic Affairs month of 2021 12th month of 2021 Transformation Period Goal/Minimum Target: Recover to Pre-COVID condition 2022 2023 medium term Plan 2024 12#14Covid-19 Vaccination Will Restore Public Confidence Health Workers will get the priority, followed by Public Officers / Services and the Elderly Vaccination Targets & Needs 1 181.5 million people 426.8 million doses Vaccination Stages: HEALTH WORKERS Vaccinations are carried out for health workers in 34 provinces 1.5 M VACCINATION PERIOD JAN-FEB 2021 3 VULNERABLE COMMUNITIES Communities in areas with a high risk of transmission 63,9 M 2 PUBLIC OFFICERS 17.3 M ELDERLY 21.6 M VACCINATION PERIOD FEB-JUN 2021 OTHER COMMUNITIES With a cluster approach according to vaccine availability VACCINATION PERIOD APR 2021 DEC 2021 - Source: Coordinating Ministry for Economic Affairs 77.7 M Procurement of Vaccines Total Firm Order (FO): 329.5 millions doses Total additional options (AO): 334 millions doses Total potential for procurement: 663.5 millions doses SINOVAC FO: 125.5 million doses NOVAVAC FO: 50 million doses AO: 100 million doses AO: 80 million doses COVAX FO: 54 million doses AO: 54 million doses Gotong Royong Vaccine "Gotong Royong" Vaccine is a special vaccine program for workers whose implementation is the responsibility of the company Targets ASTRAZENECA FO: 50 million doses AO: 50 million doses "Gotong Royong" Vaccine (20 million doses) Sinopharm Cansino Bio 15 million 5 million • Employees and families of a business entity • • Communities around the location of the business entity Foreign citizens who are employees of a business entity 13#15Herd Immunity is targeted to be achieved by the end of 2021 Based on current supply, minimum 1.5 - 3 million/day starting in Semester 2-2021 Total vaccine supply at the end of 2021: 441,9 million doses (91% of total vaccine needs) based on data from the Ministry of Health July 2, 2021 Acceleration Strategy: Supply (dose/ month) 31,8 mn + rest of 55,6 June 45,8 mn mn 85,7 mn 83,1 69,3 mn mn July Aug Sep Oct Nov Dec Target Vaccin ation/ day Average Target: Herd immunity Jakarta and its surrounding vaccination per day 1,5 mn Average vaccination per day 2 mn Target: Herd immunity Java Bali Average vaccination per day 2,5 - 3 mn 1. Involving the role of the Army/Police; 2. Involve midwives to increase the capacity of vaccinators, especially for breastfeeding mothers and children; 3. Optimizing all vaccination routes and increasing operational hours; 4. Prioritized in the red/high risk zone; 5. Vaccination for ages 18 years and over is mainly in the red zone; 6. 'Gotong Royong' Vaccination is open to individuals; 7. Involve community leaders Source: Coordinating Ministry for Economic Affairs 14#16Progress of Vaccination Implementation Vaccination has been carried out since January 2021. As of July 29, 2021, the 1st vaccination dose was 46.05 million people (22,11%), and the 2nd dose vaccination was 18.35 million people (9,29%). Vaccination Target | Vaccination Progress TOTAL 208.265.720 70,000,000 65,000,000. Vaccination Cummulative 1 & 2 Vaccination Cummulative-1 Vaccination Cummulative-2 64.407.333 60,000,000 HEALTH WORKER Vaccination 1 Vaccination 2 -Vaccination Cummulative-3 1.594.828 1.452.585 55,000,000 1.468.764 PUBLIC OFFICERS (108,58%) Vaccination 1 (98,90%) 50,000,000 Vaccination 2 45,000,000 25.356.284 10.887.436 40,000,000 2 17.327.167 Gotong Royong Vaccine: Vaccination-1: 419.887 (2,80%) Vaccination-2: 178.099 (1,19%) 46,053.004 (146,34%) Vaccination 1 (62,81%) 22,11% Vaccination 2 35,000,000 ELDERLY 4.810.970 3.120.010 30,000,000 3 21.553.118 COMMUNITY (22,32%) Vaccination 1 (14,48%) 25,000,000 Vaccination 2 iii AND VULNERABLE 4 141.211.181 18.354.329 20,000,000 13.439.531 3.898.061 (9,52%) (2,76%) 15,000,000 Vaccination 1 Vaccination 2 9,29% 10,000,000 TEENAGER 851.391 237 5,000,000 5 26.705.490 Total Target (1+2+3+4+5) (3,19%) 46.053.004 (0,00%) 208.265.720 (22,11%) 18.354.329 (9,29%) 0 28/01/21 27/02/21 29/03/21 28/04/21 28/05/21 27/06/21 27/0 Update 29 July 2021 Source: Coordinating Ministry for Economic Affairs 15#17Community Activity Restriction (PPKM) as a Support for Government Vaccination Program The purpose of the micro PPKM is to suppress positive cases of covid-19 as a precondition for success for handling Covid-19 and for national economic recovery Community Activity Restriction (PPKM) Assessment of the Covid-19 Pandemic Situation Level transmission level Period: • PPKM Period I-II: 11 Jan - 8 Feb 2021 • Micro-Scale PPKM I: 9 - 22 Feb 2021 • Micro-Scale PPKM II: 22 Feb - 8 Mar 2021 • Micro-Scale PPKM III: 9 Mar - 22 Mar 2021 • Micro-Scale PPKM IV: 23 Mar - 5 Apr 2021 . • Micro-Scale PPKM V : 6 Apr-19 Apr 2021 Micro-Scale PPKM VI : 20 Apr- 3 May 2021 response capacity pandemic situation level Level 0 Level 1 Level 2 Level 3 Level 4 a situation where Situation transmission does without not occur but local there are transmissi limitations to situations with low community a community transmission situation with limited response uncontrolled transmission incidence on preventing transmission with capacity and a risk of inadequate health services insufficient response capacity • Micro-Scale PPKM VII: 4 May - 17 May 2021 • Micro-Scale PPKM VIII: 18 May- 31 May 2021 • Micro-Scale PPKM IX: 1 Jun- 14 Jun 2021 • Micro-Scale PPKM X: 15 Jun- 28 Jun 2021 • Micro-Scale PPKM XI Strengthening: 22 Jun - 5 Jul 2021 • • • • The Emergency PPKM (Java-Bali): 3 Jul - 20 Jul 2021 Micro-Scale PPKM XII (Outside Java-Bali with Tightened Restrictions): 6 Jul - 20 Jul 2021 The Emergency PPKM (Outside Java-Bali): 12 Jul - 20 Jul 2021 Micro-Scale PPKM Level 4 (Java-Bali): 21 Jul - 25 Jul 2021 • Micro-Scale PPKM Level 1-4 : 26 Jul - 2 Aug 2021 In line with the implementation of PPKM, government support for the community and small businesses is strengthened through social protection assistance and economic assistance for MSMEs Source: Coordinating Ministry for Economic Affairs Red Higher Community Transmission > 5 houses in a neighborhood that have positive confirmed cases during the last 7 days Micro PPKM Control Scenarios Level 1-2 Orange Moderate Community Transmission If there are 3-5 houses in a neighborhood that have positive confirmed cases during the last 7 days Yellow Low Community Transmission If there are 1-2 houses in a neighborhood that have positive confirmed cases during the last 7 days Green No Active Cases If there are no house in a neighborhood that have positive confirmed cases during the last 7 days 16#18PPKM as Pandemic Handling Policy which Fully Enforced by Government Extension of Restrictions on Community Activities (PPKM) Level 1-4 in Java-Bali and outside Java-Bali Adaptation of Community Activities in PPKM Level 4 The government continues PPKM level 4 with several gradual adjustments to community activities and mobility PPKM Level 4 (Jul 26 until Aug 2, 2021) 95 Cities 45 Cities In Java and Bali Outside Java and Bali PPKM Level 3 (Jul 26 until Aug 2, 2021) 33 Cities 276 Cities In Java and Bali Outside Java and Bali PPKM Level 2 (Jul 26 until Aug 2, 2021) 65 Cities Outside Java and Bali At the moment, traditional market which selling basic needs, permitted to still open until 08.00 pm and with maximum capacity by 50% Traditional market which selling other than basic needs, permitted to open until 03.00 pm with maximum capacity by 50% and also implementing strict health protocol according to the local government regulation; Street vendors, grocery stores, voucher agent/outlet, barber, laundry, small repair shop, car wash, and small business, permitted to open until 08.00 pm and also implementing strict health protocol; Restaurant, food street vendors, and many kind of food businesses which having an open dining area is permitted to open until 08.00 pm with maximum dining time by 20 minutes. Source: Coordinating Ministry for Economic Affairs Ministry of Home Affairs Instruction No. 24 and 25, 2021 17 17#19Regulation of Community Activities in PPKM Level 4 Communities must carry out activities wisely during emergency PPKM Non-Essential Sector Teaching & learning activities 100% WFH 100% Online Essential Sector Restaurant Maximum 50% WFO Construction Activities Operate 100% Wedding Receptions Not Allowed Critical Sector Pharmacies and Drug Stores Operate 24 hours Maximum 100% WFO Public facilities • Only accept Shopping Center delivery / take HI Temporarily closed • away Not accepting dine-in Long-distance domestic travel are Travelers obligated to display DOMESTIC evidence of their first vaccination card, a negative result of COVID-19 through PCR with a maximum of 2 days and/or Rapid Antigen a maximum of 1 day before departure. Places of Worship Malls will temporarily closed be Supermarkets and traditional markets can operate till a maximum of 20:00 local time with a maximum visitor capacity of 50% Temporarily closed Art, Social and Cultural Activities Temporarily closed Public Transportation Maximum capacity 50% Source: Ministry of Home Affairs Instruction No. 24, 2021 18#20• Breakthroughs to Strengthen Support for Corporate Loans and the Hotel, Restaurant, and Cafe Sector by 2021 The Government provides support for Corporate Business People in the form of Government Guarantees to protect, maintain, and increase the economic capacity of Business Actors from the real sector and the financial industry in carrying out their business. The government also provides incentives for businesses affected by the COVID-19 pandemic, such as the hotel, restaurant and cafe sector Relaxation on the Terms of Corporate Credit Guarantee Program PMK 32/2021 Affirmation of relaxation of restructuring and new loans from Financial Services Authority (OJK) Change of Guarantee Process Simplify the terms and stages of Credit Guarantee Hotel, Restaurant and Café Sector Incentives Fund Placement and Guarantee Schemes for Hospitality SMEs credit schemes and guarantees for restaurants and cafes Source: Coordinating Ministry for Economic Affairs $1 19#21Policy Synergy in the Property and Automotive Sector The government, together with BI and OJK, have provided a stimulus to the property and automotive sectors to encourage public consumption and at the same time improve the performance of the business sector. Government B Bank Indonesia QJ OJK Automotive Sector Giving VAT Incentives on Luxury Goods Borne by the Government for Motor Vehicles through PMK No. 20 of 2021 • Expanded to: Car which produced within the country with an engine capacity of 1,501 < CC <2 500 with local purchases > 60%. • The PPnBM Discount stimulus is given in stages: As for 4x2: 50% during April-Aug and 25% for Sep-Dec 2021. ➤ As for 4x4: 25% during Apr-Aug and 12.5% during Sep-Dec 2021. Relaxation of down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles, while maintaining prudential principles and risk management as stipulated by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Letter of the Chief Executive of Banking Supervision and Non-Bank Financial Institutions : • • Relaxation of Risk Weighting Policy for Credit Risk Weighted Assets Motor Vehicle Financing Exemption from the Maximum Credit Lending Limit to Battery- Based Electric Motor Vehicle Manufacturers 2 Property Sector Giving Government-Borne VAT Incentives Borne by the Government for the Submission of Landed Houses and Apartment Residential Units through PMK No. 21 of 2021 Relaxation of Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property, while maintaining prudential principles and risk management, as stipulated by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Relaxation of Risk Weighted Assets for Credit / Mortgage Funding Depends on the LTV / FTV Ratio through the Letter of the Chief Executive of Banking and IKNB Supervision. Source: Coordinating Ministry for Economic Affairs 20 20#22The Pre-Employment Card Program Successfully Helped Indonesian Workers During the Pandemic Period The Pre-employment Card is a program from the government for job seekers to workers affected by Covid-19 to improve skills through training as well as get incentives. Registration 65,9 M Registrant in Pre-Employment Card Websites From all Cities and Regencies in Indonesia 34 Provinces 514 Cities and Regencies Recipients 2020 5,5 M Pre-Employment Card Recipient (Batch 1-11)* 5,3 M Recipients Has received an incentive 13.4 T Incentives Have Been Disbursed Recipients 2021 2,82 M 2,77 M Pre-Employment Card Recipient (Batch 12-17) Recipients who have purchased training 2,72 M 2,67 M Recipients who have completed training 60.6 49.4 50.7 46.148.8 53.951.2 39.4 Recipients who have received incentives unemployment 6,44 T Incentives have been distributed work entrepreneur employee ■before joining the pre-employment card (January 2021) after joining the pre-employment card Graduation Stages for Pre-Employment Card Program Recipients to the People's Business Credit Program (KUR) Through business financing support, people who have graduated from the Pre-Employment Card Program and received training can start businesses. The integration of this program is expected to encourage National Economic Recovery through strengthening the SME actors. Commercial Small Credit Finance Micro (KUR Credit Kecil) Super- (KUR) Micro Pre- Credit Employment Card Program Source: Coordinating Ministry for Economic Affairs 221 21#23National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 • • சச AA INDUSTRIAL CONDITIONS Require to deepen Industrial Structure Necessary to be independent on raw materials and production Unsupportive regulations and incentives The P3DN Program is not yet optimal 7 SECTORS FOCUS Food and Beverage Textiles and Clothing Import Reduction STRATEGIC STEPS through Import Substitution in Industries with Large Import Value Encouraging the Deepening of Industrial Structure Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Source: Ministry of Industry Automotive Chemical Electronic Utilisation 60% (2020) Utilisation Utilisation 75% 85% (2021) (2022) Pharmacy Medical Devices • Absorption of workers affected by layoffs. Increased domestic spending capacity • Increase in the export market 22 22#24Fiscal Incentives Policy to Boost the Economy The government facilitates fiscal incentives to create a conducive investment climate, especially for industry players. Through increased investment, it is hoped that it can strengthen the domestic industrial structure TAX HOLIDAY TAX ALLOWANCE INVESTMENT ALLOWANCE SUPER DEDUCTION TAX • . • The criteria are new investment, taxpayers including pioneer industries, and income received from the main business activities carried out. Pioneer industries are defined as industries that have broad linkages, provide added value and high externalities, introduce new technologies, and have strategic value for the national economy. There are 18 industrial sectors that fall within the scope of pioneer industries Updated: 31 Dec 2020 82 Taxpayers; 14 countries investors Investment plan of IDR 1,356 trillion Realization of IDR 204 Trillion Business locations in 24 provinces Workforce of 112 thousand Source: Coordinating Ministry for Economic Affairs • To encourage investment labor-intensive in a industries, • To increase direct investment activities for certain business fields and/or in certain areas. • The facilities include reduction in net income of 30% of the total investment for six years, accelerated depreciation and amortization, imposition of income tax on dividends paid to foreign tax subjects of 10% or lower based on a tax treaty, and compensation for losses of up • to ten years. The criteria are having a high investment value or for export, a large absorption of labor; or have a high local content. support programs for job creation and absorption Indonesian workers. of • Incentives in the form of facilities to reduce net income by up to 60% for labor-intensive sectors • There are 45 labor- intensive industrial sectors and employ an average of 300 workers in 1 tax year. . Super Deduction Vocational • Engaging industry in vocational activities to provide knowledge and encourage the transfer of knowledge • A maximum reduction of 200% gross income from costs in the context of providing work practice, apprenticeship, and / or learning activities R & D Super Deduction • Increase the role of industry in fostering innovation and the use of the latest technology in the production process Maximum gross income deduction of 300% over R&D costs carried out in Indonesia 23 23#25Government Support for MSMEs During the Covid-19 Pandemic In the form of relaxation of asset quality assessments, postponement of principal & interest subsidies, low-interest working capital loans guaranteed by Askrindo and Jamkrindo, tax incentives for MSMEs borne by the government, and Productive Presidential Assistance for Micro Enterprises MSMES CREDIT RESTRUCTURING WORKING CAPITAL CREDIT LOW INTEREST IDR30 Trillion Government Placement of Funds at Bank Himbara 1 ASSET QUALITY ASSESSMENT 2 POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES 3 According to POJK KUR Super Mikro: Loan up to IDR 10 million No. 11/POJK.03/2020 & • 14/POJK.05/2020 Interest subsidy will be 19% consist of additional interest subsidy 6% and regular interest subsidy 13%, debtors pays 0% interest from Aug - Dec 2020. 4 KUR MKM (SMEs): Asset Quality Arrangement: ≤ • 10 Loans IDR billion can be based only on the accuracy of principal interest payments Restructurisation: The credit quality for affected debtors is determined to be current restructuring since The restructuring is carried out without a ceiling limit type of financing Loan up to IDR 10 million up to IDR 500 million • • Postponement of installments and 6% additional interest subsidy for the period from Apr-Dec 2020 to 0%. KUR MSME Credit, non-KUR: Loan > IDR 500 million up to IDR 10 billion Postponement of installments and interest subsidies 3% for the first 3 months and 2% for the next 3 months 5 UMi, Mekaar, Pegadaian (Pawnshop) Postponement of principal installments and interest subsidies for 6 months from Apr-Sep 2020 Fintech Loan, Co-op, Farmers, LPDB, LPMUKP, UMKM PEMDA Relaxation is given a 6% interest subsidy for 6 months Based on Coordination Meeting held by Financing Policy Committee for MSME on December 28, 2020, KUR implementation in 2021 are as follows: Additional interest subsidy 3% for 6 months, debtors pays 3% interest. Increase the ceiling of KUR in 2021 to IDR 253 trillion. GUARANTEE Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT Income Tax for MSMEs is borne by Government MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). 6 MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE Direct assistance to 13 million Micro Enterprises and 1 million street vendors in the amount of IDR 1.2 million per recipient Source: Coordinating Ministry for Economic Affairs 24 24#26• • Integration of Various Types of Social Assistance and Financing for Super Micro and MSMEs is Continually Encouraged The Government has began to empower super micro, micro and small businesses that are un-bankable through Productive Presidential Assistance & Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR. Based on KUR Super Micro scheme, people could have loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and medium enterprises (MSME) is given an additional interest subsidy of 6% until 31 Dec 2020. For 2021, MSME is given an additional interest subsidy of 3% for 6 months, so MSME pays 3% interest. A Commercial Financing Patterns Social Assistance F Unbanked B Fully commercial loan Subsidized loan Special scheme of commercial loan Rolling soft loan C CSR D E Productive Presidential Assistance & Pre- employment Card Partnership and Community Development Program (PKBL) & Private CSR Bankable MSMEs Financing Mekaar UMi BWM LPDB* KUR Super Micro People's Business Credit Commercial (KUR) Regular Facilities Social grants Private PKBL & CSR Funds Interest Subsidy from the Government Government Guarantee Market Mechanism Source: Coordinating Ministry for Economic Affairs Business Ability 25 45#27Indonesia's Economic Improvement Trend Continues GDP Growth (%YoY) PMI Markit Indonesia 60 10 5 55 Expansion >50 50 -5 -10 45 40 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 35 2019 2020 2020 Contraction <50 30 Total GDP 27.5 25 HH Consumption GFCF Current Account Feb-19 Apr-19 Jun-19 Aug-19 Oct-19 Dec-19 Total Investment (DDI+FDI) Rp Trillion CCI & Retail Sales 53.5 130 20.0 230 220 210 200 190 26 70 110 90 thaf 10.0 0.0 -10.0 -20.0 -30.0 180 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 170 Feb-20 Apr-20 Jun-20 Aug-20 Oct-20 Dec-20 Feb-21 Apr-21 Jun-21 Trade Balance (Billion USD) of GDP (%) 4.00 80.00 3.00 60.00 1.00 12000 2.00 40.00 0.00 13000 1.00 20.00 -1.00 0.00 0.00 14000 -1.00 -20.00 -2.00 15000 -2.00 -40.00 -3.00 16000 -3.00 -60.00 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 -4.00 17000 Q1 Q3 Q1 Q3 Q1 Q3 Q1 2019 2020 2021 Balance (Billion USD) 2018 2019 2020 2021 Export-g (% YoY)-rhs Source: CEIC, BI, BPS, Bloomberg (as of 29 July 2021) Import-g (% YoY)-rhs Q1Q2 Q3 Q4Q1 Q2 Q3 Q4Q1Q2 2019 2020 2021 The Indonesian Rupiah and JCI 1/1/2020 5/1/2020 9/1/2020 IDR/USD 1/1/2021 5/1/2021 3000.00 7000 2500.00 2000.00 6500 1500.00 1000.00 6000 500.00 0.00 5500 -500.00 5000 -1000.00 -1500.00 4500 -2000.00 4000 Consumer Confidence Index (CCI) Retail Sales-g (rhs) Net Capital Inflow (Million USD) 1/1/2021 2/1/2021 3/1/2021 4/1/2021 5/1/2021 6/1/2021 7/1/2021 -JCI-rhs Equity Flow (ytd) Total Bond Flow (ytd)#28Section 2 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement BHINNEKA TUNGGAL IRA#2928 28 Rank 2007-2008 Improving Global Perception ...with recent improvements on governance effectiveness Global Competitiveness Index¹ Ease of Doing Business² 2008-2009 2009-2010 Higher rank is better 2010-2011 2011-2012 20 30 40 50 60 70 80 90 India Indonesia Worldwide Governance Indicators³ 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018* 2019* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0 20 Higher rank is better (rankings at the time of annual report publication) 40 36 41 60 45 50 80 100 72 73 91 128 120 140 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long- term growth. 160 Philippines Bulgaria Colombia Indonesia -India - Philippines Bulgaria Colombia Corruption Perception Index4 65 L 60 46 Higher score is better 53 55 44 51 42 45 42 38 40 35 38 28 25 Higher rank is better 36 15 34 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 32 Voice and Accountability Government Effectiveness Political Stability/Absence of Violence Regulatory Quality 30 Rule of Law Control of Corruption 2012 2013 2014 2015 2016 2017 2018 2019 2020 Indonesia India Philippines Bulgaria Colombia 1. Source: World Economic Forum - The Global Competitiveness Report 2019; 2. Source: World Bank - Doing Business 2020 Report; 3. Source: World Bank - The Worldwide Governance Indicators 2020 Update; 4. Source: Transparency International - Corruption Perceptions Index 2020 Report 34 40 39 37 44#30Continuous Improvement of Investment Climate ...another leap on Indonesia's Rank on Ease of Doing Business (EODB)* EoDB 2020 Rank Rank EoDB 2019 Change in Rank EoDB 2020 EoDB 2019 Change in Points Points Points Overall 73 73 0 ( 69.6 68.0 1.6 Starting a business 140 134 6 81.2 81.2 0.0 Dealing with Construction Permits 110 112 2 66.8 66.6 0.2 Getting Electricity 33 33 0 87.3 86.4 0.9 Registering Property 106 100 6 60.0 61.7 1.7 Getting Credit 48 44 4 70.0 70.0 0.0 Protecting Minority Investors 37 51 14 70.0 63.3 6.7 Paying Taxes 81 112 31 75.8 68.0 7.8 Trading Across Borders 116 116 0 67.5 67.3 0.2 Enforcing Contracts 139 146 7 49.1 47.2 1.9 Resolving Insolvency 38 36 ⇓2 68.1 67.9 ↑ 0.2 * Higher rank is better, EoDB 2020 was published in October 2019 Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB Structural reforms will continue including in the budget and real sectors Source: World Bank 29 29#31Indonesia Has Been Rated as Investment Grade Country since 2017 BBB+ BBB BBB- Indmenteco BB+ Below Investment Grade BB BB- B+ R& JCRA S&P Fitch Moody's 2008 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2030 2021 Fitch Ratings BBB / Stable March 2021, Rating Affirmed at BBB/Stable "The affirmation of the rating is underpinned by a favorable medium-term growth outlook and a still low, but rising, government debt burden compared with "BBB" category peers". S&P Global Ratings BBB / Negative April 2021, Rating Affirmed at BBB/Negative "The affirmation reflects Indonesia's solid economic growth prospects and historically judicious policy dynamics. The negative outlook reflects our expectation that Indonesia will face sustained fiscal and external pressures related to the COVID-19 pandemic over the next 12-24months". MOODY'S Baa2 / Stable Feb 2020, Rating Affirmed at Baa2/Stable "The affirmation of the ratings is underpinned by a number of credit strengths including Indonesia's robust and stable growth rates and a low government debt burden, preserved by consistent fiscal discipline and emphasis on macroeconomic stability as well as persistent credit challenges." R&I April 2021, Rating Affirmed at BBB+/Stable JCR BBB+ / Stable "In R&l view, Indonesia's economy that plunged in 2020 will likely return to a pre- coronavirus growth level in one to two years. The government's structural reform efforts are also expected to boost growth potential in the medium to long term. Despite the pressure on the fiscal side caused by policy responses, the government debt ratio remains relatively low. The economic resilience to external shocks is maintained thanks to flexible policy responses by the government and the central bank and ample foreign reserves". December 2020, Rating Affirmed at BBB+/Stable BBB+ / Stable "The ratings mainly reflect the country's solid domestic demand-led economic growth potential, restrained public debt, and resilience to external shocks supported by flexible exchange rate and monetary policies and accumulation of foreign exchange reserves. Additionally, the government has been maintaining the momentum of economic structural reforms even amid the pandemic, as evidenced by the enactment of the "Omnibus Law on Job Creation". 30#32Medium-Term National Development Plan (RPJMN) 2020-2024 President's Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation". Strengthening Economic Resilience to Achieve Superior Economic Growth President's Missions Top 5 Presidential Priorities 7 RPJMN Development Agenda 1 Improving the Quality of the Indonesian Labour Force 1 HR Development Achieving Productive, Independent 2 and Competitive Economic Structure 3 Attaining Equitable and Prosperous 2 National Development Infrastructure Development Achieving Sustainable 4 Environmental Climate Developing Cultural Progress 5 Reflecting the Nation's Personality 3 Developing a Dignified and Trustworthy 6 Legal System Free from Corruption 4 Protection of All Nations and 7 Provision of Security to All Citizens 00 Regulation Simplification Simplification of Bureaucracy Attaining Good, Effective, and Reliable Governance Economic 5 Achieving Synergy of Governmental 9 Framework with the Regional Government Transformation Developing More Remote Regions to Reduce Economic Gaps and Improve Equality Improvement of Quality and Competitiveness of the Labour Force Engaging in Mental Revolution and Culture Development Strengthening Infrastructure to Support Economic Development and Improve Basic Services Conservation of Environment, Supporting Climate Change, and Enhancing Disaster Resilience Enhancing Political, Legal, Defense and Stability and Transforming Public Services Source: National Development Planning Agency 31#33Economic Transformation is Required to Recover the Economy and Avoid the Middle Income Trap Bill on Job Creation as a strategic and extraordinary national policy to recover and improve the national economy (Complements UU 2/2020) Bill on Job Creation Economic Transformation National Economy Indonesia Maju 2045 Investment, Business License (80 Articles) Land Procurement (19 ✓ Articles) 督 Gov Investment and Strategic National Project (16 Articles) MSMEs & Cooperative (15 Articles) Ease of Doing Business (11 Articles) ☐ Fundamental Problems Hyper Regulation National and sub-national regulations = 43.604 Competitiveness Less conducive business environment Inefficient bureaucracy High cost economy hampering export Employment Low productivity albeit productive age Unemployed and part-time workforce amounting to 45,8 million people (34,3%) (before pandemic) License and Ease of Doing Business Employment (5 Articles) ☐ Licensing approach Economic Zones (4 Articles) Monitoring and Sanctions (3 Articles) Research and Innovation (1 Article) Source: Coordinating Ministry for Economic Affairs Convoluted and overlapped Difficult to start and operate a business MSME & Cooperative Complex licensing Without legal status Minimum protection and facilitation Legal Certainty Criminal sanction for administrative sanction 0000 Growth Equity Top 5 Global Economy Out of middle- income trap Protection Competitiveness GDP of USD 7.4 trillion Poverty Rate 0% Competitive workforce 32 32#34& FACT DATA The Job Creation Omnibus Law Promotes Employment and Facilitates Opening of New Business While Pursuing the Economic Recovery Toko Kuc 50 Labour Market Of the total population aged 203.97 million people, there are 14.28 people affected by Covid-19 1. Unemployment due to covid-19 (2,56 million people) 2. Not labor force due to Covid-19 (0,76 million people) 3. Temporarily not working due to Covid-19 (1,77 million people) 4. Work with shorter hours due to Covid-19 (24,03 million people) MSME BIG 5.550 unit MIDDLE 60.702 Unit SMALL 783.132 Unit MICRO 63.5 Juta Unit REGULATION Among the 64.19 million MSES, 64.13 million are Micro & Small Businesses, most of which are in the informal sector, so it needs to be encouraged to transform into formal ones. Complicated licensing issues with abundant central & local regulations (hyper-regulations) that regulate the sector, causing disharmony, overlapping, non- operational and sectoral. JOB CREATION LAW 2. BUSINESS LICENSING 3. LABOR 4. SUPPORTING MSMEs 5. EASE OF DOING BUSINESS 6. RESEARCH & INNOVATION 8. ECONOMIC ZONE 11. IMPOSITION OF SANCTIONS SUBSTANCE 1. IMPROVING INVESTMENT ECOSYSTEM 7. LAND PROCUREMENT 1 Encouraging Job Creation and Entrepreneurship through Ease of Doing Business from MSEs and Large Enterprises Source: Coordinating Ministry for Economic Affairs 9. CENTRAL GOVERNMENT INVESTMENT & 10. GOVERNMENT ADMINISTRATION SPEEDING OF STRATEGIC NATIONAL PROJECT BENEFITS (2) Protecting Worker's Rights through 3 Worker's Protection Benefits for the General Public, including provision of housing and redistribution of land 33 33#35The Framework of Job Creation Law AL New Business Creation GREENFIELD INVESTMENT www COMPANY (111> Supply Brownfield PRODUCTION Demand Business Development JOB CREATION LAW New Job Creation Welfare Creation CONSUMPTION Increased Purchasing Increased Income Power HOUSEHOLD Source: Coordinating Ministry for Economic Affairs 34 ==#36Development of Implementing Regulations for the Job Creation Law The government has completed 51 implementing regulations consisting of 47 government regulations and 4 presidential regulations The implementing regulations are grouped into 11 regulatory clusters, namely: 1. Spatial (4) 2. Land and Land Rights (5) 3. Environment (1) 4. Construction and Housing (6) 5. Cooperatives and SMEs (4) 6. 7. Investment (6) Fiscal (3) 8. Employment (4) 9. Economic Zone (2) 10. Government Goods / Services (1) 11. Licensing and Sector Business Activities (15) Regulations . The ministry immediately makes internal implementation standards or guidelines no later than 2 months after the implementing regulations are enacted Public Communication Ministries / Institutions held intensive socialization in the form of electronic media and leaflets Infrastructure and Supporting System . OSS and Supporting System will be ready for operation in July 2021 Readiness of Ministries / Agencies and Local Governments in providing networks, tools, and consultations Human Resources Training for OSS Operators and Supervisors Source: Coordinating Ministry for Economic Affairs 35#3751 Regulations for Job Creation Law (Substance Grouping) Spatial 1. Government Regulation No. 21 of 2021 concerning the Implementation of Spatial Planning 2. Government Regulation No. 43 of 2021 concerning Settlement of Inconsistencies in Spatial Planning, Forest Areas, Permits, and / or Land Rights 3. Government Regulation No. 45 of 2021 concerning the Implementation of Geospatial Information 4. Presidential Regulation No. 11 of 2021 concerning Cooperation between the Central Government and State-Owned Enterprises in Providing Basic Geospatial Information Land and Land Rights 1. Government Regulation No. 18 of 2021 concerning Management Rights, Land Rights, Apartment Units and Land Registration 2. Government Regulation No. 19 of 2021 concerning Implementation of Land Acquisition for Development for Public Interest 3. Government Regulation No. 20 of 2021 concerning Control of Neglected Areas and Lands 4. Government Regulation No. 23 of 2021 concerning Forestry Implementation 5. Government Regulation No. 24 of 2021 concerning Procedures for Imposing Administrative Sanctions and Procedures for Non-Tax State Revenues Derived from Administrative Fines in the Forestry Sector Environment 1. Government Regulation No. 22 Year 2021 concerning Implementation of Environmental Protection and Management Construction and Housing to 1. Government Regulation No. 12 of 2021 concerning Amendments No. Government Regulation 14 of 2016 concerning Implementation of Housing and Settlement Areas 2. Government Regulation No. 13 of 2021 concerning the Implementation of Flats to 3. Government Regulation No. 14 of 2021 concerning Amendments Government Regulation No. 22 of 2020 concerning Implementation Regulations of Law No. 2 of 2017 concerning Construction Services concerning 4. Government Regulation No. 15 of 2021 Implementation Regulations of Law No. 6 of 2017 concerning Architects 5. Government Regulation No. 16 of 2021 concerning Implementation Regulations of Law No. 28 of 2002 concerning Buildings 6. Presidential Regulation No. 9 of 2021 concerning the Agency for the Acceleration of Housing Management Cooperatives and SMEs 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Source: Coordinating Ministry for Economic Affairs 36#3851 Regulations for Job Creation Law (Substance Grouping) Investment 1. Government Regulation No. 42 of 2021 concerning the Ease of National Strategic Projects 2. Government Regulation No. 44 of 2021 concerning Implementation of the Prohibition of Monopolistic Practices and Unfair Business Competition 3. Government Regulation No. 48 of 2021 concerning Third Amendment to Government Regulation No. 31 of 2013 concerning Implementation Regulations of Law No. 6 of 2011 concerning Immigration 4. Presidential Regulation No. 10 of 2021 concerning the Investment Business Field 5. Government Regulation No. 73 of 2020 concerning Investment Management Institutions2. 6. Government Regulation No. 74 of 2020 concerning Authorized Capital for Management Institutions Investation Fiscal 1. Government Regulation No. 9 of 2021 concerning Tax Treatment to Support Ease of Doing Business 2. Government Regulation No. 10 of 2021 concerning Regional Taxes and Regional Levies in the Framework of Supporting Ease of Doing Business and Regional Services 3. Government Regulation No. 49 of 2021 concerning Taxation Treatment of Transactions Involving Investment Management Institutions and / or Entities They Own Employment 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Economic Zone 1. Government Regulation No. 40 of 2021 concerning the Implementation of Special Economic Zones 2. Government Regulation No. 41 of 2021 concerning the Implementation of Free Trade Zones and Free Ports Government Goods / Services 1. Presidential Regulation No. 12 of 2021 concerning Amendments to Presidential Regulation No. 16 of 2018 concerning Government Procurement of Goods / Services Source: Coordinating Ministry for Economic Affairs 37 34#3951 Regulations for Job Creation Law (Substance Grouping) Licensing and Sector Business Activities 1. Government Regulation No. 5 of 2021 concerning Implementation of Risk-Based Business Licensing 2. Government Regulation No. 6 of 2021 concerning the Implementation of Business Licensing in Regions 3. Government Regulation No. 25 of 2021 concerning the Implementation of the Sector of Energy and Mineral Resources 4. Government Regulation No. 26 of 2021 concerning the Implementation of the Agricultural Sector 5. Government Regulation No. 27 of 2021 concerning the Implementation of the Marine and Fisheries Sector 6. Government Regulation No. 28 of 2021 concerning the Implementation of the Industrial Sector 7. Government Regulation No. 29 of 2021 concerning the Implementation of the Trade Sector 8. Government Regulation No. 30 of 2021 concerning Implementation of the Road Traffic and Transportation Sector 9. Government Regulation No. 31 of 2021 concerning the Implementation of the Shipping Sector 10. Government Regulation No. 32 of 2021 concerning the Implementation of the Aviation Sector 11. Government Regulation No. 33 of 2021 concerning the Implementation of the Railway Sector 12. Government Regulation No. 38 of 2021 concerning Accompanying Accounts for Umrah Travel Expenses 13. Government Regulation No. 39 Year 2021 concerning Implementation of the Halal Product Guarantee Sector 14. Government Regulation No. 46 of 2021 concerning Post, Telecommunication and Broadcasting 15. Government Regulation No. 47 of 2021 concerning the Implementation of Hospitalization Source: Coordinating Ministry for Economic Affairs 38#40Implementation of Risk Based Licenses Encourage Government Services to be Efficient, Easy, and Certain Licensing Reform The implementation of Job Creation Law reforms business licensing regulations by implementing Risk-based Norms, Standards, Procedures, Criteria Licenses based High Risk Business Identification Number + Permit Risk based approach Government Regulation No. 5/2021 Medium High Risk approach . Purpose: A more effective and simpler business license issuance integrated supervision of business activities that is more transparent, structured and accountable Source: Ministry of Finance Business Identification Number + Standard Certification (Verification) Business Identification Medium Low Risk Number + Standard Certification (Self Declare) Low Risk Business Identification Number 39#41Investment Priority List in the Presidential Regulation No.10 of 2021 for the Investment Business Sector The government provides positive sentiment to businesses by regulating more open (positive) and priority business fields Priority Business Field Criteria Presidential Regulation No. 10 of 2021 concerning the Investment Business Field National Programs/Projects Capital Intensive Strategic Labor Intensive High Technology 245 PRIORITY BUSINESS FIELDS Pioneer Industry Export Orientation; and/or given fiscal incentives and and non-fiscal Orientation Development in and Research, Innovation Activities 89 AREAS OF BUSINESS FIELDS OR PARTNERSHIP WITH COOPERATIONS AND MSMEs 46 BUSINESS FIELDS WITH SPECIFIC REQUIREMENTS Fiscal Incentives 1. Tax Incentives: • Tax Allowance • Tax Holiday • Investment Allowance 2. Customs and excise investives (free of import duty on industrial construction machinery materials) and Non-Fiscal Incentives 1. Ease licensing of business 2. Provision supporting infrastructure 3. Guaranteed availability of energy 4. Raw materials 5. Immigration labor 6. etc In principle, the government assures that all business fields are open to investment unless stated as closed by law while continue to protect and empower MSMEs Source: Coordinating Ministry for Economic Affairs#42Investment Priority List in the Presidential Regulation No.10 of 2021 for the Investment Business Sector The government provides positive sentiment to the business world by establishing policies for regulating business sectors that are more open (positive) and prioritized PRESIDENTIAL REGULATION OF INVESTMENT BUSINESS FIELDS Priority Business Field Criteria National Strategic Programs/Projects; Capital Intensive; 245 PRIORITY BUSINESS FIELDS given fiscal incentives and and non-fiscal, a.l. Tax Allowance and Tax Holiday 89 AREAS OF BUSINESS FIELDS OR PARTNERSHIP WITH COOPERATIONS AND MSMEs 46 BUSINESS > 1700 . FIELDS WITH SPECIFIC REQUIREMENTS BUSINESS FIELDS OPEN FOR INVESTMENT Labor intensive; " High technology; Pioneer Industry; Export Orientation; and / or Orientation in Research, Development and Innovation Activities. Incentives provided . Tax Incentives: With a positive approach, the Government provides assurance that in principle all business fields are open to investment, unless otherwise stated as covered by law. The investment value for Mandatory PMA is> IDR 10 billions. This openness takes into account the protection and empowerment of MSMEs. The government also provides information on the direction of investment policy in Indonesia by determining business fields that are Government's priorities. o Tax Holiday; o Tax Allowance; o Investment Allowance Customs and excise incentives (free of import duty on industrial construction machinery and materials) Non-fiscal incentives (ease of business licensing, provision of supporting infrastructure, guaranteed energy availability, raw materials, immigration, labor, etc.) Other incentives according to regulations Source: Coordinating Ministry for Economic Affairs#43Indonesia Investment Authority (INA) as an Alternative Source of Economic Financing • The President has appointed 3 Supervisory Boards from the professional element on 27 Jan 2021. • Initial capital has been allocated IDR 15 T in 2020, in 2021 PMN non-cash IDR 60 T Progress • INA is planned to start operating in the first quarter of 2021 Internasional and Domestic Investor Discussions with more than 50 companies as strategic partners, and several countries have expressed a desire to partner with INA Republic of Indonesia Gov't (through Ministry of Finance) Indonesia Sovereign Wealth Fund (Indonesia Investment Authority (INA)) Main Investors (ex: ADIA, JBIC) Master Fund Manager Management Agreement Target Optimization of Central Government Investment Value Increase Foreign Direct Investment (FDI) Share Co-Investment saham (Minority Ownership) Directly to the company and/ or assets/projects Investment Agreement (LP) Master Fund! Managed funds Infrastructure Sector Management Fund Toll roads Airports Seaports ■ Oil & Gas reserves Energy and Natural Resources Sector Managed Fund Health Sector Managed Fund Tourism Sector Managed Fund Hospitals Pharma- ceuticals • Tourism SEZ Tanamori Toba Source: Coordinating Ministry for Economic Affairs + Likupang Hotel chain Investment Agreement (LP) Encouraging the improvement of the investment climate Technology Sector Managed Fund Digital lending Payments Commerce " New Capital City Managed Fund Contractor Utilities Land & building Top SWF in Global with its total assets: ○ Norway Gov USD 1,1 trillion О China Inv. Co.→ USD 1 trillion О Abu Dhabi USD 579 trillion Top SWF in ASEAN with its total assets: GIC Private Limited → USD 453 billion Temasek Holdings → USD 417 billion Khazanah Nasional Berhad → USD 20 billion#44& 00 Investment Facilitation Services During COVID-19 Pandemic 1 2 3 4 Companies Operation Support Optimizing facilitation for companies that accelerate the development and operation of business activities through the issuance of letters of support to companies while still observing the COVID-19 protocol Visa Recommendations for Company Leaders Providing Visa recommendations for foreign companies' leader visit to related to their industry exploration /relocation and company operations. Including to obtain an entry permit visit visa during large scale social restriction (PSBB). Visa recommendations for foreign skilled workers Providing Visa recommendations for foreign skilled workers who will enter the country related to their investment realization / implementation Managing Existing Investment Realization Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation 51 Optimization of Business Licensing Services BKPM continues to provide business licensing services amid the COVID-19 Pandemic. The average business license issued during the pandemic both online and offline is 4000- 5000 permits per day. Source: Investment Coordinating Board (BKPM) 43 43#45Investment Realization in Q2-2021 01 Oll Qu QIV 01 Oll Qu ON 01 Oll QIII QIV QI 01 Q III QIV QI Qll ON QI Oll DDI 50,4 52,2 55,6 58,1 68,8 61,0 64,9 67,6 76,4 80,6 84,7 86,9 87,2 95,6 100,7 103,0 112,7 94,3 102,9 103,6 106,0 106,2 FDI 96,1 99,4 99,7 101,0 97,0 109,9 111,7 112,0 108,9 95,7 89,1 99,0 107,9 104,9 105,0 105,3 98,0 97,6 106,1 111,1 111,7 116,8 Total 146,5 151,6 155,3 159,1 165,8 170,9 176,6 179,6 185,3 176,3 173,8 185,9 195,1 200,5 205,7 208,3 210,7 191,9 209,0 214,7 219,7 223,0 DDI: Domestic Direct Investment FDI: Foreign Direct Investment *) The achievement of investment realization in period of January June 2021 is a rounding numbers 2020 2021 Q-11 2021 Q-1 Q-11 Q-1 Q-11 Y-O-Y Q-0-Q TARGET 2021** ACHIEVEMENT QUARTER II DDI 112.7 94.3 108.0 106.2 12.7% -1.6% 430.2 49.8% y-o-y FDI 98.0 97.6 111.7 116.8 19.6% 4.5% 469.8 48.6% TOTAL 210.7 191.9 219.7 223.0 16.2% 1.5% 900.0 49.2% 210,7 JANUARY - JUNE 2020 JANUARY - JUNE 2021 JANUARY - JUNE 2021 Y-O-Y Indonesian Labor Absorption Q II 2020: 263.109 191,9 219,7 223,0 402,6 16.2% 10.0% January June y-o-y 442,8 DDI 207.0 214.3 3.5% Indonesian Labor Q-I 2020 FDI 195.6 228.5 16.8% Absorption Q II 2021 : Q-II 2020 Q-I 2021 Q-II 2021 JAN-JUN 2020 JAN-JUN 2021 In Rupiah Trillion 311.922 In Rupiah Trillion TOTAL 402.6 442.8* 10.0% (18.5%, y-o-y) Source: Investment Coordinating Board (BKPM) 44#46Investment Realization in Q2-2021 (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD billion) Singapore 26.4% 2.1 Hong Kong 1.4 18.1% Netherlands 1.1 13.8% Japan 0.7 9% China 0.6 8% Others 24.7% Source: Investment Coordinating Board (BKPM) By Region in IDR Trillion North Maluku 13.9 Banten 16.6 East Java 17.7 DKI Jakarta 25.3 West Java 35.3 By Sector Mining Electricity, Gas, and Water Supply Transportation, Warehouse, and Telecommunication 20.3 24.1 27.9 Metal, Except Machinery and 2 29.7 Equipment Industry Housing, Industrial Estate, and Office Building 31.3 45 55#47Investment Realization in Q2-2021 (excluding the upstream oil and gas sector and financial services) Q2-2020 Total IDR 191.9 T Outside Java Realization y-o-y IDR 91.3 T (48.6%) Java IDR 100.6 (51.4%) Java 8.6% Outside Java 24.6% Outside Java IDR 113.8 T (52.1%) TOTAL 16.2 Direct Investments IDR tn ■FDI DDI TOTAL Q2 - 2021 Total: IDR 223.0 T Java IDR 109.2 T (47.9%) 223.0 106.2 IT 116.8 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2020 2013 2014 2015 2016 2017 2018 2019 2021 Source: Investment Coordinating Board (BKPM) 46#48Potential Investment Realization Reaches IDR 708 T IDR 708T Potential Investment Realization IDR 517.6 (73.1%) The potential value facilitated Solving stalled investment issues is one strategy to attract investors Companies that had been facilitated: Rosneft YTL Power 211.9T LOTTE CHEMICAL 61.2T 58.1T YL GROUP YTL 38.0T (PT Tanjung Jati Power) PT. INDO RAYA TENAGA VALE 39.2T PY VALE NOONESIA TU 21.7T 14.0T HYUNDAI KOBEXINDO wwwqyr how INDONESIA PLAYER 9.5T tlb 5.2T 7.7T 2.7T GCL CJ CHEILJEDANG 2.4T GELIGA PT Multimas Nabati Asahan (PT Tenaga Listrik Bengkulu) PT Sumber 2.0T Masdar 1.8T Mutiara Indah 1.8T Minahasa Cahaya 1.8T Lestari Perdana Klaten, Central Java Dumai, Riau Indonesian government does not only facilitates large investment issues, but also medium & small investments Source: Investment Coordinating Board (BKPM), data up to Dec 2020 ANI APT Galempa Sejahtera Bersama MALUNDO 1.1T A HUBADALA bp 1.0T (SMIP) PERTAMINA GEOTHERMAL ENERGY 6.0T » GORONTALO LISTRIK PERDANA 主 2.3T 2.8T JAMBI INTEGRATED CITY, 2.4T (Project Hululais) FIRST PACIFIC 14.7T Others 1.4T 5.4T (PT Halmahera Persada Lygend) 1.4T (PT Sulawesi Cahaya Mineral) 47#49Enhancing Business License Service Standard Presidential Regulation to Accelerate Ease of Doing Business implemented since 2014 Main Policy Policy Goals Improve efficient, streamlined, & integrated business license service standards 2 A 3 Provide business licensing process assurance in terms of the costs and lead times Accelerate the business licensing process 3 M Source: Coordinating Ministry for Economic Affairs 1st Phase Forming a Task Force to identify & overcome the end- to-end licensing barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing Overcome the barriers to doing business in Indonesia 4 6 5 Increase coordination & synergy between central & regional government Implement integrated licensing process (single submission) 2nd Phase Business license regulatory reforms Implementation of the Single Submission system Note: 1st and 2nd Phase are implemented in parallel 48#50Improving Investment Climate ...Bonded Logistic Center launched in 2016 to Improve Indonesia's Competitiveness Bonded Logistic Center (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the implementation of the 1st Economic Policy Package, launched on March 2016 PLB facility aims to to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and To date, 52 Bonded Logistic Center has been launched to support various industries. textile (chemical Food & beverages industry Small and medium industry Oil and gas, and mining industry Personal care/ home care industry Synthetic Auto- motive industry medium industries; increase Heavy Equipment industry Textile (cotton) industry. Aircraft investment; and to make Defence Indonesia to become a logistics hub in Asia Pacific. industry MRO industry industry substances) Source: Coordinating Ministry for Economic Affairs 49 49#51Improving Investment Climate Online Single Submission (OSS) Has Been Launched in 2018 OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors Environment & Forestry Sector Electricity Sector Public Works & Housing Sector Health Sector Industry Sector Marine & Fishery Sector Medicine & Food Sector Transportation Sector Trade Sector Information & Communication Sector Business licenses can be secured in under an hour Other Sector The Advantage of Using OSS 良 Standardized business licenses are available More practical Source: Coordinating Ministry for Economic Affairs Accessible at anytime and anywhere Ellectronically integrated The whole licensing process is monitored by the Task Force 50 50#52Improving Investment Climate ...revision of the Negative Investment List in 2018 Introduction of New Foreign Ownership Regulation for Strategic Sectors Cold storage Before After Before Sports Center, Film Processing Lab, Crumb Rubber After Restaurants, Bars Pharmaceutical Raw Materials Manufacturing Before After Before After 33% 100% 100% 100% 100% 49% 51% 85% Key Reforms in Negative Foreign Investment List Revision of "Partnership" category to refer to partnership with Micro, Small and Medium Enterprises (MSMEs) Grandfather Law: If a particular sector is tightened in future, existing foreign investor does not need to comply with tighter stake Strengthen implementation of negative investment law through active roles from ministries, agencies and regional governments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) Toll Road Operator, Telecommunication Testing Company Before After Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Conventions Before After 95% 100% 67% 67% 33% 51% Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Telecommunication Provider Before After Consultancy for Construction¹ Before with Integrated Services After Before After 49% 67% 67% 67% 55% 65% 51 5554#53Section 3 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IRA#54Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia Manageable Inflation Rate manufacturing 4th Most Populous country in the World; 64% in productive age Rising Middle Class and Affluent Customers Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration and New Economic Structure High Infrastructure Investments From commodity-based to service sectors via infrastructure development From consumption-led to investment- led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Fuel subsidies significantly reduced and spending redirected to more productive allocation Tax base to be broadened from one reduce dependency on commodities Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 53#55National Economic Growth Improved Strong GDP Growth¹ % QoQ - YoY 7.0 5.0 3.27 3.31 3.14 4.03.19 3.09 3.06 3.0 1.0 0.04 4.97 5.05 (0.74) (0.42) 2020 2021 9.50 ° • National economic improvements observed since the third quarter of 2020 have persisted, with data published by BPS-Statistics Indonesia confirming a shallower -0.74% (yoy) contraction in the first quarter of 2021 compared with -2.19% (yoy) in the fourth quarter of 2020. Domestic economic recovery momentum is building on the back of rapid external sector gains in response to the stronger global economic recovery and ongoing acceleration of fiscal stimuli. Economic gains in Indonesia have been recorded across nearly all GDP components on the expenditure side and economic sectors. Exports expanded for the first time since the Covid- 19 pandemic befell Indonesia, growing 6.74% (yoy) after contracting -7.21% (yoy) in the previous period. The significant improvement was primarily driven by demand in Indonesia's main trading partners, namely China and the United States. Meanwhile, positive external sector developments and stronger investment performance edged up import growth to 5.27% (yoy). Government consumption accelerated to 2.96% (yoy) in line with the realisation of fiscal stimuli in the form of procurement, capital spending and social assistance disbursements. Investment is also showing signs of improvement, recording a shallower -0.23% (yoy) contraction compared with -6.15% (yoy) in the previous period. On the other hand, consumption in the household sector and non-profit institutions serving households (NPISH) remains subdued at -2.23% (yoy) and -4.53% (yoy) respectively given the mobility restrictions ongoing in several regions. By sector, most economic sectors are seeing improvements, led by Information and Communication, Water Supply as well as Health Services. Spatially, national economic growth momentum is supported by all regions, with Sulawesi-Maluku-Papua (Sulampua) moving into expansionary territory since the fourth quarter of 2020. • Looking forward, Bank Indonesia expects economic growth to continue building momentum in line with the promising global economic recovery outlook and ongoing policy stimuli. An orderly vaccination program rollout and disciplined application of Covid-19 protocols are still required to accelerate the recent domestic demand gains. To that end, Bank Indonesia will continue to strengthen policy coordination with the Government and Financial System Stability Committee, including implementation of the Integrated Policy Package, to support the ongoing national economic recovery. Growth Prospect -1.0 (0.16) (0.36) (0.30) (0.41) (4.19) -3.0 (1.73) (2.07) (1.81) (1.70) (0.52) (1.69) (0.96) (1.74) (2.41 (3.49) -5.0 (5.32) -7.0 ៩៩៩ 6683 2014 2015 2016 2017 2018 2019 Favourable GDP Growth Compared to Peers² 15.00 % yoy 10.00 5.00 6.89 5.40 5.15 Institutions 3.90 2021 GDP growth (% YoY) 2021 Budget 5.0 Bank Indonesia 3.5-4.3 IMF (WEO, July 2021) 3.9 World Bank (Global Economic Prospects, June 2021) ADB (ADO, July 2021) 4.4 4.1 4.0 2013 2014 2015 2016 2017 2018 2019 2020 2021 0.00 2012 -5.00 -10.00 -15.00 Bulgaria Colombia India Indonesia Philippines 1. Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption Consensus Forecast (July 2021) ** 2. Source: World Economic Outlook Database - July 2021; indicates estimated figure 54 5.4#56GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY)¹ 2015 2016 2017 2018 2019 2020 2021 By expenditure Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 HH. Consumption 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0 4.9 5.0 4.9 Non profit HH. consumption Government consumption Gross Fixed Cap. Formation Exports 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.7 6.7 6.6 8.1 8.5 6.0 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2,7 5,2 6,3 4,6 4,8 5,3 4.5 4.8 5.3 7.1 7.3 6.2 7,9 (1.7) 8.4 2.7 16.5 8.4 8.9 5,8 5.0 4.9 5 5.3 6.9 8,1 5,2 5 5,1 5,1 5,0 5,2 5,0 5,0 5,0 2,8 -5,5 -4,0 -3,6 -2,6 -2,2 8,8 8,7 11 9,1 17,0 15,3 7,4 3,5 10,6 -5,0 -7,8 -2,0 -2,1 -4,3 -4,5 8,2 1,0 0,5 3,3 3,8 -6,9 9,8 1,8 1,9 3,0 5,8 6,9 6,1 6,7 5,0 4,6 4,2 4,1 4,5 1,7 -8,6 -6,5 -6,2 -4,9 -0,2 7,4 8,3 4,6 6,5 -1,5 -1,8 0,1 -0,4 -0,9 0,4 -12,0 -11,7 -7,2 -7,7 6,7 Imports GDP 1. (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) (2.4) 4.8 0.2 15.4 11.9 8.1 13 15 14 7,4 12 -6,5 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5,1 5,3 5,2 5,2 5,2 5,1 Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption GDP Growth by Sector (%, YoY) ** 2.7 -6,7 -8,3 -7,9 -7,4 -3,6 -18,3 -23,0 -13,5 -14,7 5,3 5,1 5,0 5,0 5,0 3,0 -5,3 -3,5 -2,2 -2,1 -0,7 2015 2016 2017 2018 2019 2020 2021 By sectors Tot Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Agriculture, forestry, and fishery Mining and Quarrying Q1 Q2 Q3 Q4 Tot Q1 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3,3 4,7 3,6 3,8 3,9 1,8 (1. Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 2.1 1.8 0.0 0.7 1,1 2,6 2,7 2,2 2,2 2,3 -0,7 2,3 0,9 5,3 3,1 4,2 3,6 0,0 2,2 2,2 2,6 1,8 1,2 2,9 0,4 -2,7 -4,3 -1,2 -2,0 -2,0 3) Manufacturing Construction 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.3 4.3 4.3 3.5 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2 6.0 7.0 4.9 7.0 4.5 4.3 4,6 7.2 6.8 7,4 3,9 4,4 4,2 4,3 3,9 3,5 5,7 5,8 5,6 6,1 5,9 5,7 4,1 3,7 5,6 5,8 3,8 5,8 2,1 6,2 -4,3 -3,1 -2,9 2,9 5,4 -4,5 -5,7 -3,3 -1,4 -0,8 Wholesale and Retail Trade, Repair of Car and Motorcycle 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5 5,2 5,3 4,4 5 5,2 4,6 4,4 4,2 4,6 1,6 7,6 -5,0 -3,6 -3,7 -1,2 Transportation and Storage Information and communication 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8,5 8,7 5,7 5,5 7 10. 5 5,4 5,9 6,7 7,6 6,4 1,3 -30,8 -16,7 -13,4 -15,0 -13,1 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 11.1 8.8 8.3 9.6 7,8 5,1 8,1 7,1 7 9,1 9,6 9,2 9,8 9,4 Financial service Other Services GDP 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 4.2 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 3.8 8.9 4.9 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 4.2 3.5 5.0 5.0 5.0 6.0 5.9 6.1 4.8 3.8 5.5 4,3 3,1 3,1 6,2 4,2 7,2 4,5 6.0 4,6 5,4 6,2 6,7 6,4 6,2 6,8 7,3 6,4 6,2 6,7 6,2 8,5 6,6 10,6 1,1 -0,9 2,4 3,2 4,6 -6,2 -1,4 -1,7 -1,2 9,8 10,8 10,7 10,9 10,6 8,7 -3,0 -2,6 5.1 5.2 5.1 5,1 5,3 5,2 5,2 5,2 5,1 5,1 5,0 5,0 5,0 3,0 -5,3 -3,5 -2,2 -2,1 -0,7 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 55#57Economic Performance Improved In Almost All Regions Regional GDP of The First Quarter of 2021 (%, yoy) Sumatra 3,02 Kalimantan 2,35 (0,86) ACEH (1.95) (3,17) (2.26) (2,21) IV (4,30) (4,21) (2.81) 12,23) IV 7070 2071 2020 2021 rth Kalimantan (1.91) North Sumatra (1.85) 3,41 RIAU 0.41 West Sumatra (0.16) Riau Islands (1.19) West Kalimantan (0.10) East Kalimantan (2.96) JAMBI (0.33) KEP. BABEL Central Kalimantan (3.12) 0.97 South Sumatra (0.41) BENGKULU Java (1.58) LAMPUNG DKI (2.10) (1.65) Central West Java Java (0,83) (2,60) 13,91 BANTEN (0.39) (0.83) (0.87) (6,71) III IV 2020 2021 Source: BPS, calculated Sulampua 3.99 National 2,97 3,26 0,36 (0,85) (1,05) IV I 2020 2021 GORONTALO (1.98) North Sulawesi 1.87 North Maluku 13.45 West Sulawesi (1.20) Central Sulawesi 6.26. West Papua 1.47 South Kalimantan (1.25) South-East Sulawesi 0.06 MALUKU (1.88) South Sulawesi (0.21) Balinusra 0,88 East Java (0.44) BALI (9.85) West Nusa Tenggara 1.13] (6.29) 16,81) (743) 15,16) DIY 6.14 East Nusa Tenggara 0.12 I IV 7020 2021 Source: Central Bureau of Statistics of Indonesia (BPS), calculated Q1'21 ≥ Q4'20 Q1'21 < Q4'20 (0,74) (2.19) 13,49) (5,321 II IV 1 2020 2021 PAPUA 14.28 56#58Economic Performance in Most Sectors Starting to Improve Most economic sectors are seeing improvements, led by Information and Communication, Water Supply as well as Health Services. In addition, Agriculture and Electricity also recorded positive growth, while the Manufacturing Industry, Construction, and Trade, accounting for large economic contributions, improved to experience shallower contractions. % Indonesia's GDP Share (%) 90.0 80.0 100.0 2.63 1.99 2.16 2.49 2.49 3.15 3.57 3.85 4.06 3.24 4.14 4.40 4.61 4.11 3.26 3.51 3.50 4.26 3.64 3.54 70.0 3.49 3.46 3.72 3.88 3.86 4.03 3.73 3.60 3.61 3.57 3.53 3.63 3.57 3.93 3.50 4.42 3.52 5.02 60.0 50.0 9.13 9.09 9.35 9.49 9.86 13.46 13.61 13.21 13.21 13.43 13.30 13.19 13.02 13.02 13.19 12.95 12.98 4.19 4.20 4.15 4.10 4.18 3.62 3.78 3.77 3.95 3.89 3.95 5.20 5.41 5.38 5.53 5.57 5.54 4.34 17.55 17.64 17.88 18.03 18.20 18.64 18.66 18.47 18.35 18.49 18.52 18.33 19.37 18.68 19.08 18.82 19.10 19.86 19.22 18.47 4.34 4.04 5.63 4.24 4.70 4.44 4.32 3.96 4.25 4.66 4.56 5.57 5.17 3.58 4.40 4.57 4.57 4.51 4.58 4.51 4.58 4.68 4.47 4.27 12.95 40.0 30.0 20.0 10.0 Mining and Quarrying Source: Central Bureau of Statistics of Indonesia (BPS), calculated 2010 2011 2012 2013 2014 2015 2016 2017 22.04 21.76 21.45 21.03 21.08 10.21 10.38 10.38 10.53 10.76 10.37 10.60 12.88 13.01 13.20 12.8B 12.85 12.98 13.10 11.26 10.75 10.70 10.56 10.60 10.96 10.71 10.80 10.46 11.81 11.61 11.01 9.83 20.99 20.52 20.16 19.86 20.07 19.52 19.62 19.63 19.70 19.98 19.86 19.86 13.93 13.51 13.37 13.36 13.34 13.49 13.48 13.16 12.81 12.65 13.57 13.44 7.65 7.18 7.58 8.08 7.77 7.39 6.95 19.81 19.88 19.84 6.98 7.26 6.82 6.28 6.16 Taxes ■Transportation and Warehousing Other Services ■Wholesale and Retail Trade 2018 Q1-2019 11.19 12.71 12.84 15.45 14.68 Q2-2019 Financ03-2019 and Agriculture, Forestry, and Fishery Construction 704 Sex 01-2020 2019 ces Q2-2020 Q3-2020 Manufacturing Q4-2020 Information and Comm 2020 6.48 6.44 7.64 11.97 13.70 13.17 57 44#59Stronger Fundamentals Facing the Headwinds Inflation Rate (%) Inflation controlled within the target range 1998 2008 12.1 June 2021 1.33 (yoy) 1998 82.4 2008 IDR Movement (%) IDR appreciated year-to-date Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 10 months of import and external debt repayment -197 -35 21-Jul-21 -3.39 (ytd) -300 -200 -100 0 1998 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 30 2008 3.8 May 2021 3.35 0 5 10 15 20 20 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 25 30 30 35 40 Government Debt/GDP Consistently well-maintained 1998 17.4 2008 June 2021 More Liquid Market (%) Overnight interbank money market rate is relatively lower 62 10.5 2.70 1998 2008 May 2021 50.2 External Debt/GDP Higher than 2008, but significantly lower than 1998 137.1 8.6x 3.1x 3.04x 100.0% 27.4% 41.35% 116.8% 33.2% 39.1% 2008 May 2021 2008 June 2021 2008 Q1-2021 1998 1998 1998 58#60Outlook of Domestic Economy Remains Robust ...domestic economic growth is predicted to rebound in 2021 2021 Economic Outlook • Bank Indonesia projects economic growth in 2021 at the range 3.5-4.3%. Bank Indonesia projects Inflation in 2021 to remain under control and within the 3.0%±1% target corridor. • Bank Indonesia projects the current account deficit at 0.6-1.4% of GDP in 2021, thereby supporting external sector resilience in Indonesia. • Bank Indonesia projects credit growth in 2021 will be around 4.0-6.0% LOAN π Rp Economic Growth Inflation CAD (% of GDP) Credit Growth 2018 Realisation 5.17% 3.13% 2.98% 11.75% 2019 5.02% 2.72% 2.71% 6.08% Realisation 2020 -2.07% 1.68% 0.4% -2.4% Realisation 2021 3.5-4.3% 3.0±1% 0.6-1.4% 4.0-6.0% Source Bank Indonesia 59 59#61Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#62External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid US$bn 20 US$bn Current Account Recorded Deficit in Q1-2021 2013: 2014: 2015: 2016: 2017: 2018: 2019: 2020: 2021: CA Deficit CA Deficit, CA Deficit CA Deficit CA Deficit CA Deficit (US$29.1bn) (US$26.7bn) (US$17.5bn) (US$16.9bn) (US$16.2bn) (US$30.6bn) (US$30.3bn) (US$4.3bn) (US$0.9bn) CA Deficit CA Deficit CA Deficit 15 10 5 0 -5 -10 -15 137.10 160 US$bn 13 120 4.06 8 5.56 80 3 -2 (1.00) 40 -7 0 -12 AW Q102030401020 30 40 10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 1Q 2Q 3Q 4Q1 2013 2014 2015 Current Account Overall Balance 2016 Source: Bank Indonesia Trade Balance Surplus Continues 2015: 2016: 2017: Surplus Surplus Surplus US$7.59bn US$8.83bn US$11.83bn US$bn 5 43210123 -1 -2 -3 2017 2018 2019* 2020*2021** Capital and Financial Account • Reserve Asset (rhs) 1.0 -0.36 0.0 7.91 -1.0 1.43 -2.0 (6.92) -3.0 -4.0 (3.42) -5.0 ་་་་་་་་་་་་་་་་་ Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q 2013 2014 Goods 2015 2016 Primary Income Current, Account (%GDP) (rhs) 2017 2018 2019* 2020* 2021** Services Secondary Income Source: Bank Indonesia Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of June 2021: US$137.1 bn (Equiv. to 8.8 months of imports + servicing of government debt) 2018: 2019: 2020: 2021: Deficit Deficit Surplus Surplus (US$8.65bn) (US$3.24bn) (US$21.81bn) (US$11.83bn) US$bn OG Non-OG Total 140 2.38 130 TM 1.32 חות -1.06 2015 Preliminary Figure Source: BPS 2016 2017 2018 2019 2020 2021 Very Preliminary Figure 120 110 100 70 60 ឧ ន ដ ឬ ឬ 8 8 ន 8 ន FX Reserves (LHS) Month of Import & Debt Service (RHS) Month 1 3 5 7 9 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 1 3 5 7 9 11 1 3 5 7 9 11 11 1 3 56 11 2015 2016 2017 2018 2019 2020 2021 Source: Bank Indonesia 54321 61#63Exchange Rate In Line with Fundamentals Movement of Rupiah a.o 16 Jul'21 Quarterly Average 17,000 16,500 16,000 15,500 14,500 14,000 Given Bank Indonesia's stabilisation measures, rupiah exchange rate movements have remained under control despite increasing global financial market uncertainty. As of 21st July 2021, the rupiah depreciated 1.14% on average and by 0.29% (ptp) on the June 2021 level. The rupiah has succumbed to depreciatory pressures as a result of flight to quality that triggered capital outflows from developing economies amidst an adequate domestic supply of foreign exchange. Consequently, as of 21st July 2021, the rupiah depreciated by approximately 3.39% (ytd) on the level recorded at the end of 2020, lower than depreciation in several other peer countries, including the Philippines, Malaysia and Thailand. Bank Indonesia constantly strengthens rupiah exchange rate stabilisation measures in line with the currency's fundamental value and market mechanisms through effective monetary operations and adequate market liquidity. Monthly Average 15,711 IDR/USD 14,673 14893 15,179 14,5 14,80. 14,381 14,708 14,220 14,232 14497.515,000 14157 14254 14,113 14339 14120 13,714 14,855 14,387 1400 14134 14,141 14,031 1406414219 14,105 14,006 14,201 14,12 14,529 14,023 13,500 14,044 13,000 Rupiah Exchange Rate Fared Relatively Well Compared to Peers Rupiah Exchange Rate Volatilty YTD 2021 vs 2020 TRY -13.792.18 32.26 BRL -1.30 -4.48 JPY -6.44 -1.09 INR -2.10 0.77 THB -8.85 0.92 IDR -3.39 1.58 MYR -4.65 2.24 PHP -4.65 point-to-point 2.48 SGD -2.95 average 3.31 EUR -4.27 5.10 KRW -5.85 5.30 CNY 0.85 6.63 a.o 21-Jul-21 ZAR 0.11 21.45 20.09 17.65 16.41 14.56 13.21 11.38 9.93 7.15 7.20 | 7.99 8.99 8.02 9.21 8.00 10 7.21 7.04 6.10 7.35 7.26 4.72 5.37 5.64 4.46 3.16 55 2.90 4.24 4.87 35 ■May-21 30 Jun-21 a.o 21 Jul 2021 25 25 Jul-21 20 16.68 20 15 12.94 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP Source: Reuters, Bloomberg (calculated) 62 62#64Ample Lines of Defense Against External Shocks Ample Reserves • Ample level of FX reserves to buffer against external shock FX Reserve • FX Reserves as of of June 2021: US$137.1 bn Swap Arrangement Bilateral Regional Global Japan Singapore China Malaysia ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2018 The facility is available in USD and JPY • Renewed a one year SGD/IDR swap arrangement with the size up to USD7 billion (equivalent) in November 2020 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in November 2018 • Established a year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019 Entitled to a maximum swap amount of USD600 million under ASA The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million Increased in size to U.S.$2 billion in 2005 Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement • Came into effect in 2010 with a pool of US$120 bn and . Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) Source: Bank Indonesia 63#65Healthy External Debt Profile The Structure of External Debt is Dominated by Long-Term Debt Short Term External Debt Long Term External Debt External Debt Structure Private External Debt Public External Debt 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2009 450,000 17.1 400,000 350,000 300,000 115 11.312.0 250,000 External Debt Remains Manageable Million USD 2011 2013 2015 2017 Q1-19* Q3-19* Jan-20* 100% 90% 80% 49.7 70% 60% 50% 40% 30% 50.3 20% 10% 83.8 16.2 Mar-20* May-20* Jul-20* Sep-20* Nov-20* Jan-21* Mar-21* May-21** 0% 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-19* Q2-19* Q3-19* Q4-19* Jan-20* Feb-20* Jan-20 Mar-20* Apr-20* May-20* . *07-սոՐ Jul-20* Aug-20* Sep-20* Oct-20* Nov-20* Dec-20* Jan-21* Feb-21* Mar-21* Apr-21* May-21** External Debt to GDP Ratio & Debt to Export Ratio % % External Debt (rhs) 20.0 240 36.1 32.90 External Debt 18.0 220 31.8 29.1 16.0 27.4 200 26.5 25.0 14.0 12.0 180 10.2 200,000 150,000 100,000 50,000 0 2009 7 2010 2011 2012 Source: Bank Indonesia, External Debt Statistics of Indonesia 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* 10.1 9.910.2 10.0 160 O 8.0 O 7.5 7.0 8.0 140 6.5 4.9 6.0 5.9 3.8 3.3 120 4.0 123.1 3.0 21.814.9 113.8 2.0 100 Q1-2020* 7 Q2-2020* Q3-2020* Q4-2020** + 0.0 00 80 Q1-2021* 2009 2010 2011 101.0 2012 2013 *Provisional Figures 34.3 34.7 36.7 36.5 36.1 36.1. 36.0 34.5 37.3 38.1 39.4 39.1 215.1 207.1 209.1 197.4 25125250 +0 40 35 30 168.47168.672.168.472.0 77.08377.5 139.5 External Debt/ Export Ratio (rhs) External Debt/ GDP Ratio 2014 2015 2016 2017 2018 **Very Provisional Figures Q1-2019* Q2-2019* Q3-2019* Q4-2019* Q1-2020* Q2-2020* Q3-2020* Q4-2020** Q1-2021* 64 ==#66Manageable External Debt Profile Short term non-bank corporate debt (non affiliation) represents only 4.8% of total external debt Public US$206.3bn Long Term 1 US$156.2bn or or 49.7% of Total Ext. Debt 74.9% of Private Ext. Debt External Debt Position Private Bank US$20.5bn or 9.8% of Private Ext. Debt Affiliation US$12.0bn or 5.8% of Private Ext. Debt 50.3% US$415.0bn 49.7% 74.9% US$208.7bn or 50.3% of total Ext. Debt 25.1% Private External Debt Position as of May 2021 1 Based on remaining maturity Source: External Debt Statistics of Indonesia, July 2021 39.1%% US$52.4bn or 25.1% of Private Ext. Debt 37.6% US$31.9bn or 60.9% of Private Ext. Debt 62.4% 60.9% Short-Term¹ Private Non-Bank US$19.9bn or 9.6% of Private Ext. Debt Non Affiliation 99 65#67Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Hedging Ratio* Uruguay 86.1 93.9 76.2 24.2 Philippines 24.7 22.2 36.3 Indonesia 35.3 361 48.7 Colombia 53 ■2021F 42.7 2020F 53.6 Bulgaria 56.6 2019 56.3 0 20 40 60 80 100 269 corporates (10.4%) ≤ 3 months 2,309 corporates (89.6%) Source: Moody's Credit View Fundamental Data, July 2020 Regulation on Prudential Principle in Managing External Debt Regulation Key Points Object of Regulation 1 Jan 17 & beyond Governs all foreign currency Debt Liquidity Ratio* 325 corporates (12.6%) 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 2,253 corporates (87.4%) 172 corporates (6.7%) > 3-6 months 2,406 corporates (93.3%) ■Comply Not Comply *Data as of Q4 2020, with total population 2.,578 corporates Source: Bank Indonesia 66#68Solid Policy Coordination In Managing Financial Markets Volatility CMP BSF Source: Ministry of Finance The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financial System Stability Committee (KSSK) KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP) Gov't Securities Crisis Management Protocol (CMP) Indicators: - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; Foreign ownership in government securities Policies to address the crisis at every level : - Repurchase the government securities at secondary market Postpone or stop the issuance State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget State's Budget First Line of Defense Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related SOES (min. level Aware) BPJS (min. level Aware) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) Implementing Bond Stabilization Framework (BSF) 67 40#69BHINNEKA TUNGGAL IKA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#70Saving Life is The Main Concern of The Government State budget continue to work hard and responsive in 2021 3.0 Initial Forecast* 4.5 - 5.3% *Before the increasing case in June -5.3 -3.5 -2.2 -0.7 Outlook 2020 Realization (Audited) (Rp trillion) 3.7-4.5% State Budget 2,595.5 2021 Allocation (Rp trillion) Growth (%) 2,750.0 6.0 National Economic Recovery Program (PEN) 575.9 744.75 29.32 Health 62.7 214.95 242.85 Social Protection 216.6 187.84 -13.28 MSMEs Support & Annual 2021 projection: 3.7-4.5% Corporation Financing 173.0 161.20 -6.82 Business Incentives 58.4 62.83 7.59 Priority Program 65.2 117.94 80.89 Deficit (% to GDP) 6.14 5.70 Q1 Q2 22 2020 70 Q4 Q1 Q2 22 Q3 Q4 2021 Economic indicators continue to show strengthening, however, Emergency PPKM measures must be applied to control the spread of the virus. Expectations of economic recovery must be supported by anticipatory measures to address the pandemic in order to maintain the momentum of recovery More massive vaccination, Strengthen test, tracing, and isolation, Adaptive and responsive of PEN programs to help vulnerable people and affected businesses. 69#71Poverty aAnd Unemployment are Experiencing A Downward Trend Social Protection is strengthened to maintain the momentum of community welfare recovery in Semester II-2021 The national poverty rate is on an improving trend, mainly due to the economic recovery and Social Protection policies 11.25 Mar-14 Sep-14 Mar-15 Sep-15 9.22 Mar-16 Sep-16 Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Sep-19 10.19 10.14 Mar-20 Sep-20 Mar-21 ■ The trend of economic recovery at the beginning of the year has been able to improve the level of community welfare. Unemployment and poverty rates in early 2021 decreased compared to their last period at the end of 2020 The acceleration of the social protection program since early 2021 is effective in protecting the poor and vulnerable community ■ Without the social protection expansion, the World Bank projects that poverty in 2021 could reach 11.2% Welfare levels are expected to continue to improve until Semester I, before the trend of rising COVID-19 cases in June. The social protection policy is expanded and strengthened during the Emergency Public Activity Restriction (PPKM Emergency) period OPEN UNEMPLOYMENT RATE February 2021 6.26% (Open unemployment) 8.75 million people Decline of Feb 21 against Aug 20 0.81 p.p 1.02 mio people The economic recovery has created 2.61 million new jobs in the period Sept 20 - Feb 21 POVERTY RATE March 2021 · 10.14% . • 27.5 million people Decline of Feb 21 against Aug 20 0.05 p.p 0.01 mio people The decline in poverty and inequality is driven by improved job opportunities and the sustainability of the Social Protection of National Economic Recovery Program for 2021#72• • • Economic Recovery Policy Framework 2021 Social Protection Programme For bottom 40 and the vulnerable group: PKH, Sembako card, BST, BLT DD, Pre employment, electricity discount, internet subsidy SURVIVAL AND RECOVERY KIT Maintaining Business Continuity Support for SMEs and • cooperation Priority programs to support job creation Free Vaccination → for 181.5 million people to achieve herd immunity Encouraging 3M 3T Other intervention → Health facilities, Health Protective Equipment Source: Ministry of Finance HEALTH INTERVENTION GAME CHANGER 2021 NATIONAL ECONOMIC RECOVERY STRUCTURAL REFORM Through the Job Creation Law to address various challenges of national development (providing employment opportunities, empowering MSMEs, regulatory reform, SWF development, Ease of Doing Business, etc.) 71#73Vaccines as The Game Changer Accelerated around the world, is expected to immediately end the pandemic and strengthen economic recovery Vaccination Progress in Several Countries (million doses, as of July 26) Daily Vaccination in Indonesia (Doses, As of July 26) 0 500 1,000 (1) China (2) India (3) US (4) Brazil 433.15 341.82 131.85 (5) Germany 89.04 (6) UK 83.72 (7) Japan 73.97 Billion doses Million doses (8) France 69.74 1,500 2,000 1,500,000 1,538.71 1,200,000 900,000 623,188 600,000 >3.85 -33.7 300,000 may 0 25-Jan 25-Feb 25-Mar 25-Apr 25-May 25-Jun 25-Jul cumulative (9) Turkey 66.15 (10) Italy 65 12 (11) Indonesia 62.86 (12) Mexico 59.58 worldwide per day worldwide -180 1st and 2nd Vaccination Progress (Million Doses, As of July 26) 50 (12) Russia 56.20 44.73 (14) Spain 53.45 Countries already started vaccination 40 (25) Malaysia | 16.90 (27) Thailand | 15.87 30 18.13 20 (28) Philippines | 15.10 (40) Cambodia | 9.67 (48) Singapore 7.14 (64) Vietnam 4.54 10 0 5-Feb 24-Feb 15-Mar 3-Apr 22-Apr 11-May 30-May 18-Jun 7-Jul 26-Ju Source: Bloomberg Vaccine Tracker, Ministry of Health 72#74At The First Semester, State Budget Supports Pandemic Handling and Economic Recovery In line with economic activity improvement and government support in Covid-19 pandemic handling and economic recovery 2020 2021 Account (IDR T) % of % of Budget Realized² YoY (%) Budget Realized4 YoY (%) Budget³ Budget Revenue 1,647.8 812.6 47.8 (9.7) 1,743.6 886.9 50.9 9.1 Tax Revenue 1,072.1 531.8 44.4 (12.0) 1,229.6 557.8 45.4 4.9 Customs & Excise 213.0 93.2 45.3 8.8 215.0 122.2 56.9 31.1 Non Tax Revenue 343.8 185.7 63.1 (11.2) 298.2 206.9 69.4 11.4 Expenditure 2,595.5 1,069.7 39.1 3.4 2,750.0 1,170.1 42.5 9.4 Central Government Expenditure 1,833.0 668.8 33.9 6.0 1,954.5 796.3 40.7 19.1 Regional Transfer & Village Funds 762.5 400.9 52.5 (0.7) 795.5 373.9 47.0 (6.8) Primary Balance (633.6) (99.6) (633.1) (116.3) Surplus (Deficit) (947.7) (257.2) (1,006.4) (283.2) % to GDP (6.14) (1.67) (5.70) (1.72) Financing 1,193.3 416.2 40.0 136.0 1,006.4 419.2 41.7 0.7 Budget Surplus (Deficit) 245.6 159.0 135.9 (1) LKPP Audited 2020, (2) As of First Half 2020, (3)% to Presidential Regulation 72/2020, (4) As of First Half 2021 Revenue Tax Revenue grew positively in line with improving economic activity and international trade. Non-tax revenue increased in line with the upward trend in commodity prices, especially oil, minerals, coal, and CPO. Fiscal incentives are optimized for the handling of the Covid- 19 pandemic and support for the business. Expenditures Government spending is accelerated to support Covid- 19 handling and national economic recovery at the central and regional levels. The 2021 APBN Law provides flexibility for the management of state expenditures through refocusing and reallocating the budget. Financing The Budget Deficit and Financing is in line with the countercyclical policy implemented in the first semester. 73#75The State Budget Remains Flexible and Responsive to Give Full Support for The Community and Business During The Emergency Mobility Restriction • The national economic recovery (PEN) program is taking into account the Covid-19 development The allocation of the 2021 PEN programme (IDR774.75 T) increased compared to the realization of the 2020 (IDR575.2 T) Pictures source: unsplash.com • HEALTH SECTOR 2020 realisation reached IDR62.7 T, for handling pandemic handling (purchase of medical devices/PPE, treatment for Covid patients and health protocol support). In 2021, the budget increased from IDR193.93T to IDR214.95T, for acceleration of vaccination, completion of treatment claims, strengthening the handling of Covid in the regions. * Initial allocation IDR214.95 T (IDR193.93 T)* SOCIAL PROTECTION AND MSMES SUPPORT Through the social security program, priority programme as a safety net for job creation, MSME interest subsidies and micro business aid assistance. IDR349.04 T (IDR325.63 T) BUSINESS SUPPORT To support business entities (including luxury tax incentives for motor vehicles purchase to support the automotive industry and housing incentives), as well as encourage public consumption and increase the purchasing power of employees. IDR62.83 T (IDR58.4 T) 74#76PEN Program As The Main Instrument To Combat The Effect Of Pandemic As of 23 July 2021, the Realization of PEN reached IDR252.3 T (36.1% Budget IDR744,8 T) SOCIAL PROTECTION PRIORITY PROGRAMS • • 2021 Real 2020 Budget IDR187.84 T Realization IDR87.5T (46,6%) HEALTH Budget Real IDR214.95 T IDR59.02T (27,5%) 4.96 T 2020 Medical treatment and equipment • Tax incentive for health sectors Other programs carried out in 2nd Semester 2021 Therapeutic for treatment costs for 236.34 thousand patients, health worker incentive for 323.486, death benefit, as well as medicines and personal protective equipment (PPE/APD) Procurement of 53.91 Juta million doses of vaccine • • • • 2020 Distribution of PKH, basic food, Jabodetabek and non-jabodetabek Social Assistance Pre-employment cards, cash social assistance for villagers, electricity subsidy, . 70.72 T 2021 Distribution of PKH, Basic Food Cards, Pre- employment cards, cash social assistance, electricity subsidy, Internet Quota Assistance Improving integrated population and Social Welfare Data SUPPORT FOR MSME AND CORPORATE Budget IDR161.20 T 2020 Realization IDR51.54T (32%) Fund placement Other programs carried out in 2nd Semester Source: Ministry of Finance as of July 23, 2021 30,22 T 2021 Government Assistance for Micro Enterprises (BPUM) 9.8 million business ⚫ interest subsidy for 3.3 million debtors • Fund placement in banks . Budget IDR117.94 T 2020 Labor-intensive measure programs • Other programs carried out in 2nd Semester Realization IDR45.47 T (38.6%) 5.23 T 2021 • Labor-intensive Line Ministries for 760.1 thousand workers • •Tourism (National Tourism Strategic Areas, Ecotourism, and HR training); • Food Security (food estate and irrigation programs) ⚫CT (ICT infrastructure and public broadcasting) BUSINESS INCENTIVES Budget IDR62.83 T 2020 Import Income Tax 22 Exemption • Income Tax 25 Installment Reduction • VAT Preliminary Refund Corporate Income Tax Rate Reduction Realization IDR48.35 T (77.0%) 13,49 T 2021 • Income Tax 21 borne for 90,858 Employers • MSME Final Income Tax borne for 129,215 MSME • Import Income Tax 22 Exemption for 15,989 taxpayers • Income Tax 25 Installment Reduction for 69,654 taxpayers 75#77Income Decile Current Social Protection Policy Scheme Help the community, especially in poor and vulnerable conditions (decile 1 to decile 4) Family Hope Program/ ΡΚΗ Food Card Electricity Program Discount Cash Transfer 6+ 5 3 18.8 Million Families Cash Transfer Through Village Fund* 32.6 Million Families 10 Million Families 8 Million Families 450 VA: 100% discount on January and March, 50% on April and December Pre-Employment Program 5,6 Million people + 672 thousand people Training: IDR 1 million/Month IDR 300K/month IDR 300K/month outside PKH and food card program outside PKH and food card Incentive: IDR600 K/Mo Survey (3x): IDR50 K beneficiaries 900 VA: 50% discount on 2 1 10 Million Families For: Pregnant Women, early Children, students (primary to high school), disable, and elderly IDR 200K/month July and August are paid twice January and March, 25% on April and December program, cash transfer, and pre- employment card beneficiaries Internet Quota Food Aid/Rice Subsidy BULOG 38.1 Million Beneficiaries Early Childhood education (7GB/month), Elementary to high school students (10GB/month, Collage students (15GB/month), teachers (12GB/month), lecturer (15GB/month) at a price per 1GB of IDR 2,750 10 Million Families of Cash transfer Recipients And 18.8 Million Families of Food Aid Recipients 10 kg/Fam Food Card PPKM 5.9 million people Proposed by Local Government IDR 200K/Month Wage Subsidy 8.8 million workers who work in non critical sector in PPKM level 4 participants and educators outside PKH and food card program, and cash transfer, beneficiaries Wage subsidy: IDR 1.0 million monthly for 12 Duration monthly for 12 months + 2 months 9 months (Jan-Sept) + 3 months (Oct- 6 months 12 months (Jan-Dec) Incentives for 4 Months 10 months (Jan-Mei + 3 Aug- Dec) One-off disbursement 6 months (Jul-Dec) One-off disbursement months Dec) Source: Ministry of Finance *Relaxation of Cash transfer through Village Fund beneficiaries targeting is under the authority of the Village Head by paying attention to the poor who are affected by the Covid-19 pandemic and have not received assistance 76#78The 2022 Preliminary Budget to Keep The Commitment of Fiscal Consolidation To manage the deficit backs at 3% of GDP in 2023, fiscal consolidation undertakes all together with maintaining economic recovery 2022 Macroeconomic Assumption Economic Growth (%, YoY) Inflation (%, YoY) Budget Posture 5.2-5.8 Description (IDR Trillion) 3.0±1 State Revenue Tax Revenue 2022 1,833,5 1,895,4 1,499.3 10 year T-bonds Rate (%) Exchange Rate (IDR/USD) Indonesian Crude Price (USD/barrel) Oil Lifting (thousand barrel per day) Gas Lifting 6.32-7.27 Non-Tax Revenue 322.4 1,528.7 363,1 Grants 1.8 3.6 13.900 15.000 Government Expenditure 2,630.6 2,776.6 Central Government Expenditure 1,859.6 1.991,6 55-65 Transfer to Region and Village Fund 771.0 785.0 Primary Balance 413.0 481.9 686-726 Surplus (Deficit) (807,0) (881.3) % of GDP 4,51 4.85 (thousand barrel of oil equivalent per day) 1,031 - 1,103 Financing 807.0 881.3 2022 Policy Directions Increasing State Revenue TAX REFORM Administrative and Policy Reform for Fair and Equitable Tax System OPTIMIZING OF ASSET MANAGEMENT INNOVATION TO INCREASE NON-TAX REVENUE Productive Spending Zero-Based Budgeting Integrated & Targeted Subsidy and Effective Social Protection Program Strengthening Fiscal Decentralization Function Improving quality control of intergovernmental transfers Innovative and Sustainable Financing Prudent and Sustainable Debt Management Effective Investment Financing Financial Deepening Financing Innovation through SWF, SMV and PPP Strong Cash Management for Efficient Fiscal Buffer Source: Ministry of Finance 77#79Build The Foundation for Consolidation and Reform COVID-19 as a momentum to bolster fundamental reform to accelerate economic transformation 3 Bureaucracy Reform 1 5 President's Strategic Human Capital Development 2 Infrastructure Development Directions STRUCTURAL REFORM Regulatory Simplification 5 Economic Transformation FISCAL REFORM HUMAN CAPITAL • Quality and competitive education • Integrated and reliable health system • Lifelong and adaptive social protection ECONOMIC TRANSFORMATION • Increasing production capacity & sustainable growth (infrastructure connectivity, mobility and productivity) • Institutional reform (bureaucratic and regulatory reform) • Tax reform (broadening the tax base and increasing compliance) Spending reform (zero based budgeting): focus on priority programs, efficient, synergistic and results-based; Innovative, prudent, and sustainable financing (Strengthening the SWF, PPP scheme, and efficient fiscal buffer) Fundamental Reform as New Economic Foundation for Economic Transformation to achieve Economic Growth Acceleration towards "Indonesia Maju“ (Advanced Indonesia) Source: Ministry of Finance 78#80Tax Reform: Pursuing A Healthy And Fair Taxation System To anticipate social, economic and demographic dynamics and implementation of best-practices • CHALLENGE Anticipating medium to long term social economic dynamics Huge informal sector REFORM ASPECTS Administration Strengthening institution and human resources Policy Widening tax base and finding new source of revenue • • HEALTHY Effective as policy instrument Optimum and sustainable source of revenue Adaptive with transforms in economic structure . Limited tax base • Data and information are not optimal Aligning with international best practice Going Forward Administration simplification Strengthening monitoring function for extensification and intensifications Fair Law Enforcement Growing middle income class consumption increasing rapidly - consumption tax potentially to become main source of revenue. [Noted: currently, VAT is not optimum yet administration support is not optimum as there are lot of exemption] Improving VAT collection and reducing its regressivity Strengthening personal income tax policy Corporate Income Tax - tariff reduction - as an incentives instrument for business (industrialization and value-added creation) including various facilities, tax holiday, and tax allowance. • FAIR • Tax treatment certainty Encouraging taxpayer voluntary compliance Balancing tax burden between groups and between sectors Personal Income Tax - potentially become source of revenue from income tax, in line with improvement of data and administration, and increasing of income per capita. The PIT also could play as instrument for income redistribution, which is not optimum yet. Source: Ministry of Finance 12 79#812021 Budget Financing Macroeconomic Assumption for Economic Growth Inflation Exchange Rate 10 years T-Bills Rate 5% 3% 2021 Budget 14.600 IDR/USD ICP US$ 45 7.29% per barrel Oil Lifting 705 Gas Lifting 1.007 thousand barrel of thousand barrel/day oil equivalent/day 2020 2021 Account IDR Trillion Perpres Supporting national APBN Growth 72/2020 Revenue 1,699.9 1,743.6 2.6% • Domestic Revenue 1,698.6 1,742.7 2.6% STATE REVENUE POLICY providing tax incentives selectively and prudently calculated Cutting the red tape to accelerate national economic recovery economic recovery by 1. Tax Revenue 1,404.5 1,444.5 2.8% • Improving public services to optimize non-tax revenue 2. Non Tax Revenue 294.1 298.2 1.4% EXPENDITURE FOCUS Grants 1.3 0.9 -30.8% Expenditure 2,739.2 2,750.0 0.4% Handling COVID-19 and supporting health programs Central Government Expenditure 1,975.2 1,954.5 -1.0% • 1. Ministries Expenditure 836.4 1,032.0 23.4% 2. Non Ministries Expenditure 1,138.9 922.6 -19.0% Continuing social safety net to lay a solid foundation of inclusive economic recovery Expanding access to capital for MSMEs and cooperatives through interest subsidy • Transfer to Region and Village Fund 763.9 795.5 4.1% Supporting programs activities for impacted sectors (e.g. Tourism) 1. Transfer to Region 692.7 723.5 4.4% 2. Village Funds 71.2 72.0 1.1% • Primary Balance Surplus/(Deficit) % to GDP (700.4) (633.1) -9.6% (1,039.2) (1,006.4) -3.2% (6.3) (5.7) • Financing 1,039.2 1,006.4 -3.2% FINANCING STRATEGY Supporting the restructuring Sovereign Wealth Fund (SWF) • Increasing access to financing for MSMEs and housing for low-income household Continuing to support higher education,, research and cultural activities of SOES, PSA, Source: Ministry of Finance 80#822021 Financing Needs Financing Needs Budget Deficit 2021 IDR1,006.4 T (5.7% of GDP) + o Investment financing o Lending • Liabilities 。 Other financing • Matured debt Financing Sources Foreign Denominated Debt 15-20% Foreign Loan GROSS GS (Through auction & non- auction) GDS 68-73% Sukuk 27-32% *GS: Government Securities Domestic Debt 80-85% Foreign Denomina- ted Bonds Domestic Domestic Loan GS 2021 Matured T-Bills Issuance Source: Ministry of Finance Debt to GDP Ratio Realization* Projection 2020 38.68% 2021 41.35% *preliminary figure 81#832021 Financing Strategy Opportunistic, Measured, and Prudent Financing Strategies to support counter cyclical policies Debt is used as an instrument to support counter cyclical policy; managed in prudent manner, measurable and opportunistic Debt Policy Overall Funding Strategy 1 Manage debt by maintaining the debt over GDP ratio within the safe limit 1 Non-debt funding source optimization, including SAL utilization To adopt a flexible debt management which is 2 responsive in supporting the countercyclical policy, while prudently manage the cost and risk 2 Targeting Loan Program from Development Partners, for both bilateral and multilaterals, i.e. World Bank, ADB, KfW, JICA, EDFC, and AIIB To achieve an efficient debt cost, by doing market deepening exercises: investor base widening 3 improving the infrastructure in the SBN 3 market debt instrument diversification eg. SDG bond issuance and municipal bond/sukuk issuance 4 To maintain macro stability by managing debt portfolio composition optimally. 4 A well targeted SBN (Government Bond) issuance by optimizing all available sources Targeting domestic/onshore bond issuance (including retail bond) for up to IDR 80 tn Targeting Foreign Currency/Global Bond issuance amount at 12-15% from total SBN funding (subject to market conditions) Private Placement from specific institutions Support from Bank Indonesia as the funding of the last resort / back stop Source: Ministry of Finance 82#84Government Securities Indicative Financing Plan for 2021 Government Securities Issuance Composition Source: Ministry of Finance Auction: Conventional Securities - 24x Islamic Securities - 24x Non Auction - Retail GDS (tradable/ORI & non tradable), Retail Sovereign Sukuk (tradable/sukri & non-tradable) Private Placement - based on request GS Rupiah Foreign Domestic Auction [80%-85%] [85% -88%] Non Auction International [4% -6%] [12% - 15%] *GS: Government Securities • • Denominated GS Foreign denominated GS as complementary (avoid crowding out in domestic market) The target amount can be adjust to the potential of other financing sources and financing needs 88 83#85Synergy Between Central Bank and the Government in Accelerating National Economic Recovery The Enactment of Emergency Law No. 1/2020 (becoming Law No. 2/2020) allows Central Bank to buy GS in the primary market 1st Joint Decree between Minister of Finance and Governor of Bank Indonesia (BI) on April 16, 2020 (SKB I) The role of BI is as backstop buyer in the primary market 2nd Joint Decree between Minister of Finance and Governor of BI on July 7, 2020 amended with Joint Decree on July 20, 2020 (SKB II) Burden Sharing Scheme Realization of Gov't Securities purchased by Bank Indonesia under SKB I IDR 75,855 tn COVID-19 HANDLING ALLOCATION IDR 903,46 T Health 1. Public Goods Covered by Bl with rate based on BI Reverse repo 3M Issuance specifically to BI through private placement 2. Non-Public Goods: MSME ■ Corporation on-MSME 3. Non-Public Goods: Others Covered by Government with rate BI Reverse repo 3M minus 1%, and BI covered the remaining difference with market rate Full Covered by Government amounting market rate Issuance through market mechanism (auction, Green Shoe Option, Private Placement according to the SKB on April 16, 2020) • Public Goods IDR 397.56T Non-Public Goods IDR 505.90T IDR 87.55T Social Protection IDR 203.90T Sectoral K/L, Local Govt IDR 106.11 T Micro small and Medium Enterprises (MSME) IDR 123.46T Corporation Non-MSME IDR 53.57T Others IDR 328.87T SBN purchased by BI (SKB II) for Public Goods IDR397,56T or 100% from target and issuance of SBN for Non Public Goods reach IDR177,03T (100%). Non-Public Goods: Others, refer to all issuance (incl: auction, private placement, retail, and foreign denominated GS. Source: Ministry of Finance 84#86Government Securities Financing Realisation (a.o June 30, 2021) (Trillion IDR) Realization (ao. June 30, 2021) Government Securities (GS) Government Debt Securities (GDS) IDR Denominated GDS - Coupon GDS - Conventional T-Bills - Private Placement - Retail Bonds Foreign Denominated Bonds - SEC USD-EUR REG SHELF TAKE-DOWN - Samurai Bond - SEC USD REG SHELF TAKE-DOWN - USD Onshore Bonds 699.80 487.53 414.37 342.83 32.55 13.00 26.00 73.16 59.97 13.18 0.00 0.00 Sovereign Sharia Securities (Sukuk) 212.27 Domestic Sovereign Sharia Securitoes 169.48 - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk 143.50 - Retail Sukuk 16.73 - Private Placement 9.25 Global Sukuk 42.79 Source: Ministry of Finance Note: including GSO transaction 85#87Republic of Indonesia - Dual Currency US$3bio and EUR1bio Issuer Issuer Rating Exp. Issue Rating Format Issue Pricing Date Settlement Date Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) Baa2 Moody's / BBB S&P / BBB Fitch SEC Registered Senior unsecured fixed rate notes off US SEC Shelf January 5, 2021 January 12, 2021 PB/Others, CB/SWR Ban Investor Breakdown by Investor Type Isurance PF, 95% RIEUR033 CB/SWF PB/Others, 3% 1% Banks, 8% Insurance PF 20% RI0351 Banks, 1% PB/Others, 1% PB/Others, AM/FM, 75% CB/SWF 8% AM/FM, 58% CD/SWE -5% Insurance PF. 24% RI0371 Currency Size US$1.25bio USD US$1.25bio US$0.5bio Euro €1bio Banks, 26% RI0331 AM/FM, 63% Tenor Long 10-year Long 30-year Long 50-year Long 12-year Insurance PF,2% Maturity March 12, 2031 March 12, 2051 March 12, 2071 March 12, 2033 Coupon (p.a.) 1.850% 3.050% 3.350% 1.100% Investor Breakdown by Geography Yield 1.900% 3.100% 3.400% Price 99.538% 99.020% 98.794% 1.174 99.165% US, 20% Listing Use of Proceeds Singapore, Frankfurt Stock Exchange The net proceeds are for general purposes of the Republic of Indonesia, including its Covid-19 relief efforts RIEUR0333 APAC, 9% EMEA, 71% EMEA, 30% US, 27% RI0351 Transaction Highlights • The lowest yields and coupons throughout the issuance of Indonesian Global Bonds for all tenors and currencies All tranches priced inside of the Republic's existing credit curve with negative new issue premium and at the tightest levels for every one of the tranches • The transaction was well-executed and competitively priced, with final pricing across all tranches pricing 45bps inside of initial price guidance for USD and 40bps inside of initial price guidance for EUR Source: Ministry of Finance EMEA, 22% US, 20% APAC, 43% EMEA, 31% RI0331 APAC, 58% AM/FM, 69K RI0371 US, 37% APAC, 32% 86#88Republic of Indonesia - Samurai Bond JPY100bn Issuer Issuer Rating Exp. Issue Rating Format Pricing Date Settlement Date Deal Size Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) Baa2 Moody's / BBB S&P / BBB Fitch Samurai Bond (Public Offering) May 21, 2021 May 27, 2021 Investor Breakdown by Investor Type Others, 19.6% Shinking JPY100bn banks/ JPY29.0bn 3-year Size Tenor Maturity Coupon Re-offer Spread over 0.33% YMS+35 0.57% YMS+56 Yen Mid Swap (YMS) Joint Lead Managers Daiwa/Mizuho/Nomura/SMBC JPY46.8bn JPY1.2bn JPY18.2bn Regional 5-year 7-year May 27, 2024 May 27, 2026 May 26, 2028 10-year May 27, 2031 banks, Public Funds, 8.9% 0.2% 0.70% 0.89% Central Central YMS+65 YMS+76 Banks, 4.0% Cooperative City Banks, 22.2% s, 7.0% Asset Managers, 31.1% Insurers, 7.0% Transaction Highlights • . Rol's seventh consecutive year accessing this market with JPY 100 billion or larger sized benchmark transactions since 2015. This benchmark sized transaction has been achieved with the lowest JPY spreads and coupon levels in comparison with Rol's past Samurai deals, maintaining a fairly low premium over its USD secondary curves • The lowest coupon in the history of the issuance of Samurai Bonds for a tenor of 10 years, amounting to 0.89%. This coupon is even lower when compared to the issuance of 10-year Samurai Bonds with JBIC guarantee in 2015 which was at the level of 0.91%. • Rol successfully issued mid to long tenured tranches (5-year and above) for more than 70% of the total issuance with the lowest ever dependency on 3-year tenor. This significant demand shift from 3-year tranche to longer tenors reflected investors' confidence on Rol's fundamentals. Source: Ministry of Finance 87#89Republic of Indonesia - Global Sukuk US$3bn 34% 6% 8% Issuer Issue Format Issuer Rating Pricing Date Republic of Indonesia 144A/Reg S, Senior, Unsecured, Wakala US$ Trust Certificate ("Sukuk") issued under a USD$25billion Trust Certificate Issuance Program Baa2 Moody's (Stable) / BBB S&P (Neg) / BBB Fitch (Stable) Investor Breakdown by Investor Type 5-Year USD 7% 10% 10-Year USD 12% 30-Year USD 27% 35% 02 June 2021 18% Issue Date 09 June 2021 (T+5) Tenor Maturity 5-year Sukuk 9-Jun-26 10-year Sukuk 9-Jun-31 30-year Green Sukuk 9-Jun-51 33% 6% 16% 29% Trance Size Profit Rate USD1.25B USD1.00B 1.5% fixed, semiannual, 2.55% fixed, semiannual, 30/360 30.360 Re-Offer Price 100.00% 100.00% Re-Offer Spread UST +70.4bps UST +95.7bps Listing Joint Bookrunners Co-Managers USD750M 3.55% fixed, semiannual, 30/360 " ■ ME/Islamic ■ Europe ■ US ■ Asia (ex-Indonesia) Indonesia Investor Breakdown by Geography 100.00% UST +125.5bps 5-Year USD 10-Year USD 2% 256 23% 30-Year USD 1% 19% Transaction Highlights . SGX-ST and Nasdaq Dubai CIMB, Citigroup, Dubai Islamic Bank, HSBC, SCB (B&D) PT BRI Dana Sekuritas and PT Trimegah Sekuritas Indonesia Tbk Republic of Indonesia marked their annual return to the Sukuk market with the issuance of Global Sukuk which was very well received by investors by generating a total order book in excess of USD 10.3 billion reflecting an oversubscription of more than 3.43x. • The transaction was carried out in line with the 2021 financing strategy, including accommodating the needs of the state budget in handling the impact of the Covid 19 pandemic. The USD 3 billion issuance also included a Green Tranche. The Green tranche was issued under the 30 year tenor for the first time, which is also the first in the world, after consistently issuing Green Sukuk with a 5 year tenor every year since its debut in 2018. This aptly demonstrates the Republic's dedication and long term commitment to Green and sustainable finance, as well as pioneering financing methods in the fight against climate change. Source: Ministry of Finance 41% 40% 12% 5% 30% 4% 10% 12% - Fund Managers - CBS/SWFs - Ins/Pension = Banks ■ PB & Others Achievement ■ Lowest ever 5, 10 and 30 year yield, spread over UST and profit rate achieved by the Republic of Indonesia for global Sukuk issuance, First ever 30 year Green Sukuk issuance in the world, ■Robust investor orderbook allowed pricing below fair value across all tranches. Challenges Global • financial market conditions are very volatile and still affected by the Covid 19 pandemic • Performed under WFH conditions . No roadshow. 88 63%#90GS Primary Market Performance 2020 - 2021 Through Auction In 2021, average incoming bid = IDR49.31 tn/auction while average awarded bid = IDR21.62 tn/auction [IDR Trillion] 400 6.50 350 300 5.14 250 Average Incoming Bid 2020 = IDR54.50T /auction Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) 3.91 4.24 Average Awarded Bid 2020 = IDR15.85T /auction 200 3.01 3.35 3.14 150 2.45 2.16 100 50 1.98 3.85 7.00 6.00 5.00 4.00 2.96 3.00 2.95 2.03 2.23 2.30 2.27 2.00 1.85 Jan-20 Feb-20 Source: Ministry of Finance Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 1.00 89#91Ownership of IDR Tradable Government Securities (a.o June 30, 2021) MUTUAL FUND INSURANCE & PENSION FUND FOREIGN 3,16% 14,24% 22.82% INDIVIDUAL OTHERS 15.83% Govt Institution 32,50% 51,67% BANK NON-BANK (IDR tn) Description Banks* Dec-17 Dec-18 Dec-19 Dec-20 June 30, 2021 491.61 23.41% 481.33 20.32% 581.37 21.12% 1375.567 35.54% 1,391.98 32.50% Govt Institutions (Bank Indonesia**) Bank Indonesia (gross) GS used for Monetary Operation Non-Banks 141.83 6.75% 253.47 10.70% 262.49 9.54% 454.3606 11.74% 677.95 15.83% Mutual Funds Insurance Company and Pension Fund Foreign Holders Foreign Govt's & Central Banks Individual 179.84 8.56% 217.36 9.18% 38.01 1.81% -36.11 -1.52% 1,466.33 69.83% 1,633.65 68.98% 104 4.95% 118.63 5.01% 348.86 16.61% 414.47 17.50% 836.15 39.82% 893.25 37.71% 146.88 6.99% 163.76 6.91% 59.84 2.85% 73.07 3.09% 117.48 5.60% 134.22 5.67% 2,099.77 100% 2,368.45 100% 273.21 9.93% 874.875562 10.72 0.39% 420.514938 1,908.88 69.34% 2,040.83 130.86 4.75% 161.321131 471.67 17.13% 542.817373 1,061.86 38.57% 973.91 194.45 7.06% 178.3111 81.17 2.95% 131.210288 3.39% 192.21 4.49% 163.32 5.93% 231.572274 5.98% 297.71 6.95% 2,752.74 100% 3,870.76 100% 4,282.62 100% 22.60% 987.08 23.05% 10.86% 309.13 7.22% 52.72% 2,212.69 51.67% 4.17% 135.40 3.16% 14.02% 610.06 14.24% 25.16% 977.31 22.82% 4.61% 251.99 5.88% IDR 1.092,02T on January 24, 2020, foreign holders reach a record high in nominal terms. 68,19% Portion of foreign ownership in the mid & long term sector (≥ 5 years). Others Total 4,49% 6,95% Note: 1) 2) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund. Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance 00 90#92Triliun IDR Disciplined and Advanced Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt / GDP (%) 500 442 446.3 0.0% 407 414.52 7,000.00 6,000.00 39.36% 41.35% 45% 362 400 -0.5% 40% 842.76 300 5,000.00 27.46% 28.34% 29.40% 29.81% 30.18% 852.91 35% 200 -1.0% 30% 24.68% 4,000.00 764.48 100 810.74 25% 19 746.32 3,000.00 734.85 755.12 2,000.00 1,000.00 1,931.22 677.54 2,410.01 2,780.86 3,248.93 3,612.69 4,014.80 5,221.65 5,711.79 0 20% 15% -100 -58 -4 -69 (20) 10% -200 5% -300 -2.5% -2.5% 0% -2.6%298 -400 (308) 14 11711] -1.5% -1.8% (56) (66) (9)(35) -2.0% -2.2% -2.5% (269) (341) (349) -3.0% 2014 2015 2016 2017 2018 2019 2020 Jun-21 2015 2016 2017 2018 2019 Bond Loan Debt to GDP GS Nett Non-Debt Weighted Average Debt Maturity of ~8.7 Years Well Diversified Across Different Currencies Loan Nett Surplus (Deficit) Budget 10 9.75 9.5 9.39 9.13 9 % of Yearly Issuance 100% 1% 1% 1% 1% 1% 7% 6% 4% 4% 5% 5% 80% 31% 29% 30% 27% 23% 22% 8.68 87 60% 8.52 8.5 8.37 8.5 40% 57% 59% 58% 62% 66% 68% 8 20% 7.5 0% 2014 2015 2016 2017 2018 2019 2020 Jun-21 2016 2017 2018 2019 2020 Jun-21 ATM IDR USD EUR JPY OTHER Source: Ministry of Finance 91#93Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks Declining Exchange Rate Risks 25.0 50.0 22.12 43.4 44.6 21.0 20.7 21.0 42.6 45.0 41.3 41.0 19.2 19.7 37.9 20.0 40.0 17.5 33.5 16.1 32.21 35.0 14.8 14.2 14.03 15.0 13.7 30.0 12.1 10.6 10.6 25.0 9.8 20.0 10.0 15.0 12.2 12.1 12.1 12.2 13.2 13.32 10.7 11.4 5.0 50 10.0 5.0 0.0 0.0 2014 2015 2016 2017 2018 2019 2020 Jun-21 2014 2015 2016 2017 2018 2019 2020 Jun-21 FX to GDP Ratio ■ VR Proportion Refixing Proportion ■FX Proportion Debt Maturity Profile IDR tn 700 600 103 500 400 145159141 163 95.90 300 80 89 58 200 375392408 476 284 63 3 300290 100 176 2021 2022 2023 2024 2025 לסלת 2026 2026 2027 לסל Source: Ministry of Finance Upcoming Maturities (Next 5 Years) 45.0 39.3 40.4 41.0 39.6 39.61 ■IDR Denominated (Trilion IDR) Other Currencies (Trilion IDR) 40.0 36.0 33.9 34.7 35.0 30.0 61 25.0 25.5 24.3 24 25.0 22.7 22.8 21.4 20.1 20.0 37837 225217 98129185 2028 8202 6ZOZ 6202 2030 2030 2031 IFOZ 2032 2033 2021 2034 N 2035 22 10 38 33 28 111144 87 48 90 20370 2038 09W 2039 2040 W 2041 w 3 115 15.0 4 20 27 9.9 10.6 1433 35 24 31 10.0 7.7 8.4 8.1 8.87 7.8 6.5 31 61 21 18 6952 5.0 2049-2071 00 0.0 2014 2015 2016 2017 2018 2019 2020 Jun-21 ■1 Year 3 Year 5 Year 92 22#94Holders of Tradable Central Government Securities More Balance 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 100% 100% 25.2% 22.8% 26.63% 80% 38.2% 37.5% 39.8% 37.7% 38.6% 36.0% 80% 37.0% 38.6% 34.8% 33.5% 44.7% 60% 40% 37.8% 39.9% 36.8% 42.0% 40.3% 60% 39.3% 44.7% 34.1% 39.0% 37.4% 35.6% 36.8% 41.56% 35.8% 39.8% 40% 37.7% 38.6% 38.2% 37.5% 25.2% 22.8% 20% 20% 35.5% 17.8% 17.3% 22.0% 22.1% 32.5% 18.4% 22.67% 23.9% 22.5% 23.4% 20.3% 21.1% 11.8% 5.3% 5.1% 1.9% 6.7% 4.0% 4.43% 1.3% 0% 0% 3.5% 5.0% 4.3% 2.4% 4.6% 4.71% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Jun-21 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Jun-21 10-1 Foreign Holders Domestic Non -Banks Domestic Banks >2-5 >1-2 >5-10 >10 % Foreign Ownership of Total Source: Ministry of Finance 93#95Section 6 Commitment to Sustainability and Preserving the Environment BHINNEKA TUNGGAL IKA#96Indonesia's Commitment to Climate Change Indonesia's Climate Policies: • Indonesia Nationally Determined Contribution (NDC), 2016 • National Mid-Term Development Plan 2020-2024 • National Action Plan on Sustainable Development Goals Source: Ministry of Finance PARIS2015 COP21 CAP11 la FENCE "Indonesia has geographical conditions that are vulnerable to climate change. Two-thirds of the territory consists of the sea, has 17 thousand islands, many of which are small islands. These vulnerabilities and challenges do not stop Indonesia's commitment to contribute to global action to reduce emissions. Therefore, Indonesia is committed to reducing emissions by 29% below business as usual by 2030, or 41% with international assistance." President of the Rep. of Indonesia, Joko Widodo, Paris, 2015- FIRST NATHINALIS DETERMINED CONTRIBUTION REPUBLIC OF INDONESLA ENTRETENDERLİNAN MATHEM Per www MOMM The UCLA Sc in saved me T3000, T T い PROCEDURESSES DULU SHE HAS 95#97Commitment to Sustainability and Climate Change Mitigation Republic of Indonesia's Commitment to Sustainability which Includes Climate Change Mitigation Commitment to Sustainability Successfully implemented the Sustainable Development Goals by achieving the 2030 development agenda introduced by the United Nations (UN). The Indonesia's Presidential Regulation no. 59/2017 concerning the implementation of SDGs in Indonesia mandated the Ministry of National Development Planning to provide the Roadmap of SDGs in Indonesia Background of Commitment Combining public and private funds to support Sustainable Development Goals (SDG)s The Government of Indonesia through the Ministry of Finance and PT Sarana Multi Infrastruktur (SMI) seeks to achieve the SDGs through the establishment of an integrated platform called "SDG Indonesia One"1 which combines public and private funds through blended finance schemes to be channeled into infrastructure projects related to the achievement of SDGs The President's Nawacita Programme The Nine Agenda Priorities of the President's priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs 13 14 PAAT JUDGE PERTATION SUSTAINABLE DEVELOPMENT GOALS Mitigation Based on the Paris Agreement and Indonesia's NDC, Gol has committed to reduce greenhouse gas emission by 29% in 2030 on unconditional mitigation scenario using self-financing, and by 41% in 2030 on conditional mitigation scenario using international financing support Based on National Energy Policy, increase New Renewable Energy to 23% of national energy mix by 2025 Strengthen the Core Actions through strengthening the policy framework, human and institutional capacity, socializing, and researching With regards to forestry, the actions should include deforestation prevention, forest degradation prevention, conservation, and others Note: (1) SDG Indonesia One, PT Sarana Multi Infrastruktur Environment Commitment and Objectives Adaptation Climate Change: Significant risks for Indonesia's natural resources that will impact the production and distribution of food, water, and energy National Action Plan on Climate Change Adaptation: National framework for adaptation initiatives mainstreamed Development Plan into the National Medium-term Goal of Indonesia's climate change adaptation strategy: reduce risks on all development sectors by 2030 through local capacity strengthening, improved knowledge management, convergent policy on climate change adaptation and disaster risks reduction Biodiversity Indonesia is the world's largest archipelago comprising over 16,056 islands with unique ecosystems containing a large number of diverse species. Contains the world 3rd largest area of rainforests Biodiversity Strategy and Action Plan 2015-2020 was launched to provide an outline on how biodiversity could be utilized sustainably to improve economic and development opportunities. Source: Ministry of Finance 96#98Climate Governance in Indonesia Ministry of Finance is responsible for climate fiscal policy Ministry of Finance c.q. The Fiscal Policy Agency is also the National Designated Authority of the Green Climate Fund (NDA- GCF) as the core interface between the country and the GCF Climate Change National Focal Point (NFP- UNFCCC) •Leading role in Climate Policy Formulation and Coordination -Coordinating climate program implementatir and MRV Source: Ministry of Finance Coordinating Ministries Coordinating Ministry of Economic Affairs Coordinating Ministry of Maritime and Investment Ministry of Environment and Forestry Ministry of Finance (Focal Point) •Climate Finance Policy Formulation & Coordination *Planning & Budgeting for Climate Programs •Climate Budget Tagging *Mobilizing other financing source for climate actions Central Bank and Financial Sector Authority Also coordinating with Central Bank (BI) and FSA (OJK) to promote green and resilience development through fiscal, monetary, and financial policy mix National development plan related to Climate Programs Planning & Budgeting for Climate Programs Climate Budget Tagging Ministry of National Development Planning Technical Line Ministries & Agencies " Implementing role in climate programs and climate budget Implementing role in climate policy and targets 97#99Anticipating the Rise of Emissions After the COVID-19 Pandemic As global economy recovered, the emissions is predicted to increase of 2019 and 2020 (Mt CO₂) per day Daily differences between January and October +5 0 LD -10 -15 Power Ground transport Indus Power Ground transport Industry Residential Aviation Shipping -20 Jan. Feb. March April May June July August Sept. Oct. ZLAGEC Photo: kanalkalimantan.com & BPBD Prov. Kalsel Photo: Bayu Pratama Source: Ministry of Finance During the COVID-19 pandemic, global CO2 emissions have contracted due to a decrease in economic activity and human mobility. However, slowly emissions are crawling up as human mobility policies loosen in some countries. • It should be of mutual concern that, in the midst of the challenges facing the COVID-19 pandemic that has not yet ended, the economy is slowly starting to enter the recovery phase and it is pushing back the level of global carbon emissions. • Therefore, the government should not be off guard because the risk of rising carbon emissions can threaten economic sustainability and people's well-being through the impacts of climate change. . Pandemic is not over yet, and Indonesia were faced by flood disasters in several provinces. This disaster needs to be of concern to the central and local governments in managing forest and land areas so that the ecosystem of water absorption areas can be maintained. 98#100Indonesia's Commitment on Emission Reduction Nationally Determined Contribution (NDC) H Through the Ratification of the Paris Agreement and the Submission of NDC to the UNFCCC, Indonesia is committed to reducing GHG emissions by: 29% below BaU unconditionally With International support or 41% (Conditional) 3,500 3,000 2,500 2,000 1,500 1,000 500 Emission Reduction Target per Sectors FORESTRY ENERGY AND TRANSPORTATION WASTE AGRICULTURE IPPU 497 314 11 9 2.75 650 398 26 4 3.25 note: data dalam MTon CO2e IPPU,2.9 Waste, 2.17 INDONESIA Agriculture, 0.38 FOLU, 5.6 Energy & Transportation, 236.2 In USD Billion Source: Second BUR (2018), USD billion Based on the Second Biennial Update Report (BUR-2) in 2018, Indonesia's financing needs to achieve emissions reduction targets in 2030 reaching USD247.2 billion or around IDR3,461 trillion (IDR266.2 trillion/year). 2010 2011 2012 2013 2014 2015 2016 2017 Emission Reduction in 2017: 24,7% below BaU 2018 2019 2020 Actual Emission Level (include FOLU) BAU NDC Source: KLHK, 2018 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Source: Ministry of Finance 99 99#101Indonesia's Green Project Priority Sector Gol realize that investments in green and sustainable infrastructure are becoming increasingly important in post-pandemic. Regarding the NDC target in reducing the carbon emission, Gol has establish the PPP priority sector of 2020-2024, which two sectors are related to climate issue, respectively: • • Urban Transport, and Waste Management Environmental quality aspects is started to be considered since the beginning of PPP project cycle, notably in planning and preparation stage, such as climate change issues; Promoting green financing, etc. The Project Development Fund (PDF) Facility from MoF is focused to assist those priority sectors to implement the environmental aspects and other quality aspects to be included in project preparation through the PDF. PPP Focused Sectors 2020-2024 Water and Sanitation ID Urban Transport + Gas Distributio n Housing Health Facility Waste Management PPP Green Project 3 1 2 City Street Lighting, Surakarta, Central Java Expected to contribute for 70% energy efficiency by using LED technology as well as carbon emission reduction Waste Management, Legok Nangka, West Java Expected to manage around 2,000 ton waste per day from 6 municipals Source: Ministry of Finance 100#102The Role of Fiscal Policy in Green Economic Transformation Rp TAX State revenue policy is directed to support the development of renewable energy as well as environmentally friendly business areas The Ministry of Finance provides tax facilities in the form of tax holiday, tax allowance, import duty exemption, VAT reduction, government borne income tax, and reduction of property tax to support the development of geothermal and other renewable energy State expenditure policy is directed to support low-carbon and climate-resilient government spending (spending better). The Ministry of Finance implements the Mechanism of Climate Budget Tagging at the national and regional levels to determine the contribution of the State Budget and Sub- National Budget to tackle climate change. Implementation of climate budget tagging in the region in collaboration with the Ministry of Home Affairs and Local Government. Source: Ministry of Finance Financing policy is directed to support expansive fiscal policy through the development of innovative financing instruments The Ministry of Finance issues Sovereign Green Sukuk (Green Islamic Bond) both global green sukuk and green sukuk retail to finance climate mitigation and adaptation projects. 101#103Fiscal Incentives Rp TAX: Tax Holiday Income Tax Facility VAT Facility Import Tax Facility Property Tax Several tax incentives to promote green private investment. Instruments 100% tax discount for Up to 20 years depends on the amount of investment for 17 pioneer industries. Tax Allowance for geothermal businesses, renewable energy generators, and bioenergy industries. The exemption of article 22 income tax on imported goods for geothermal business activities. VAT exemption on imported goods for geothermal activities. Import tax exemption on geothermal activities. Fiscal Transfer Strengthening the capacity of sub-national governments in tackling climate change. Profit Sharing Fund on Natural Resources (DBH SDA) DBH SDA Forestry DBH SDA Geothermal Special Allocation Fund for Physical Development (DAK Fisik): • DAK Fisik Agriculture & Irrigation Development • DAK Fisik Environment Development DAK Fisik Forestry Development • DAK Fisik Marine & Fisheries Development Non Physical Special Allocation Fund (DAK Non Fisik) DAK Non Fisik for Waste Management (for tipping fee support) Incentive Fund (DID) • Property tax deduction exploration stage. up to 100% for DID on Waste Management Source: Ministry of Finance 102#1042018-2020 Climate Change Mitigation and Adaptation Budget Allocation and Realization of the 2018-2020 Climate Change Budget (IDR Trillion) 4.0% 7.0% Rp140.00 Rp120.00 6.0% 6.0% Rp100.00 5.0% Rp80.00 4.0% Rp60.00 2.8% 3.0% Rp40.00 IDR 126.04 2.0% IDR83.54 1.0% Rp 20.00 IDR132.47 IDR97.66 IDT77.71 Rp0.00 0.0% 2018 2019 APBN Perpres 72/2020 Realization Climate Change Budget Climate Change Realization % of Budget Alokasi Anggaran Perubahan Iklim % of Budget • The average climate change budget in APBN reaches 4.3% per year In 2018 and 2019, the realization of government spending for climate change mitigation and adaptation activities reached IDR209.57 trillion, with an average absorption rate of 91.1% of the 2018-2019 cumulative budget allocation. The climate change budget in the Central Government is mostly used to fund climate change mitigation activities Realization of Climate Change Budget According to 2018-2019 Activities (IDR Trillion) Source: Ministry of Finance Mitigation Adaptatio Co-Benefit n IDR9.33 IDR33.25 IDR83.47 2018 IDR3.68 IDR33.39 IDR46.46 2019 103#105Composition of the 2018-2020 Climate Change Budget Actual Climate Change Budget Based on Output Type (IDR Trillion) Total Output in the 2018-2020 Climate Change Budget 24.16 101.87 5.06 166 62 145 138 78.47 105 64 2018 2019 2020 (Pers. Reg 72/2020) 2018 2019 Infrastructure Non-Infrastructure Infrastructure Non-Infrastructure . The climate change budget is dominated by output in the form of physical infrastructure development (waste, energy, transportation and agriculture sectors) Based on the number of outputs, the climate change output in the APBN is more to produce non-infrastructure output in the form of: i. formulating policies and regulations; ii. community empowerment; iii. monitoring and evaluating policies; and iv. increasing the capacity of stakeholders (i.e. training green industry for the industrial sector by the Ministry of Industry). Source: Ministry of Finance 104#106Regional Climate Budget Tagging (RCBT) MOF developed criteria for identifying regional climate change budgets and selected regions to become pilot projects in 2020. 11 Piloting Areas of RCBT Gorontalo Regency Siak Regency Sumedang Regency Pekanbaru City Aceh Province Gorontalo Province West Java Province North Kalimantan Province Papua Province Papua Barat Province Riau Province As per the results of regional climate budget tagging from 11 local governments, the average climate change budget reached IDR 3.01 billion each year between 2017 - 2020. The average annual mitigation budget is IDR 1.19 billion, while the annual adaptation budget is IDR 1.82 billion. Climate budgets in the regions are generally allocated more for climate change adaptation initiatives. Approximately 61 percent of the climate change budget is allocated to adaptation activities, while 39 percent is allocated to mitigation. In 2021, MOF will conduct RCBT Implementation in 6 new areas. 3,000 2,500 Potential Regional Climate Budgets in 11 Piloting Areas 2,490 1,929 2,000 1,683 €1,500 1,338 1,327 1,269 1,196 €1,000 814 500 IDR (in million) Source: Ministry of Finance 2017 2018 2019 2020 | Mitigation Adaptation 105#107Fiscal, Monetary, and Financial Sector Policy Mix for Green Economy Fiscal Policy: KEMENTERIAN KEUANGAN REPUBLIK INDONESIA 1. Mitigation Fiscal Framework 2. Implementation of Govt. Expenditure for Climate Change 3. Tax Facilities 4. Republic of Indonesia's Green Bond/Sukuk Framework 5. Sustainable Finance Platform: SDG Indonesia One, Green Climate Fund, BPDLH 6. Development of Climate Change Fiscal Framework BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Central Bank Policy: 1. Macroprudential Policy that encourages financing in green building and environmentally friendly vehicles 2. Technical Assistance/Capacity Building to increase awareness about sustainable and green finance 3. International Cooperation Forum (Network for Greening the Financial System/NGFS) QJ OTORITAS JASA KEUANGAN Financial Sector Authority Policy: 1. Roadmap of Sustainable Finance, 2. Regulation of Sustainable Finance Implementation, 3. Green Bond/Sukuk Regulation, 4. Capability Enhancement to market participants with support from the International Finance Corporation (IFC) and the Sustainable Banking Network (SBN) Source: Ministry of Finance 106#108Sustainable Finance Roadmap (2021-2025) 7 components of Indonesia Sustainable Finance Ecosystem Policy Awareness 1 2 Human Resources SUSTAINABLE Products FINANCE INDONESIA Market Infrastructure Coordination of related ministries/ Institutions Source: Financial Services Authority (OJK) Non-govermental Support 3 4 5 OJK Strategic Initiative on Sustainable Finance Development of a green taxonomy which aims to classify sustainable financing and investment activities in Indonesia Implementation of ESG aspects into risk management with the aim of increasing resilience and mitigating environmental and social risks that may affect financial industry's business processes Scalable Green Program Development to present success stories of innovative green scheme development to be replicated so as to enhance the role of the financial industry in sustainable financing The innovation of sustainable financial products and services to accelerate financial industry's transition towards sustainability is carried out by developing innovative schemes of sustainable project financing/funding A national campaign for sustainable Finance that aims to build an understanding of the importance of activities that take into account environmental, social, and governance aspects 107#109Innovative Financing: Sovereign Green Sukuk and Planned SDGs Bond Sovereign Green Sukuk and Planned SDGs Bond 14 12 Renewable Energy 10 Green Sukuk Financed Sectors (2016-2019) Sustainable Transportation No Issuance Value 1 Global Green Sukuk (Mar 2018) USD 1,25 billion Number of Projects Energy Efficiency Resilience to Climate 2 Global Green Sukuk (Feb 2019) USD 750 million 3 Green Sukuk Retail (Nov 2019) IDR 1,46 trillion 4 Global Green Sukuk (Jun 2020) USD 750 million Waste to 2 Energy and Waste 0 Management Rp0 Change for Disaster Risk Areas Rp5,000,000,000,000 Rp10,000,000,000,000 Rp15,000,000,000,000 Rp20,000,000,000,000 Financing Commitment 5 Green Sukuk Retail (Nov 2020) IDR 5,42 trillion SDGs Financing Needs in Indonesia 6 Global Green Sukuk (Juni 2021) USD 750 million In USD Billion, 2020-2030 8:00 • Sovereign green sukuk is Indonesia's main financing instrument for climate actions. 700 THOD • Total global green sukuk financing: USD 3.5 billion 500 • Total green sukuk retail financing: IDR 6.88 trillion • Green sukuk has financed various projects in 5 sectors and mostly for transportation projects. • MoF is planning to issue SDGs Bond 759 668 588 517 453 396 400 147 302 3:00 261 404 39% 227 372 192 347 316 200 100 17 168 206 247 226 267 291 Est. SDGs Financing Distribution In USD Billion, 2020-2030 Non-Government Government 4,710 44% 3,030 56% B1% BALL High 0 Source: Ministry of Finance 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Soup: APPELS, SD, 2018 BAU High 108#110Indonesia's Existing Green Bond and Sukuk Framework Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects 1 2 Use of proceeds of Green Bond and Green Sukuk Eligible Green Projects must fall into one of the nine eligible sectors Project Evaluation and Selection Review and approval process by Ministry of Finance and National Development Planning Agency Project selection will utilize the Climate Budget Tagging (CBT) mechanism 3 Management of Proceeds Management - Ministry of Finance The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance Line Ministries The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects 4 Reporting Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report on the list of projects, amounts of proceeds allocated to such projects and estimation of beneficial impacts The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction Source: Indonesia's Green Bond & Green Sukuk Framework 109#111Indonesia's Existing Green Bond and Sukuk Framework (cont'd) Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects Eligible Sectors Green Shading according to CICERO's second-party opinion Dark Green Medium to Dark Renewable Energy Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Sustainable Transport Waste and Waste to Energy Management Green Tourism Sustainable Agriculture Light to Medium Energy efficiency Sustainable Management of Natural Resources The Framework Excluded Use of Proceeds for New Fossil Fuel- Large Scale Based Power Source: Green Sukuk Allocation and Impact Report - May 2021 Electric Light Green Green Building Hydropower Plants > 30 MW Nuclear Assets 110#112Indonesia's Green Initiatives: Financing Green Projects Indonesia's Green Projects Financed by a Combination of Green Sukuk and Other Funding Sources The Government of Indonesia has issued four sovereign global green sukuk, consecutively in March 2018, February 2019 and June 2020 & 2021, with the total amount of USD 3.5 Billion Global Green Sukuk Proceeds Allocation by Sector (in percentage) 83% 2021 Issuance USD 750 million USD 750 million 2020 Issuance 2019 Issuance USD 750 million 2018 Issuance USD 1.25 billion 2018 2019 2020 In 2019-2020, the Government of Indonesia issued two retail green sukuk in November 2019 and November 2020, with the total amount of USD 490.1 million (IDR 6.86 trillion) Use of Proceeds 2020 Global Green Sukuk Issuance The 2020 Global Green Sukuk Issuance comprised of 0.08% and 49% financing new projects 51% refinancing existing projects 7.21% 10.77% 49.51% 33.02% Resilience to Climate Change for Highly Vulnerable Areas and Sectors/ Disaster Risk Reduction Sustainable Transport Waste and Waste to Energy Management Project Owner Financing of 2020 new projects 2 Refinancing of Ministry of Public 2018 projects Works and Housing Ministry of Transportation Ministry of Agriculture 55% 48% 27% 22% 8% 8% 11% 5% Renewable Energy Energy efficiency Resilience to Climate Change for Highly Vulnerable Areas and Sustainable Transport Sectors/Disaster Risk Reduction 9% 11% 7% 7% Waste and Waste to Energy Management Cumulative 2018, 2019, and 2020 Global Green Sukuk Issuance Allocation by Sector 11% 5% Renewable Energy Energy efficiency 41%: Sustainable Transport Allocation by Activity 43% Adaptation 0 36% Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction 6% Waste and Waste to Energy Management 57% Mitigation Information extracted from Green Sukuk Issuance Allocation and Impact Report (May 2021), which has obtained a limited assurance statement from EY Projects were financed in Indonesian Rupiahs and the currency exchange rate is based on the State Budget Assumption for 2020 budget year of IDR 14,400 per USD. Note: 111#113Indonesia's Green Initiatives: Projected Environmental and Social Impacts Environmental Benefits Arising from 2020 Global Green Sukuk Projected Environmental and Social Impacts For 2020 Global Green Sukuk Sustainable Transport • • Expected to: Reduce 1,415,718 tCO2e of GHG emission Reduce travel time by 30 minutes on average Increase passengers-km by 1.3 times (over 2.5 billion passengers are expected to shift from private mode of transportation) Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction • Expected to: Fulfill raw water supply needs for drinking water of 275.5 m³ Protect 1,920.4 Ha of areas from flooding Rehabilitate 134,700 Ha of tertiary irrigation network Develop 1,071 units of other water source Benefit 1,236,000 people Create and revitalize 12,000 Ha of rice field Waste to Energy and Waste Management Expected to 2,059,094 households benefit due to the improved waste management SUSTAINABLE DEVELOPMENT GOALS AFFORDABLE AND CLEAN ENERGY 8 DECENT WORK AND 9 INDUSTRY, INNOVATION 11 SUSTAINABLE CITIES AND COMMUNITIES 13 CLIMATE ACTION ECONOMIC GROWTH 112#114Tangible Results from Indonesia's Green Sukuk Initiatives Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance in 2020 Proceeds from Indonesia's Green Sukuk Initiative has been successfully deployed to a range of eligible Green projects Locations Amount Committed to Finance 2020 New Projects Amount Committed to Refinance 2020 Projects Impacts Social / SDGs Project Examples Financed Refinanced Note: Resilience to Climate Change Across the country Sustainable Transport Jakarta, Java, Banten Waste and Waste to Energy Management All provinces except Banten USD 371.3 million USD 247.7 million 10 Management of Dam, Lake and Other Water Retention Facilities (Financing) Development of water retention units, i.e. water retention basins (embung), dams, and lakes in 22 provinces across Indonesia. These projects provided solutions for the local community to access the groundwater. Locations: 22 provinces across Indonesia Preservation Expansion and of Agricultural Lands (Refinancing) Implementation of rice-field opening and revitalization project in areas highly vulnerable to climate change impacts which may threaten food security. Locations: Potangoan Village of Buol Regency in Central Sulawesi *Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW USD 0.6 million USD 54.1 million 13 ACTION Development and Management of Railway Transport and Supporting Facilities (Refinancing) ° Upgrade of South Line Java Railways Network from single to double track connecting Cirebon City in West Java Province to Jombang Regency in East Java Province. The upgrade of double-track lines becomes a significant part in the effort to improve the role and efficiency of the railroad mode in Java, minimizing the transport burden of road networks. Furthermore, the goal is to improve interregional connectivity to reduce the regional disparity. USD 80.8 million AB Supervision and Development of Settlement Sanitation (Refinancing) While municipal solid waste management focuses to reduce number of waste disposed to landfill by applying 3R principles, the Ministry of Public Works and Housing priorities to develop regional landfill for 3-4 ciities, and improve the carrying capacity and management from open dumping to sanitary landfills Locations: All provinces except Banten Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (May 2021), which has obtained a limited assurance statement from EY Projects were financed in Indonesian Rupiahs and the currency exchange rate is based on the State Budget Assumption for 2020 budget year of IDR 14,400 per USD. 113#115Section 7 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#116Bank Indonesia's Policy Mix Synergy to Build Economic Recovery Optimism Maintaining accommodative monetary policy stance (lowering policy rate 125bps in 2020, and 25ps in February 2021). Maintaining rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms. Strengthening the monetary operations strategy to reinforce the accommodative monetary policy stance. Focusing on the quantity channel by providing liquidity to stimulate economic recovery 1 Monetary Policy 2 Macro- prudential Policy B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA 3 5 4 Financial Market Deepening Payment System Policy Strengthening accommodative macroprudential policy to stimulate growth of loans/financing allocated to priority sectors, incl. SMEs, and inclusion of export L/C as a financing component to stimulate bank lending to the corporate sector and export-oriented businesses. Refining the MSME credit ratio into the Macroprudential Inclusive Financing Ratio (RPIM) by expanding the scope of bank partners to disburse inclusive financing as well as through inclusive financing securitisation and other business models. Accommodative macroprudential policy stance by: Relaxing the Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing Relaxing down payment requirements on automotive loans/financing Holding the countercyclical buffer (CCB) at 0%, Macroprudential Intermediation Ratio (MIR) in the 84- 94% range, Macroprudential Liquidity Buffer (MLB) at 6% with 6% repo flexibility, Relaxing credit card policy Controlling inflation through Inflation Control Team in national and regional level. Supporting the 2020 state budget through SBN purchases in the primary market in line with Act No. 2/2020, while maintaining macroeconomic stability. Supporting national economic recovery program thru Burden Sharing Scheme with the MOF Promoting lower lending rates through close supervision and public communication in coordination with OJK. the Strengthening policy coordination with Government and Financial System Stability Committee to maintain macroeconomic and financial system stability. Coordination with other Authorities Strengthening money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in the forex market Accelerating infrastructure development, including Electronic Trading Platforms (ETP) as well as a Central Counterparty (CCP) Developing Money Market Development Blueprint 2025 Accelerating digital transformation payment system policy and faster implementation of Indonesia Payment System Blueprint 2025 Strengthening and expanding electronification: Social program, e-payment for Government Expanding of QRIS (QR Indonesia Standard) acceptance Source: Bank Indonesia 115#117Bank Indonesia Policy Mix: July 2021 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 21st and 22nd July 2021 to hold the BI 7-Day Reverse Repo Rate at 3.50%, while also maintaining the Deposit Facility (DF) rates at 2.75% and Lending Facility (LF) rates at 4.25% % P Rp Hold the BI 7-Day Reverse Repo Rate at 3.50% Continuing the strengthening strategy for monetary operations to reinforce the effectiveness accommodative policy. of monetary • Nurturing intermediation by strengthening prime lending rate (PLR) transparency with an emphasis on the risk premium and its impact on setting interest rates for new loans across various credit segments Maintaining rupiah exchange rate policy to preserve stability in line with the currency's fundamental value and market mechanisms. Strengthening the payment system ecosystem through PBI PJP/PIP implementation to simplify a more efficient licensing/approval process, while fostering innovation in terms of payment system services. secure Increasing support for a fast, simple, affordable, and reliable payment system that underpins government social aid program (bansos) disbursements and online transaction efficiency. Strengthening exports by extending the SPE exemptions that were due to end on 29th November 2020 until 31st December 2022 in order to exploit increasing demand in trading partner countries as well as rising international commodity prices. Promoting trade and investment as well as continuing to socialise the use of local currency settlement (LCS) in conjunction with other relevant institutions. In July and August 2021, Bank Indonesia will promote trade and investment in Japan, United States, Sweden and Singapore. Source: Bank Indonesia 116#118Loose Liquidity Persist, In Line with Strengthened Synergy Between Monetary and Fiscal Policy PRINCIPLES OF FUNDING AND BURDEN SHARING PRUDENT Maintaining the credibility of Monetary Policy in the effort to Maintain Economic Stability MARKET MECHANISM TRADABLE & MARKETABLE MEASURED LAST RESORT SUN/SBSN tradable maintaining inflation in the target range One-off Policy in 2020 GOVERN Prioritize good governance SUSTAINABLE Bl as the back-stop for Non-public Goods scheme Bank Indonesia has injected liquidity through quantitative easing to the banking industry totaling IDR 101.10 trillion in 2021 (as of 19th July 2021). Furthermore, Bank Indonesia continues to purchase SBN in the primary market as part of policy synergy between Bank Indonesia and the Government to fund the 2021 State Revenue and Expenditure Budget (APBN). As of 19th July 2021, Bank Indonesia has purchased SBN in the primary market totalling IDR 124.13 trillion, consisting of IDR 48.67 trillion through primary auction and IDR 75.46 trillion through Greenshoe Options (GSO) Expansive monetary policy supports loose economic liquidity conditions, as reflected in the high ratio of liquid assets to deposits at 32.95% and deposit growth of 11.28% (yoy) Liquidity in the economy has also increased, as indicated by narrow (M1) and broad (M2) money supply, which grew 17.0% (yoy) and 11.4% (yoy) in June 2021. The main drivers of money supply growth are expansive policies by the authorities and credit growth, which has moved into positive territory Moving ahead, increasing lending activity is expected to expand the contribution of liquidity in terms of driving economic growth through a higher velocity of money in the economy Source: Bank Indonesia 117#119Further Strengthening of an Accommodative Bank Indonesia's Policy Mixe BGM: Lower/Hol dBI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market & Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy BGM 19-20 FEB, 2 MAR, AND 18-19 MAR 2020 1. Lower BI7DRR by 25 bps in February to 4,75%, and other 25 bps in March to 4,50% reserve 2. Lower a 50bps of daily rupiah requirement (RR) for the banks engaged in export-import financing, and expanding rupiah RR cut for SME 3. Lower Foreign Exchange Reserve Requirement from 8% to 4% 4. Rupiah (vostro) accounts of foreign investors as underlying of DNDF 5. Domestic custodian bank for global investors 6. Triple intervention: DNDF, & spot, purchasing SBN in the secondary market 7. Daily FX swap auction and Repo auction of SBN 8. Liquidity through operation injection monetary 9. Relaxation of Macro- prudential Intermediation Ratio 10. QRIS campaign to SME, traditional markets, students and worship places Board of Governor Meeting 11. Lower SKNBI cost Source: Bank Indonesia BGM 13-14 APRIL AND 18-19 MAY 2020 1. Hold the BI 7-Day Reverse Repo Rate at 4.50% for external stability & stimulate growth 2. Strengthening the intensity of triple intervention policy 3. Providing liquidity for the banking industry on restructuring MSME loans and ultra-micro with formal loans 4. Lower the rupiah RR ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks 5. Strengthening Monetary operations and Islamic financial market deepening through FLisBI, PaSBI and SiPA 6. Relaxing the additional demand deposit obligations on the MIR 7. Raised the MLB by 200bps for conventional commercial banks and by 50bps for Islamic banks 8. Increasing the non-cash payment instruments uptake 9. Strengthening policy mix and coordination with the other & Government authorities 10.Accelerating implementation of digital economy & finance BGM 17-18 JUNE AND 15-16 JULY 2020 1. Lower BI7DRR to 4,00%, 25 bps in June and 25 bps in July 2. Maintaining Rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms 3. Providing reserve requirement remuneration of 1.5% per year for banks meeting daily and average rupiah reserve requirements 4. Strengthening a synergized expansive monetary policy response with accelerated fiscal stimuli from the Government: • • to social sectoral firmly committed funding the APBN 2020 through SBN purchases in the primary market to finance the budgets for healthcare, protections, government ministries and agencies & local government Burden sharing with the Government to accelerate MSME and corporate sector recoveries 5. Expediting payment system digitalization to hasten the digital economy and finance implementation as part of the economic recovery efforts BGM 18-19 AUG, 16-17 SEP AND 12-13 OCT 2020 1. Hold BI7DRR at 4,00% 2. Focusing on the quantity channel by providing liquidity to stimulate economic recovery, including supporting Government in accelerating 2020 state budget realization 3. Maintaining rupiah stabilization policy in line with fundamental value & market mechanisms 4. Strengthening MO strategy in order to accelerate monetary policy transmission 5. Accelerating money market and foreign exchange market deepening through infrastructure development, including ETP & CCP 6. Lowering the minimum limit of DP on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles 7. Extending the 50bps lower on rupiah reserve requirements, as an incentive for banks disbursing loans to SMEs and for export-import activity and to non-SMEs operating in priority sectors as stipulated in the PEN, from 31 Dec' 20 previously until 30 Jun'21; 8. Accelerating development of money market instruments to support corporate and SME financing in line with the national economic recovery program 9. Strengthening synergy with the banking industry, FinTech, Government and relevant authorities to accelerate digitalization, amongst others, by supporting SME digitalization and the Made in Indonesia National Movement (GERNAS BBI), and promoting the use of QRIS for e-commerce 10. Expanding QRIS acceptance to bolster economic recovery and accelerate SME by extending 0% MDR for micro-businesses from 30 Sept 20 previously until 31 Dec'20 11. Strengthening policy implementation to stimulate SMEs through corporatization, increasing capacity, access to finance as well as digitalization in line with Gernas BBI 12. Strengthening the digital economy & finance ecosystem through the use of digital payment instruments & collaboration between the banking industry, FinTech & e- commerce to support PEN 118#120Further Strengthening of an Accommodative Bank Indonesia's Policy Mixe BGM: Lower/Hol dBI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market & Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy Board of Governor Meeting Source: Bank Indonesia BGM 18-19 NOV, 16-17 DEC 2020 AND 20-21 JAN 2021 1. BI7DRR lower 25 bps at 3,75% in Nov, and Hold the rate in Dec and Jan 2021. 2. Focusing on the quantity channel by providing liquidity to stimulate economic recovery, including supporting Government in accelerating 2020 state budget realization 3. Strengthening money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in forex market 4. Accelerating the deepening of the foreign exchange market and the domestic financial market development through the implementation of BPPU 2025 5. Maintaining a CCB ratio of 0%, RIM 84-94%, PLM 6% as well as 6% repo flexibility and LTF / FTV ratio for property loans. 6. Accelerating digital transformation & synergy to strengthen economic recovery momentum with robust payment system policy and faster implementation of BSPI'25 7. Strengthening payment system digitalization in order to build economic recovery momentum through several digital transformation initiatives, including: expanding access to digital financial economy services for SMEs & public, collaboration between banks & fintech; promoting broader acceptance of digital payments through the QRIS. 8. Reducing service fees for the BI-RTGS, extending the period of lower service fees for the SKNBI, and lowering payment limit & late payment fees for CC. 9. Implementing payment system regulatory reforms in accordance with PBI No. 22/23/PBI/2020 through industry restructuring, license reclassification, ownership, technological innovation, including data and information, as well as strengthening supervision, including cyber risk management. BGM 17-18 FEB AND 17-18 MARCH 2021 1. Lower BI7DRR to 3.50% in Feb and Hold it in March 2. Relaxing on down payment requirements automotive loans/financing to min 0% for all new motor vehicles and relaxing the LTV/FTV ratio on housing loans/financing to maximum 100% on all residential property for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property. Both effective from 1st Mar until 31st Dec 2021. 3. Publishing the "Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" in February 4. Strengthening Prime Lending Rate (SBDK) transparency in the banking industry, while coordinating with the Government and other relevant authorities to: (i) accelerate monetary policy transmission to lending rates in the banking industry; and (ii) stimulate lending/financing to the corporate sector. 5. Strengthening MIR/Sharia MIR policy through the inclusion of export L/C as a financing component, while incrementally introducing regulatory disincentives in the form of MIR related reserve requirement, to stimulate bank lending to the corporate sector and export-oriented businesses 6. Supporting the Regional Digitalisation Acceleration and Expansion Teams (TP2DD) to stimulate innovation, accelerate and expand Electronification of Regional Government Transactions (ETP) and integrate the digital economy and finance. 7. Supporting development of an inclusive and efficient digital economy & finance ecosystem, by: Extending the QRIS 0% MDR for micro • enterprises until 31st December 2021; Expanding QRIS acceptance to 12mil merchant BGM 19-20 APRIL, 24-25 MAY AND 16-17 JUN 2021 1. Hold BI7DRR at 3.50% 2. Expanding the use of (SukBI) for tenors of 1 week to 12 months, effective from 16th April 2021. 3. Maintaining accommodative macroprudential policy by holding the CCyB at 0%, the MPLB at 6% with repo flexibility at 6%, as well as Sharia MPLB at 4.5% with repo flexibility also at 4.5%. 4. Expanding money market deepening efforts by accelerating the establishment of a Central Counterparty (CCP) as well as standardising repo transactions for clearing via the CCP. 5. Lowering the upper limit on credit card interest rates from 2% to 1.75% per month, effective 1st July 2021 6. Extending the National Clearing System (SKNBI) pricing policy of IDR1 from BI to banks and a maximum of IDR2,900 from banks to customers from 30th June 2021 previously until 31 Dec 2021 7. Extending policy of lower late payment penalties on credit cards at 1% of the outstanding balance, or max of IDR 100,000, until 31 Dec 2021, to encourage the use of credit cards as a private consumption buffer to support the national economic recovery. 8. Strengthening PLR transparency in the banking industry with an emphasis on suppressing higher interest rates on new loans, the affecting factors (increasing risk perception and profit margin) as well as PLR analysis at individual banks 9. Accelerating the money market deepening program by strengthening the corresponding regulatory framework and implementing the Multi-Matching ETP, specifically targeting the Rupiah money market and FX market. 10.Strengthening QRIS policy by: • . Raising the QRIS transaction limit from IDR 2 mil to IDR 5 mil, effective from 01/05/21 Lowering the MDR for Public Services Agencies (BLU) and Public Service Obligations (PSO) 0.7% to 0.4% effective from 01/06/21 119#12110 10 15 Stable Monetary Environment Despite Challenges 20 20 Well Maintained Inflation Ensured Price Stability CPI (%, yoy) rhs •Core (%, yoy) - lhs Volatile Food (%, yoy) - lhs2 Administered (%, yoy) - lhs 0 5 H 1.6 5.00 1.49 1.33 4.00 0.49 3.00 2013 2014 2015 2016 2017 2018 2019 2020 Jun-21 Rupiah Exchange Rate Fared Relatively Well Compared to Peers (ytd) YTD 2021 vs 2020 Strengthened Monetary Policy Framework (%) 8.00 19 August 2016 The New Monetary 7.00 LF Rate: 7.00 BI Rate: 6.50 6.00 Jan-16 May-16 Mar-16 Credit Growth Profile % yoy 20.0 Jul-16 Q3-2016 Q1-2017 TRY -13.72.18 BRL -1.30 -4.48 15.0 -6.44 JPY -1.09 INR -2.10 0.77 10.0 THB -8.85 -0.92 IDR -3.39 1.58 5.0 MYR 4.65 2.24 PHP -4.65 point-to-point 2.48 0.0 SGD -2.95 average 3.31 EUR -4.27 5.10 KRW -5.85 5.30 CNY 0.85 6.63 -10.0 a.o 21-Jul-21 ZAR 0.11 12.94 -20.0 -15.0 -10.0 -5.0 0.0 5.0 10.0 15.0 Source: Bank Indonesia *) Source: Reuters and Bloomberg -5.0 Total Growth -Investment Loans Operation Framework Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Oct-17 Jan-18 Apr-18 Jul-18 Jul-18 1 Oct-18 Jan-19 Jan-20 Mar-20 May-20 Working Capital Loans Consumption Loans Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Apr-20 02-1 Jul-20 Oct-20 07-120 LF Rate: 4.25 BI 7Day RR Rate: 3.50 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 DF Rate: 2.75 Jan-21 Jan-21 Feb-21 Feb-21 Mar-21 Mar-21 Apr-21 1.96 0.59 0.34 -0.41 May-21 Jun-21 120 Jul-21#122Regional Inflation Remains Under Control ...supported by a well maintained inflation in all regions JUNE 2021(%, YOY) SUMATRA 1.76 NATIONAL INFLATION JUNE 2021 1.33% (yoy) Inf> 4% 3%<Inf≤4% L Aceh 2.4 KALIMANTAN 1.45 Riau Islands 1.5 North Sumatra 1.7 Bengkulu 1.9 Riau 1.7 Babel islands 2.5 West Sumatra 1.7 Lampung 2.3 South Sumatra 1.2 Jambi 2.4 1.18 1.4 West Kalimantan 1.1 South Kalimantan 2.2 East Kalimantan 1.2 Central Kalimantan 1.3 North Kalimantan 1.7 SULAWESI 1.79 2.27 216 2.03 1.39 3 1.26 1.76 1.30 2% <Inf≤3% Inf≤2% Banten 1.2 DKI Jakarta 1.0 West Jawa 1.4 Central Jawa 1.2 East Jawa 1.2 Source: BPS, calculated JAVA 1.20 DI Yogyakarta 1.5 BALI-NUSA TENGGARA 1.05 Source: Central Bureau of Statistics of Indonesia (BPS), calculated Bali 0.6 West Nusa Tenggara 1.9 East Nusa Tenggara 1.3 1.4 1.13 1.16 1.21 Gorontalo 2.8 North Sulawesi 2.4 Central Sulawesi 1.7 West Sulawesi 3.9 South Sulawesi 1.5 South-East Sulawesi 2.0 MALUKU-PAPUA 1.21 Maluku 1.2 North Maluku 1.2 Papua 0.5 West Papua 3.3 121#1234 Strategies to Achieve the Inflation Target 2020-2021 Target Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining volatile food inflation less than 4% Controlling administered price inflation 4 Strategies 1. Price Affordability 2. Supply Availability 3. Well Managed Distribution 4. Effective Communication Stabilizing the price Managing demand side Strengthening production, Government food reserves and food export-import management Strengthening institution Encouraging trade cooperation between regions Improving trade infrastructure Improving data quality Strengthening central-regional coordination Source: Bank Indonesia 122#124Principles of Average Reserve Requirement Ratios Improvement . • Considerations for the Average Reserve Requirement Ratios Improvement Improvement in average reserve requirement is a follow up to the monetary policy operational framework reform implemented by Bank Indonesia since 2016. Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. reserve The current improvement aims to elevate flexibility in banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness of monetary policy transmission in maintaining economic stability. * Substance a. Additional rupiah average reserve requirement for conventional commercial banks b. Annulment of demand deposit renumeration c. Implementation of foreign exchange average reserve requirement for conventional commercial banks d. Implementation of average reserve requirement for Islamic banks Old New Effective Date Fixed RR: 5% Fixed RR: 4.5% Average RR: 1.5% RR: 6.5% Average RR: 2% RR: 6.5% 16th July 2018 2.5% (from 1.5% RR) 0% Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% 16th July 2018 Average RR: 2% RR: 8%* 1st October 2018 Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% 1st Average RR: 2% RR: 5%* October 2018 Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 123#125Relaxing Reserve Requirement Ratios Lower reserve requirements, effective 1st May 2020 Regulation 1 2 3 4 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% Source: Bank Indonesia 124#126Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 1 Considerations for Macroprudential Instruments Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 2 3 4 Striving to stimulate the bank intermediation function and liquidity management, Bank Indonesia issued Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018 and Board of Governors Regulation (PADG) No. 20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also overcoming the issue of liquidity procyclicality. This macroprudential policy instrument is countercyclical and can be adjusted in line with prevailing economic and financial dynamics. Source: Bank Indonesia 125#127Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) 1 MIR Accounting Formula Credit Owned Bond Deposit Issued Bond 2 Rate and Parameters Ceiling 94% • Floor 84% 3 Scope of credit/financing . and deposits to calculate MIR MIR Sharia . MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit Issued Sharia Bond Ceiling 94% • Floor 84% • Minimum • 14% Capital Adequacy Requirement • Minimum Capital Adequacy Requirement 14% Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 Credit: rupiah and foreign currency Deposits in rupiah and a foreign currency: • (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds Monthly Commercial Bank Reports Corporate bonds and/or corporate sukuk • For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank • Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 • Financing: rupiah and foreign currency Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds Monthly Sharia Bank Reports Corporate bonds and/or corporate sukuk • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering 4 Source of Data 5 Criteria for securities held • • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 126#128Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 6 Percentage of the securities held 7 Criteria for securities issued 100% (MTN) medium-term notes (MTN), floating rate notes • sharia-compliant medium-term notes (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering • Equivalent to investment grade rating affirmed by a rating agency 8 88 Securities Reporting 9 Scope of deposits to meet DD MIR /DD MIR Sharia 10 Relaxation of DD MIR/Sharia DD MIR • Administrated by an authorised securities institution Offline delivery mechanism (email) • Average daily total deposits in rupiah at all branch offices in Indonesia . Including rupiah liabilities to a resident and non-resident third-party nonbank, consisting of: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • Average daily total deposits in rupiah at all branch offices and sharia business units in Indonesia Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities • Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation • The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK) • Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 127#129Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backgrounds • • • • In response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. BI relaxed MIR/sharia MIR policy in March 2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity. Considering the potential of bank funding sources that are not included in the MIR ratio, for example the expanding share of loans/financing received by banks, Bl decides to adjust MIR/sharia MIR policy in order to optimize loans/financing received for bank lending. This policy to stimulate credit growth will comply with prudential principles. Therefore, Bl is only encouraging banks with low non-performing loans and adequate capital resilience to expand credit/financing. *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia Main Regulatory Points Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement. Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: Credit + Owned Bond Deposit + Issued Bond + Loan/Financing Received Lower disincentive parameter MIR/sharia MIR RR= Lower Disincentives Parameter X (Lower Bound MIR/Sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 14% KPMM ≤ 19% KPMM 19% Lower Disincentives Parameter 0.00 0.00 0.10 0.15 Upper disincentive parameter MIR/sharia MIR RR= - of 0.2 x (Bank's MIR/sharia MIR Upper Bound of MIR/Sharia MIR Target - ) x Deposit *This disincentive applies for banks with CAR below 14%. The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA). 128#130Strengthened MIR and Sharia MIR to accelerate economic recovery To accelerate the economic recovery through stimulating bank lending to the corporate sector and export-oriented businesses, BI has decided to strengthen Macroprudential Intermediation Ratio (MIR/Sharia MIR)) policy through the inclusion of export L/C as a financing component, while incrementally introducing regulatory disincentives in the form of MIR related reserve requirement Expanding the scope of securities in the formula to calculate MIR through the inclusion of a new component, namely export L/C, while maintaining the MIR/Sharia MIR at 84-94% a. Incremental reintroduction of the MIR related reserve requirement (RR) disincentive for banks with an MIR below 75% from 1st May 2021, below 80% from 1st September 2021 and below 84% from 1st January 2022: i. 0.15 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement (KPMM) above 19% ii. 0.10 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement above 14% and up to 19% iii. 0.00 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement below or equal to 14% iv. 0.00 for banks with a gross NPL/NPF ratio above or equal to 5% c. The upper disincentive parameter is set at 0.00 for banks with a Minimum Capital Adequacy Requirement below or equal to 14% and banks with a Minimum Capital Adequacy Requirement above 14%. Current Regulation New Regulation Current Regulation New Regulation Regulation MIR (CCB) Sharia MIR (SCB and SBU) Regulation MIR (CCB) Sharia MIR (SCB and SBU) In the form of and/or corporate sukuk; Criteria of Securities held corporate bonds In the form of corporate sukuk; 1.Issued by nonbank corporation and residents. 2 Offered to the public through a public offering. 3.Rated by a rating agency no lower than investment grade. 4.Administrated by an institution In the form of corporate bonds and/or corporate sukuk; In the form of corporate sukuk; Lower Lower NPL/NPF KPMM Disincentive Parameter NPL/NPF KPMM Disincentive Parameter Criteria of Securities held 1. Issued by nonbank corporation and residents. 2. Offered to the public through a public offering. >19% 0.00 >19% 0.15 14%<KPMMS 14%<KPMM< 3. Rated by a rating agency no lower than investment grade. <5% 0.00 <5% 0.10 19% 19% authorised to provide securities settlement and custodial services. 4. Administrated by an institution authorised to provide securities settlement and custodial services. ≤14% 0.00 <14% 0.00 ≥5% 0.00 ≥5% 0.00 In the form of export L/C, Applicable to banks with an MIR/Sharia MIRbelow 75% from 1stMay 2021, below 80% from 1stSeptember 2021 and below 84% from 1stJanuary 2022 129#131Principles of Macroprudential Liquidity Buffer (MLB) Regulation 1 Rate 2 Components 3 Calculation Formula 4 Flexibility 5 Sources of Data on Deposits MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks) 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) • Securities denominated in rupiah held by a conventional commercial bank that may be used for monetary operations (including SBI/SDBI/SBN); and • Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits • Monthly Commercial Bank Reports • Rupiah deposits to calculate MLB are the average daily total deposits at all branches in Indonesia • Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • • Monthly Sharia Bank Reports Rupiah deposits to calculate sharia MLB are the average daily total deposits at all branches in Indonesia Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 130#132Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020. Regulation 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 2 Before After 6% of rupiah deposits 4% of rupiah deposits Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits Credit card policy, effective 1st May 2020. Regulation 1 Lower upper limit on credit card interest 2 Temporary reduction of minimum payment requirements Before 2.25% per month 10% 3 Temporary reduction of late payment penalties 3% or maximum of Rp150,000 4 Supporting credit card issuer policy to extend the due date for customers After 1.75% per month 5% 1% or maximum of Rp100,000 Issuer discretion Effective Period 1st July 2021 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2021 1st May 2020 - 31st December 2020 131#133Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection* 1. Increasing opportunities of first time buyers to fulfill their housing needs through housing loan, specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio for property financing as shown in the table below. PROPERTY LOAN & PROPERTY FINANCING BASED ON MURABAHAH & ISTISHNA DEEDS 2. 3. Relaxing the amount of loan/financing facility through indent mechanism to a maximum of 5 facilities without taking account of the orders Adjusting the arrangement of stages and amount of property loan/financing disbursement of indent property: Stage and Disbursement Rate House/Office House/Shop Current Regulation Conditions PROPERTY FINANCING BASED ON MMQ & IMBT DEEDS Current Regulation Current Regulation Relaxation PROPERTY TYPE PROPERTY TYPE Property Loan & (m²) Financing Property Loan & Financing Property Financing Relaxation Property Financing (m²) I Ill etc 1 Il etc etc Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 80% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling etc HOUSE Type >70m² HOUSE 85% 80% 75% 80% Type 22-70m² 85% 80% 85% Type>70m Type 22-70m² 90% 85% 80% 85% 90% 85% 90% Type <=21m² Type <=21m² APARTMENT APARTMENT Apartment Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 70% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of ceiling Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Type >70m² 85% 80% 75% 80% Type>70m² 90% 85% 30% 85% Relaxation Type 22-70m² 90% 85% 80% 85% Type 22-70m² 90% 85% 80% 85% Type <=21m² 85% 80% 85% Type <=21m² 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% 66 "The LTV rate depends on each bank's risk management Stage and Disbursement Rate House Office House/Shop House Max. Cumulative disbursement up to 30% of ceiling Max. Cumulative disbursement up to 50% of celling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia Conditions After loan deeds Footing finished Roof toop finished Letter of acceptance accompanied with deeds of purchase and covernote 132#134Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* 1. 2. 3. Prudential aspects of Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank's risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debtor and developer/seller's bank account. LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia 133#135Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* (Effective December 2nd, 2019) Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. • Policy Backgrounds In response to global and domestic economic developments, Bl is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be given to borrower with strong repayment capacity and low credit/financing risk. Main Regulatory Points 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing. a. Bl decides to relax the LTV ratio for property loans and FTV ratio for property financing by 5% from current ratio as follows: Landed House Type >70 Type >21-70 Type $21 Table 1. Current LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Financing based on Akad Murabahah & Akad 1 Istishna Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad Property Financing based on akad MMQa & akad IMBT 22 Property Financing based on akad MMQ & akad IMBT 1 22 1 Istichna 2 23 1 80% 85% Apartment Type >70 80% Type >21-70 85% Type ≤21 8.5% Office House 85% Landed House Type >70 Type >21-70 Type ≤21 2 23 85% 80% 70% 90% 80% 60% 70% 85% 75% 65% - 80% 70% 85% 80% 70% 60% 85% 75% 65% 85% 90% 80% 70% 90% 80% 70% 85% 80% 70% 80% 70% 85% 80% 70% 80% 70% Table 2. Adjusted LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Property Financing Does Not Meet NPL/NPF Criteria Property Financing Property Financing Financing based on Akad Murabahah & Akad based on akad MMQ & akad IMBT based on Akad Murabahah & Akad based on akad MMQ & akad IMBT Istishna 22 1 22 1 Istishna 2. 23 1 2 23 1 85% 90% 90% 85% 95% 75% 85% 65% 90% 80% 75% 85% 70% 75% Apartment • Bl will regularly evaluate this policy at least once a year. Type >70 85% 90% 85% 75% 65% 90% 80% 70% Type >21-70 90% 90% 95% 85% 75% 95% 85% 75% Type $21 9.0% 90% 85% 75% 85% 75% Office House 9.0% 90% 85% 75% 85% 75% Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 134#136Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* (Effective December 2nd, 2019) Main Regulatory Points 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria standards/certificates Table 3. LTV/FTV Ratio for Green Property Meets NPL/NPF Criteria Property Loan & Property Property Financing Financing based on Akad Murabahah & Akad Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad issued by refers a nationally to the Istishna 1 or Landed House Type >70 Type 21-70 internationally recognized environmental institution. b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows: İ. For buildings 2500m², the bank may conduct a self-assessment using the tools/applications provided by a recognized institution. ■ For buildings > 2500m², the assessment must be conducted by a recognized institution; ■ For new buildings constructed in an area by one developer or group of developers, the assessment must be conducted by a recognized institution and the certificate must be submitted by the developer Additional incentive for green property on LTV ratio for property loans and FTV ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows: Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 Type 121 Apartment Type 70 Type>21-70 Type $21 Office House based on akad MMQ & akad IMBT 22 1 22 1 90% 95% Istishna 23 Property Financing based on akad MMO & akad IMBT 2 23 ד 95% 90% 80% 90%. 70% 95% 85% 75% 80% 90% 80% 90% 95% 90% 80% 70% 95% 85% 75% 95% 9596 90% 80% 90% 80% 95% 95% 90% 80% 90% R0% 95% 95% 00% 80% 90% 80% of Down Payments 3. Adjustment Loans/Financing on Automotive a. Down Payments on Automotive Loans/Financing is adjusted as follows: i. Relaxation on the down payments of automotive loans automotive financing 5%-10% from current regulations; or ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment of down payments of automotive loans/financing in points a and b is as follows: Table 4. Current Down Payment on Automotive Loan or Financing Table 5. Adjusted Down Payment on Automotive Loan or Financing Current Down Payment Adjusted Down Payment Meets MPUMPF Does Not Meet Criteria Meets NPL/NPF Criteria NPL NPFC Does Not Meet MPL/NPF Criteria 2-Wheeled 20% 25% 2-Wheeled 15% 20% 3-Wheeled or more non productive) 3-Wheeled or more aroductive] 253 30% 3-Wheeled or more (non productive) 15% 25% 20% 3-Wheeled or more productivel 10% 15% 135#137Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing** (Effective December 2nd, 2019) Main Regulatory Points 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; ¡¡¡. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Table 6. Down Payment on Green Automotive Loan or Financing 2-Wheeled Down Payment on Green Automotive Loan or Financing Does Not Meet NPL/NPF Meets NPL/NPF Criteria 10% 10% 5% Criteria 15% 20% 10% 3-Wheeled or more (non productive) 3-Wheeled or more (productive) Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing is effective from December 2nd, 2019 Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 136#138Adjustment of Minimum Down Payments on Green Automotive Loans/Financing (Effective 1st October 2020) Bank Indonesia adjusts macroprudential policy in automotive sectors by: (Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles. Main Regulatory Points 1. Adjustment of Minimum Down Payments on Green Automotive Loans/Financing. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. Type of Green Motor Vehicle Current regulation Two-wheel Three-wheel or more (non- commercial) Three-wheel or more (commercial) New Regulation *) (PBI No. 21/13/PBI/2019) *) 10% 0% 10% 0% 5% 1. Applicable to banks with a non-performing loans (NPL) ratio below 5% 2. Effective 1st October 2020 Requirements: 1. Gross NPL ratio on total credit <5%; and 2. Net NPL ratio on automotive loan <5% Source: Bank Indonesia 0% 137#139Adjustment of LTV/FTV Requirements on Automotive loans/financing (effective from 1st March 2021 until 31st December 2021) Bank Indonesia relaxes down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles to stimulate credit growth in the automotive sector, while maintaining prudential principles and risk management Policy Objectives and Background a. b. C. d. e. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. Considering the need to stimulate recovery, particularly in the automotive sector, and considering the sector has strong backward and forward linkages in the economy. The policy is implemented as part of the policy mix with fiscal stimuli issued by the Government, including a reduction to the luxury goods sales tax (PPnBM). The amendment also takes into consideration the contained credit/financing risk in the automotive sector. Looser downpayment requirements on automotive loans must comply with prudential principles and risk management. Changes to Down payment Requirements on Automotive Loans/Financing Current Requlation Downpayment Requirements on Non-Green Vehicles New Regulation Devinpayment solirements Downpayment Requirements on Green Vehicles Source: Bank Indonesia Downpayment Require rents on Green Vehicles Vehicle Type NPL Requirements Met NFL Requirement Not Met NFL Requirements Met-- NPL Requirements Not Met Vehicle Type on Non-Green Vehicles NPL Requirements Met NFL Requirements Not Met NFL Requirements Met- NFL Requirements Not Met Two Wheels 19% 20% 0% 15% Two Wheels 0% 10% 0% 0% Two Wheels 15% 25% 0% 20% Two Wheels 0% 10% 0% 0% or More (Non- Commercial) Two Wheels 10% 15% 0% 10% of (Non- Commercial) Two Wheels More 0% 5% 0% 0% Mare or More (Commercial) (Commercial) *) previous regulation, PBI No. 21/13/PBI/2019 *) Requirements as follows: 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio <5% Notes: Green vehicles include battery electric vehicles (BEVS) as stipulated in prevailing laws and regulations on accelerating the battery electric vehicle program for road transportation. 138#140Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2021) Bank Indonesia relaxes he Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property to stimulate credit growth in the property sector, while maintaining prudential principles and risk management, Policy Objectives and Background a. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. b. C. d. Considering the need to stimulate recovery, particularly in the property sector, and considering the sector has strong backward and forward economic linkages. The amendment also takes into consideration the contained credit/financing risk in the property sector. The LTV ratio is set at an upper limit of 100% for banks meeting the NPL/NPF requirements and regulations concerning the liquidation of partially prepaid property (inden) are being relaxed, which must comply with prudential principles and risk management. a. Changes to LTV/FTV Ratio on Non-Green Property Loans/Financing Current Regulation NPL/NPF Criteria Met Property Loans Financing NPL/NPF Criteria Not Met* Property Loans/Financing Property Financing based on MMO and IMBT Contracts 田 New Regulation NPL/NPF Criteria Met Property Loans/Financing based on NPL/NPF Criteria Not Met* Property Loans/Financing based on Murabahah and Istishna Contracts Property Financing based on MMO Source: Bank Indonesia Property Facility 1 based on Murabahah and Istishna Contracts 22 Financing based on MMQ and IMBI Contracts 1 22 based on Murabahah and Istishna Contracts 12 23 Murabahah and Property Financing based on MMO and IMBT Contracts and IMBI Contracts 12 23 Facility Istishna Contracts 1 22 1 22 1 2 23 1 2 23 Landee House Type >70 85% 90% Type>21-70 90% 95% 85% 75% 65% 90% 80% 70% 85% 75% |85% 75%| Type ≤21 Apartment - - - - Landec House Type >70 Type >21-70 Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 95% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% 100 100 % % 95% 95% Type >70 85% 90% Type >21-70 90% 90% Type ≤21 90% 90% 85% 75% 65% 90% 80% 70% 95% 85% 75% 95% 85% 75% 85% 75% 85% 75% Apartment - Type >70 Type >21-70 100% 100% 100% 100% 100% 100% Shop House/Office 90% 90% 85% 75% 85% 75% Type ≤21 100% 100% 100% 100% 95% 95% House Notes: Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100 100 % % 100% 95% 90% 90% 95% 90% 90% 95% 95% 1. denotes LTV ratio policy at bank discretion 2. Based on PB No. 21/13/PBU2019 *) NPLANPF Criteria: 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio on property loans/finanong <<5% 139#141Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2021) Facility based on Murabahah and Istishna Contracts 1 27 1 22 2 based on Murabahah and Istishna Contracts 1 23 1 2 23 Facility b. Changes to LTV/FTV Ratio on Green Property Loans/Financing Ketentuan Saat Ini NPL/NPF Criteria Met Property Loans/Financing Property Financing based on MMO and IMBT Contracts NPL/NPF Criteria Not Met" Property Loans/Financing Property Financing based on MMO and IMBT Contracts Ketentuan Baru NPL/NPF Criteria Met Property Loans/Financing based on Murabahah and Istishna Contracts 1 Property Financing based on MMQ and IMBT Contracts 22 1 22 PP Bdsr NPL/NPF Criteria Not Met* Property Loans/Financing based on Murabahah and Istishna Contracts 1 23 2 Akad MMQ & Akad IMBT 1 2 23 Landed House Landec House Type >70 Type >21-70 90% 95% 95% 90% 80% 70% 95% 85% 75% 90% 80% 90% 80% Type >70 100% 100% 100% Type >21-70 100% 100% 100% Type $21 Type ≤21 100% 100% 100% 100% 95% 90% 100% 95% 95% 100% 100% 95% 90% 95% 90% 90% 95% 95% 95% 95% 95% 100% 95% 95% Apartment Type >70 90% 95% |90% 80% 70% 95% 85% 75% Type >70 100% 100% 100% Type >21-70 95% 95% 90% 80% Type $21 95% 95% 90% 80% 90% 80% |90% 80% Type>21-70 100% Type $21 100% 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100% 100% 95% 95% 100% 95% 95% Shop House Office 95% 95% 90% 80% 90% 80% Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% House Notes 1. denotes LTV ratio policy at bank discretion *NPLANPF Criteria 2. Based on PB No. 21/13/PB/2019 3. Criteria for a green building a Property area <2,500m², assessed by Bank Indonesia using tools from an approved green building appraisal institution and/or certified directly by an approved green building appraisal institution, b. Property area 2500m², certified by an approved green building appra sal institution. 1. Gross NPL/NPF ratio < 5%, and 2. Net NPL/NPF ratio on property loans/financing <5% c. Changes to Indent Regulations Current Regulation Source: Bank Indonesia New Regulation Repeals regulations concerning the gradual liquidation of Indent and the maximum cumulative liquidation of property loans or property financing. 2. Banks are required to maintain prudential principles and risk management when liquidating property loans/financing on indent. Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation up to 30% of ceiling up to 50% upon completion of loan contract 1. upon completion of foundations up to 90% of ceiling upon completion of roof up to 100% of ceiling upon signing of BAST accompanied by AJB and a cover note. 140#142Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry Bank Indonesia published the “Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" to accelerate monetary policy transmission and expand the dissemination of information to corporate and individual consumers in order to enhance governance, market discipline and competition in the credit market. Prime Lending Rate and Deposit Rate Response to BI7DRR 1 Bank Indonesia has maintained an accommodative monetary and macroprudential policy stance in order to stimulate economic growth. Key Takeaways The banking industry has continued to lower prime lending rates (PLR), although the magnitude ofreductions has slowed. The cost of loanable funds (CoLF) is still edging prime lending rates down, yet higher profit margins have offset further reductions. The risk premium in the banking industry is trending upwards, pointing to a higher risk perceptionof the corporate sector. Consequently, state-owned banks, national private commercial banks and regional government banks raised lending rates on new loans in April 2021. • Prior to the Covid-19 pandemic, from June 2019 until Feb 2020, BI lowered the BI7DRR policy rate five times by a total of 125bps from 6.00% to 4.75%. From March 2020, Bank Indonesia lowered the policy rate another four times (100bps) to a level of 3.75% in November 2020, and lower another 25 bps in Februari 2021 to 3.50%. In terms of liquidity, accommodative monetary and macroprudential policy significantly boosted liquidity in the banking industry in order to maintain financial system stability and the bank intermediation function. Graph 1 Prime Lending Rate, BI7DRR and 1-Month Term Deposit Rate Performance 10.64 8.87 6.14 5.73 5.37 5:20 3.65 3.50 2 O 5388 8 8 8 2017 2018 2019 2020 2021 Spread (SBDK-BITDRR) SBDK Graph 2. Prime Lending Rates by Bank Gro Spread (SBDK - Sb depo 1 bln) Deposito 1 bulan Group Graph 3. Prime Lending Rate Performance by Component The banking industry has continued to lower prime lending rates (PLR) in response to the BI policy rate, although the magnitude of reductions has slowed. By bank group, state-owned banks were the main driver of lower PLR in the banking industry. . . By component, the cost of loanable funds (CoLF) remained the main contributor to lower PLR. In the near term, the dynamics of PLR components are characterised predominantly by higher profit margins in the banking industry amidst a lower cost of loanable funds (COLF). Pursuant to OJK Regulation (POJK) No. 37/POJK.03/2019 concerning Bank Report Transparency and Publication, the PLR consists of three components, namely; i. the cost of loanable funds (COLF), incl. the cost of funds, cost of services, regulatory costs and other costs; ii. overhead costs (OHC), incl. labour costs, education and training costs, R&D costs, rental costs, promotion and marketing costs, maintenance and repair costs, fixed asset and inventory depreciation costs as well as other overhead costs; and iii. profit margin, which is determined by the respective bank for lending activity. 1 Assessment period until April 2021. Source: Bank Indonesia 14 12 10 8 B 6 14" 12 10 2018 --BPO 2019 BUMN Source: Financial Services Authority (OJK), processed 5.5 5.0 4.5 11.39 40 10.0.3 9.35 3.5 10.21 9.05 30 8.70 7.75 25 6.57 20 2020 2021 BUSN KCBA 3 2 3 3 4 2 3 3 4 2 3 8 2017 2018 HPDK OHC 4.53 3.48 3.20 2.62 148 2019 2020 2021 Margin Keuntungan Source: Financial Services Authority (OJK), processed.#143Improving the Effectiveness of Monetary Policy Transmission Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars B Reformulation of Monetary Policy Operational Framework Implementation of BI 7 Day Reverse Repo Rate Enhancement of monetary policy signal Implementation of Money Market Deepening Program Enhancement of instruments and transactions Implementation of Reserve Requirement (RR) Averaging Enhancement of banking liquidity management Blueprint for Money Market Development (BPPU) 2025 launched on Dec 14th, 2020 to build a reliable and efficient ecosystem for money market development in Indonesia Initiative I Promoting Digitalization and Strengthen Financial Market Infrastructures (Trading venue, central counterparty, BI-SSSS, BI-RTGS, trade repository) Initiative II Strengthening Effectiveness of Monetary Policy Transmission (Repo, IndONIA and JIBOR, Overnight Index Swap, DNDF, LCS) Initiative III Developing Economic Financing Sources and Risk Management (long-term hedging, sustainability and green financing, investor retail, asset securitization) Blueprint is accessible here: https://www.bi.go.id/en/publikasi/kajian/Pages/Blueprint-Pengembangan-Pasar-Uang-2025.aspx Source: Bank Indonesia 142#144Principles of Domestic Non Deliverable Forward (DNDF) Transaction 1. 2. 3. Purposes To support the effort of stabilizing the Rupiah exchange rate through the additional of alternative hedging instruments To support the development and deepening of the domestic financial market To increase the confidence of exporters, importers, and investors in conducting economic and investment activities through the flexibility of hedging transactions against Rupiah currency risk General Provisions ✰ Domestic Non-Deliverable Forward Transaction (DNDF Transaction) Plain vanilla derivative transaction of foreign exchange against rupiah in the form of forward transaction with fixing mechanism in the domestic market Forward Transactions Forward Transactions are sell/purchase foreign currencies against rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date Fixing Mechanism Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date) Other Definitions The definition of derivative transaction of foreign exchange against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah Source: Bank Indonesia 143#145Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: Transaction between: III Bank Customer III Can only be performed to hedge rupiah exchange rate risk. 1. Must have Underlying Transactions: X Including all following activities : a. b. C. Trade of goods and services Investments, loans, capital, and other investements. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excluding following activities: a. b. ن فن d. e. f. g. Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies Intercompany loan Money changer activities. Bank Foreign Party III III 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank - Bank Source: Bank Indonesia 144#146Principles of Domestic Non Deliverable Forward (DNDF) Transaction Source: Bank Indonesia Transaction Settlement • Use Fixing mechanism Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR Settlement currency : IDR Roll over and early termination are not allowed Roll over and early termination for DNDF is prohibited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging Customer/ Foreign Party Overseas Bank Hedging Cover Hedging Bank Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. 145#147Amendment on DNDF Regulation *to provide more flexibility in DNDF transaction *to increase liquidity and efficiency in domestic foreign exchange market BI Regulation No. 20/10/PBI/2018 Article 3 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without underlying documents Article 6 2. DNDF can be terminated (unwind); Article 11 3. Underlying documents must be final (firm) with additional supporting documents 4. Not Regulated; Article 11 *Effective on May 17th, 2019; English version of the regulation is available in Bl website. Source: Bank Indonesia 3. Underlying documents for buy FX/IDR for DNDF is : Final (firm commitment) + Supporting documents 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: . • Final (firm commitment) + Supporting documents Projection (anticipatory basis) + Supporting documents Article 11 5. In using estimate underlying transaction documents in the form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. 146#148• Strengthening Jakarta Interbank Spot Dollar Rate (JISDOR) To accelerate money market deepening The strengthening of JISDOR to increase domestic foreign exchange market credibility and support exchange rate stability. This measures is in line with the benchmark reform initiatives taking place on global financial markets, to establish a reference rate that represents daily exchange rates based on transactions supported by best practice methodologies. ✓ Effective starting April 5, 2021 • JISDOR is obtained by calculating the weighted average based on transaction volume of the Rupiah exchange rate against USD on the spot market within the specified time window Before Implementation Specification After Implementation Information Currency Pair USD/IDR Not changed Data type Actual USD/IDR spot transactions traded in interbank market Not changed Data Reporting Media SISMONTAVAR Publisher Administrator Bank Indonesia Observation Range 08.00-09.45 08.00-16.00 Not changed Not changed Changed Jakarta Time JISDOR Publication Time Calculation Method 10.00 WIB Weighted average rate of USD/IDR spot transactions traded in interbank market Jakarta Time * 16.15 WIB * Changed Not changed Publication Media Bank Indonesia Website Not changed * Adjustment of the operational time for the domestic FX Market operating hours during The COVID-19 Pandemic: Monitoring Period JISDOR ranges: 09.00 - 15.00, JISDOR published at 15.15 Jakarta Time. JISDOR is available on every working days on https://www.bi.go.id/en/statistik/indikator/Default.aspx Source: Bank Indonesia 147#149Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) As hedging instruments against Rupiah interest rate changes IRS market development OIS market development We're Here 3 IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest Improvement of IRS transaction liquidity rate Encourage price transparency in the rupiah money market * Strengthen monetary policy transmission Provide alternative hedging instruments against rupiah interest rate changes Support securities market deepening in Indonesia 148#150OIS and IRS Transactions: General Provisions Market Players. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Transaction Needs Analysis. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is required to have an analysis on the need of rupiah interest rate derivative transactions. Calculation Base ACT/360 Market Conventions Interest Payment based on Netting OIS Quotation rates based on 2 decimals Market Conventions. When performing IRS and OIS transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Settlement. Settlement can be performed as a netting payment and every transaction has to be settled in Rupiah. Close-out netting can be applied under predetermined conditions. IndONIA Index with 5 decimals Compound Floating Rates (CFR) based on 5 decimals Notional of Net interest payment in IDR with 0 decimals Settlement Date = 1 business days after Maturity Date (MD) Quotation : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, OIS settlement will only be done at the end of the OIS tenor (MD+1bd). Source: Bank Indonesia 149#151Enhancement of Monetary Operations Framework 3 2 STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement. ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties 4 MOVING FROM AXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS PROGRESS • • • PREVIOUS JIBOR Can be traded among contributor banks for 10 minutes. • Up to the amount of IDR10 billion. Up to 1-month tenor. CURRENT JIBOR (as per June 1st, 2016) Can be traded among contributor banks for 20 minutes. Up to a total of IDR20 billion. • Up to 3-month tenor. Source: Bank Indonesia 150#152IDR Tn 160 140 120 100 80 60 40 20 0 2016 Source: Financial Service Authority (OJK) 2017 IDR Tn 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Bank Loans Financial Intermediation is Affected by Curbed Economic Activities The slowdown in new loan demand, which was found across all segments is still happening especially with the increase in COVID-19 cases in Indonesia. However, OJK's comprehensive response to the pandemic was crucial in preventing a deeper downturn... LOAN Bank Loan Growth continued to improve in May-21, therefore the growth contraction is decreasing and currently at -1.23%. Financing growth also continues to improve despite the opposing number. The growth for May-21 was at -13.7% in (YoY). Nov-19 Dec-19 Jan-20 Feb-20 YoY Growth (rhs) YoY 5,514 16% IDR tn - 12% 500.0 8% 400.0 4% 300.0 -1.23% 0% 200.0 -4% 100.0 -8% 0.0 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 ΠΙΡΟ Rights Issue Corporate Bond & Sukuk 50 Through 6 July 2021 30 Financing Total of securities issuance reaches IDR 91.69 Tn (YTD) as of 6 July 2021, indicating a more optimistic signal to economic recovery. General & Reinsurance premium growth was currently contracting at -2.9% (YOY) and Life insurance premium grows by 14% (YoY) as of May-21. -30 2018 2019 2020 2021* 49.58 -10 35.66 6.45 Jan-19 10 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Life Insurance Premium Growth General & Reinsurance Premium Growth Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 151 -2.9 Jul-20 Aug-20 Sep-20 Oct-20 14 Growth (rhs) YOY 10% 5% 362.7 0% -5% -13.7% -10% -15% May-21 -20%#1530 Jan-19 Feb-19 2 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 4 Apr-20 May-20 Jun-20 10 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 15 Jul-19 Aug-19 Sep-19 Oct-19 20 20 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 Apr-20 May-20 May-20 Jun-20 % 25 % 9 26 Net Interest Margin has remained stable throughout the year, while Return on Assets shows slight contraction starting in early 2021 with a value of 4.66% and 1.80% respectively in May 2021. Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Net Interest Margin ■Return on Assets Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Jul-20 Aug-20 4 4.66 3 2 1.80 1 0 T Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 T Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Mal-20 Apr-20 May-20 May 20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Sep-20 Oct-20 Nov-2 Nov-20 Dec-20 Dec-20 Jan-21 Feb-21 Mar-21 Jan-21 Feb-21 Mar-21 152 CAR ■Tier 1 Resilient Financial Institutions Domestic financial institutions remains sound and stable, supported by strong capitals and leverage amidst hurdles due to the new variant of COVID-19... As of May 2021, CAR of the banking sector was steadily high and remained stable at 24.34% and Tier-1 capital at 22.55%.*) RBC of the insurance industry was consistently high, stable, and above the minimum threshold, with General Insurance RBC at 336% and Life Insurance RBC at 651% as of May 2021. Apr-21 May-21 0 24.34 900 22.55 800 700 500 400 300 200 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 009 100 threshold Insurance RBC (Lhs)= 120% Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Gearing ratio of multi-finance remained below the threshold and continued to contract at 2.01% as of May 2021. Apr-21 May-21 2.01 Jul-20 Aug-20 Sep-20 Life Insurance (Lhs) General Insurance (rhs) 400 336 350 300 651 250 200 threshold Insurance RBC (rhs)= 120% 150 100 50 May-21#1540 Jan-19 Feb-19 1 4 3 2 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 % 5 Mar-20 Apr-20 May-20 NPL Net % 170 160 150 140 130 120 110 100 90 80 70 60 50 40 Jan-19 H Feb-19- Mar-19 - Apr-19- May-19- Jun-19- Jul-19- threshold LA NCD= 50% Aug-19 Sep-19 Oct-19 Nov-19 Dec-19- Jan-20- May-20- Apr-20 Jun-20 Jul-20 % Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs) 240 220 150.96 35 200 180 32.71 30 160 threshold LA to Deposit (rhs) = 10% OGENN 140 25 120 100 80 15 60 10 40 20 Banking NPL ratios in April 2021 were well-managed and remained steadily below threshold at 3.22% gross and 1.02% net. Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Nov-20 Dec-20 Jan-21 Fob-21 Feb-21 Mar-21 Apr-21 ■NPL Gross Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 May-21 Manageable Credit Risks with Adequate Liquidity Liquidity risk and capital risk in banking, insurance and capital market industries are slightly impacted as new Covid-19 variant starts to spread and affect the economy... Liquid Assets to Non-Core Deposits and Liquid Assets to Deposits remained well-above the threshold following banks' cautious appetite for lending. *) As of April 2021, Investment Adequacy Ratios of Life and General Insurance Industry remained solid and well above the threshold. *) Aug-20- Sep-20- Oct-20 Dec-20- Nov-20 5 3.35 4 3 2 1.1 1 0 Jan-19 Feb-19- Mar-19- Apr-19- T Jul-19- May-19 Jun-19- Aug-19- Sep-19- Oct-19- Nov-19 Dec-19 Life Insurance threshold Investment Adequacy Ratio= 100% Jan-20 Feb-20 Mar-20 Apr-20- May-20- Jun-20- Jul-20 % 206 As economic conditions are improving, NPF of multi-finance companies is well-managed steadily below the 5% threshold and currently at 3.9% as of April 2021. *) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 153 4.0 Aug-20- Aug-20- Sep-201 Oct-20- Nov-20- Dec-20- Jan-21 Feb-21 Mar-21 Apr-21 May-21 General Insurance 109.5 196.6#1550 Jan-19 Feb-19 300 600 1,500 1,200 900 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 % LO 5 4 3 2 1 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Oct-19 Nov-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 IDR Tn nsurance investment value was growing steadily reaching IDR 1262.71 Tn and pension fund investment increased to IDR 306.46 Tn in May 2021. *) Insurance May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Apr-20 May-20 Jun-20 Jul-20 Manageable Market Risks Several indicators of market risk across industries showed adequate performance result amid global pressure... Net open position in the banking sector stood at 1.88% in May 2021, maintained far below the maximum limit of 20%. *) Net asset value (NAV) of equity mutual funds grew with low volatility in June 2021. Aug-20 Sep-20 Oct-20 Nov-20 Pension Funds (rhs) IDR Tn IDR Tn 400 1262.71 250 350 200 306.46 300 150 100 250 50 200 0 50 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 May-21 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 0 IDR Tn 800 600 1.88 400 200 NAV Equity Mutual Funds Aug-20 Sep-20 Oct-20 Nov-20- Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 Multi-finance companies' exposure to foreign and domestic debt remains steadily low. *) Domestic Debt Foreign Debt Nov-20 NOV-20 Dec-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 154 May-21 86.15 137.51 JCI (rhs) 8,000 6,000 4,000 2,000 As of 18 June, 2021 0 May-21 Jun-21-#156-100 -150 Jan-19 -50 0 IDR Tn 100 50 50 Domestic Capital Market Performance Amid Global Challenges The progress of Covid-19 vaccines rollout and prospect of faster economic recovery have kept a positive tone in the global capital market... ☐☐ ☐☐ Global indices performance continues the positive trend although some countries still facing challenges. JCI performance has returned to its pre-pandemic level and keeps moving steadily. Stock Index Performance as of 6 July 21 (compared to 31 Dec'20) -Comp Stock Index (lhs) Comp Bond Index S KOR 7000 400 15.03% EU 13.28% 6500 380 US 12.97% 360 SIN 12.19% 6000 WORLD 11.93% 340 THAI 9.80% 5500 320 BRAZ 5.11% 5000 300 JPN 4.37% HKN 3.09% 4500 280 CHIN 1.65% 260 INDO 1.14% 4000 240 PHIL -2.06% 3500 MAL -5.87% 220 TURK -6.37% (% YTD) 3000+ 200 -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% Non-resident portfolios of gov't bonds and equity records total net buy of 1.6 Tn in July 2021. Oct-19 Jan-20 Apr-20 Jul-20 Apr-21 Jul-21 Gov't bond yields remains competitive followed by stable rupiah as risk premium is maintained. Oct-20 Jan-21 Gov't Debt Securities ■Equity 5-yr Yield 10-yr Yield Yield (%) 10 2.57 20-yr Yield IDR (rhs) Source: Bloomberg and Ministry of Finance Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 As of 9 July 2021 Nov-20 Jan-21 Mar-21 May-21 Jul-21 8 -0.97 7 6 5 Jan-19 Mar-19 6 As of 6 July, 2021 May-19 Jul-19 Sep-19 Nov-19- Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 18,000 14,000 10,000 6,000 2,000 155#157Stimuli to Support Indonesia's Financial Industry OJK and other government institutions have worked intensively to minimize the impact of COVID- 19 on the economy 1 Maintaining business fundamental of the real sector 2 KANN Bank NBFI OJK Regulation No. 48/POJK.03/2020 on "Extension of National Economic Stimulus as A Countercyclical Policy of The Impacts of COVID-19 Outbreak" Amended *OJK Regulation No. 11/POJK.03/2020 Relaxation of credit assessment and credit restructuring to debtors who are affected by COVID-19. - Credit assessment (up to IDR10 billion) is based only on one pillar, the punctuality of debtors to pay their debts and interests. This applies to Commercial and Sharia Banks ▪ This regulation also amended several other conditions, including: " Banks' Management Risk Implementation Credit Restructuring Mechanism Banks' Capital and Liquidity Policy Banks' Reporting Mechanism Valid until March 31st, 2022 OJK Regulation No. 58/POJK.05/2020 on "Extension of Countercyclical Policy as an Impact of COVID-19 for Non-Bank Financial Institution (NBFI)" Amended *OJK Regulation No. 14/POJK.05/2020 Extended deadline of report submission Relaxation of financing assessment Financing Restructuring This regulation also add other conditions and further relaxations including: Communication Mechanism for Insurance through Video Conference Working Capital Facility Relaxation of corporate debt issuance Valid until April 17th, 2022 Source: Financial Service Authority (OJK) companies Supporting National Economic Recovery Continuing Capital Market Stabilitzation - - Prohibition of short-selling, Asymmetric Auto Rejection (current auto rejection limits under 7%), 30-minute Trading Halt for 5% decrease in IHSG, Stock buyback without prior general shareholders meeting. Mortgage Credit/Financing Policy Reducing Risk-Weighted Asset (RWA) for residential property mortgages depending on a Loan to Value (LTV) ratio. Vehicle Credit/Financing Policy Reducing RWA for vehicle loan/financing. Allowing insurance company to set the premium/contribution rate for vehicle insurance lower than the lower threshold as regulated in SEOJK 6/2017. Allowing bank and multifinance companies with certain criteria to provide loan with down payment (DP) 0%. Health Sector Credit Policy Reducing credit RWA from 100% to 50%. Digitizing MSMEs Expanding the ecosystem for MSMEs digitization from upstream to downstream with the UMKMMU and BWM Mobile platforms. Support to Sovereign Wealth Fund (SWF) Provision of funds to SWF is subject to a risk weight of 0% in the calculation of RWA for credit risk. *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities. 156#158Banking Regulations Way Forward in 2021 For 2021, banking research and regulation provisions issued by the OJK will focus on strengthening banking business processes that support trends in industry and technology developments, as well as updating prudential regulations that follows international standards, while still observing the best fit principle. OJK's Draft Regulation for Commercial Bank Business Activities: To support bank competitiveness and innovation, it is necessary to make adjustments to the licensing mechanism and product classification and/or activities that banks can carry out. OJK's Draft Regulation on Commercial Banks: Adjustments to trends in industrial developments and banking business processes, supporting the strengthening of the banking industry and adapting to the latest policies OJK's Draft Regulation Amendments to OJK Regulation No. 19/POJK.03/2014 on Branchless Financial Services in the Context of Financial Inclusion: adjustments to current conditions and developments in banking information technology OJK's Draft Regulation to Provision of Funds for the Development of Human Resource Quality for Commercial Banks: Renewal of Director Decree No.31/310/KEP/DIR in 1999 Source: Financial Service Authority (OJK) OJK's Draft Regulation Amendments to OJK Regulation No. 34/POJK.03/2018 on Reassessment of Main Parties of Financial Services Institutions: The need to accelerate the process of handling Bank problems OJK's Draft Regulation Amendments to OJK Regulation No.13/POJK.03/2017 on the Use of Public Accountant (AP) and Public Accounting Office (KAP) in Financial Service Activities: Adjustments to the latest AP/KAP regulations OJK's Draft Circulation Letter on Guidelines for Calculating RWA for Credit Risk Using the Standard Approach: Adjustment to the Basel III Reforms standard which will take effect from 1 January 2023 OJK's Draft Circulation Letter on Guidelines for Calculating RWA for Market Risk Using a Standardized Approach: Adjustment to the Basel III Reforms standard which will take effect from 1 January 2023 OJK's Draft Circulation Letter on Commercial Bank Business Plan: Adjustment to the needs and development of industry, and in line with the development of the RBB in the OJK's Online Reporting Application (APOLO) which will be effective by the end of 2021 157#159OJK's Role in the National Economic Recovery Program (PEN) The Pandemic raises various risks that affect the financial system, namely default debtors, investor outflows, liquidity risk and capital risk. Credit restructuring relaxation policy by OJK, reducing the volatility of the capital market to assist financial services institutions in mitigating risks and helping businesses to continue their business activities in the midst of a pandemic. Some other OJK's support for the PEN program includes: Providing Interest Subsidy data related regarding banking debtors, finance company, BUMN Credit Distribution Program, which becomes the basis of giving interest subsidy. MSME's Guarantee Coordinating with Ministry of Finance in formulating the framework of implementing policy related to MSME's guarantee and providing information of criteria that can receive the guarantee. Corporate Guarantee Coordinating with Ministry of Finance in formulating the framework of implementing policy related to Banking guarantee and providing information of criteria that can receive the guarantee. Realization of the National Economic Recovery Program Gov't Fund Placement in Coordinating with Ministry of Finance assessing prospective Commercial Bank Partners as well as information & data exchange. OJK is actively monitoring Government fund placement to HIMBARA, Regional Development Bank and Sharia Bank. Various government stimulant such as government funds in these industry may encourage lending to accelerate the growth of the economy. r HIMBARA Regional Development Bank Credit Disbursement *IDR 218.36 T ■ Credit Disbursement *IDR30.12 T Sharia Bank ■ Credit Disbursement *IDR 5.89 T *data as of 31 Dec 2020 OJK's Way Forward Continuing Restructuring extension Restructuring Policy will be given selectively based on bank assessment to avoid moral hazard. Regional Economic Acceleration Accelerating regional economic to further facilitate national government spending. Source: Financial Service Authority (OJK) Financial Industry Optimalization financial Optimizing industry through financing labor-intensive business and / or high-multiplier effect consumption. Acceleration of Digitalization & Integrated Finance Accelerating digitalization and continuing NBFI and capital market reformation to increase competitiveness. Strengthening Integrated Supervision Improving supervision infrastructure technology licensing. and based 158#160OJK's Strategic Policies in The Financial Sector 2021 National Economic Recovery Program Stimulus Policy Extension of the restructuring policy for debtors affected by Covid-19 to 2022. Providing sovereign rating in calculating risk-based capital when buying securities issued by the Investment Management Institution. Recurring credit / financing restructuring during the relaxation period. Temporary prudential policy relaxation, namely: Recurring credit / financing restructuring during the relaxation period and without unnatural / excessive fees. Reduction of credit risk weighting (RWA) for Credit and Property Financing as well as Motor Vehicle Loans and Financing. Adjustment of Legal Lending Limits and Reduction of Credit Risk Weighting (RWA) for the health sector. Simplify and accelerate access to finance for MSMEs by expanding (KUR) Cluster pilot project. Digitalization of integrated community economic activities from upstream to downstream through the development of Bank Wakaf Mikro (BWM), KUR, the securities crowdfunding platform and the MSMEs digital marketplace. Digital Transformation Acceleration in the Financial Services Sector Accelerating digitalization in the financial services industry, including granting licenses for digital banks. Strengthen prudential rules for fintech peer to peer lending Supporting the growth of fintech start-ups by developing a regulatory sandbox Digitalizing Sharia products. Source: Financial Service Authority (OJK)-- I Strengthening Resilience and Competitiveness of the Financial Services Sector Accelerating the consolidation of the financial services industry by gradually implementing a minimum capital policy. Strengthening the implementation of governance, risk management through Investment Limits and Large Fund Provision, Improvement of Capital Regulations, & Status Determination and Supervision Follow-Up (Exit Policy). Financial Services Sector Ecosystem Development Maintaining market integrity and developing the retail and domestic investor base. Supporting financial services institutions to carry out multi-activities business and be digital-based. Accelerating the expansion of financial access and improving public financial literacy through KUR, BWM, Laku Pandai and Student Savings and strengthening consumer protection. Implementing Sustainable Finance through the Roadmap Phase II 2021-2025. Improving the human resource capacity of the financial services sector based on the blueprint for human resource development in the financial services sector 2021-2025. Strengthening OJK's internal capacity Developing integrated supervision of all financial service products Improving governance in internal business processes. Adjusting the market conduct monitoring process related to the product life cycle stages. Strengthening digital-based surveillance. I I I | I 4'59#161A Comprehensive Financial Deepening Program ...strategy to tackle challenges in deepening Indonesia's financial markets In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate "The National Strategy of Financial Market Development" Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR 1 2 STRATEGIC ACTION PLAN 3 ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars RISK MANAGEMENT DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market Bond FX Market Market Stock Market Syariah Market Structure Product Market 7 Elements of Financial Fund Market Infrastructure Regulatory Framework Market Ecosystem Instrument Benchmark Rate & Standardization Coordination & Education Source: Bank Indonesia Intermediaries 160#162BI's Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA) Bl supports government's program of shifting social assistance to targeted non cash social assistance disbursement through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG subsidy. NCSA Programs Family Hope Program (Program Keluarga Harapan -PKH) Smart Indonesia Program (Program Indonesia Pintar-PIP) Pilot Project Source: Bank Indonesia KARTY RELAREA SEMATERA Gradual Implementation Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) I 9876543210 XXYYZZ 12345678 LPG Subsidy 2016-2020 Full Implementation Interconnected & interoperable payment system T T 161#163Progress of NCSA Programs • • Family Hope Program (Program Keluarga Harapan - PKH) The Family Hope Program (PKH) is a program that provides cash to very poor households. IDR1.89 million /year will be granted for each household. PKH will be granted every February, May, August, and November. As of December 2017, PKH has been distributed to 6.0 million households on non- cash basis. • In 2018, PKH has been distributed to 10 million households on non-cash basis. with • In 2019, PKH has been distributed to 9.84 million house hold on noncash basis total realization of IDR32.75T. KARTU KELUARGA SEJAHTERA 126 5678 12345678 AGO RAMANALS 1107 • • Non Cash Food Assistance (Bantuan Pangan Non Tunai - BPNT) BPNT is a poverty alleviation and social protection program that is managed by the central government. It provides subsidized rice and eggs to low-income households. IDR110 thousand month will be granted for each household as BPNT that can be used in certain stores which called e-warong. As of December 2017, BPNT was distributed to 1.2 million households in 44 cities. In 2018, BPNT has been distributed to 10.1 million households (65.1% of the target of 15.5 million households target). . In 2019, BPNT has been distributed to 15 million household on non cash basis with total realization of IDR15.44T Source: Bank Indonesia 162#164Section 8 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA#165PIC Institutional Reforms to establish a conducive PPP ecosystem kppip WLKPP KANTOR BERSAMA KPBU REPUBLIK INDONESIA Institutional Reforms for PPP Implementation KPPIP: Coordinating unit in decision- making processes and debottlenecking efforts for infrastructure acceleration PPP Joint Office: Information center for policy coordination and capacity building to encourage the use of PPP schemes IIGF Indonesia Infrastructure Guarantee Fund: Provides guarantee and supports project preparation VSMI Sarana Multi Infrastruktur: Facilitating infrastructure financing, preparing project, and serving advisory PPP Stages Project Development Facility (PDF) Outline Business Case Determination of Funding Scheme Tender document + Transaction PPP Agreement preparation Final Business Case (FBC) Government Contracting Agency (PJPK) IIGF Keenan PPM Вердитым Kementerian PPM/ Bappenas KANTOR BERSAMA KPBU REPUBLIK INDONESIA kopp Infobuldur Pric Payn KANTOR BERSAMA KPBU REPUBLIK INDONESIA kppip Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) KANTOR BERSAMA KPBU REPUBLIK INDONESIA VAMI Financial Close Legend Business Entity P Sapp IIGF Lender Business Entity Ministry of National Development Planning Ministry of Finance 164#166Reforms Along the Project's Life Cycle ...to encourage and accelerate infrastructure project using PPP scheme Government of Indonesia Project Development Facility (PDF) Preparation Project development facility assists the Government Contracting Agency (GCA) in PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI and PT IIF, Ministry of Finance Viability Funding Gap (VGF) Guarantee Scheme Tax Facilities Availability Payment Land Acquisition A facility which contributes to construction cost in order to increase project financial feasibility Managing entity: Ministry of Finance based on GCA proposal Govt's commitment: Max 49% per project cost Bidding Process Guaranteeing govt. contractual obligations under infra. concession agreements and MoF Reg. No. 130/PMK.08 /2016 re: Govt. guarantee for electricity project acceleration Managing entity: Indonesia Infra. Guarantee Fund (IGF) and MoF. MoF Reg. No.150/2018 allowed 100% Tax Holiday for 18 Pioneering Industries for 5 - 20 years depending on the investment value. The tax holiday is not only given to the new investments but can also be obtained by the existing taxpayers who want to expand their business. Managing entity: Ministry of Finance A scheme in which concessionaires receive periodic payments from central or regional government if the service standard is fulfilled. The MoF Regulation and MOHA Regulation on Availability Payment have been stipulated. Managing entity: Ministry of Finance Ministry of Home Affairs Construction A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing entity: Ministry of Finance; Ministry of Agrarian and Spatial Planning/BPN, and BLU-LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 165#167Efforts to Accelerate Infrastructure Provision The establishment of Indonesia Asset Management Agency (LMAN) Government has established State Asset Management Unit (LMAN) as a solution to accelerate the land acquisition through the provision of land acquisition fund LMAN at a Glance 1. LMAN was established in December 2015 through the issuance of MoF Reg. 219/2015 concerning State Assets Management 2. In 2016, BLU LMAN was mandated to provide land acquisition fund as a support to Ministry of Public Works due to US$ 1,081 Mio shortage of fund to acquire land for priority toll roads 3. The scope of support is broaden for all National Strategic Projects through the issuance of MoF Reg. 21/2017 (j.o MoF Reg. 209/2019 j.o. MoF Reg. 139/2020) concerning land acquisition financing guideline for PSN - 4. In 2016 July 2021, LMAN has disbursed up to IDR 80,17 Trillion through bridging finance scheme for 97 PSN projects, and planned to start the implementation of direct payment scheme G 1. 2. 3. Land Acquisition Budgeting Scheme Unutilized fund can be allocated for the following year Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the other project Land acquisition fund for PSN projects is managed under one agency This LMAN initiative provides better flexibility, coordination and management of land acquisition fund provision for National Strategic Projects (PSN) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 166#168Efforts to Accelerate Infrastructure Provision Limited Concession Scheme as an Alternative of Infrastructure financing Presidential Regulation No 32/2020 about Infrastructure Financing through Limited Concession Scheme Definition Limited Concession Scheme of Infrastructure Asset is the asset concession agreement to improve operations of Government assets (BMN) and/or SOEs' assets to generate revenue to improve similar project operations and/or finance other infrastructure provision Infrastructure Financing Priority Revenue generated by the LCS will be used to fund the priority infrastructure projects and/or national strategic infrastructure projects Several adjustments on the substance of Presidential Regulation Number 32/2020 will be conducted, by considering the uncertainty conditions of the assets affected by COVID- 19 pandemic which causing the LCS quite difficult to be implemented. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOEs to private sector to 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 167#169Efforts to Accelerate Infrastructure Provision Land Value Capture (LVC) Scheme " A policy approach that enables communities to recover and reinvest economic value increases and increases in economic productivity that result from public investment and other government actions. (Lincoln Institute of Land Policy) Tax Based LVC Land and Property Tax Betterment Levies and Special Assessment Development Based LVC Land Sale and Rent Collaboration in the development of LVC Regulation in Indonesia The implementation of LVC obviously need an intensive cooperation of all related stakeholders, such as: National and Regional Government, SOE & ROE, International Institution, as well as higher education agencies with CMEA as an implementing coordinator. Tax Increment Financing (TIF) Air Right Sale Joint Development Land Readjustment 2019 Triple Win LVC Creating Fiscal Space Reducing Subsidy Better Urban Mobility LVC Benefit Local revenue from tax and levy Better city planning and development Regional growth Distributed development in urban area Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) • National and Regional Govt SOE & ROE Universit and other higher Internatio nal education Institution agencies LVC Policy Development Timeline Finalizing Study on National Value Capture Framework in Indonesia 2020 Initiate the LVC policy implementation in the form of legal regulation and pilot projects Conducting socialization and stakeholder capacity development on LVC 2021 . Completing the pilot project modelling process to find the most appropriate LVC scheme to be implemented in Indonesia Completing legal drafting as the regulation on national LVC policy 2022 • LVC development and implementation Conducting socialization to Regional Government and SOE 168#170Efforts to Accelerate Infrastructure Provision Sovereign Wealth Fund (SWF) SWF Investment Guide Omnibus Lawmandated the establishment of Sovereign Wealth Fund as Gol investmentbody |⚫ With goal to • • Increase and optimize asset value in long term To support sustainable development Gol committed to invest IDR 15 Billion as initial capital for SWF/LPI Domesticand International Investor Co-Investor Government of Indonesia Cq. Ministry of Finance Indonesia Sovereign Wealth Fund (Lembaga Pengelola Investasi/LPI) (Minority Shareholder) Direct landing to company/ asset/project Managed fund for infrastructure • Toll roads Investment Agreement Managed fund for Energy & Natural Resources Management Agreement Master Fund Manager Master Fund/ Manage Fund Principal Investor (ex. ADB, JBIC) Investment Agreement Managed fund for Health Managed fund for Tourism Managed fund for Technology Managed fund for New Capital sector • Tourism SEZ • Tanamori • Toba • Likupang ⚫ Hotel chain ⚫ Digital lending Payments • Commerce • Contractor •Utilities • Land & building . Airports Seaports • Oil & Gas Hospitals Pharma- ceuticals reserves Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 169#171Fundamental Regulations Initiation to accelerate infrastructure projects delivery 1 2 3 4 5 Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF Reg. No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. Presidential Reg. No. 66/2020 on Land Acquisition Funding for Public Interest in Implementing PSN This Presidential Reg. was issued to accelerate the process of land acquisition funding for PSN as well as replacing the Presidential Reg. No. 102/2016 MoF Reg. No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects (PSN) and Asset Management of Land Acquisition by State Asset Management Agency (j.o. MoF Reg. No. 5/2019, j.o. MoF Reg. No. 209/2019, j.o. MoF Reg. No. 139/2020) The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 170#172National Strategic Projects (PSN) may receive privileges as stipulated in the Presidential Reg. No. 3/2016 j.o. the Presidential Reg. No. 58/2017 j.o. the Presidential Reg. No. 56/2018, j.o Presidential Decree no.109/2020 Project acceleration for private investment Settlement of Legal Issues Accelerate Goods and Service Procurement Land transfer fee waiver 12 01 Electronic permit licensing 11 PSN Facilities 02 10 60 Spatial Planning 10 03 04 Land clearing acceleration Problems and 09 Hindrance Completion New Facilities 08 05 55 SOE's Assignment 07 06 Projects Monitoring via KPPIP IT System Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Local Content Utilization Government Guarantee Provision 171#173Job Creation Law's Positive Development on PSN PP No. 40 Year 2021 Government Regulation on the Implementation of Special Economic Zones PP No. 42 Year 2021 Government Regulation on Ease of National Strategic Projects PP No. 43 Year 2021 Government Regulation on Settlement of Mismatches Between Spatial Planning and Forest Areas, Permits and/or Land Rights PP No. 18 Year 2021 Government Regulation on Management Rights, Land Rights, Flat Units and Land Registration Derivative of Job Creation Law 11/2020 in supporting PSN Projects PP No. 21 Year 2021 Government Regulation on the Implementation of Spatial Planning PP No. 19 Year 2021 Government Regulation on the Implementation of Land Acquisition for Development in the Public Interest PP No. 23 Year 2021 Government Regulation on Forestry Implementation Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) PP No. 20 Year 2021 Government regulations on Area Control and the Abandoned Land *) National Strategic Projects (PSN) 172#174Under Presidential Reg. No.109/2020, PSN list has been revised into 201 Projects and 10 Programs 42 Projects Sumatera IDR 773,6 T 82 Program Projects 16 Projects Kalimantan IDR 505,8 T Jawa IDR 1.924,7 T 22 Projects Sulawesi IDR 276,9 T 18 Projects Bali & Nusa Tenggara IDR 33,1 T *Note: . The value was calculated at the time of the preparation of Presidential Decree 109/2020 and does not take into account projects and programs, such as the Food Estate Program, the Economic Equity Program and Bali Utara Airport. *) National Strategic Projects (PSN) PSN includes 12 sectors at project level and 10 sectors at program level A Road 54 Projects Dams 57 Projects SEZs & IES 18 Projects Railway 15 Projects Energy 15 Projects Ports 13 Projects Clean Water & Sanitation 12 Projects Airports 8 Projects Education 1 Projects Technology 5 Projects Housing 2 Projects C Sea Dike 1 Projects до Smelter Superhub 1 Programs 1 Program 4 Electricity 1 Program Economic Equality 1 Program Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Exit Toll Access 1 Program Food Supply 1 Program Tourism Strategic Zone Waste Processing Installation Border Area 1 Program 173 1 Program 1 Program#175PSN Profile of 201 Projects + 10 Programs The Estimated Investment Value for 201 Projects + 10 Programs PSN State Budget 11% 5 Sectors with Highest Investment Value Energy 15 Projects IDR 1.556 Tn SOES/ RSOES Private 67% 22% 4 Electricity 1 Program IDR 915 Tn Total Investment Value2 IDR 5.607 Trillion State Budget IDR 626 Tn SOES/RSOES IDR 1.100 Tn Private IDR 3.879 Tn *Exclude Food Estate Program, Regional Development Acceleration Program and Bali Utara Airports Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) A l Roads 69 Projects IDR 919 Tn Railways 15 Projects IDR 432 Tn SEZs and IEs 18 Projects IDR 485 Tn 174#176- From 2016 June 2021, there were 110 projects completed with total estimated investment value of IDR 604 tn Completed 2016 20 Projects (IDR 33,3 T) • 7 Airports • 1 Toll Road • 6 Dam 1 Seaports • 1 Gas Pipe • 4 National Border Completed 2017 10 Projects (IDR 61,4 T) . 2 Toll Road Completed 2018 32 Projects (IDR 207,4 T) Completed 2019 30 Projects (IDR 165,3 T) . 2 Railway • 1 Access Road • 4 Dam 1 Airports • 1 Irrigation • 1 Gas Facility • 10 Toll Road • 3 National Border • 5 SEZ • 1 Dam • 1 Irrigation Completed 2020 12 Projects (IDR 123,1 T) • • 1 Airports 4 Airports • 1 Airports 4 Industrial Zone • 9 National Road • 1 Raillways • 4 Smelter • 6 Industrial Zone • 2 Toll Road 1 Fishery Center • 2 Smelter • 1 Seaport • 4 Dam • 1 Water Supply System • 2 Technology • 3 Industrial Zone • 2 railways • 3 Dam • 1 seaport Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) National Completed Jan-Jun 2021 6 Projects (IDR 13,5 T) ⚫2 Toll Road . 2 Water Supply System . 2 Dam 175#177Since January 2021, 18 PSN projects completed with 27 projects operate partially and 107 under construction From the list of 201 Projects + 10 National Strategic Project Programs, in June 2021 there was 18 PSN Projects declared Completed, compared to 11 Projects in December 2020 December 2020 7% 11% 47% 33% June 2021 8% 21% 16% 51% 4% 66 Projects + 4 Programs (Super Hub, Food Estate, Exit Toll Road and Regional Development Program) in the Preparation stage. 4 Projects in the Transaction stage. 98 Projects + 1 Programs (Waste Management into Electrical Energy) in the Construction stage. 19 Projects + 5 Programs (Electricity Facility, Economic Equality, Border Area, National Tourism Strategic Area, dan Smelter) are Operated Partially. 12 Projects are Completed. 41 Projects + 4 Programs (Super Hub, Food Estate, Exit Toll Road and Regional Development Program) in the Preparation stage. 8 Projects in the Transaction stage. 107 Projects + 1 Program Programs (Waste Management into Electrical Energy) in the Construction stage. 27 Projects + 6 Programs (Electricity Facility, Economic Equality, Border Area, National Tourism Strategic Area, dan Smelter) are Operated Partially. 18 Projects are Completed. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) *) National Strategic Projects (PSN) 176#178Progress on 37 National Strategic Project (PSN) During 1st Quarter of 2021 (Covid-19 Pandemic Conditions), there were 8 PSN Projects that were declared Partially Operated, and 22 PSN Projects that were successfully pushed through the Preparation Stage to the Transaction and Construction Stage. Successfully pushed PSN Projects pass the Preparation Stage Successfully pushed PSN Projects Start Operated Partially 23% No PSN Projects Investment Value (in IDR Bio) 22 PSN 1 Jalan Tol Serpong - Cinere 2.219 Jalan Tol Cimanggis - Cibitung 4.524 77% Penambahan Lingkup Jalan Tol Ngawi - 3 1.783 Kertosono Kediri 5 Projects exit the Preparation Stage to the Transaction Stage There are 22 PSN Projects with a total investment value of IDR 392.6 trillion which is divided into 8 sectors: 3 Toll Roads (IDR 62,2 Tn) 3 Seaports (IDR 1,3 Tn) 17 Projects out of Preparation Stage to Construction Stage Penambahan Lingkup Jalan Tol Depok Antasari 6.600 Makassar New Port 3.168 Pembangunan Pelabuhan Patimban 43.221 Pengembangan Pelabuhan Terminal Kijing Pengembangan Pelabuhan Kupang 5.048 223 • 6 Airports (IDR 14,5 Tn) • • 4 Dam (IDR 7 Tn) 1 SEZs and IES (IDR 31,4 Tn) 2 Irrigations (IDR 5,7 Tn) 2 Clean Water & Sanitasionsi (IDR 72,9 Tn) 8 PSN Projects were successfully pushed to operated partially with estimated investment value IDR 100,8 Trillion • 1 Energy (IDR 196,9 Tn) Status is a comparison of progress between December 2020 and June 2021 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) *) National Strategic Projects (PSN) 177#179National Strategic Project (PSN) Completed in Q1-2021 Q PSN Progress Status 201 Projects + 10 Programs (January-June 2021) 18 6 PSN Projects Completed in Q 1 - 2021 Completed (IDR 136,6T) (8%) 44 33 (16%) (21%) Partially Operated (IDR 2.294,3T) 1 Construction (IDR 1.990,3T) 8 Medan - Binjai Toll Road 2 Cengkareng Batu Ceper 3 Kuningan Dam Kunciran Toll Road (4%) Transaction (IDR 365,6T) Preparation (IDR 875,5T) 108 (51%) PSN Investment Contributor 4 Passeloreng Dam 5 6 Semarang Barat Water Supply System Umbulan Water Supply System Total IDR 5.607 Trillion* State Budget 11% SOES/ RSOES Private 67% 22% * Exclude Regional Development Acceleration Program (Perpres 79 an 80/2019) and Bali Utara Airports Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 6 PSN Projects Completed in 1st Quarter in year 2021 with estimated investment value IDR 13,5 Trillion and 25 PSN Projects are partially operated with estimated investment value IDR 394,6 Trillion 178#180Progress on 37 National Strategic Project From the revised National Strategic Projects, the Government has selected a list of 37 National Strategic Project to be the focus of infrastructure provision. 24 22 23 24 15 2 18 24 23 18 24 30 12 23 24 18 18 18 27 25 18 31 24 18 18 37 18 14 24 27 23 24 4 22 23 22 22 24 27 24 4 11 23 36 7 24 3 13 9 16°33 27 37 12 10 1? 19 32 20 18 24 1234 1. # New Priority Projects # Existing Priority Projects Balikpapan-Samarinda Toll Road 24 37 35 21 20 29 26 27 6 28 37 37 24 37 5 24 24 26. 13. LRT of DKI Jakarta 2. Manado-Bitung Toll Road 14. Kuala Tanjung International Hub Seaport 27. 3. Panimbang-Serang Toll Road 15. Bitung International Hub Seaport 4. 15 Segments of Trans - Sumatera Toll 16. Patimban Port 28. Road 17. 56∞ 5. - Probolinggo Banyuwangi Toll Road 18. Inland Waterways Cikarang-Bekasi-Laut (CBL) Palapa Ring Broadband 29. Tuban Oil Refinery RDMP/Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) Abadi WK Masela Field Unilization Field Has Jambaran-Tiung Biru 30. 6. - Yogyakarta Bawean Toll Road 19. Batang, Central Java Power Plant (CJPP) 31. Indonesian Deepwater Development (IDD) Tangguh LNG Train 3 Development 7. SHIA Express Railway 8. MRT Jakarta South-North Line 20. Central West Java Transmission Line 500 kV 32. 21. Indramayu Coal-fired Power Plant 33. West Semarang Drinking Water Supply System Jakarta Sewerage System 9. Makassar-Parepare Railway 22. 10. Light Rail Transit (LRT) of Jakarta- 23. Depok-Bogor-Bekasi Sumatera 500 kV Transmission (4 Provinces) Mulut Tambang Coal-fired Power Plant (6 Provinces) 34. National Capital Integrated Coastal Development (NCICD) Phase A 35. Jatiluhur Drinking Water Supply 11. LRT of South Sumatera 24. PLTGU (16 Provinces) 36. Lampung Drinking Water Supply 12. East Kalimantan Railway 25. Bontang Oil Refinery 37. Waste to Energy Program in 8 cities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 179#181Energy Sector: the Progress of 35.000 MW Program Report on the Progress of the Electricity Infrastructure Development Program (1/2) National 2% 2% 29% 17% 35,8 GW 50% National Capacity 35.823 MW Sumatera Kalimantan Sulawesi 1% 15% 2% 4% 6% 6% 9% 37% 3% 9,5 5 GW 34% 3,5 47% 2,6 GW 40% GW 35% 48% 13% Jawa, Madura, & Bali 10.259 MW Completed 8% 29% 17.970 MW Construction Stage 18,4 GW 6.063 MW PPA has been completed but not yet financial close 839 MW Procurement Stage 724 MW Planning Stage 63% Maluku, Papua, & Nusa Tenggara 20% 51% 1,7 10% GW A 19% Source: PLN reports May 2021 PPA has been completed Completed Construction stage Procurement stage but not yet financial close Planning stage Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 180#182Energy Sector: the Progress of 35.000 MW Program December 2019 July 2020 October 2020 May 2021 2% 2% 2% 2% 14% 2% 2% 3% 2% 24% 20% 18% 27% 18% 17% 29% 35,3 GW 35,5 GW 35,6 35,8 GW GW 62% 54% 50% 50% 5.071 MW in COD/SLO/ Commissioning Stage 21.825 MW in Construction Stage 6.878 MW in the contract/PPA stage, but not yet Construction 829 MW in Procurement stage 8.382 MW in COD/SLO/ Commissioning Stage 19.067 MW in Construction Stage 6.528 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 9.694 MW in COD/SLO/ Commissioning Stage 17.853 MW in Construction Stage 6.528 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 10.259 MW in COD/SLO/ Commissioning Stage 17.970 MW in Construction Stage 6.063 MW in the contract/PPA stage, but not yet Construction 839 MW in Procurement stage 734 MW in Planning stage 724 MW in Planning stage 724 MW in Planning stage 724 MW in Planning stage ¹COD: Commercial Operation Date; 2SLO: Sertifikat Laik Operasi (Commissioning Certificate) Source: Compile from PT PLN and Ministry of Energy and Mineral Resources Reports 181 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)#183Acceleration of 35.000 MW Program The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects Government Support (outside Guarantee) • Provision of Primary Energy Provision of Renewable Energy Simplicity of Permits and non-Licensing Spatial Planning Land acquisition Resolution on Legal Matters Government Assignment Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content. 1 EPC Powerplant and Transmission PT PLN Provision of Electricity 2A 2B 23 PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance Independent Power Producer Direct Lending PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter Strengthen Equity Strengthen PLN's Balance Sheet Loan from independent lenders Equity Injection by the Government Refinancing Hedging Bond issuance by PT PLN Asset Revaluation Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 182#184Significant Progress on Infrastructure Projects Roads Won FON FR OPBY Trans-Sumatra Toll Road Dams Merah Putih Bridge, Ambon Drinking Water Processing Jatigede Dam (Operational) Umbulan Drinking Water Provision System, East Java Transportation Jakarta MRT Project² Terminal 3 Ultimate Soekarno-Hatta² New Tanjung Priok Port Project² Nop Goliat Dekai, Papua Improving Monitoring System on Infrastructure Projects¹ KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects' latest status which can be effectively utilized for monitoring and decision-making purposes. Database Project information such as map, track, existing study and latest project status. 2 Platform data outlook that is efficient and functional using a user-friendly framework. 12 1 An integrated IT system with monitoring capacity for stakeholders, so that they can have real time data. 3 Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 183#185Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth Infrastructure Development is a Key Priority • Infrastructure Development in order to: 1. Accelerate growth particularly in rural areas 2. Support industrial development and tourism 3. Reduce unemployment and poverty • Infrastructure fundraising needs: $357.9 bn (or equivalent to IDR4,796.2 tn) • 245 National Strategy Projects under National Medium Term Plan for 2015 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn) 37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion) ●Majority of 37 priority projects are expected to commence commercial operation by 2018 2022 - Budget Central & regional budget (special allocation fund & rural transfer) • Primarily to support basic infrastructure projects: Food security: Irrigation, dams etc. Maritime: Seaports, shipyards etc. Connectivity: Village roads, public transportation etc. Public Private Partnership Broad Objective Core Mandates Additional Mandates Establishment of PPP Unit Champion project preparation and acceleration of the PPP agenda in Indonesia - Improve quality of project selection under KPPIP OBC criteria Support project preparation through PDF support and highly qualified transaction advisors Act on behalf the Minister of Finance in providing government support and approvals for projects Coordinate all public finance instruments Provide input for PPP Policy program Development and Regulations Implement capacity building for Govt. Contracting Agency (GCAs) One stop shop for PPP promotion & Information Certain infrastructure projects to be funded and operated through a partnership between the Indonesian government and the private sector Projects ready for auction under the PPP Scheme: Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung Railway projects such as an express line into Soekarno-Hatta International Airport Water supply projects such as the West Semarang Project Various government support for PPP: - - Project Development Facility (PDF): Helps Government Contracting Agencies (GCAs) in project preparation and transaction Viability Gap Fund: improves financial viability of PPP projects Government Guarantees: Supports PPP projects' bankability by providing sovereign guarantees Infrastructure Financing Fund: Provided through PT SMI and IIGF Availability Payment (AP): GCA pays private partner based of availability of infrastructure services Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity Source SOE & Private Sector Government to inject capital into SOES: Intended multiplier effect to develop more infrastructure projects • Key focus areas: Infrastructure and maritime development Transportation and connectivity Food security ● Medium term infrastructure developments to focus on: Water Supply Airports Seaports Electricity and power plants Housing Mining Ministry of Finance; Bappenas; KPPIP: "Komite Kebijakan Percepatan Penyediaan Infrastruktur" or National Committee for the Acceleration of Infrastructure Delivery Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 184#186Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Credit Guarantee Business Viability Guarantee (BVG) PPP Guarantee Political Risk Guarantee Government Guarantee Program Power (Electricity) - Full credit guarantee for PT PLN's debt payment obligation under FTP 1 10,000MW and 35GW programs*. Clean Water - Guarantee for 70% of PDAM'S debt principal payment obligations. - Toll road Full credit guarantee for PT Hutama Karya's debt payment obligations for development of Sumatra Toll Roads. Contingent Liabilities from Government Guarantee as of Q1 2021 ** Credit Outstanding Guarantee No. Central Government Guarantee for Infrastructure Programs /Investment Document Exposure (billion)* 1 Coal Power Plant 10,000MW Fast Track Program (FTP 1) 13 USD 1.06 the 2 Clean Water Supply Program 6 USD 0.004 3 Direct Lending from International Financial Institution to SOES 10 USD 1.81 4 Sumatra Toll Road 10 USD 3.00 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) USD 3.94 Full 6 Public-Private Partnerships (PPP) USD 5.81 7 Regional infrastructure financing USD 0.21 8 Public Transportation (Light Rail Transit) 1 USD 0.59 9 Electricity Infrastructure Fast Track Program (35 GW) 6 USD 4.77 Total 61 USD 21.19 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) credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. ⚫ Power (Electricity) Guarantee for PT PLN's obligations under Power Purchase Agreements with IPPS (off-take and political risk) under FTP-2 10.000MW and 35GW programs* - ⚫ Infrastructure Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements ⚫ Infrastructure Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees *) MOF provides both credit guarantees and BVGs for 35GW program Source: Ministry of Finance From 2008 to Q1-2021**, the government has issued 92 guarantee documents with total value of USD41.53 billion, there were 31 guarantee documents worth USD4.26 billion have been expired. The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. Starting from 2008 the Government has allocated a contingent budget with respect to these guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund. This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees. **) Currency conversion of IDR14,105.01/USD1 and IDR17,330.13/EUR1 (as of end December 2020) 185#187Government Financial Facilities for PPP Projects Financial Facilities to Attract More Private Participation More Funding Schemes are on the Pipelines Viability Gap Fund (VGF) Project Development Facility (PDF) LCS (Limited Concession Scheme) Government Guarantees (directly by MoF or through IIGF) Availability Payment Schemes Financing from PT. SMI and PT. IIF PINA (Non-Government Budget Infrastructure Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: Financing) Source: Ministry of Finance Project Financing funded by the private sector through the granting of concessions for an operating asset owned by the Government/SOE (based on the policy of the Government) to the private sector to be operated & managed. • • Scheme Characteristics Asset is owned by public sector Operating asset, not greenfield project Records positive cash flow for the last several years Predicted revenue Project Financing funded by any source of funds other than Government's budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas. . Scheme Characteristics Asset is owned by private sector Greenfield brownfield / operating projects 186#188New Guarantee Schemes for Non-PPP Projects Guarantee on SOE Direct Lending from International Financial Institutions (IFIs) The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing, State finance soundness Guarantee for Regional Infrastructure Financing Provision with 3 main principles: Fiscal sustainability Best practice of fiscal risk management Based on Government Regulation No. 95/2015 and Ministry of Finance Regulation No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried out by PIP (Government Investment Center). The Government had issued Ministry of Finance Regulation No 174 of 2016 to provide guarantee to PT SMI on the assignment of regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. The objective is to give stimulus to the acceleration of local infrastructure development through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in order to meet local infrastructure development needs and to reduce reliance on state/local budget. 187#189Ternate & Tidore f indonesia.travel @indtravel indonesiatravel @indtravel wonderful indonesia www.indonesia.travel