#1BHINNEKA TUNGGAL IKA Republic of Indonesia Strengthening Policy Synergy to Maintain Stability while Advancing the Economy amid Escalating Uncertainty and July 2023 Declining Global Growth#2About Investor Relations Unit of the Republic of Indonesia Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Ministry of Investment, Financial Services Authority, Ministry of State-Owned Enterprises, and The Committee for Acceleration of Priority Infrastructure Delivery. IRU also arranges an investor conference call on a monthly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit - Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Rosita Dewi (International Department - Bank Indonesia, Ph.: +6221 2981 8232) Thasya Pauline (Deputy Ministry for Macroeconomic and Finance Coordinator - Coordinating Ministry for Economic Affairs, Ph. +6221 352 1843) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Ph.: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Ph.: +6221 351 0714) E-mail: [email protected] This Presentation Book also can be downloaded from: https://www.bi.go.id/en/iru/presentation/default.aspx 1#3Highlight of the Month What's New Economic Recovery Program and Its Updates ...page 6-10 Accelerated Reforms Agenda Supported by Institutional Improvement and Progressive Infrastructure Development Prudent Pandemic Management and Continued Economic Recovery Big but measured steps including a strong vaccination program Synergy between institutions nationwide Responsive and flexible Government Budget Resilient economic performance Continued National economic recovery momentum, reflected by 5.03% (yoy) economic growth in first quarter of 2023, driven by high exports and growing domestic demand in. ... page 32 Fiscal & Financing Policy Update Rating Agencies Fitch Ratings ...page 87-104 Bank Indonesia Board of Meeting Decision MOODY'S S&P Global R&I Rating and lavestuest Information, Inc. BBB (Stable) Baa2 (Stable) BBB (Stable) BBB+ (Positive) ...page 107 Affirmation of Investment Grade and Sovereign Credit Rating Outlook Improvement Standard and Poor's (S&P) has affirmed Indonesia's Rating (Outlook) Sovereign Credit Rating at BBB with a stable outlook on July 4, 2023, with the key factors namely the economy's sound growth prospects, historically prudent policy, and rapid fiscal consolidation. The stable rating outlook reflects the solid economic growth over the next two years which will support fiscal performance and debt stabilization. Meanwhile, Rating and Investment Information, Inc. (R&I) has upgraded Indonesia's outlook to positive from stable and affirmed its Sovereign Credit Rating at BBB+ as announced on July 25, 2023. Several key factors support this decision, encompassing Indonesia's robust economic performance and its resilience amid global economic uncertainty, achievement of inflation and fiscal deficit within the targeted range earlier than expected, maintained financial stability, and declining trend in government debt ratio. 2#4Overview A 1 Economic Recovery Program and Its Updates External Factor: Improved External Resilience Accelerated Reforms Agenda Supported by Fiscal Performance and Flexibility: 2 Institutional Improvement and Progressive Infrastructure Development 5 Strong Commitment in Maintaining Fiscal Credibility Economic Factor: 3 Improved Growth Prospects Supported by 6 Continued Economic Recovery Momentum Monetary and Financial Factor: Credible Monetary Policy Track Record and Favorable Financial Sector 3#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IKA#6Constructive Policies, The Key To Successful Indonesia's Economic Recovery In the midst of various global challenges, the government has succeeded in ensuring that the economic recovery continues, while maintaining effective handling of the pandemic. Growth: 6% -7% BRAKE Growth: 5% Handling Covid, Detection, Therapeutic Vaccination, Health Protocol (PPKM) Economic growth fell / Unemployment and poverty rates rose Indonesia's Exit Strategy is starting to move towards economic recovery phase Covid-19 Case Trajectory Effective and widespread economic recovery program (PEN) >445 million COVID-19 vaccines have been administered (main and booster doses). Indonesia has produced the COVID-19 vaccine domestically, to strengthen the supply of vaccines, including Indovac developed by Bio Farma. Vaccination Sustainability PPKM rules Revoked the Growth: 3% SPEED UP Source: Coordinating Ministry for Economic Affairs Growth: -5.3% President Joko Widodo on 30 December 2022 officially announced that PPKM had been repealed. However, the Pandemic status in Indonesia was not revoked. 5#7National Economic Recovery Program (PEN) Effectively Assist the Covid-19 Handling & Promote Economic Recovery PEN 2020 575.9 Trilion PEN PROGRAM as a response to the handling of the Covid- 19 pandemic and aims to handle health and support the economy BUSINESS INCENTIVES 67.6 Trilion HANDLING HEALTH SOCIAL PROTECTION PRIORITY PROGRAM SUPPORT MSMEs BUSINESS INCENTIVES AND CORPORATE 65.2 Trilion 62.7 Trilion 216.6 Trilion 58.4 Trilion 173.0 Trilion H BOO SUPPORT MSMES AND CORPORATE 116.1 Trilion PRIORITY PROGRAM 105.6 Trilion SOCIAL PROTECTION 167.7 Trilion PEN 2022 455,62 Trilion HANDLING HEALTH 122,5 Trilion Source: Coordinating Ministry for Economic Affairs SOCIAL SAFETY NET 154,8 Trilion HANDLING HEALTH PEN 2021 655.14 198.1 Trilion Trilion STRENGTHENING ECONOMIC RECOVERY 178,3 Trilion PEN 2021 BUDGET Initially lower than in 2020. However, as the covid-19 cases escalated due to the Delta variant, PEN was again strengthened for social protection and hospital costs Focus: Continuation of Covid handling and acceleration/expansion of vaccinations Focus: maintaining the purchasing power of the poor and vulnerable, as well as tackling extreme poverty Focus: Job Creation and Increased Productivity 6#8Achievements and Experiences in the Implementation of Covid-19 Pandemic Management Program and National Economic Recovery PC-PEN is an embodiment of policies that are extraordinary, responsive and adaptive in responding to the dynamics of crisis and risk of uncertainty. 1 2 3 4 5 6 Under the directions of the President, the combination of brakes and accelerator proved to be optimal. Dare to take risks, but measured. PERPPU No 1 of 2020 provides responsible discretion. During the COVID-19 pandemic crisis period, support was not only needed by the poor but also the lower middle class. Data availability & quality are important in formulating policies. Intensive coordination between the Central Government, Regional Governments and the TNI/Polri as well as the involvement of all elements of society. The formulation of programs for ministries/institutions and local government may no longer be business as usual. Utilization of digital technology can increase the accuracy of program targets For example: KPCPEN One Data System, Care to Protect, Telemedicine Services, PKL-WN Applications, etc. The pandemic creates innovation i.e. manufacture of Red and White Vaccines. Source: Coordinating Ministry for Economic Affairs 7#9Post Pandemic: Covid-19 Pandemic Handling 1. PPKM was officially revoked on Friday, 30 December 2022; 2. During the transition: • . • The COVID-19 Task Force will continue to run until the community becomes resilient (for 6 months and then evaluated); The second booster vaccination runs from 12 January 2023, free of charge. 3. Handling of the COVID-19 Pandemic including vaccination will be integrated with regular health programs under the authority of the Ministry of Health and related institutions. 4. 5. The Early Warning Indicators dan Early Warning System for the Pandemic COVID-19 are still being monitored and managed by the Ministry of Health, similar to other health indicators. Crisis Management Protocol Pandemic COVID-19 can be reactivated if conditions return to a crisis period based on an assessment and recommendation from the Ministry of Health. The Direction of the National Economic Recovery Policy for 2023: As the Covid-19 Pandemic is under control and the Activity Restriction (PPKM) ends, implementation of Health Management, Social Protection, and Economic Recovery Programs in 2023 will be according to the duties of each Ministry/Agency. The government will strengthen the Adaptive Social Protection Program through various database improvements and program enhancements to anticipate the impact of economic turmoil and potential disasters that will occur in the future. Source: Coordinating Ministry for Economic Affairs 80#10Boosting Consumption: Maintaining Purchasing Power Through Inflation Control And Price Stabilization Policy PROGRAM SYNERGY Price Affordability EXTRA-EFFORT POLICY (RP) FISCAL POLICY MONETARY POLICY Stock Availability Effective Communication Smooth Distribution • State Budget is optimized as Pro-stability monetary policy a shock absorber • • Energy Subsidies and Compensation° Food Security Budget Mandatory Social Protection from Unexpected Expenditure (BTT APBD) Food aid (rice) support • Front-loaded, preemptive, and forward-looking interest rate policies. Rupiah exchange rate stabilization policy. Sale/purchase of Securities in the secondary market (twist operation). GNPIP M The Supply and Food Price Stabilization Program (SPHP)/ Market Operation Facilitating the Distribution of Food Commodities from surplus to deficit areas Expanding Inter- Regional Cooperation (KAD) Increased Production (such as yard planting programs and urban farming) The National Movement for Food Inflation Control (GNPIP) Program to accelerate the stabilization of food prices in the regions Detailed Data Monitoring and Strengthening Supply and price data per region Market Monitoring with the Food Task Force#11From Semi-Social Assistance (Bansos) Scheme To Normal Scheme In 2023, the Government will implement a normal scheme that focuses more on improving skills, through offline, online or mixed training. Thus, the Pre-Employment Card is no longer semi-social assistance SEMI-BANSOS SCHEME NORMAL SCHEME* The membership requirements are the same as before TRAINING MODE ONLINE TRAINING MODE ONLINE - MIX - OFFLINE HOWEVER, SOCIAL ASSISTANCE RECIPIENTS/ GOVERNMENT ASSISTANCE ALLOWED TRAINING BUDGET LIMIT MAX. Rp 1.000.000 POST TRAINING INCENTIVES & SURVEY 4 x Rp 600.000 & 3 x Rp 50.000 TRAINING BUDGET LIMIT MAX. 3.500.000 POST TRAINING INCENTIVES & SURVEY 1 x Rp 600.000 & 2x Rp 50.000 *AMOUNT OF AID AND TRAINING MODES HAVE BEEN DETERMINED IN KEPMENKO 251/2022 DATED DECEMBER 2, 2022 * TOTAL TARGET RECIPIENTS: 1,000,000 PEOPLE • The allocated budget for FY 2023 is 2.67 T for 595 thousand beneficiaries • So that an additional budget of 1.7 T is needed for 405 thousand beneficiaries Regarding preparations for the implementation of the Normal Scheme, MPPKP has also coordinated with the relevant Ministries/Institutions to involve higher education institutions and K/L Training Institutions that have the potential to join the Pre-Employment Card Program Source: Coordinating Ministry for Economic Affairs 10#12Age Pre-Employment Card to Boost Working Skill Program >45.1 mio Achievements Verified applicant registered on the Kartu Prakerja database Outcome A. Improved Working Skills and Entrepreneurship Opportunity 87,2% The training to improve skills and competence 56% 39,8% Who previously unemployed are now getting jobs 16.425.420 Total Beneficiaries (Batch 1-47) Rp37,96 trillion Incentive fund disbursement 38 Province 514 District/City 18... 26... 27% 34% 36... 21% 46... 13% >55 5% Residency B. Acceleration of Financial Inclusion 47% Beneficiaries who previously did not have access to financial services are now have bank account or e-wallet. C. Improved Purchasing Power and SMES % beneficiaries used the cash incentives for 74% 70% 61% Statistical Demography 95% Staple Food Electricity/Water Business Capital Mobile Data Source: Coordinating Ministry for Economic Affairs Desa Kota 64% 36% Education Bachelor 11% Diploma 4% High-School 49% Middle-... 17% Elementary... 19% Brokerge 64% Fuel 55% Transportation | "Kartu Prakerja is the most extensive G2P (Goverment to Person) Program" Source: Project Management Officer Program Kartu Prakerja, Dec 2022 11#13Fiscal Incentives Policy to Boost the Economy The government facilitates fiscal incentives to create a conducive investment climate, especially for industry players. Through increased investment, it is hoped that it can strengthen the domestic industrial structure TAX HOLIDAY & MINI TAX HOLIDAY TAX ALLOWANCE INVESTMENT ALLOWANCE SUPER DEDUCTION TAX • The criteria are new investment, taxpayers including pioneer industries, and income received from the main business activities carried out. • There are 18 eligible pioneer industries that consist of 169 KBLI. Pioneer industries are defined as industries possessing broad linkages, giving added value and high externality, introducing new technology, as well as possessing strategic value for the national economy. • Income tax reduction are 100% & 50% (mini tax holiday) during the next 2 (two) years subsequent to the end of the CIT reduction periods above, the taxpayers are eligible for half of the CIT reduction percentages As of December 2022 year to date): Total Investment: Rp146.5 Trillion Tax Payer: 20 Tax Payer Location: 10 provinces Origin of investment: domestic and 6 countries • • To increase direct investment activities for certain business fields and/or in certain areas. • The facilities include a 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 and compensation for losses of up to 10 years. The criteria are having a high investment value or for export, a large absorption of labor; or have a high local content. Total Investment: Rp14.3 Trillion • Tax Payer: 16 Tax Payer • Approval: 19 Minister of Finance Decree Source: OSS December 2022 • To encourage investment in labor-intensive industries, programs for job support creation and absorption of Indonesian workers. ⚫ Deduction from net income, of 60% of the amount invested in tangible fixed assets, including land, that are used for the taxpayer's main business activities. The deduction is spread over six years (10% annually), starting from the fiscal year the commercial production commences • There are 45 labor-intensive industrial sectors and employ an average of 300 workers in 1 tax year. Total Investment: Rp368,3 Billion Investment: 2 activities Tax payer: 2 tax payers Source: OSS December 2022 Super Deduction Vocational . Engaging industry in vocational activities to provide knowledge and encourage the transfer of knowledge • A maximum reduction of 200% gross income from costs in the context of providing work practice, apprenticeship, and/or learning activities. • As per September 2022, there are 186 agreement for vocational activities (ytd) R & D Super Deduction • Increase the role of industry in fostering innovation and the use of the latest technology in the production process • Maximum gross income deduction of 300% over R&D costs carried out in Indonesia • As per December 2022, there are 18 proposal for research and development activities (ytd), with estimated RnD cost up to Rp110.4 billions Source: Coordinating Ministry for Economic Affairs 12#14Section 2 Accelerated Reforms Agenda Supported by Institutional Improvement and Progressive Infrastructure Development BHINNEKA TUNGGAL IKA#15Improved Outlook and A Well Maintained of Indonesia's Sovereign Credit Rating Amid Global Economy Uncertainties R&I Fitch Ratings BBB / Stable BBB+ BBB BBB- Investment Grade BB+ BB BB- JCRA S&P December 2022, Rating Affirmed at BBB/Stable "Indonesia's rating balances a favourable medium-term growth outlook and low government debt/GDP ratio against weak government revenue and lagging structural features, such as governance indicators, compared with category peers. 'BBB' Fitch Moody's B+ 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 S&P Global Ratings July 2023, Rating Affirmed at BBB/Stable BBB / Stable "The stable rating outlook reflects our expectation that Indonesia will achieve solid economic growth over the next two years. This will support prudent fiscal outcomes and stabilize debt". MOODY'S Baa2 / Stable March 2023, Rating Affirmed at Baa2/Stable ""Indonesia's credit profile is supported by its large economy, low fiscal deficits and modest debt burden., balanced against low revenue mobilization, reliance on external funding and some economic concentration that leaves the economy vulnerable to commodity cycles." R&I July 2023,, Outlook Revised To Positive; BBB+ Ratings Affirmed BBB+ Positive JCR "In R&l view, Indonesia's economy has been showing strong performance even amid uncertainties of the global economic environment. With the inflation rate that has fallen within the target range in 2023, the price stability is being restored. The government has achieved its target level of fiscal deficit a year earlier than originally planned and the government debt ratio stays on a downward trajectory. The stability of financial system has been maintained and the economy has resilience to external shocks". July 2022, 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 accumulation of foreign exchange reserves. JCR holds that the debt will gradually decrease as the fiscal balance improves mainly increased revenue from economic growth and higher commodity prices". 14#16Indonesia Gold Vision 2045: Become A Sovereign, Advanced And Sustainable Country INDONESIA GOLD VISION 5 GOLD VISION TARGETS OF INDONESIA 8 DEVELOPMENT MISSIONS 17 DEVELOPMENT DIRECTIONS 2025-2045 1. Income per capita is the same as developed countries 2. Poverty goes to 0% and inequality decreases 3. Leadership positions and international influence increased 4. HR competitiveness increases 5. GHG emission intensity towards NZE Development Phase 1. Social 2. Economy 3. Governance TRANSFORMATION FOUNDATION OF TRANSFORMATION First Phase (2025-2029) Second Phase (2030-2034) Strengthening the foundation of transformation With the establishment of a strong foundation, Indonesia has accelerated its economy 4. Legal Supremacy, Stability, & Diplomatic Strength 5. Socio-Cultural and Ecological Resilience Third Phase (2035-2039) Fourth Phase (2040-2045) 45 MAIN INDICATORS OF DEVELOPMENT Indonesia started steps to expand globally Indonesia succeeded in realizing Indonesia Gold 2045 TRANSFORMATION IMPLEMENTATION FRAMEWORK 6. Equal and Quality Territorial Development 7. Quality and Environmentally Friendly Facilities and Infrastructure 8. Development Sustainability Source: Preliminary Draft RPJPN 2025-2045, May 19 2023 15#17TARGETS OF ECONOMIC TRANSFORMATION FOR INDONESIA GOLD 2045 Economic transformation aims to lift Indonesia out of the middle-income trap and into a high-income country. For this reason, the Indonesian economy must achieve an average growth of 6-7% in the next 20 years, high economic growth that is inclusive and sustainable Proyeksi GNI per Capita Indonesia (USD) 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 Indonesia has been trapped in MIT for 30 years (1993-2022 22 years Optimistic Scenario Transformative Scenario Baseline Upper-Middle Income Threshold Economic Transformation 1. Science and Technology, Innovation and Economic Productivity 7% 2. Green Economy Implementation 3. Digital Transformation 6% 4. Domestic and Global Economic Integration Proyeksi High Income Threshold 5% 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 2023 2026 2029 2032 2035 2038- 2041 2044 Scenario Average Growth Years Escape form MIT Transformative 6% 2041 Optimistic 7% 2038 5. Cities as Centers of Economic Growth First Phase (2025-2029) Second Phase (2030-2034) Third Phase (2035-2039) Fourth Phase (2040-2045) Downstream natural resources and strengthening innovation research and labor productivity Massive increase in productivity and expansion of sources of economic growth Economic power house that is integrated with global and domestic chain networks, as well as strong exports High income country Source: Preliminary Draft RPJPN 2025-2045, May 19 2023 16#18Investment Policy Direction 2020-2024: Improving Investment Quality To Promote Inclusive and Sustainable Economic Growth Encouraging downstream products and increased use of domestic products Encouraging increased Optimizing the use of natural resources and domestic production investment in business sectors categorized as green investment and having a large positive social impact Environmental and Social and equitable investment Equality (ESG) throughout Indonesia Encouraging investment in export-oriented industries and industries that substitute imports Job Creation/Encouraging investment in labor-intensive business fields and developing business fields that involve the community by utilizing existing human resources Labor intensive Direction of Investment Policy: Quality Investment 2020-2024 Export Oriented and Import Subtitution Sumber: Strategic Planning of Ministry of Investment/ BKPM (Renstra) 2020 - 2024 Increase Productivity Encouraging increased company efficiency (i.e. Industry 4.0) and improvements to the Incremental Capital Output Ratio (ICOR) Transfer of Knowledge and Technology Encouraging human resource development and increasing R&D in an effort to master technology Improve Competitivenes s and Market Access Encouraging increased perceptions and opening up a wider market for national companies and MSMEs through business partnerships 17#19Indonesia's strategy prioritizes investment with multiplier effects: downstream, green economy, digitization, and HR development 6 Main Strategies for Economic Transformation: E Green and low carbon Increasing economic productivity economy Relocation of the nation's capital Digital transformation Domestic economic integration HR development Green and Low Carbon Economy is one of the main strategies set by President Joko Widodo to realize medium-long term economic transformation, which is achieved through the Low Carbon Development framework. Priority Investment Sector Value Added Labor Intensive Industry Export Oriented New Renewable Industry Energy Infrastructure Digital Economy Industry (Downstream) Source: Ministry of Investment (BKPM) 18#20The Framework of Job Creation Law COMPANY A New Business Creation New Job Creation GREENFIELD INVESTMENT 1111> Business Development Welfare Creation HOUSEHOLD Supply Brownfield PRODUCTION Demand JOB CREATION LAW CONSUMPTION Increased Purchasing Increased Income Source: Coordinating Ministry for Economic Affairs Power 19#21Job Creation Law As A Tool For Long-term Structural Reform Clusters in the Job Creation Law 2. Improving the Investment Ecosystem and Business Activities Employment 3. 4. Ease, Protection, and Empowerment of Cooperatives and MSME Ease of Business PROGRESS OF THE JOB CREATION LAW With the Omnibus Law method, 79 laws were revised and simplified to become the Job Creation Law (Law Number 11 2020) was promulgated on November 2, 2020 1. 5. Research and Innovation Support 6. Land Procurement 7. Economic Zone Derivative regulations of 54 Government Regulations/Presidential Regulations The decision of the Constitutional Court on November 25, 2021 On June 16, 2022, Law No. 13 of 2022 concerning Amendments to Law No. 12 of 2011 concerning the Establishment of Legislation The government prepares improvements to the job creation law following the decision of the Constitutional Court, which involves the technical formation of the job creation law but does not change its substance. Preparation of academic manuscripts and draft law manuscripts It has expected to be completed in 2022. Source: Coordinating Ministry for Economic Affairs • • 8. Central Government Investment and Acceleration of National Strategic 9. Projects Implementation of Government Administration 10. Imposition of Sanctions a) Revising Law 12/2011 to accommodate the Omnibus Law method b) Change the Job Creation Law based on the revision of Law 12/2011 within two years c) Review the substances that objection to the community The subject matter in the revision includes: a) Omnibus method; b) Strengthen community involvement and meaningful participation; c) Regulatory digitalization d) Improve the technical error of writing in the draft law either that has been agreed upon or after the President receives the bill The Job Creation Law and its implementing regulations are still in effect and no material on the Law has been annulled by the Constitutional Court. Thus, the implementation of the Job Creation Law, which concerns, among others, Business Licensing and OSS, Employment including provincial and district/city minimum wages, and facilities for MSMEs, still applies. 20 20#22The Government Focuses On Regulations And Procedures For Ease of Doing Business Improvement of regulations in the context of structural reforms to the Job Creation Law and its derivative regulations can provide legal certainty to business actors. Streamlining Administrative Procedures and a Positive Investment Climate Ease of Doing Business Policy Latest update FDI Realization (IDR Tn) Impact on ease of doing business 644,2 PERPPU 2 of 2022 454,0 Law No. 11 of 2020 About Job Creation Creation has been issued concerning Job Providing legal certainty to business actors 423,1 412,8 2019 2020 2021 2022 Government Regulation No 5 of 2021 Revision of the Legal Draft and Appendix I/II Improving risk-based licensing procedures (NSPK) and harmonization with other PPs Assistance in conformity evaluation Better and OSS RBA System smoother Business between Regulation and Licensing Services Source: Coordinating Ministry for Economic Affairs System Unemployment Rate (%) 7,07 5,86 Feb-22 Feb-21 Feb-20 Feb-19 Feb-18 Feb-17 Feb-16 Feb'15#23Perppu No. 2 of 2022 Concerning Job Creation Law Is An Improvement of The Previous Regulation Constitutional Court The Constitutional Court (MK) stated that the Job Creation law was conditionally unconstitutional. ☐ The Job Creation law is still valid and asked the government to complete the revision within two years. Follow-up 1. Setting the omnibus method in the Law on the Formation of Legislation (Law Number 13 of 2022) 2. Improvements to the Job Creation Law: • Use of the omnibus method . • Meaningful increase in participation Substantial study results: employment, land, environment and base Emergency Regulation It is urgently needed to anticipate global and domestic conditions. PERPPU NO. 2 OF 2022 (30 December 2022) The contents of the Job Creation Perppu are generally the same as the contents of the Job Creation Law, however there are some major improvement to the content Several Major Improvement are Related To Employment Regulation, Halal Certification, and Water Resource Management Employment Regulation Halal Product Assurance (Halal Management of Water Resources Implementation of water sources in Certification) 1. Refinement of the setting of 1. Development of the BPJPH 1. Regency/City Minimum Wage. organization in the regions as the form of diversion of river channels 2. Changes to the formula for needed. based on approval by the calculating the Minimum Wage 2. which takes into account certain variables of Economic Growth, Inflation and Indices The Halal Certificate is valid since issuance and remains valid as long as there is no change in the composition of the ingredients and/or PPH. Government 2. Criminal sanctions for intentionally violating water source activities include diverting the river channel without approval. 3. Halal certification for MSEs through a halal statement is free of charge. 3. Imposition of administrative sanctions in the form of administrative fines.#24The Job Creation Law Encourages Employment and Facilitates New Business Opening While Recovering the Post-Pandemic Economy Has simplified into With the Omnibus Law method, 79 Indonesian Laws were revised at once with only one Job Creation Law which regulates 16 sectors Investment Ecosystem and Business Activities Business Licensing Employment SME and Cooperatives 11 Cluster Research and Innovation Land Acquisition Inna Economic Zones Ease of Doing Business Job Creation Law 186 Article dan 15 chapter Government Investment & National Strategic Project (PSN) Public Administration Imposition of Sanctions *The UUCK has been in effect since its promulgation on November 2, 2020. The Constitutional Court Decision No. 91/PUU XVIII/2020 dated November 25, 2021 which states that the Law of Job Creation is unconstitutional with the condition: remains in effect operational but must be formally revised within 2 years. The issuance of Ministerial Regulations/Regional Regulations/Regional Head Regulations which are technical in nature, operational can still be carried out, and the OSS System will continue to run as should be. Source: Ministry of Investment (BKPM) 23 23#25Improved Ease of Doing Business Implementation of the Job Creation Law: No. 11/2021 as Amended By Law No. 6/2023 Breakthrough in the legal system in Indonesia Job I simplified Creation Law I I I Opening more sectors for 100% FDI All business sectors are 100% open to foreign ownership, except for a few mentioned in Presidential Decree 49/2021 concerning Investment Business Sector. Previously, there were 515 business fields that were restricted to FDI in the "Negative Investment List". Competitive capital requirements for FDI There is no requirement for authorized capital for the establishment of a business entity but there is a requirement for a minimum paid-up capital of IDR 10 billion (~US$700,000) for foreign investment (PMA). 79 Laws simplified in 1 Law 11 cluster which regulates various sectors. ☐ Improve the investment climate and create legal certainty Harmonize the central - regional policies Minimize and prevent the practice of corruption ☐ Simplify regulation ☐ Creating a vast job opportunity I I Reduction of Company Income Tax (PPh). I I Corporate Income Tax 22% for companies that are not registered or 19% for companies listed on the Indonesia Stock Exchange (IDX). I Provide protection and facility for SME's and Cooperatives Before 2020 Starting 2020 25% 22% Source: Ministry of Investment 24 24#26More Business Fields Are Open for Foreign Investment >> Further provisions regarding investment requirements are regulated in a Presidential Regulation Number 10 Year 2021 Jo. 49 Year 2021 Pres. Regulation 44/2016 "Investment Negative List" Pres. Regulation 10/2021 Jo. 49/2021 515 Business Fields Business Restriction oriented Source: Ministry of Investment (BKPM) STOP "Investment Business Fields" More Attractive and Competitive The Regulation has come into force since 4 March 2021 (30 days after the regulation enacted) (Article 15 Pres. Regulation 10/2021) Encouraging the Development of Priority Business Fields Mandate of Law Number 11 of 2020 concerning Job Creation Artide 77 Number 2 (Amending Law Number 25 of 2007 concerning Investment Artide 12) 25#27The Latest Investment Business Field Arrangements Presidential Regulation No. 44/2016 0 "Investment Negative List" Business Fields Closed for Investment 20 Business Fields Presidential Regulation No. 10/2021 Jo. 49/2021 "Investment Business Fields" " Attachment I PRIORITY Priority Business Fields* 246 Business Fields *Equipped with Tax Holiday, Tax Allowance, and Investment Allowance Attachment II Business Lines Reserved for or Required for Partnerships With Cooperatives and SME 145 Business Fields/KBLI % Business Fields Opened with Conditions 350 Business Fields Source: Ministry of Investment (BKPM) Attachment III % Business Lines Allocated for or Required for Partnerships With Cooperatives and SME 182 KBLI in 106 Business Groups Business Fields Opened with Conditions 37 Business Fields 26#28Boosting Investment through Priority Sectors with Value Added R K 7 Export Oriented - Labor R Intensive industries Pharmaceutical and Heath Equipment N 0 Automotive Industries Electronic Indutries Infrastructure Energy, especially renewable energy Mining, That creates added value products Source: Ministry of Investment (BKPM) 27 27#29Boosting Investment: Implementation Of Job Creation Law To Provide Legal Certainty And Improve Investment Climate Constitutional Court Decision (25 Nov 2021) ☐ The Constitutional Court stated that the Job Creation Law (Law Number 11 of 2020) conditionally was unconstitutional - The omnibus method has not yet been regulated in the Law - on the Establishment of Legislation Writing technical error Meaningful participation is not maximized The Job Creation law is still valid, and asked the government to complete the revision within two years. Follow-up (Jan-Dec 2022) 1. Setting the omnibus method in the Law on the Formation of Legislation (Law Number 13 of 2022) 2. Improvements to the Job Creation Law: ■ Use of the omnibus method ☐ Meaningful increase in participation ■ Substantial study results: employment, environment, land, and base ■ Correction of writing technical errors. Emergency Regulation (30 Dec 2022) The President has issued a Government Regulation instead of Law Number 2 of 2022 concerning Job Creation (Perpu on Job Creation). ☐ It is urgently needed to anticipate global and domestic conditions. The contents of the Job Creation Perppu are generally the same as those of the Job Creation Law. However, there are some improvements to the content. Promulgation of the Job Creation Law (31 March 2023) as an The government has promulgated Law No. 6 of 2023 endorsement of Perpu No. 2 of 2022 concerning Job Creation Becomes Law. Perpu on Job Creation as an attachment to Law no. 6 Year 2023. All implementing regulations for the Job Creation Perpu and Law Number 11 of 2020 concerning Job Creation are still valid. Identification of Revision of Implementing Regulations of Law Number 6 of 2023 • Source: Coordinating Ministry of Econ . PP Number 5 of 2021 concerning the Implementation of Risk-Based Business Licensing • PP Number 28 of 2021 concerning the Implementation of the Industrial Sector • PP Number 29 of 2021 concerning the Implementation of the Trade Sector . • • • PP Number 39 of 2021 concerning the Implementation of the Field of Halal Product Assurance Presidential Regulation Number 32 of 2021 concerning Commodity Balances Determination of Decisions and/or Actions that are Considered Legally Accepted PP Number 19 of 2021 concerning the Implementation of Land Acquisition for Public Interests Presidential Decree Number 10 of 2021 concerning the Investment Business Sector (BUPM) and Presidential Decree Number 49 of 2021#30Boosting Investment: Indonesia Investment Authority (INA) To Accelerate FDI •PP Number 73 of 2020 concerning Initial Capital for the Indonesia Cumulative total deployment Investment Authority Legal ⚫pp Number 74 of 2020 concerning the Indonesia Investment basis Authority (INA and partners) 2023 to -USD -USD date 2.2 bn 2022 -USD 1.7bn •PP Number 49 of 2021 concerning Tax Treatment of Transactions Involving the Indonesia Investment Authority and/or Entities Owned 2021 800 mn ⚫PP Numbers 110 and 111 of 2021 concerning the Addition of PMN to the Capital of Investment Management Institutions Update on Progress Fruitful partnerships with various institutional investors have resulted in >USD 25 billion in collective commitments. INA has deployed >USD 2 billion of capital to date together with investor partners and will potentially deploy close to USD 3.5 billion by the end of 2023 Investment opportunity that has been completed (closed): • • Digital infrastructure: Mitratel's IPO for a total transaction size of USD 800 million together with ADIA, ADG, GIC Toll Road: Investment into SMR PPTR (Waskita Karya Toll Road) for an upfront transaction size of USD 400 million together with CDPQ, ADIA, APG Tourism/Digital: Investment into Traveloka for a total transaction size of USD 300 million with BlackRock, Allianz, and other leading institutions Healthcare: Investment into a significant minority stake in Kimia Farma Apotek and subscription into Kimia Farma (KAEF IJ)'s MCB for a total transaction size of USD 150 million with Silk Road Fund Green Energy: Anchor investor into the IPO of Pertamina Geothermal Energy (PGEO IJ) for a total transaction size of USD 490 million with Masdar Current cooperation agreements secured are: • • • Toll Road: Investment platform with ADIA, CDPQ, and APG for USD 3.75 billion. The Hutama Karya opportunity is expected to close in June 2023, while a Waskita Karya opportunity is envisioned to be completed in early 2023. Seaports: Alliance agreement with DP World for developing container ports and supporting maritime logistics infrastructure amounting to USD 7.5 billion throughout the concession period. Green Sector: USD 2 billion investment for Optimizing blended finance in ETM programs such as ADB, SMI, PLN, Global Energy Alliance with CATL Green EV Fund General: USD 10 billion investment framework agreement with ADG for various sectors in Indonesia General: USD 3 billion investment framework agreement with SRF for various sectors in Indonesia Source: Coordinating Ministry of Economics Source: INA, as of May 30, 2023 29#31Risk-Based Licensing Approach Risk Level PREPARATION OPERATIONAL COMMERCIAL NIB as the single license for preparation, operational, and commercial stages Low ⚫ Business actors are still required to comply with the implementation of K3L standards NIB ⚫ For Micro & Small Businesses, guidance is carried out by the Government in the implementation of K3L standards Low Middle Upper Midle SS* : self declaration SS**: verification result NIB and Standard Certificate (SS) as the license for preparation, operational, and commercial stages Notes: NIB+SS NIB+SS* Standard Certificate in the form of self-declaration to meet business activity standards Business actors are required to meet business standards Supervision is carried out to ensure that business actors meet business standards • Standard Certificate in the form of self- declaration to meet business activity standards ⚫NIB + SS* as the license for preparation stage. verification SS** SS** is issued after verification of compliance with business standards by the Government NIB + SS ** as a business license is valid for operational and commercial stages High NIB NIB as the business license for the preparation stage NIB + LICENSE Companies must meet all the requirements before license is issued. NIB + Permit as business license for the operational and commercial stages Source: Ministry of Investment (BKPM) 30 30#32Risk-based Business Licensing Deregulation Measures To Encourage FDI Ex-ante Licensing (satisfying all requirements in advance) is effectively replaced by ex-post licensing (the requirements are checked afterward), which will be particularly advantageous for low- and medium-risk businesses. Starting a Business Doing Business RISK-BASED TARGETING - Optimizing Effectiveness and Cost of Monitoring: Resource and time limitations The Government implemented OSS-RBA on August 9, 2021, based on Regulation 5 of 2021. • Low Risk Medium Risk High Risk • Focus on critical hazards that are more likely to arise NIB Issued = 4.886.769 Period August 4, 2021 – July 26, 2023 • Based on Business Based on Actor: Investment Type: Based on Business Scale: Business Entity Micro = • FDI = 17.954 = 605.807 DDI = Individual = 4.868.815 • 4.280.962 • Short Medium-term • - Action Plans 4.669.739 = Small 158.938 Medium 20.101 Large = 37.991 Accelerate the reduction of Ex Ante licenses toward Ex Post compliance (Risk-Based Approach) • Towards technical regulations for risk management - Third Party System . Establish OSS as a national portal for business licenses with legal security Long-term Speed up better development approach (e.g., climate change, etc.) Source: Coordinating Ministry of Economics Consider random inspections because blanket inspections are not appropriate, resulting in excessively costly (for countries. and businesses) INSPECTION: . • Based on the risk Inspection is carried out to ensure the implementation of operational and commercial activities according to business standards exception in the implementation of supervision for Micro and Small Enterprises implementation of inspections can be carried out by certified professionals (third parties). The Progress of Development Monitoring/Inspection Subsystem Of the 44 modules in the monitoring (inspection) subsystem: • 36 modules have been completed/embedded in the OSS RBA (go-live) • 8 modules are still in the process of User Acceptance Testing (UAT) 31#33Implementation of Risk-Based Business Licensing Government Regulation Number 5 of 2021 To Start and Carry Out Business Activity Basic Requirement for Business Licensing Prior to Law 11/2020 Location Permit Environmental Permit Building Permit (IMB) and Building After Law 11/2020 Suitability of Space Utilization Activities (KKPR) Environmental approval Building Approval Function Certificate (PBG) and SLF (SLF) Risk Based Business Licensing (KBLI) Risk-Based Business Licensing based on KBLI regulated in PP 5/2021. The fulfillment of provisions, requirements and obligations is based on the Sector PP, Presidential Regulation, and Permen/Perban* derivatives of PP 5/2021. Business Licensing to Support Business Activity (PB UMKU) Previously (OSS 1.1) was known as Commercial/Operational License PB UMKU services are carried out entirely through the OSS system • PB UMKU is in the process of finalizing the system with Line Ministries and there is an agreement: • if the nomenclature and services have been accommodated in the line ministries system, first the system integration will be carried out, however, if it has not been accommodated by the line ministries system, the priority is immediately planted in the OSS system. *) Various requirements are regulated in 22 Candy/Bandages that must be accommodated and planted in the OSS system Source: Ministry of Investment (BKPM) 32 2#34Risk Based OSS System: Users and Features OSS KEMENTERIAN INVESTASI/BKPM OSS System is Mandatory Business/ Investor Line Ministries Regional Government SEZ KPBPB SME 18 Line Ministries 34 Province 19 SEZ 5 KPBPB Non SME Source: Ministry of Investment (BKPM) 416 Regency 98 City Features in OSS Information Business License and Facility Monitoring 33#35Architecture of OSS System 2. SUB SYSTEM OF LICENSING & FACILITIES Investor 1. SUB SYSTEM OF INFORMATION General Information on Business Licensing 2.a. VALIDATION 2.b. SMART ENGINE Profile of KTP - Dukcapil Investor Paspor-Imigrasi Requirements/ Obligations Durations/SLA Basic Requirements Business Activities/KBLI Investment List Scale of Business Authority Other Criteria Investment Risk Valuations Akta - AHU Complaint Services NPWP-DJP OSS Dictionary OSS User Manual KKPR Darat - ATR/BPN Risk Parameters RISK MANAGEMENT ENGINE FAQ INVESTMENT FACILITIES 2.c. OUTPUT BASIC LICENCES RISK-BASED BUSINESS LICENCES (PB) Low Risk: Business Identity Number (NIB) Lower-Middle Risk: NIB+ Standard Certificate (SS) Upper-Middle Risk: NIB + Verified SS High Risk: NIB + License (+Verified SS*) SUPPORTING BUSINESS LICENCES (UMKU)) As required. 3. SUB SYSTEM OF SUPERVISION Regular Supervision Incidental Supervision Annual Supervision Schedule Assignment Letter Supervision Report/MoS Profile of Investor Imposition of Sanctions Business Licensing Simulation Source: Ministry of Investment (BKPM) KKPR Laut - KKP KBLI/ Business Activities- based Risk Matrix: - Risk Assessment from related Ministries Land Area Building Details Other Criteria Input/Evaluation/ Site Visit Verification & Notification Central/Regional Government based on Authority (+Supporting IT System) 34 34#36Ease of Business Licensing and Investment Facility through the OSS System 2 Validation 3 LO Incentive 4 Risk Based Approach Tax Holiday KTP/ID-Dukcapil 1 Right of Access for Pasport-Imigration Business Akta -MOLHM Building Permit & Certificate of Properness Peta Digital-ATR/BPN Basic Requirement Spatial Conformity (PKKPR) Enviromental Approval Low Risk NIB Medium - Low Risk NIB + Standard Certificate(SS) Medium - High Risk NIB + SS (Verified) High Risk NIB + License (+ SS) Source: Ministry of Investment (BKPM) Tax Allowance Import Duty Investment Facility in SEZ 35 55#37Tax Incentives and Reform Lower Tax Rate for the Corporate Income Tax Law No. 2/2020, PERPPU 1/2020, 25% <2020 Rp 22% 2020-2021 Investment Facilities through OSS System Tax Holiday and Mini Tax Holiday Corporate income tax exemption of 50-100% for 5-20 years for investments in pioneer industries. Tax Allowance Income deduction before corporate income tax of 30%-TA (or 60%-IA for labor-intensive industries) of the investment value for 6 years for investments in certain business fields and/or areas. PP 30/2020 Other improvements: 1. E-filing for CIT, VAT, worker income tax (payroll) 2. Faster VAT Restitution Source: Ministry of Investment (BKPM) Import Duty Facility Import duty exemption incentives for imports of machinery as well as goods and materials for industry and service industries. 20% 2022 dst Investment Facility in SEZ Tax Holiday for Main Activities, Tax Allowance for Other Activities, for investors investing in Special Economic Zones. * Import Duty, Excise and Tax facilities related to Import do not go through OSS. 36#38Investment Realization in Jan-Mar 2023 Amount in Rupiah 350 300 Indonesia Investment Trend 2021-2023 YOY Q1 250 219,7 200 282,4 328,9 177 147,2 150 111,7 135,2 100 108 151,9 Investment Realization Jan - March 2023 Rp 328,9 T Labor Absorption 384.892 people 23,5 % YOY Investment Target 2022 Rp 1400 T 50 2021 2022 2023 FDI DDI Total Realization Source: Ministry of Investment (BKPM) FDI Rp 177.0 T (53,8%) DDI Rp 151,9 T (46,2%) Outside Java Rp 172,9 T (52,6%) Java Rp 156,0 T (47,4%) 37 32#39Investment Realization Trend in Java and Outside Java 2019 Total: Rp809,6 T Labor Absorb: 1.033.835 Secondary Sector: Rp216 T DDI: Rp386,5 T (47,74%) FDI: Rp423,1 T (52,26%) 2020 Total: Rp826,3 T Labor Absorb: 1.156.361 Secondary Sector: Rp272,9 T DDI: Rp413,5 T (50,04%) FDI: Rp412,8 T (49,96%) 2021 Total: Rp901 T Labor Absorb: 1.207.893 Secondary Sector: Rp 325.4 T DDI: Rp447 T (49,62%) FDI: Rp454 T(50,38%) 2022 Total: Rp1.207,2 T Labor Absorb: 1.305.0001 Secondary Sector: Rp497,7 T DDI: Rp552,8 T (45,79%) FDI: Rp654,4 T (54,21%) Outside Java Rp375,0 T (46,3%) Outside Java Rp417,5 T (50,5%) Outside Java Rp468,2 T (52,0%) Outside Java Rp 636,3 T (52,7%) Java Java Java Rp434,6 T (53,7%) Rp408,8 T (49,5 %) Rp432.8 T (48,0%) Java Rp570,9 T (47,3%) Source: Ministry of Investment (BKPM) Since the 3rd quarter of 2020, investment realization outside Java has always been greater than investment realization in Java. Thi massive infrastructure development outside Java during the 1st period of President Joko Widodo's administration. 38 38#40Investment Realization Trend Based on Countries 2019 2020 2021 2022 No. Country Value (USD-Mil) No. Country Value (USD-Mil) No. Country Value (USD-Mil) No. Country Value (USD-Mil) Singapura 6.509,6 1 (*: Singapura 9.779,1 1 Singapura 9.390,1 1 Singapura 13.281,1 2 Tiongkok 4.744,5 2 Tiongkok 4.842,4 2 Hongkong, RRT 4.609,3 2 R.R. Tiongkok 8.226,0 R.R. Hongkong, 3 Jepang 4.310,9 3 Hongkong 3.535,9 3 3.160,4 3 Tiongkok 5.514,2 RRT Amerika Hongkong 2.891,0 Jepang 2.588,0 2.537,2 4 Serikat Jepang 3.564,8 Korea 5 Belanda 2.596,8 5 1.841,9 5 Jepang 2.263,2 Malaysia 3.343,3 Selatan Amerika 6 Malaysia 1.357,5 6 Belanda 1.422,4 6 Belanda 1.761,6 6 3.026,2 Serikat Korea Korea Korea 7 1.070,2 7 Malaysia 1.045,3 7 1.640,2 Selatan Selatan 7 2.297,8 Selatan Amerika Amerika 8 989,3 8 749,7 8 Malaysia 1.364,3 8 Belanda 1.220,2 Serikat Serikat 6 Britis Virgin Islands 743,8 6 Taiwan 454,3 9 Bermuda 674,4 6 Bermuda 964,7 10 Australia 348,3 10 Australia 348,6 10 Swiss 599,8 10 Inggris 628,3 Source: Ministry of Investment (BKPM) 39#41Investment Realization Trend Based on Sectors 2019 2020 9. No Sector Rp (T) % No Sector Rp (T) % No Transportation, Transportation, 1. Warehouse, and 139,0 17,2% 1. Warehouse, and 144,8 17,5% Telecommunication Electricity, Telecommunication Electricity, 2021 Sector Metal, Metal Goods, Except Machinery, and Rp (T) % No 2022 Sector Metal, Metal Goods, Except Rp (T) % 117,5 13,0% 1. 171,2 14,2% Machinery, and Equipment Industry Equipment Industry 2. Gas and 126,0 15,6% 2. Gas and 102,0 12,3% Housing, Water Supply Water Supply Industrial Estate, 2. 117,4 13,0% 2. Mining 136,4 11,3% Housing, Industrial Metal, Metal and Office 3. Estate, and Office Goods, Except Building 71,1 8,8% 3. 94,8 11,5% Machinery, and Transportation, 3. Building Transportation, Warehouse, and 134,3 11,1% Equipment Industry 3. Warehouse, and 107,4 11,9% Telecommunication Metal, Metal Telecommunication Housing, Industrial Housing, Industrial Goods, Except 4. 61,6 7,6% 4. Estate, and Office Electricity, 4. Estate, and Office 109,4 9,1% 76,4 9,2% Machinery, and 4. Gas and 81,6 9,1% Building Building Equipment Industry Water Supply Chemical and 5. Pharmaceutic 93,6 7,8% 5. Mining 59,5 7,4% 5. Construction 71,0 8,6% 5. Mining 81,2 9,0% al Industry Metal Industry Investment Realization Growth (2019-2022) +177,9% In line with the policy of the President of the Republic of Indonesia on economic transformation from primary sector industry to value-added based (downstream) industry, investment in the Basic Metal, Metal Goods, Non-Machinery and Equipment Industry sector increased 177.9% from IDR 61.6 T to IDR 171.2 T (year 2019-2022). Source: Ministry of Investment (BKPM) 40 40#42National Strategic Project (PSN) list was established in 2016, and have undergone several amendments until recently stipulated under Coordinating Minister Regulation No.21/2022 Pres. Regulation No. 3/2016 2016 225 Projects 1 Program USD 168,58 Billion Pres. Regulation No. 58/2017 2017 245 Projects 1 Program USD 283,06 Billion Evaluati Pres. Regulation No. 56/2018 2018 223 Projects 3 Programs USD 265,91 Billion PSN Lis Evaluation Eval Pres. Regulation No. 109/2020 2020 201 Projects 10 Programs USD 308,7 Billion Coord. Minister Regulation No. 7/2021 2021 208 Projects 10 Programs USD 365,13 Billion PSN List Evaluation Coord. Minister Regulation No. 9/2022 2022 200 Projects 12 Programs USD 351,22 Billion PSN List Evaluation 2022 210 Projects 12 Programs USD 383,09 Billion PSN Lis Evaluation Project included in the PSN List Proposed project is evaluated by KPPIP ✓ and approved through High level Limited Meeting (Ratas) Ongoing project from the previous list and being pushed by the government The project has been declared Complete and there are no issues that need to be resolved The project no longer requires PSN facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 00 || || Project excluded from the PSN List 41#43As of now, there are 210 Projects and 12 Programs under the National Strategic Project list in which more than 60% of investment is expected from private sectors 42 Proyek Sumatera USD 49,01 Billion 1 81 Program Proyek 13 Kalimantan Proyek USD 15,4 Billion Jawa USD 126,45 Billion 11 11 Program Proyek Nasional USD 99,33 Billion 22 Proyek Sulawesi 13 Proyek Maluku & Papua USD 36,47 Billion USD 21,48 Billion 18 Proyek Bali & Nusa Tenggara USD 2,92 Billion PSN list covers 14 sectors on project level and 12 Program level A Road 53 Projects 000 Cleanwater, Wastewater, Dams 47 Projects Irrigation 8 Projects Ind. Estate Railway Plantation 18 Projects 14 Projects 1 Project Energy Ports 14 Projects 15 Projects Sea Wall 14 Projects Airport 6 Projects Tourism 1 Project Smelter Program Superhub Program Electricity Program Economic Dev. Program Toll Road Access Program Food Estate Program Strategic Tourism Program Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Est. Total Investment Value USD 383,09 Billion* 13% O 67% State Budget 20% SOE Budget Private *Include potential tennant investment in Industrial Estate Housing 2 Proyek SEZ Program Education 1 Proyek Waste to Energy Program Technology 6 Proyek Border Dev. Program Sugar & Palm Program 42#44Since 2016, 156 PSN have been expedited towards completion with investment value of USD 69,48 Billion and most of the projects have passed preparation stage 1st Amendments: Addition of 55 projects + 1 industrial program aircraft 2nd Amendments: Added 2 projects + 1 program even distribution economy 3rd Amendments: Added 88 projects +5 programs 4th Amendments: Added 7 projects 2021 2020 2019 2018 2017 62 projects IDR 302,1T 92 project Rp467,4T 104 project Rp590.5T 128 projects IDR 716.2 T 2016 30 projects IDR 94.7 T 20 project IDR 33.3 T 37+ projects 1 program 32+ projects 28+ projects 2 programs 2 programs 24+ projects 26 projects + 5 programs 7 programs 5th Amendments: Added 13 projects + 2 programs 6th Amendments Added 10 Projects 2022 153 projects IDR 1,040 T (25 projects completed in 2022) 30 projects +9 programs May 5, 2023 Information 156 projects IDR 1,080.2 T Project completed 31 projects +9 programs Partially Operated Construction Phase 75 projects 96 projects + 1 program 95 projects 119 projects 100 projects 99 project + 1 program 89 projects 78 projects Transaction Phase 6 projects 13 projects 81 projects 6 projects 4 project 36 projects +1 aircraf 6 projects 59 projects + 1 industrial aircraft Program 53 projects + 1 industrial program aircraft Program 66 project 10project 47 projects + 3program 4 project 46 projects 4 project 3 programs 44 projects 3 programs Project in stages setup + 4 programs 15project 29 projects 9 projects + 1 program 14 Projects Exit project from PSN list 43 3#45All National Strategic Projects have been given a special facility to ease each of the project's implementation as stipulated in the Pres. Regulation No. 109/2020 PSN Facility Land transfer fee waiver for PSN Local content utilization Electronic permit licensing Government guarantee Spatial planning IT Monitoring system by KPPIP Land aquisition Existing New norm on Presidential Regulation No. 109/2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) SOE appointment Debottlenecking Procurement acceleration Law settlement assistance Project acceleration for private investment 44#46Highlighted PSN Projects which aligned with recent National ESG (Environment - Social - Governance) Agenda (1/2) Electricity Program with focus on Renewables 1 Electricity Infrastructure Development (PIK) (which contains projects listed in RUPTL 2021-2030); Electricity Program 2 National Rooftop Solar Power Plant 3 Large-scale Solar Power Plant in Riau Islands 45#47Highlighted PSN Projects which aligned with recent National ESG (Environment - Social - Governance) Agenda (2/2) EV Battery end-to-end Development Plant The Electric Vehicle Battery Industry is one of the Government's priorities In the next five years, the President's direction is that the government wants to focus on the downstream industry of nickel ore, considering that Indonesia has the largest reserves in the world. Electric Battery Development Program as part of new PSN List in 2022 ос 1. Nickel Smelter in East Halmahera PT Indonesia Battery Corporation in East Halmahera A joint venture project with the LGES consortium to support the supply of nickel for the electric vehicle battery industry in Indonesia at the Batang Integrated Industrial Estate Sorowasa Sey Pomalia, Smith East Sul #2 #pc Central Sulawesi 2. PT Vale Indonesia Integrated Smelter Development Project in Pomala Contributing the downstreaming of electric battery precursor products up to 40,000 tons/year 46#48Highlighted PSN Projects which provide substantial benefit to private investor - Special Economic Zones Development (KEK) on 18 Location in Indonesia 1. Aan North Acch & Lhokseurrow, Ace Government Regration No. 5/2017 February 20121 Operating in December 2018 Primary Actieties Energy Industry Putrocham and cham wountry Palm Cincustry -Logging industry Log 2. Marghe SEZ Simalungun, North Sumatera Government Regution No 29/2012- February 20121 Operating in January 2015 Primary Acti -Falm oil industry -Rubber Industry Log Stan Aero Technic SEZ Betom Raulands Government Regulation No. 67/2001- June 20211 Primary Actieties MRO Industry Maltenance, Repair Over Mongia SEZ Batam, Kepulauan Ru Government Regulation No. 41/2021- Jure 20011 Primary Activities IT Tourhm 11. Ores SEZ Gresik, East Deve 19 SEZS AND ITS PRIMARY ACTIVITIES Bow Regulation o 71/20021-June 21 Primary Aces Mesa edustry (Cooper and steel smaller Energy Industry -Electronic Industry -Chenical industry -Logistic SLOC Malacca ALK- 12. Sing Myang, East Cent legstation No. 68/2019-September 2019 Primary Actinties -Touris -Distal Technolog 13 Wind SEZ Central Lorrbok, NTBI Goverment Regulation o 62/2014 June 2014 Operating in October 2017 Primary Ages: Touns 54. METKEZ East Hutal, East Kamarton Gowerment Relation No. 85/2014-October 2014 Operating in April 2019 Primary Activities: Pam Of, Inntry Erary hdustry -Logste Pala, Central Sulawes Kovantment option No 31/2014 May 2014 Operating in Septem Primary Activities: -Base Metal Industry FIFLUC 18.png SEZ North Minaha North Su (Government Regulation No 84/2019-December 20191 Primary Act: Touran Shung North Sulawes Government Regration No. 32/2014- May 2014 Operating in Apr 2019 Proceeding dry Primary Activities -Coco -Fishery incustry -legdic Mortal Islands, North Maluku Government Regstation No. 50/2014- June 2014: Operating in April 2019 Primary Activities Fishery incustry -Leght 19. Sorong S2 Sorong, West Pape (Government Regulation No. 31/2016 Aug 2016 Ban, Alwilance ovement Pegaon Na 42/2017 October 20171 Operating in December 2018 Primary Activities Bouake Industry Logist &Tanjung Ai-Ai SEZ Bonyuasin South Sumatera Government Regulation o 51/2014-June 20141 Primary Actisties Prim OR industry Rubber try Petrochemical industry -Logic 7/Tarjung Kelayang SEZ Belugangs Beltung ALKI- ALKI-II Govemment Fegulation No. 06/2016- March 2016 Operating in March 2019 Primary Act: Tourem TELESEZ Pandeglang, Bantes Government Fegulation No 24/2012 February 2012 Operating in February 2015 Primary Activities Tourm 9. Lido SEZ Bogor, West Jes Government Regulation No 69/2021 June 2021 Primery Activit Taurium Creative Industry Operating in Detater 2019 Primary Activities: -Nickel Smeber industry Pilm 04 industry Forstery Sgol Industry Logisti 10 Handal S Kendal, Central Java Government Regulation No 85/2019-December 2019 Operating in May 2021 Primary Activities Teattan and Clothing industry Furniture and Tury Inthastry Food and beverage industry Automotive incatry Electronic Industry SUMMARY OF THE 19 SPECIAL ECONOMIC ZONES PERFORMANCE *) Investment Realization (IDR Trillion) 2019-2021 2019 2020 2021 13.21 26.86 42.98 Investment Commitment IDR 116.4 Trillion 27,800 Numbers of Employment IDR 5.2 Trillion Export Value in 2021 IDR 64.8 Trillion Investment Realization (Tenant & Developer) *) up to December 2021 Increasing Export Focusing on industries which have GVC (fashion, automotive, furniture, etc.) Speed Up Development of Industry 4.0 Focusing on industry with automation MAIN TARGET OF SEZS Developing Under- Developed Regions Giving added value to raw materials such as mining or farming Develop Potential Service Industry Development industry in the field of IT, financial services, education & healthcare Improve Indonesia Balance of Trade Import substitution Industries, such as chemical, pharmaceutical, machinery & electronics 47#49Highlighted PSN Projects which provide substantial benefit to private investor - Various facilities and Modalities for SEZ investors Investment Opportunities as Tenant ■ Invest in SEZ Business Sectors (Industry: palm oil, rubber, petrochemical, agro, fishery, manufacturing, logistic, tourism, etc) Investment Opportunities as Developer Investment Opportunities as Infrastructure Provider INVESTOR I Joint Venture with the SEZ Provide SEZ Infrastructures: Developer in operating and managing SEZ I On-site infrastructure (power plant, Corzy with a: thar? I I water treatment plant, waste water treatment plant, etc) TAX HOLIDAY (10-20 YEARS) (In line with SEZ theme) Yes No TAX ALLOWANCE (Other than designated SEZ theme] One-Stop-Services Controlled goods regulation not applied Negative List Not Applied Indonesia National Standard Not Mandatory Environmental License by Developer Building Permit by Developer No export obligation Property Ownership for Foreigners Special Tripartite Forum VOA could be extended 5 times Land Title for 80 years 50% reduction for Local Taxes Zero percent custom tax for production goods with 40% local content Entering Domestic Market Free luxury tax for property sales (only in SEZ with tourism themes) IMPORT: Foreign ownership limitation not applied Import duty exemption for machinery & capital goods (up to 5 yrs) Transaction inside the SEZ: value added tax (VAT) and luxury sales tax* (LST) are not collected INCOMING GOODS Deferred import duty ⚫ VAT & LST no: collected FROM DOMESTIC TARRIFAREA: VAT&LST rot collected EXPORT: OUTGOING PRODUCTS • Normal Regulation TO DOMESTIC TARRIF AREA ⚫If Local Content> 40%, Import Duty are exempted 48#50Various initiatives to boost private sector participation in Infrastructure sector especially for National Strategic Projects 1 2 3 4 боло Public Private I Partnership (PPP) Limited Concession Scheme (LCS) Land Value Capture (LVC) Other Creative I Financing for I Infrastructure 19 49#51Institutional reforms to establish a conducive PPP ecosystem... 1 Public Private Partnership (PPP) Institutional Reforms for PPP Implementation KPPIP: kpop Coordinating unit in decision-making processes and debottlenecking efforts for infrastructure acceleration Indonesia Infrastructure IIGF Guarantee Fund: Provides guarantee and supports project preparation KANTOR BERSAMA KPBU REPUBLIK INDONESIA PPP Joint Office: Information center for policy coordination and capacity building to encourage the use of PPP schemes Sarana Multi SMI Infrastruktur: Facilitating infrastructure financing, preparing project, and serving advisory PPP Guarantee As a Single Window Institution to provide Government guarantee for PPP infrastructure projects. Presidential Regulation 78/2010; McF Regulation 8/2016 PPP Project Development Facility Provide project preparation and transaction advisory services for PPP projects assigned by the Minister of Finance (MoF). MoF Regulation 180/2020 National Strategic Project (PSN) Guarantee Project Guarantee against Political Risks that can result in delays in the implementation of PSN and unfavorable financial impact on Business Entities implementing PSN. MoF Regulation 30/2021 SOE Credit Guarantee Credit guarantee against of State Owned Enterprises /SOE default risk on loans and bond issuance to finance infrastructure project MoF Regulation 101/2018 National Economic Recovery Program Corporate Credit Guarantee Credit Guarantee for Corporate working capital as part of National Economic Recovery Program MoF Regulation 98/2021 Credit Guarantee for State- owned Enterprises/SOE involved in National Economic Recovery Program MoF Regulation 211/2021 Government Commitment through Fiscal Support oool Project Preparation Project Development Facility (PDF) Commitment Contracting Agency (CA) Commitment MoF assigns SOE to assist Through conversion CA in PPP project preparation and transaction from State Budget to PPP financing scheme Viability of Project Viability Gap Fund (VGF) Availability Payment (AP) MoF provides support resulting a more viable project to be offered to market MoF provides periodic payment scheme for non- commercial projects that greatly needed by public Bankability Sovereign Guarantee and Long-Term Financing MoF established SOE in order to provide sovereign guarantee and long-term financing support Land Support MoF established dedicated unit that settle land acquisition payment to be used for strategic infrastructure projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 50#52National Strategic Project (PSN): 214 projects through Public Private Partnership (PPP) 1 PPP Projects under National Strategic Projects (PSN) – incl. PSN Programs (Updated on 2023) Public Private Partnership (PPP) 210 projects under 14 sectors PSN Program #10 Regional Development Program 31 Projects 62 Projects (USD 52,47 Bil) 6 Projects (USD 0,87 Bil) (USD 7,37 Bil) 49 Projects (USD 16,33 Bil) 220 PPP Projects 72 Projects PSN Projects Waste to Energy Programs Central Java Projects (USD 9,12 Bil) East Java Projects West Java Projects Total . 30% of the projects are small scale PPP projects initiated by the Regional Government, with investment value under USD 15 Million. Of these, 36 projects (53%) are Toll Road projects. Highlighted Projects Kediri Airport PPP Unsolicited - Initiated by Private Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Project Scope Investment Value USD 607 Million • Design-Build - Finance - Operate - Maintain - Transfer (DBFOMT) (incl. land acquisition) · 50 years concession · User Charge 51 5557#53Limited Concession Scheme Stipulation as an asset recycling scheme for brownfield infrastructure asset 2 Limited Concession Scheme (LCS) is a concession agreement, that includes asset operations and development, between Government and Private Entities for 20+ years of concession period. Limited Concession Scheme (LCS) LCS Concept 0A о 000 ARR Government can get: ⚫ Upfront payment that can be received at the time of Financial Close, and/or • Annuity payment during the concession period • Additional incentives in the form of revenue sharing All future CAPEX will be borne fully by the concessionaire, thus easing the burden of Government's budget Government guarantees the issuance of permits and licenses Flexible operations allow private sector to innovate and increase revenue LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOES to private sector to operate, maintain, and develop the assets; As the rewards, Government and/or SOE will receive upfront payment or annuity payment during the concession period Future CAPEX during the concession period will be borne by the concession holder to ease the Government and SOE budget burdens Technical Criteria for the LCS assets The asset has been fully operated for minimum 2 years The asset needs to improve operation efficiency based on international standard Asset's useful life minimum is 10 years For the SOE's asset, the asset must have positive cash flow for minimum 2 years in a row and has been audited at least 3 years in a row For Government asset (BMN), the asset should be on the Ministry Financial report that has been audited based on the Government Accountancy Standard in the previous period Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 62 52#54LVC Scheme implementation to ease the government burden on infrastructure development 3 "A policy approach that enables communities to recover and reinvest economic value increases and increases in economic productivity that result from public investment and other government actions. (Lincoln Institute of Land Policy) Land Value Capture (LVC) Open Housing & Settlement Keep Investing- network Grows 0000000 Human Settlement Improvement Tax based LVC Land and Property Tax Value Uplift Retain a Portion Betterment Levies and Special Assessment Tax Increment Financing (TIF) Development Based LVC Land Sale and Rent Air Right Sale Joint Development Land Readjustment I LVC Benefit 1. Local revenue from tax and levy Better city planning and development Regional growth I | . Distributed development in urban area Triple Win LVC Better Urban Mobility Reducing Subsidy Source: KPPIP, Kemenko Perekonomian, Desember 2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Creating Fiscal Space 53#55Government of Indonesia is exploring the potential of pilot project on LVC to encourage Regional Government in implementing LVC Scheme 3 Land Value Capture (LVC) Coordinating Ministry of Economic Affairs in partnership with The World Bank and DFAT- Australia has formulated Piloting Project study (Demo Project) for Land Value Capture initiatives in 5 Cities. MRT Station Harmoni, TOD Jurangmangu, Tangerang, Banten DKI Jakarta Value Capture Instrument: FAR (Floor Area Ratio) Compensation Betterment Levy Value Capture Instrument: Concession Fee Betterment Levy Gedebage Area, Bandung, Jawa Barat Value Capture Instrument: Betterment Levy TOD Tawang Station, Semarang, Jawa Tengah Value Capture Instrument: Concession Fee Betterment Levy Sekanak Lambidaro Area Development, Palembang, Sumatera Selatan Value Capture Instrument: Betterment Levy Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 54 5.4#56SDG Indonesia One is launched by PT SMI as an integrated funding platform for private investor 4 Other Creative' Financing for Infrastructure Profile of PT SMI • PT SMI is a SOEs' non-bank financial institution with 100% of its shares owned by the Indonesian government. • The first financial institution in Southeast Asia accredited by Green Climate Fund (GFC SDGs Initiative • The platform was launched in October 2018 THE WORLD BANK AllB TE ADR AFD gef CTF • The Pipeline Projects comprise public transportation sector, health care, renewable energy, tourism and drinking water supply system Impact toward SDGs: Increase funds availability for infrastructure projects and project appropriateness. 19641 2000 M Standard MUFG CTBC BANK Maybank HSBC DBS mandır UOB Chartered BCA Den ⚫EMTN Program USD 2 billion Shelf Registration Conventional Bonds I "Rp 30 tron •Shelf Registration Conventional Bonds Il "Rp 25 trillion use Shelf Registration Sukuk Mudharabah Rp 3 trillion Shelf Registration Green Bonds Rp 3 trillion sh03 MTN Rupiah Rp 850 tle ho ⚫ MTN USD 300 mio KFW Development Partners Bank Loan VSMI Capital Market USD 700 min Offshore Loan Syndication Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Infrastructure Projects Source: PT SMI, 2019 + 13 13 MOLE PER Focuses on 15 out of 17 components in SDGs which are related to infrastructure development 55#57Other Financing Scheme and Modality - Indonesia Investment Authority (INA) as an Alternative Source of Economic Development Financing 4 Legal basis Other Creative ' Financing for Infrastructure Development ⚫PP Number 73 of 2020 concerning Initial Capital for indonesia Investment Authority ⚫PP Number 74 of 2020 concerning Indonesia Investment Authority •PP Number 49 of 2021 concerning Tax Treatment of Transactions Involving Indonesia Investment Authority and/or Entities Owned ⚫PP Numbers 110 and 111 of 2021 concerning the Addition of PMN to the Capital of Investment Management Institutions ⚫The Supervisory Board has been formed based on Presidential Decree No. 6/P of 2021 •The Board of Directors has been formed based on the Decree of the INA Council Number 1 of 2021 ⚫An initial capital of IDR 15 T has been allocated in 2020, and an additional capital of IDR 15 T from PMN and from the transfer of shares amounting to IDR 45 T ⚫There have been discussions with more than 50 companies to become strategic partners, and several countries have expressed a desire to partner with INA Main Sectors of Investment Health Services Seaports Toll Airport Road Industrial Area Digital Infrastructure Renewable Energy Traditional Energy Plantation Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Development of INA's Progress The total investment opportunity commitment received up to June 2022 reached >USD 20 billion. At least two investment opportunities are expected to be closed in 2022-2023: Toll Road and Seaport. Current cooperation agreements secured are: • Toll Road: Investment platform with ADIA, CDPQ, and APG for USD 3,75 billion. Hutama Karya's opportunity is expected to close in December 2022, while ADIA is reevaluating the Waskita Karya opportunity. • Seaports: Alliance agreement with DP World to develop ports and support infrastructure amounting to USD 7.5 billion throughout the concession period. • General: USD 10 billion investment framework agreement with ADG for various sectors in Indonesia Investment opportunity that has been completed: Digital infrastructure: Mitratel's IPO with ADIA, ADG, and GIC for a total of USD 770 million 56#58Other Financing Scheme and Modality - Capital/Secondary Market that have contribution as an alternative infrastructure financing instrument (example) 4 Other Creative' Financing for Infrastructure Limited Mutual Fund (RDPT - Reksadana Penyertaan Terbatas) Recent Progress • Capital Market Instrument in a form • of Mutual Fund that is offered to limited investors Since 2018, there are already more 1 Example on RDPT Financing Summary of TPJT TPJT is located at East Java where it connects the area of Pasuruan and Probolinggo. The Toll Road will potentially attract traffic from western part of Java going across Surabaya, Probolinggo and Banyuwangi for tourism. TPJT is a subsidiary of PT Waskita Transjawa Toll Road ("WTTR"). Location: East Java Ownership Structure RDPT 60.5% WTTR 99.9% trans-jawa работа Jalan tol Tall Road 39.50% than 50 products of RDPT with approximate value of IDR 16 Trillion 2 and USD 125 Million • Most of the sector offered is on Toll Road Sector Waskita Toll Road Raih Rp550 M dari Emisi RDPT Infrastruktur MARKET-Donald Banjamahor, CNBC Indones ww Summary of KKDM KKDM was established on December 20, 1996. KKDM obtained the Toll Road Concession Rights for Bekasi-Cawang- Kampung Melayu Toll Road section ("Becakayu") with concession period of 40 years (start concession period: 2016). It is planned to connect to Jakarta Inter Urban Toll Road ("JIUT"). Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Location: Greater Jakarta Ownership Structure RDPT JASAMARGA Toll Road 27.90% 71.80% 0.3% TIKKDM JALAN TOL BECAKAVU 57 40#59The Domestic Component Level (TKDN) Implementation "Domestic Component Level (TKDN) represents the quantity of domestic components in goods, services and combination of goods and service" The Domestic Component Level (TKDN) Electronics ICT Medical Devices L TKDN Value (goods) consist of: Raw materials; Direct Labor; • Factory overhead TKDN Value (services) consist of: . Government Procurement ☐ State budget ☐ Regional budget State-owned company ☐ Regional-owned company • WTO Rules (Compliance) • Labor; • Working ⋅ Facility/Machinery; General Services Government procurement by the Government for electronics, ICTS and medical device prioritize domestic product with minimum TKDN + Company Benefit Weight (BMP) > 40%. Government procurement is funded by state budget, regional budget, state-owned company budget, and regional-owned company budget. Non Government ✗ Procurement Non-governmental procurement is not prioritizing product's TKDN The government constitutes the Increased Use of Domestic Products (P3DN) National Team P3DN Team tasks: a. coordinate, supervise, and evaluate the implementation of Increased Use of Domestic Products (P3DN) in their respective environments; b. provide a final interpretation of the dispute of the TKDN value between the producer of the goods/services provider and the goods/services procurement team; c. Other tasks and liaisons related to P3DN 58#60Improving National Logistics System Resiliency: "Key Priorities In Encouraging The Investment" The government established an integrated logistics system through The National Logistic System Development Policy (SISLOGNAS). This system aims to facilitate the flow of goods to fulfill the community's basic needs and increase the competitiveness of national products. LOGISTICS PROGRAM FOR 2022-2024 1 Increasing national logistics efficiency, focusing on food and health products This focus aims to ensure the 2 availability and reliability of logistics services to support the smooth distribution of goods at the district and city levels. Increasing efficiency and effectiveness of export/import flows of national leading products and imports of priority industrial raw materials. This focus aims to improve the smooth flow of exports and imports, both goods and documents, to increase Indonesian products' competitiveness in the global market. 3 1. Specify a specific commodity. Commodity-based improvement framework 2. Identify demand patterns, supply patterns and logistics costs. 3. Set logistics efficiency targets for these commodities, for example: a. Lead time for domestic goods delivery; b. Lead time at the port for import-export goods. Strengthen Key-Enabler 1. Mapping and collaborating stakeholders and off-takers to implement the action plans. 2. Establish a responsible organization to ensure the implementation of action plans to support the achievement of logistics efficiency targets. Organizing action plans based on 6 key drivers Preparing action plans based on the six key drivers to achieve efficiency in national logistics and the effectiveness of export/import flows. 6. Regulations, Rules and Legislation 5. Human Resource Managemen 4. ICT 3. Logistics Service Provider t 2. Transportation Infrastructure 1. Main Commodity Competitivenes and Social welfare Sources: RPJMN 2020-2024; Presidential Regulation No.26/2012 Concerning Blueprint of National Logistics System Development Key Drivers: Logistic Action Plan Transportation Infrastructure → There are +90 projects of infrastructure development spread across Indonesia, such as toll roads, ports, airports and railways, to support the improvement of the logistics process Logistics Service Provider Through Government 5/2021, of the total 81 standard classifications of business field in overall logistics sectors, 72 (around 89%) required NO LICENSE but only identification business number and/or standard certificate. Furthermore, through Presidential Regulation 10/2021, there are relaxations toward foreign investment requirements. In the logistics sectors, the relaxations take form in the allowability of foreign investment equity to fully own a business. ICT NLE is a system to provide one-stop services for the transmission of data, trade logistics documents, and secure and reliable information to serve G2G, G2B, and B2B transactions for domestic and international trade Human Resource Management → Some programs include (a) The establishment of the National Occupational Map for Logistics and Supply Chain (b) Legalization of the Indonesian National Occupation Competency Standards#61Government Continues to Support the Development of Downstream Industries Indonesia's Coal Gasification Roadmap until 2045 <♦2021 ♦2025 2030 2035 2045 • 2021-2025 Establishment of 3 • Gasification Plants for DME and/or Industry • Import of LPG has decreased • • • by 3,51 million tons by DME substitution • Infrastructure and Product Distribution Channel for Coal Upgrading Phase-1 has been built Establishment of Coke Factory for Metallurgy Increased value-added of around 19.6 million tons of coal in the Coal Downstream Industry. • 2026-2030 Increased capacity of the Gasification Industry to meet the demand for DME and Industry Establishment of 2 Coal to SNG plants in Sumatra. Establishment of a bio-coal briquette factory and implement the use of bio-coal briquettes. • Coal Upgrading industry started operation. • Increased value-added of around 22.7 million tons of coal in the Coal Downstream Industry. 2031-2035 • Increased capacity of the Gasification Industry to meet the demand for DME and Industry Establishment of 2 Coal to SNG plants in Sumatra & 1 plant in Kalimantan. Establishment of the Coal Liquefaction Industry to substitute imported gasoline • Establishment of REE industry and Advanced Materials, Agri- Industry, Materials from coal. • Increased value-added of around 28.7 million tons of coal in the Coal Downstream Industry. 2036-2045 • Increased capacity of the gasification industry to meet the demand for 19.81 million tons of Methanol for DME and Industry • Increased capacity (optimization) in each Coal Downstream Industry • There has been an increase in value-added of around 40.7 million tons of coal in the Coal Downstream Industry. Source: Ministry of Energy and Mineral Resources 60#62Encouraging The Downstream Industry To Increase Value-added Commodities Downstream Industry Policy Acceleration of Economy Growth Strengthen and deepen industrial Structure through R&D, product innovation, brand, and design. Number of Smelter Commodity Total Number and Investment Smelter 2021-2024 Investment Realization Total Investment Existing Plan TOTAL (mn $) (mn $) Nickel 11 19 30 7619.3 5508.4 Broaden Working Bauxite 2 6 8 7138.9 2979.5 Opportunity DOWNSTERAM Iron 1 1 2 53.7 47.2 INDUSTRY Acceleration of Copper 2 2 4 4693.3 1046.9 Country foreign Industrial Mangan 1 1 2 23.9 12.5 exchange reduction with Deployment which Lead and Import Substitution 0 2 2 28.8 22.0 covers NKRI territorial Zinc TOTAL 17 31 48 19557.9 9616.6 Increase Local Added Increase foreign Value exchange revenue through Export Supporting Policy For Downstream Industry Provide Industrial Infrastructure / Development of sufficient Industry Area or SEZ (port, energy, land, natural gas, etc.) Create a conducive industrial business environment (Job Creation Law, risk-based business licensing, OSS, etc.) Fiscal incentive and disincentive Technology provision, building advanced human resources, and industrial machinery. Source: Coordinating Ministry for Economic Affairs Coal Development Project The development of the Coal to DME Project aims to increase national energy Bukit Asam security by reducing LPG imports. The project in Tanjung Enim will become a Special Economic Zone (SEZ) so that facilities and incentives will support it. With 6 million tons of coal annually, this project can produce 1.4 million DME to reduce LPG imports by 1 million tons annually. Gasification AIR PERTAMINA PRODUCT COAL TO DME PLAN COAL 6 MTPA Source: Ministry of Energy and Mineral Resources, 2022 Tanjung Enim SYNGAS METHANOL DME 1,4 MTPA 61#63Promoting The Development Of Nickel-based Industries To Become A Global Battery And EV Supplier Government Issues Presidential Decree No. 55 of 2019 to Accelerate the Use of Battery Electric Vehicles (BEV) on the Road & Government Regulation No. 74/2021. In order to strengthen the ecosystem of Battery-Based Electric Motorized Vehicles, the Government provides Incentive Support in the form of Government-borne VAT Potential: Indonesia's Nickel Reserves Are Abundant Global Nickel Reserve INDONESIA Australia 21,0 M 20,0 M Brazil Other 16,0 M 14,0 M Russia 6,9 M Cuba 5,5 M Philippines 4,8 M Also rich in other battery materials reserve South Africa 3,7 M China 2,8 M Canada 2,8 M Guatemala 1,8 M Madagascar 1,6 M 1.2 billion ton Aluminium 51 million ton Copper 43 million ton Manganese Colombia 0,4 M US 0,1 M Cobalt Lithium Graphite Benefits and Added Value of Nickel Downstream Value added process Input Output Value-added 90 to 150 Nickel Ore Battery times Amount of Incentive for Battery-Based Electric Motorized Vehicles - - TKDN > 40% - VAT incentive of 10%, so that the VAT that must be paid remains 1% - TKDN > 20% - 40% - VAT incentive of 5%, so that the VAT that must be paid remains 6% In Indonesia, the deepening of the electric vehicle industry structure is carried out through the obligation to gradually increase the domestic content level (TKDN) until 2030. Supporting Regulation Regulation Of The Minister Of Finance Of The Republic Of Indonesia 38/2023 62 2#64Economic Transformation from Primary Sector Industries to Value-Added Industries Export Ban of unprocessed minerals Nickel (2020) Bauxite (2022) Copper (2023) Tin (2023) Focus on Natural Resources, such as nickel Natural Resources Based (primary) Economy Source: Ministry of Investment (BKPM) Value-Added Based Economy Focus on Downstream Industries 33 63#65The Benefit of Nickel Downstreaming Export of Nickel Derivative Products 2017 USD 3,3 Billion Nickel Export Ban (2020) Export of Nickel Derivative USD Products 20,9 2021 Billion PANDEMIC CONTROL IS KEY TO STRONG Added Value of Nickel Derivative Products Source: Ministry of Investment (BKPM) x 37,5 x 19,4 x 11,4 x67,7 Nickel Sulfate Precursor Cathode Battery Cells 64#66Nickel Downstreaming: Indonesia as the World Production Hub for Electric Vehicle Investment Plan: LG CATL Foxconn Integrated Battery Industry US$9,8 Billion Integrated Battery Industry US$5,2 Billion : Electric Battery Industry, Electric Vehicle Industry (4wheel, 2wheel, E-Bus), and Supporting Industry (including charging station, R&D, and training) US$8 Billion BritishVolt: Battery and electric vehicle industry, US$2 Billion Implementation of the Second Phase of the Electric Battery Industry Batang, 8 June 2022 In addition to downstreaming, investment also creates big impact: through collaboration with SOE (MIND ID, Pertamina, PLN), national entrepreneurs, especially MSMEs, high use of domestic component (TKDN), and large absorption of local manpower. Indonesia will become an exporter of high value-added commodities LG Energy Solution CATL BRITISHVOLT ◉ Source: Ministry of Investment (BKPM) ◉-BASF FOXCONN We create chemistry HYUNDAI 65#67Natural Resource Downstreaming As a Value-Added Commodity Processing of Nickel to make the battery for electric vehicles Investment Collaboration with State-Owned Enterprise and National Private Sector in the precursor, cathode, and electric batteries industries Gasification of Coal into Dimethyl Ether (DME) Investment plan in collaboration with State- owned And National Private Sector in Coal gasification industry and its derivatives Processing natural gas into methanol and Fertilizer State-owned and National Private Sector investment in the natural gas processing industry into Methanol and Fertilizer in Fakfak, West Papua and Bojonegoro, East Java Industrialization Downstreaming for Food Sector The food sector is able to create many new jobs and also create new economic growth areas. Location: Central Sulawesi, North Maluku, Central Java Commodity: Location: Tanjung Enim, South Sumatra Commodity: Location: West Papua and East Java Commodity : Location: Eastern Indonesia Commodity : Food Nickel Coal Natural gas Source: Ministry of Investment (BKPM) 66#68Development Stages of the National Capital City 2020-2024 Initial transfer to IKN 2025-2035 Building IKN as a Resilient Area 2035-2045 Building the entire infrastructure and ecosystem of 3 cities to accelerate the development of East Kalimantan 2045-onwards Strengthening reputation asa "World City for All" Critical basic infrastructure is completed and • operational (eg water, energy, rail) for residents in the initial stages Build central infrastructure (e.g. Presidential Palace, MPR/DPR Building) and housing in the Main IKN area Transfer of early-stage ASN (eg TNI, Polri, K/L ASN) Initiation of priority economic sectors Source: Coordinating Ministry for Economic Affairs Developing the next phase of the city (e.g., innovation and economic centre) • Completed the transfer of • the IKN government centre Develop priority economic sectors Implement an incentive system for priority economic sectors Achieving the goals of the Sustainable Development Goals (SDGs) Expand urban development and complete connectivity between and within cities FDI Destination No. 1 for priority economic sectors in Indonesia Top 5 top destinations in Southeast Asia for global talent Encouraging sustainable utility networks by implementing circular economy enablers Developing a center for innovation and talent development To be the leading city in the world in terms of competitiveness Top 10 livable cities in the world Achieving net zero- carbon emissions and 100% renewable energy at installed cap a city - the first city in the world with >1 million inhabitants to reach this target 67#69Visioning Nusantara - New Capital City Of Indonesia Vision The National Capital City (IKN) is a milestone in a new era of regional development and new economic centers in the Regions, as well as a symbol of a big push strategy to accelerate growth and equal distribution of the national economy. Recent Progress 1. The financing for land acquisition proposed by the Minister of PUPR is IDR9.09 T until 2023, where in 2022, it was allocated through DIPA PUPR of IDR 500 M. 2. 3. 4. The Minister of Finance requested that the 2023 land procurement proposed by PUPR of IDR8.45 T be accommodated through LMAN. The DJA has approved the construction budget from PUPR for 2022 of Rp. 5 trillion. The need for the 2023 Construction budget is IDR23.6 T, including proposals from 5 Ministries / Agencies. New Capital City Planning Scheme K-IKN Kawasah KN Area 56181 ha KIPP Kawasan Inti Pusat Pemerintahan Area: 6,856 ha KP-IKN Kawasan PerluasanikN Area 256.14272 ha Zona Area H K-IPP 6.856 K-KN 56.181 KP-IKN 256.142 Target Populasi 2045 jwa) 280.000-300,000 1.700.000-1.900.000 The IKN proposal as National Strategic Project (NSP) is approved and included in the Regional Development Program as a Subprogram. The inclusion of IKN as NSP will refer to the Presidential Decree No.63/2022 and the draft One Map - One Planning - One 68#70The Progress of New Capital City "Nusantara" Development The Important Role of Establishment of IKN In February 2022, the Government of Indonesia enacted Law Number 3 of 2022 concerning the State Capital. The relocation of the National Capital City is based on the concentration of economic activities in Jakarta and Java Island, so it causes economic disparities between Java and Outside Java. Indonesia's New Economic Driver ndoned New Capla City GDP of USD180 Billion 3 Million New Jobs 7+ Million Residents of IKN, Balikpapan, and Samarinda Composition of Financing for the Capital of the Archipelago Funding for the Development of the Capital of the Archipelago (IKN) is obtained from the State Budget, PPP, SOES, and Private Investment. Private Investment Cooperation Government buildings and Government worker housing Education and Health Facilities (Hospitals, Schools) Commercial area (café and restaurant, hotel) Tourism area, industrial area, innovation and technology center Smart city Area operational 65% of the total estimated need for facilities and infrastructure in 2022- 2024* will be implemented through the PPP scheme. State Budget Palace, basic infrastructure (non- cluster), defense and security, costs of transferring Government worker reforestation, costs of operating authority Composition of Financing schemes 4% 31% 65% Source: Coordinating Ministry for Economic Affairs Private/SOE ■State Budget 69 PPP#71The General Election Period Will Boost Economic Activity Political Stability is one of the keys to the success of ! economic achievement. Indonesia is the third-largest democracy in the world. Since 2004, the people can directly elect the president and members of parliament. NPSHIs consumption and M2 (money supply) increased during the election period (including the campaign period) in 2014 and 2019 2004 2009 2014 2019 Number of parties Presidential candidate's 24 38 12 16 60,6% 60,8% 53,2% 55,5% vote 30 25 20 15 10 5 0 -5 -10 -15 GE Period |2013-2014 GE: Juli 2014 NPSHIS Consumption -Growth M2(RHS) GE Period 2018-2019 18,00 1. I 16,00 Elections will drive the national and regional economy through: Increasing MSME economic activity until the campaign period through e- mail, printing, and various merchandise; Election logistics costs; Improvement of facilities and infrastructure (including infrastructure) to build public image; Regional Original Revenue (PAD) through advertisement tax for the installation of billboards, banners, video trans, etc.; 14,00 2. 12,00 3. 10,00 А MA 8,00 4. 6,00 GE: April 2019 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 4,00 70 10#72Section 3 Economic Factor: Improved Growth Prospects Supported by Continued Economic Recovery Momentum BHINNEKA TUNGGAL IKA#73Conducive Environment Underpinning Improved Growth Fundamentals Amid Temporary Moderation. Largest Economy in South East Asia 4th Most Populous country in the World; 64% in Manageable Inflation Rate productive age Large and Rising Middle Class and Affluent Customers From commodity-based to manufacturing and service sectors via infrastructure development From consumption-led to investment-led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Tax base to be broadened from one reduce dependency on commodities Stable Economy Consistent Budget Reform Reform- Oriented Administration New Economic Structure High Infrastructure Investments Fuel subsidies significantly reduced and spending redirected to more productive allocation Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 72#74National Economic Growth Remains Solid Strong GDP Growth¹ QoQ -YoY 7,07 8,0 5,72 6,0 5,02 5.01 4,0 2,0 0,0 -2,0 (2,07) (0,16) 3,83,27 3,7431 ኩኩኩኩ 4,01 3,14 3,19 3,09 5,03 5,05 5,01 4,01 4,21 4,20 3,72 3,06 B.31 1.5506 (1,73,36) (1,810,30) (170,41) (1,68.5 (1,742,41) (0,42 0,96) 1,81 0,92 (0,96) 0,36 (0,52) (419 -4,0 -6,0 -8,0 Q2 Q4 Q2 Q4 Q4 Q2 Q2 Q4 Q2 QA Q2 2015 2016 2017 2018 2019 2020 2021 Favourable GDP Growth Compared to Peers² 15,00% yoy 10,00 5,00 0,00 Q4 Q2 Q4 Q2 Q4 2022 2023 Against a backdrop of global economic moderation, economic growth in Indonesia remains solid. The latest data published by BPS-Statistics Indonesia indicates 5.03% (yoy) national economic growth in the first quarter of 2023, up slightly from 5.01% (yoy) in the previous period. Moving forward, Bank Indonesia projects solid economic growth in 2023 with a bias towards the upper bound of the 4.5-5.3% range on the back of improving domestic demand and persistently strong export performance. Solid economic growth in the reporting period was supported by all GDP components. Exports maintained high 11.68% (yoy) growth, underpinned by strong demand in key trading partner countries. Household consumption growth improved to 4.54% (yoy) in line with increasing mobility and purchasing power, coupled with lower inflation. Government consumption expanded 3.99% (yoy), primarily driven by procurement and personnel expenditures. Meanwhile, non-building investment growth also remained solid in line with export performance, though overall investment was sluggish at 2.11% (yoy) given subdued building investment growth. Robust economic growth was also reflected by broad-based sectoral and spatial growth. All economic sectors recorded positive growth in the first quarter of 2023, primarily underpinned by the Manufacturing Industry, Wholesale and Retail Trade as well as Mining and Quarrying. Meanwhile, the Transportation and Storage sector, Accommodation and Food Service Activities as well as Other Services posted strong growth on greater public mobility and a surge of inbound international travellers. Spatially, economic growth in the first quarter of 2023 was maintained in nearly all regions of Indonesia, led by Kalimantan, followed by Sulawesi-Maluku-Papua (Sulampua), Java, Sumatra and Bali-Nusa Tenggara (Balinusra). 2023 Growth Projection *) 6,10 6,20 5,00 1,40 1,00 2023 Budget Institutions -5,00 -10,00 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Bulgaria Colombia India Indonesia Bank Indonesia Consensus Forecast (July 2023) Philippines World Bank (GEP, June 2023) IMF (WEO, July 2023) *** 1. 15 sauce: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption 2. Source: World Economic Outlook Database - JULY 2023; * indicates estimated figure *) Consensus Forecast number will be given later ADB (Asian Development Outlook, April 2023) GDP growth 5.3 4.5-5.3 4.8 4.9 5.0 4.8 73#75GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY)¹ 2018 2019 2020 2021 2022 2023 Share Economic Growth by Expenditure Total Total Total Q1-2021* Q2-2021* Q3-2021* Q4-2021* Total Q1-2022** Q2-2022** Q3-2022** Q4-2022** Total Q1-2023*** (%) GDP Growth (% yoy) 5,17 5,02 (2,07) (0,69) 7,08 3,53 5,03 3,70 5,02 5,46 5,73 5,01 5,31 5,03 Private Consumption 5,14 5,16 (2,67) (2,25) 5,92 1,06 3,55 2,01 4,37 5,49 5,40 4,50 4,94 4,57 54,06 Household Consumption 5,05 5,04 (2,63) (2,21) 5,96 1,02 3,56 2,02 4,34 5,51 5,39 4,48 4,93 4,54 52,88 NPI Serving Households Consumption 9,15 10,62 (4,21) (3,65) 4,06 2,87 3,20 1,62 5,90 5,02 5,97 5,70 5,64 6,17 1,17 Government Expenditure 4,82 3,27 2,12 2,57 8,22 0,65 5,29 4,24 (6,62) (4,63) (2,55) (4,77) (4,51) 3,99 5,32 Gross Fixed Capital Formation 6,68 4,45 (4,96) (0,21) 7,52 3,76 4,49 3,80 4,08 3,09 4,98 3,33 3,87 2,11 29,11 Building 5,41 5,37 (3,78) (0,74) 4,36 3,36 2,48 2,32 2,58 0,92 0,07 0,11 0,91 0,08 21,69 Nonbuilding 10,44 1,83 (8,44) 1,44 18,50 4,96 10,40 8,42 8,63 9,71 19,32 12,11 12,53 7,93 7,42 Export 6,51 (0,48) (8,42) 2,17 28,41 20,74 22,24 17,95 14,22 16,40 19,41 14,93 16,28 11,68 22,71 Import 12,14 (7,13) (17,60) 5,21 33,20 31,08 32,61 24,87 16,04 12,72 25,37 6,25 14,75 2,77 (19,56) Source: Central Bureau of Statistics c GDP Growth by Sector (%, YoY) Economic Growth by Sector 2018 Total 2019 2020 2021 2022 2023 Share Total Total Q1-2021* Q2-2021* Q3-2021* Q4-2021* Total Q1-2022** Q2-2022** Q3-2022** Q4-2022** Total Q1-2023*** (%) Economic Growth (% yoy) Agriculture, Forestry, and Fishery Mining and Quarrying 5,17 5,02 (2,07) 3,88 2,16 1,22 (0,69) 7,08 3,53 5,03 3,70 5,02 5,46 5,73 5,01 5,31 5,03 3,61 1,77 3,48 0,56 1,44 2,33 1,87 1,16 1,68 1,95 4,51 2,25 0,34 11,77 (1,95) (2,02) 5,22 7,78 5,15 4,00 3,82 4,01 3,22 6,46 4,38 4,92 11,85 Manufacturing 4,27 3,80 (2,93) (1,38) 6,58 3,68 4,92 3,39 5,07 4,01 4,83 5,64 4,89 4,43 18,57 Construction 6,09 5,76 (3,26) (0,79) 4,42 3,84 3,91 2,81 4,83 1,02 0,63 1,61 2,01 0,32 9,88 Wholesale and Retail Trade 4,97 4,60 (3,79) (1,28) 9,50 5,12 5,54 4,63 5,73 4,43 5,37 6,55 5,52 4,89 12,95 Transportation and Warehousing 7,05 6,38 (15,05) (13,09) 25,10 (0,72) 7,93 3,24 15,79 21,27 25,80 16,99 19,87 15,93 5,56 Information and Communication Financial and Insurance Services Other Services 7,02 9,42 10,61 8,72 6,90 5,54 6,24 6,82 7,15 8,06 6,95 8,75 7,74 7,19 4,19 4,17 6,61 3,25 (2,97) 8,33 4,29 (2,59) 1,56 1,64 1,50 0,87 3,76 1,93 4,48 4,31 6,18 6,66 (1,24) (2,51) 9,83 (0,84) 3,43 2,35 3,33 4,03 7,88 4,95 5,04 4,55 16,32 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 74#76Economic Performance In All Regions Remains Solid Economic growth in the first quarter of 2023 was recorded at 5.03% (yoy), up slightly from 5.01% (yoy) in the previous period... Realization of PDRB Quarter I 2023 (%, yoy; compared to Quarter IV 2022) ACEH 4.96 Sumatra 4.73 4.98 4.79 Kalimantan 5.71 5.97 5.79 4.08 4.54 3.46 4.63 North Sumatra 4.87 RIAU 3.88 West Sumatra " " 2022 2023 Riau Islands 6.51 " IV 1 2022 2023 North Kalimantan 5.23 8.25 Sulampua 8.06 6.88 6.79 5.54 11 IV 2022 2023 West Kalimantan East Kalimantan 6.95 4.65 Babel Islands Central Kalimantan 3.22 4.37 South Kalimantan 5.12 West Sulawesi 3.59 Central Sulawesi 13.18 GORONTALO 4.23 North Sulawesi 5.26 North Maluku 16.50 West Papua 3.13 South Sulawesi South East Sulawesi 6.48 MALUKU 5.12 4.80 JAMBI 5.00 BENGKULU South Sumatra 5.11 4.07 LAMPUNG Jakarta DKI 4.96 4.95 West Java Central BANTEN 4.68 Java East BALI 5.00 5.04 Java 4.95 6.04 DIY 5.31 Q1'23>Q4'22 Q1'23=Q4'22 Q1'23<Q4'22 5.65 Java 5.75 5.06 4.78 4.96 " 2022 Source: BPS, calculated 2023 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 5.29 West Nusa Tenggara 3.57 East Nusa Tenggara 3.73 3.50 Balinusra 6.73 6.01 4.74 4.01 " IV ' 2022 2023 PAPUA -2.39 75#77% 100,0 2010 2011 2012 2013 Taxes Transportation and Warehousing Mining and Quarrying Other Services Wholesale and Retail Trade Source: Central Bureau of Statistics of Indonesia (BPS), calculated 2014 2015 2016 2017 2018 2019 Q1-2020 Financial and Insurance Services Construction Agriculture, Forestry, and Fishery Q2-2020 Q3-2020 Q4-2020 2020 Q1-2021 Q2-2021 Q3-2021 Q4-2021 13,93 13,51 13,37 13,36 13,34 13,49 13,48 13,16 12,81 12,71 12,84 15,44 14,67 11,97 13,70 13,23 14,29 14,32 11,39 13,28 12,57 13,08 13,00 11,00 12,40 11,77 90,0 17,5 17,6 17,88 18,0 18,2018,64 18,6€ 18,47 18,35 18,6 19,10 18,88 19,10€ 19,87 19,2 18,5 18,54 17,08 18,18 18,0 17,0 16,66 16,19 17,09 16,75 16,31 80,0 70,0 3,73 3,60 3,61 3,57 3,50 3,57 3,53 3,63 3,93 4,42 3,49 3,46 3,72 3,88 3,86 4,03 4,19 60,0 13,46 13,61 13,21 13,21 13,43 13,30 13,19 13,02 13,02 13,01 13,19 4,20 4,15 4,24 4,70 4,44 4,32 3,52 3,62 3,78 3,77 3,96 4,25 4,66 4,56 5,02 5,20 5,41 5,38 5,57 5,17 3,57 4,39 12,81 12,80 4,56 4,57 4,67 4,51 4,58 4,41 4,51 4,58 4,43 4,47 4,27 4,21 4,26 4,37 3,90 4,12 4,34 4,34 4,16 4,00 4,28 4,41 4,35 4,12 4,02 4,62 4,82 5,03 4,56 4,24 4,05 4,13 4,31 4,13 5,56 4,15 5,02 5,56 4,19 12,84 12,91 13,07 13,07 13,00 12,71 12,96 13,10 12,76 12,79 12,77 12,85 12,95 50,0 9,13 9,09 9,35 9,49 9,86 10,21 10,38 10,38 10,53 10,75 10,70 10,55 10,59 10,95 10,70 10,79 10,11 10,38 10,48 10,44 10,43 9,18 9,49 10,01 9,77 9,88 40,0 22,04 21,76 21,45 21,03 21,08 30,0 20,99 20,52 20,16 19,86 19,70 19,97 19,85 19,84 19,80 19,87 19,82 19,28 19,14 17,92 17,97 18,79 19,24 19,21 18,32 18,34 18,57 20,0 10,46 11,81 11,61 11,01 9,83 7,65 7,18 7,58 8,08 7,26 6,82 6,27 6,15 6,48 6,43 7,64 8,09 9,55 10,43 8,97 10,37 12,64 13,03 12,65 12,22 11,85 10,0 Indonesia's GDP Share (%) Economic Performance in Most Sectors Continue to Improve Sound performance in all economic sectors supporting solid economic growth, in particularly the manufacturing industry, wholesale and retail trade as well as transportation and storage. Indonesia's economy is mainly supported by services sector, manufacturing, and primary sector. Services sector (wholesale and retail trade, information and communication, financial and insurance service) has expanded the last five years, while primary sector (mining and quarrying) has benefited from higher commodity prices in 2022. 2021 Q1-2022 Q2-2022 Q3-2022 Q4-2022 2022 Information and Communication Manufacturing Q1-2023 76#78Solid Fundamentals Facing the Headwinds Inflation Rate (%) Inflation above the target range, but below the 1998 projection 2008 12,1 June 2023 3.52 (yoy) IDR Movement (%) IDR depreciated year-to-date 1998 -197 82,4 2008 24 Jul 23 Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 6.0 months of import and external debt repayment 1998 -35 2008 3.63 (ptp) June 2023 -300 -200 -100 0 1998 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 30 2008 3,8 May 2023 2.52 0 5 10 15 20 25 30 35 40 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 17,4 50,2 137.5 More Liquid Market (%) In the markets, the IndONIA rate is in line with the higher BI7DRR and strengthening the monetary operations strategy of Bl Government Debt*/GDP Consistently well-maintained 8.6x 3.1x 2.9x 100.0% 27.4% 37.93% 2008 May 2023 1998 1998 62 10,5 5.61 1998 2008 24 July 2023 External Debt/GDP Significantly lower than 1998 crisis 116.8% 33.2% 30.1% 2008 Q1-2023 2008 June 2023 1998 77 *) Domestic & Forex#79Outlook of Domestic Economy Remains Solid ...the domestic economic recovery projected to continue in 2023 amid global uncertainty 2023 Economic Outlook ● Bank Indonesia projects economic growth in 2023 continue to accelerate to the range of 4.5-5.3% in 2023. ● Bank Indonesia, therefore, is confident that inflation will remain under control in the 3.0%±1% target this year and 2.5%±1% in 2024. ● Bank Indonesia projects Balance of Payment (BOP) performance in 2023 to remain sound, supported by a manageable current account maintained in the range of a 0.4% surplus to a 0.4% deficit of GDP. • Bank Indonesia projects credit growth in 2023 will grow by 9.0-11.0% LOAN Economic Growth π Inflation Rp CAD (% of GDP) Credit Growth 2018 Realization 5.17% 3.13% 2.98% 11.75% 2019 5.02% 2.72% 2.71% 6.08% Realization 2020 -2.07% 1.68% 0.4% -2.4% Realization 2021 3.69% 1.87% surplus 0.3% 5.24% Realization 2022 5.31% 5.51% Realization surplus 1.0% 11.35% 2023 4.5-5.3% 3.0±1% surplus 0.4% - 9-11% deficit 0.4% Source Bank Indonesia 78#80Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IRA#81External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid O Capital and Financial Account Reserve Asset (rhs) Current Account US$bn Overall Balance 20 15 10 5 0 -5 -10 -15 Current Account Recorded Surplus 2019: CA Deficit CA 2020: (US$4.4bn) 2021: 2022: 2015: 2016: 2017: 2018: CA Deficit CA Deficit CA Deficit CA Deficit (US$17.5bn) (US$16.9bn) (US$16.2b)(US$30.6b) (US$30.30T) (Surplus CA Surplus CA Surplus US$3.5bn US$13.2bn US$bn 160 145,19 US$bn 23 2,00 6,52 120 Goods Services 0,89 18 M Primary Income Secondary Income 1,00 13 Current Account (%GDP) (rhs) 3,38 80 8 3 2,97 40 སྱེསྱེ (2) 14,72 (1,00) 1,47 (2,00) (8,60) (3,00) (4,62) (4,00) Q1Q2Q 2018 1Q2 Q3 Q4Q1 Q2 Q3 Q 2019* 2020* 1Q2 Q3 Q4Q1Q2Q3Q4Q1 2021* 2022** 2023** (7) 0 (12) Q3Q4Q1Q2Q3Q4Q1Q2Q3 2017 2018 2019* 2020* 2021* 2022**2023** Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 2015 2016 Source: Bank Indonesia Trade Balance Surplus Continues 2018: 2019: US$bn Deficit Deficit (US$8.65bn) (US$3.24bn) Q2Q3Q4Q1Q2Q3Q4Q1 2020: 2021: 2022: 20223 Surplus Surplus Surplus Surplus (US$21.81bn) (US$33.8bn) (US$54.52bn) (US$20bn) འཕགས་པ་སུས་པ་བཅས་ལུགས་པ Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 stee: Bank onesia 2017 Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of June 2023: US$137.5bn (Equiv. to 6.0 months of imports + servicing of government debt) 15 10 5 0 -5 US$bn OG Non-OG Total 150 140 130 120 4,42 110 100 3,46 90 ☑ 80 חי 70 -0,96 60 50 135 5 2018 2019 2020 2021 2022 2023 Source: BPS Preliminary Figure Very Preliminary Figure FX Reserves (LHS) Month of Import & Debt Service (RHS) Month 1 3 5 7 9 13579 1 3 5 7 9 11 11 2018 2019 Source: Bank Indonesia TTTTT 54321O DEEEEE18765432 11 1 3 5 7 9 13579 1 3 5 11 11 2020 2021 2022 2023 80 50#82Exchange Rate Movement In Line With BI Stabilization Measures Movement of Rupiah 24-Jul-23 14120 Quarterly Average 14893 14669 14064 14219 Rupiah Exchange Rate Volatilty 15568 14935 15223 14566 14373 14157 14339 14399 14259 14344 14860 16.500 16.000 15.500 15023 14.000 13.500 Rupiah exchange rates remain under control in 17.000 line with the stabilisation measures implemented by Bank Indonesia. Year to date, the rupiah has gained 3.63% (ptp) in value from the position recorded at the end of December 2022, thereby exceeding the Philippine peso 15.000 (1.78%), Indian rupee (1.11%) and Thai baht 14.500 (0.04%). Moving forward, as global financial market uncertainty subsides, Bank Indonesia expects rupiah appreciation to persist, fostered by solid economic growth, low inflation, attractive 13.000 yields on domestic financial assets for investment and the positive impact of implementing Government Regulation 66/2023 concerning the foreign exchange proceeds of natural resources exports (DHE SDA). Investor perception concerning the national economic outlook is also improving, as reflected by an upgrade to Indonesia's sovereign credit rating by the R&I rating agency from a stable to positive outlook, with a BBB+ rating (a full two notches above the lowest investment grade category). Bank Indonesia will also continue strengthening rupiah stabilisation policy through triple intervention and the twist operation to mitigate the contagion risk of global financial market uncertainty. 81 TRY -30,59 -18,98 ZAR -5,40 -9,86 INR 1,03 -4,24 CNY -4.21 3,09 JPY -7,18 -2,69 MYR -3,82 1,63. IDR 3,63 -121. PHP 1-1,78- -1,08 KRW 2023 vs 2022 (YTD) -1,12 0,13 BRL 10,41 ■point-to-point average 2,49 THB 0,43 2,59 EUR 3,37 24-Jul-23 SGD 0,61 3,24 -35,0 -30,0 -25,0 -20,0 -15,0 Source: Reuters, Bloomberg (calculated) -10,0 -5,0 0,0 5,0 10,0 15,0#83Ample Lines of Defense Against External Shocks Ample Reserves • Ample level of FX reserves to buffer against external shock FX Reserve Swap Arrangement Bilateral Japan Singapore China Malaysia Australia • FX Reserves as of of June 2023: US$137.5 bn Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2021 The facility is available in USD and JPY Renewed a 1 year SGD/IDR swap arrangement with the size up to SGD 9.5 bn / IDR 1000 tn (equivalent) in November 2022 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 250 bn / IDR 550 tn (equiv.) in January 2022 Established a 3 year RM/IDR swap arrangement with a size up to RM 8 billion / IDR 28 trillion (equiv.) in September 2022 Renewed a 3 year A$/IDR swap arrangement with a size up to A$10 billion or IDR 100 trillion in February 2022 Regional Global Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Source: Bank Indonesia Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement Came into effect in 2010 with a pool of US$120 bn ● Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem · Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) 82#84Healthy External Debt Profile The Structure of External Debt is Dominated by Long-Term Debt 100% Short Term External Debt Long Term External Debt 83,8 Private External Debt Public External Debt External Debt Structure 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 90% 80% 50,7 70% 60% 50% 40% 30% 49,3 20% 16,2 Jan-23* Q1-2023* May-23** Nov-22* Mar-22* May-22* Jul-22* Sep-22* Q1-2020 Q3-2020 Jan-21 Mar-21 May-21* Jul-21 Sep-21 Nov-21 Jan-22* 37,38,39,747,34,33,601,20,2 External Debt to GDP Ratio & Debt to Export Ratio Jan-23* May-23** Q1-2023* % 10% 906 0% 2009 2011 2013 2015 2017 Q1-2019 Q3-2019 Mar-22* May-22* Jul-22* Sep-22* Nov-22* 2009 2011 2013 2015 2017 Million USD External Debt 01-20 201 2020 450, pillion USD Jan-21 Mar-21 23-2020 Manage May-21* Jul-21 Sep-21 Jan-22* Nov-21 400,0 350,0 300,0 250,0 200,0 150,0 100,0 50,0 2009 2012 2015 2018 Q1-2019 Q2-2019 Q3-2019 Total External Debt 2019 Q1-20 Q2-20 Q3-20 2020 Mar-21 36,34,34,36,86,36,56,36, 32,99 29,19 27,4 14,40 21488,8 197,2 1206,92 189,2 175,3 40 35 30 30,1 12 25 20 محمـ 156,6 139,5 15 External Debt/Export Ratio (rhs) 145,2 118,9 131,1 10 121,3 External Debt/ GDP Ratio 5 % 240 % 120 $1,8 20,0 !00 15,0 25,0 .80 10,0 .60 5,0 .40 (1,74) .20 121,8 (5,0) .00 Jun-21 Sep-21 2021 Mar-22* Jun-22* Q3-22* Source: Bank Indonesia, External Debt Statistics of Indonesia 2022* Mar-23* 8628 (10,0) 80 168,4168,648,72,378377, 123,1 114,9 113,8 101,0 2015 2017 *Provisional Figures **Very Provisional Figures Q1-2019 Q3-2019 Q1-2020 Q3-2020 Q1-2021* Q3-2021* Q1-2022* 2009 2011 2013 Q3-2022* Mar-23** 83 83#85Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Uruguay 67,7 79.4 87,2 304 corporates (12%) Hedging Ratio* 144 corporates (5.7%) Philippines Panama Mexico Kazakhstan 邀 5010 3437,6 42,7 81,388,9 96,2 2022 2021 2020 ≤ 3 months 313339 Indonesia 53492 37,2 Colombia Source: Moody's Credit View Fundamental Data, September 2022 Regulation on Prudential Principle in Managing External Debt Regulation Key Points 1 Jan 17 & beyond Governs all foreign currency Debt Object of Regulation 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 2221 corporates (88%) Liquidity Ratio* 342 corporates (13.5%) 2183 corpor ates... ■Comply Not Comply > 3-6 months 2381 corporates (94.2%) *Data as of Q4-2022, with total population 2,515 corporates Source: Bank Indonesia 84#86BHINNEKA TUNGGAL IRA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#87UP BUDGET OUTTURN REMAINED STRONG IN THE 1st HALF 2023 Remained robust economic activities and gained from the tax reforms have sustained revenue collection amid moderating commodity prices 2022 2023 Positive Growth in Main Sector Tax Revenue (YoY) Account (IDRtn) 1st Perpres 98/2022 1st Semester Realization % to Budget Growth Budget Semester (%) Realization % to Growth Budget (%) Share ■1st Semester 2023 1st Semester 2022 A. Revenue 2,266.2 1,336.1 59.0 50.6 2,463.0 1,407.9 57.2 5.4 27.4% Manufacturing 8,0% 51,6% I. Tax Revenue 1,784.0 1,049.4 58.8 54.3 2,021.2 1,105.6 54.7 5.4 (DG Tax & Custom-Excise) 1. Tax 1,485.0 882.6 59.4 58.2 1,718.0 970.2 56.5 9.9 23.1% Trade 7,3% 73,2% 2. Custom & Excise 299.0 166.8 55.8 36.5 303.2 135.4 44.7 (18.8) II. Non-Tax Revenue 481.6 286.4 59.5 38.4 414.4 302.1 68.5 5.5 12.7% B. Expenditure 3,106.4 1,244.9 40.1 6.4 3,061.2 1,255.7 41.0 0.9 51,7% Mining 294,9% I. Central Government 2,301.6 877.2 38.1 10.2 2,246.5 891.6 39.7 1.6 Financial Services 12.5% 27,5% & Insurance 16,0% 1. Line Ministries Spending 945.8 393.8 41.6 (12.4) 1,000.8 417.2 41.7 5.9 2. Non-Line Ministries 1,355.9 483.4 35.6 39.4 1,245.6 474.4 38.1 (1.9) 4.3% Transportation & 43,5% Warehouse 16,9% II. Regional Transfer & Village Funds 804.8 367.7 45.7 (1.7) 814.7 364.1 44.7 (1.0) Construction & 4.0% 14,4% C. Primary Balance Real Estate 14,1% (434.4) 279.0 (64.2) D. Surplus (Deficit) (840.2) 91.2 340.0 (10.9) 132.2 (156.8) (598.2) 368.2 % to GDP (4.50) 0.47 E. Financing 840.2 158.6 18.9 (62.3) (2.84) 598.2 (234.9) 32.0 152.3 (25.5) 66.9 0.71 Information & 3.3% Telecommunicatio 14,9% 14,0% n 135.1 22.6 (14.8) 3.1% 28,6% Business Services 20,0% Source: Ministry of Finance#88IMPORT DUTY REVENUE IS WELL MAINTAINED, BUT EXPORT DUTY IS DECREASING 2022 2023 Growth Yoy IDR Trillion Import Duty Revenue 22,56% 9,00% 27,05% Jan-Jun YOY -1,09% -12,68% -9,85% 2022 23.12 30.50% 2023 24.20 4.65% 3,34 4,09 3,48 3,79 4,48 4,43 4,01 3,50 3,61 4,59 4,20 3,79 Up to May 2023 7.87% In 2023, Import Duty Revenue grew by 4.65% YoY, while import performance declined at -6.42% YoY. Factors contributing to BM revenue growth include a 4.65% YoY increase in USD exchange rate and growth in key commodities like vehicles, spare parts, mining machinery, and iron/steel. Jan Feb Mar Apr Mei Jun May -68.13% -71.79% 7-70.10% 7-75.87% -22.16% IDR Trillion -97.59% Jan-Jun YOY 2022 15.85 54.46% -76.97% 2023 5.32 3,63 1,16 2,95 0,88 4,13 1,00 3,81 1,07 1,33 1,04 7,26 0,17 Jan Feb Mar Apr May Jun Export Duty Revenue In 2023, cumulative revenue from export duties declined by -76.97% (YoY) due to lower CPO prices, reduced mineral exports, and copper/bauxite export bans. Up to May 2023 -67.52% IDR Trillion Jan-Jun YOY 117.14 32.30% -12.61% Up to May 2023 -12.45% Tobacco Excise Tax Tobacco Exicse revenue until June decreased by -12.61% (YoY) due to a production decline in March and relatively stagnant production in April. Production of tobacco product until April continued to decline, especially in groups 1 and 2. The weighted average tariff only increased by 3.28% (lower than the normative increase of 10%) due to the decrease in production for high-tariff groups 1 (SKM) and 2 (SPM). 87 -3.05% 4.97% -3.55% -33.40% -17.24% -14.42% 24,74 17,54 18,41 23,87 13,37 12,96 Jan Feb Mar Apr May Jun 26,41 20,68 2022 17,60 14,40 17,11 12,33 2023 102.38#89POSITIVE GROWTH IN NON-TAX REVENUE PERFORMANCE UNTIL JUNE 30, 2023 (3,8) (23,6) (4,3) 87,9 Non-Tax Revenue Oil & Gas Revenue (IDR T) 54,6T 75,0 T 41,7 T 39,9 T (19,9) 60, T 2019 2020 2021 2022 2023 38,4% Gas Oil Growth (%) 17,9% 102,8 54,8 11,4% 94,7 (3,8) (20,7) 5,5% -11,2% 302,1 78,3 T 286,4 Non-Oil & Gas 40,2 T 16,2 T 12,8 T 19,8 T Revenue 209,1 207,0 185,7 2019 2020 2021 2022 2023 Non-Mineral & Coal Mineral & Coal Growth (%) 93,0 122,9 19,4 (32,7) (65,6) Separated State Asset 68,7 T 35,5 T 42,4 T 15,9 T 2019 2020 2021 2022 Central Bank Surplus 30,3 SOES' Dividend 2023 -Growth (%) 25,0 30,3 Jan - June 2019 Jan - June 2020 Jan - June 2021 Jan - June 2022 Jan - June 2023 Non Tax Revenue (IDR Trillion) Growth 71,0 T 23,7 87,8 T (5,5) 83,0 Т Other Non- Tax Revenues 43,5 T 54,4 T Source: Ministry of Finance, YTD 30 June 2023 2019 2020 2021 Grant DMO 2022 Line Ministries Revenue 2023 -O-Growth (%) 43,8 2,6 Public Services 97,4 6003 T O (20,6) 479 T 21,3 T 30,6 T (19,8) 38,4 T Agency (BLU)- 2019 2020 2021 Revenue BLU 2022 -Growth (%) 2023#90CENTRAL GOVERNMENT SPENDING REACHES 39.7% OF GOVERNMENT BUGDET TARGET Central Government Spending IDR Trillion 19,1 12,9 10,2 6,0 1,6 474,4 483,4 449,6 350,4 342,4 393,8 417,2 346,7 318,3 288,4 2019 2020 2021 2022 2023 Non-Line Ministries Spending Line Ministries Spending Growth (%) Source: Ministry of Finance, YTD 30 June 2023 1 Line Ministries Expenditure IDR417.2T* (41.7% of Budget target), driven by support for Election preparation, IKN development, and priority infrastructure completion. *) Includes personnel, goods, capital, and social assistance expenditures. Non-Ministries Expenditure: IDR 474.4T (38.1% of Budget target), 2 includes realization of subsidies and compensations (fuel and electricity), pre-employment card program, and fertilizer subsidies. 89 88#91INCREASED TRANSFER TO REGIONS WITH IMPROVED GOVERNANCE (January-June) 2023 2022 ■Revenue Sharing (DBH) ■General Allocation (DAU) Physical Special Allocation (DAK Fisik) I Non- Physical Special Allocation (DAK Non Fisik) ■Grant ■Special Autonomy & Privilege Allocation for Yogyakarta Village Fund Incentive Fiscal ■Special Fund The realization performance of the 2023 Regional Budget (APBD) expenditure has grown by 6.23% year on year (YoY). This growth is attributed to the improvement in expenditure absorption for personnel, goods and services, capital, and other expenses. The positive realization performance needs to be sustained until the end of the year. Transfer to Region Fund IDR 364.1T (44.7% from budget) IDR367.7T (45.7% from budget) Local Government Performance IDR Trillion transfer to the region (TKD) supports regional funding and the development of public services infrastructure in areas such as education, healthcare, irrigation, water supply, agriculture, transportation, tourism, economic development, environmental protection, and rural development. As of June, TKD disbursement reached Rp364.1 trillion (44.7%), slightly lower than last year, primarily due to preparations for specific stage 2 DAU disbursement and verification processes for previous Operational Assistance Funds for Schools funds by regional APIP, leading to delayed transfers for certain TKD types. IDR Trillion 88,63 4,36 86,44 3,82 26,06 24,67 103,79 101,91 62,73 64,34 163,12 181,08 49,04 46,92 Jan - Jun 2022 Jan - Jun 2023 2021 2022 Personnel Spending Social Assistance Spending Material Spending Health Spending Economy Spending Source: Ministry of Finance#92IN THE FIRST SEMESTER OF 2023, BUDGET FINANCING CONTROLLED AMID GLOBAL MARKET VOLATILITY & GOVERNMENT LIQUIDITY Financing Realization Up 1st Semester 2023 Domestic Loan (Net) IDR 2.48 T Foreign Loan (Net) IDR 6.14 T 91.2 150.4 182,6 157,9 8,6 14,2 2022 Loan (nett) Domestic Loan Withdrawal (Gross) IDR 3.47T Domestic loan principal installment financing IDR (0.997) • 2023 Foreign Loan Withdrawal (Gross) IDR 46.15T Foreign loan principal installment financing IDR (40.00T) FLPP Securities (nett) Accelerate Investment in Priority Sectors for The Welfare of The Society Housing Financing Liquidity Facility IDR 85.78T(Total Fund) As of June 30, 2023, a total of 114,500 FLPP (Housing Financing Liquidity Facility) homes have been disbursed to low-income communities across 386cities/regencies, with a total value of IDR 12.9 trillion. Lembaga Manajemen Aset Negara State Asset Management Agency As of June 2023, funding amounting to IDR11.3 trillion has been allocated for national strategic projects, including toll roads, dams, ports, irrigation, water supply, railway lines, the national capital, and national strategic tourism areas. Education Fund Management Agency (LPDP) IDR 8T (2023 Funding Target) Total Endowment Find as of June 2023 IDR 134.11T LDKPI International Development Cooperation Fund (LDKPI) Grant disbursement: Rp200.85M to 32 countries, incl. Timor Leste, Solomon Islands, Fiji, Pakistan, Afghanistan, Palestine, Ethiopia, OACPS Secretariat, etc. (2020- June 2023). Source: Ministry of Finance#932023 Budget Financing Increasing productivity for an inclusive and sustainable economic transformation Macroeconomic Assumption for 2023 Budget 2023 Development Target Description (IDR Trillion) Budget 2023 A. State Revenue 1. Tax Revenue 2,463.0 2,021.2 Economic Growth 5.3% ICP US$90/barrel Unemployment rate Human Development Index 5.3-6.0 73.31-73.49 2. Non-tax Revenue 441.4 3. Grants 0.4 B. State Expenditure 3,061.2 Inflation 3.6% Oil Lifting 660 thousand barrel/day 1. Central Government Expenditure 2,246.5 Gini Ratio 0.375-0.378 Poverty Level 7.5-8.5 2. Regional Transfer & Village Fund 814.7 C. Primary Balance (156.7) Exchange Rate IDR14,800/USD 51 D. Surplus (Deficit) (598.2) 105-107 % of GDP (2.84) Gas Lifting 1,100 thousand barrel of oil equivalent/day Peasant Exchnage Rate Fisherman Exchnage Rate 107-108 10Y T-Bonds Rate E. Financing 598.2 7.90% Source: Ministry of Finance 22 92#942023 Financing Needs Source: Ministry of Finance Financing Needs Financing Sources Budget Deficit (2,84% GDP) Foreign Loan Foreign Currency 15%-25%) Local currency (75%-85%) Domestic Loan o Investment financing Foreign Denominated Bonds Domestic GS o Lending ○ Liabilities o Other financing o Matured debt Gross GS 2023 Matured (Auction & non- auction) T-Bills Issuance Sukuk 30-36% GDS 70-64% 93 93#952023 Financing Policies Our Debt financing policies encourage flexible and sustainable debt management to support economic transformation. Amidst increasing global risks, fiscal pressures, and moderating domestic SBN demand, we will optimize non-debt financing sources considering the high financing needs and choosing the right timing for issuance. Management of prudent and sustainable debt financing by controlling debt risk at a safe and credible level General debt policy direction Prioritizing domestic sources of financing to increase financial independence Procurement of foreign debt as an effort to mitigate the crowding out effect. Source: Ministry of Finance Flexibility in debt financing, both in terms of timing and composition, to obtain the most favorable costs and risks for the government. Utilizing cash loans within the framework of financing flexibility to ensure the fulfillment of financing, while the choice of cash loan currency takes into account cash requirements and debt portfolio management 94 44#96DEBT FINANCING As of June 27th, 2023 Note: 1. 2. Budget Financing continues to well risk-controlled, among others through optimal composition, good related to currency, interest rates, and maturity Government Securities Rp 157.9 (Net) Debt Financing Realization Rp 166.5 (23.9%) Loan (Net) all numbers in trillion Rupiah The percentage is the percentage of budget ceiling from National Budget year 2023 Source: Ministry of Finance Rp 8.6 Foreign Loan (Net) Rp 46.2 95 55#97GS Financing Realization 2023 (Trillion IDR) Realization (ao. Jun 27, 2023) 174.49 Government Securities (GS) Nett Government Securities (GS) Gross Government Debt Securities (GDS) 462.10 308.09 IDR Denominated GDS 249.32 - Coupon GDS 191.45 - Conventional T-Bills 28.80 Private Placement (+ Voluntary Disclosure Program) 6.88 - Retail Bonds 22.18 Foreign Denominated Bonds 58.78 - SEC USD-EUR ( - Buyback LM) 46.77 - Samurai Bond - SDG Bonds - Valas Voluntary Disclosure Program 11.24 0.00 0.77 Sovereign Sharia Securities (Sukuk) 154.00 Domestic Sovereign Sharia Securitoes 154.00 - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk 115.00 - Retail Sukuk 21.49 - Private Placement 2.32 Global Sukuk 0.00 96 Source: Ministry of Finance#98I Primary Market Performance 2022 - 2023 Government Securities (GS) 500 Incoming Bids Awarded Bids 6.00 -2022 Avr Incoming Bids -2022 Avr Awarded Bids 450 Bid to Cover Ratio [RHS] 5.01 4.77 5.00 400 350 3.56 300 3.11 250 2.73 2.62 2.60 2.45 200 2.24 2.25 2.14 150 100 50 50 Jan-22 IDR32.25 tn per auction Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Source: Ministry of Finance Aug-22 Sep-22 4.00 2.78 3.00 2.40 2.27 1.96 2.02 1.81 1.78 2.00 IDR12.46 tn per auction Oct-22 Nov-22 Dec-22 Jan-23 Feb-23 Mar-23 Apr-23 May-23 Jun-23 1.00 In 2023: • average incoming bid IDR42.80 tn/auction = average awarded bid = IDR14.58 tn/auction 97#99Ownership Of Tradable Domestic Government Securities Description Banks* Dec-19 Dec-20 581.37 21.12% 1,375.57 35.54% Dec-21 1,591.12 34.01% Dec-22 Govt Institutions (Bank Indonesia**) 262.49 9.54% Bank Indonesia (gross) 273.21 9.93% 454.36 874.88 GSused for Monetary Operation 10.72 0.39% Non-Banks 1,908.88 69.34% Mutual Funds 130.86 4.75% 11.74% 22.60% 420.51 10.86% 2,040.83 52.72% 161.32 4.17% 801.46 17.13% 1,220.73 26.09% 419.27 8.96% 2,286.40 48.87% 157.93 3.38% Insurance Company and Pension Fund Foreign Holders 471.67 17.13% 542.82 14.02% 655.24 14.00% 1,697.43 31.97% 1,020.02 19.21% 1,453.58 27.38% 433.57 8.17% 2,591.98 48.82% 145.82 2.75% 873.03 16.44% Jun-23 1,695.67 31.06% 951.27 17.43% 1,391.80 25.50% 440.53 8.07% 2,811.89 51.51% 173.09 3.17% 70.41% Portion of foreign ownership in the mid & long term sector (≥ 5 years) 946.12 17.33% 1,061.86 38.57% 973.91 25.16% 891.34 19.05% 762.19 14.36% 846.89 15.51% Foreign Govt's&Central Banks 194.45 7.06% 178.31 4.61% 233.45 4.99% 203.11 3.83% 215.91 3.96% Individual 81.17 2.95% 131.21 3.39% 221.41 4.73% 344.30 6.48% 361.34 6.62% IDR 1,092.02T on January 24, 2020, foreign holders reach Others 163.32 5.93% 231.57 5.98% Total 2,752.74 100% 3,870.76 100% 4,678.98 360.47 7.70% 100% 466.65 8.79% 5,309.43 100% 484.45 8.87% a record high in 5,425.54 100% nominal terms 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance Govt Institutions, 17.43% Banks, 31.06% Non-Banks, 51.51% Others, 8.87% Insurance and Foreign Pension Fund, Holders, 17.33% 15.51% Individual, Mutual 6.62% 3.17% Funds, 98#10038,2% 37,5% 39,8% 37,7% 38,6% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Dec-21 Dec-22 Jun-23 ■Foreign Holders Domestic Non Banks Domestic Banks 25,2% 19,0% 14,4% 15,5% 5,3% Jan-22 Feb-22 0-1 >1-2 Mar-22 Apr-22 May-22 Jun-22 37,8% 39,9% 36,8% 42,0% 40,3% 39,3% 46,9% 53,7% 53,4% Holders of Tradable Gov't Domestic Debt Securities Holders of Tradable Central Government Securities Balanced Ownership In Terms of Holders and Tenors 23,9% 22,5% 20,3% 23,4% 21,1% 35,5% 34,0% 32,0% 31,1% 29,6% 29,8% 30,0% 27,89% 28,4% 26,9% 27,1% 24,2% 24,27% 24,19% 24,80% 25,60% 22,78% 38,4% 37,8% 36,7% 38,52% 34,8% 36,2% 36,9% IIII I. 23,8% 23,1% 18,7% 19,87% 39,5% 39,55% 40,08% 39,83% 39,15% 49,01% 21,8% 22,1% 22,3% 22,8% 22,33% 22,17% 21,39% 20,93% 18,61% 15,51% 18,97% 18,82% 17,57% 17,03% 16,56% 16,09% 15,65% 15,24% 14,31% 13,90% 14,27% 14,36% 10,3% 10,14% 10,2% 9,9% 8,7% 8,6% 9,29% 9,15% 9,04% 8,76% 5,17% 5,1% 2,9% 4,1% 4,3% 3,59% 4,8% 4,9% 5,0% 5,0% 4,57% 4,41% 4,95% 5,56% 4,44% Jul-22 Aug-22 Sep-22 >2-5 >5-10 >10 % Foreign Ownership of Total Oct-22 Nov-22 Dec-22 Jun-23 Foreign Ownership of Gov't Domestic Debt Securities by Tenor Source: Ministry of Finance 99 99#101Disciplined and Advanced Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt / GDP (%) 9.000,00 40,73% 45% 39,36% 39,48% 1.177 878 659 37,93% 8.000,00 40% 442 446 358 7.000,00 27,46% 28,34% 29,40% 29,81% 30,18% 887,04 855,09 35% 53 819,86 6.000,00 14 1 30% 30 852,91 5.000,00 25% (20) (56) (57) 4.000,00 764,48 810,74 746,32 3.000,00 734,85 755,12 2.000,00 1.000,00 2.410,01 2.780,86 3.248,93 3.612,69 4.014,80 5.221,65 6.091,85 6.846,89 6.950,10 (269) 20% (341) (9)(35) (349) (36) (7) (105) (464) 15% -2,50% -1,80% -2,20% -2,38% (775) 10% -6,14% (948 -4,57% 5% 2017 0% 2015 2016 2017 2018 2019 2020 2021 2022 Jun-23 2018 Non-debt (net) Deficit/GDP (RHS) 2019 2020 2021 2022 Government Securities (net) Bond Weighted Average Debt Maturity Loan Debt to GDP Domestic & Offshore Loan (Net) Surplus (Deficit) Well Diversified Across Different Currencies % of Yearly Issuance 1% 1% 1% 1% 0% 9,39 9,13 100% 0% 6% 4% 5% 5% 4% 20% 5% 4% 80% 8,68 30% 27% 23% 20% 20% 20% 8,6 8,52 8,5 8,37 60% 8,27 8,15 40% 58% 62% 66% 70% 71% 72% 20% 2015 2016 2017 2018 2019 2020 2021 2022 Jun-23 0% 2018 2019 2020 2021 Dec-22 Jun-23 ATM Source: Ministry of Finance IDR USD EUR JPY OTHER 100#102Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks (%) Declining Exchange Rate Risks (%) 28,0 25,5 50,0 22,0 44,6 20,7 21,0 26,4 42,6 23,0 19,2 19,7 41,3 41,0 17,5 40,0 37,9 16,1 33,5 18,0 30,0 29,2 13,0 10,6 10,6 30,0 27,52 8,9 6,6 8,0 20,0 13,7 12,1 12,2 10,6 10,6 12,1 12,1 12,2 13,2 11,4 12,2 11,5 9,8 10,4 3,0 7,6 7,4 8,2 8,6 10,0 (2,0) 2015 2016 2017 2018 2019 2020 2021 0,0 2022 Jun-23 2015 2016 VR Prop Non SKB VR Prop SKB Refixing Proportion Debt Maturity Profile 2017 2018 2019 2020 2021 2022 Jun-23 ■FX to GDP Ratio FX Proportion Upcoming Maturities (Next 5 Years) 800 700 600 500 400 300 492502526516 200 100 204 2023 2024 2025 2026 2027 2028 Source: Ministry of Finance 454 332275347278243232 2029 2030 2031 2032 2033 2034 2035 2036 ■IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 50,0 171 2037 W 2038 2039 W 2040 2041 2042 119 73 143 21 130 2043 2044 00 2045 2046 2047 2048 2049-2071 39,3 40,4 41,0 39,6 40,1 42,5 43,19 40,0 34,7 36,0 30,0 25,0 25,5 24,3 24,6 25,22 22.7 21,4 22,8 22,8 20,0 9,9 10,6 8,4 10,0 8,1 7,8 6,5 6,4 7,5 8,17 0,0 0.0 2015 2016 2017 2018 2019 2020 2021 2022 Jun-23 ■1 Year 3 Year 5 Year 101#103Republic of Indonesia USD3 bn Global Bonds Issuance Issuer Issuer Rating Format Pricing Date Settlement Date Issue Size Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Negative) BBB Fitch (Stable) SEC-Registered Notes Offering January 5, 2023 March 11, 2023 USD3 bn Tenor Maturity 5year January 11, 2028 10year January 11, 2033 30year January 11, 2053 Tranche Size USD1,0 bn USD1,25 bn USD750 milion Coupon (p.a.) 4.550% 4.850% Price 98.900% 98.061% Yield (p.a.) 4.800% 5.100% 5.650% 98.678% 5.750% JLM Listing Use of Proceeds BofA Securities, DBS Bank Ltd., HSBC, Mandiri Securities and Standard Singapore, Frankfurt Stock Exchange Net proceeds from the sale of the Bonds will be used for the general purposes of the Republic Chartered Bank Source: Ministry of Finance Transaction Highlight . The first Emerging Asian sovereign issuer in 2023 and marks the Republic's thirteenth successful SEC-registered US$ transaction since 2018. A low new issuance concession for the transaction, which was also one of the lowest amongst the transactions launched on the same day Investor Breakdown by Region 30% 28% 3.3% 5-year 10-year 37% 315 30% 44% 30-year 26% Asia EMEA US Investor Breakdown by Investor Type 1% <1% 8% 10% 68% 5-year 67% 6% 10-year 1% 19% 17% 17% 11% 30-year 69% Asset Managers / Fund Managers Banks Central Banks / SWFs Private Bank Insurance / Pension Fund 102#104Republic of Indonesia JPY104,8 bn Samurai Bonds Issuance Series RIJPY0526B RIJPY0528B RIJPY0530 (Blue SB) RIJPY0533 (Blue SB) Tenor 3 Years 5 Years 7 Years 10 Years Maturity Date May 26, 2026 May 26, 2028 May 24, 2030 May 26, 2033 Pricing Date 19 May 2023 Settlement 26 May 2023 Date Investor Breakdown by Investor Type Central Cooperatives; Public Fund; 4,80% 5,90% Regional Cooperatives; 1,00% Regional Banks; 0,50% Asset Managers; 9,40% Offshore Investors; 27,90% Size JPY46.9 Bio JPY37.2 Bio JPY14.7 Bio JPY6 Bio Yield/ Coupon 0,74% 0,98% 1,20% 1,43% City Banks; 9,50% Transaction Highlight • • • The Republic becomes the first Sovereign Blue Bonds issuer that publicly offered in accordance with ICMA principles. This issuance demonstrates the government's commitment to sustainable financing, particularly for the achievement of the Sustainable Development Goals (SDGs), and represents a major milestone for blue financing. The Republic successfully achieved its objective of marking lower yield levels across tranches despite a significant rise in underlying interest rates compared to the previous year's transaction. Source: Ministry of Finance Others; 15,70% Lifers; 25,30% 103#105Section 6 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IRA#106Bank Indonesia's Policy Mix Direction in 2023 Maintaining Stability, Accelerating Economic Recovery Monetary policy towards maintaining stability Policy rate increase as a follow-up step to ensure continued lower expected inflation and inflation in a front-loaded, pre-emptive, and forward- looking measure to maintain core inflation within the range of 3.0±1% Strengthening rupiah stabilization policy as part of measures to control inflation, primarily imported inflation Issuing new foreign exchange monetary operation instruments to boost placement of Export Proceeds, domestically by banks and exporters to strengthen stabilization, including Rupiah exchange rate stability and national economic recovery • Continue buying/selling SBN in the secondary market to strengthen transmission of the BI7DRR by increasing the attractiveness of SBN yields for foreign portfolio investment inflows to strengthen exchange rate stabilization measures B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA ☐ Accommodative macroprudential policy stance to reignite bank lending to the corporate sector and drive the national economic recovery, while maintaining financial system stability Incentivize banks to disburse financing to priority sectors and promote inclusive financing Strengthen implementation of macroprudential Inclusive Financing Ratio (RPIM) to increase economic inclusion, unlock financial access, while strengthening MSME's contribution to the national economic recovery Accommodative macroprudential policy stance, among others by: relaxing LTV/FTV, relaxing down payment requirement, CCB 0%, Macroprudential Intermediation Ratio (MIR) 84-94%, Macroprudential Liquidity Buffer (MLB) at 6% with 6% repo flexibility, Sharia Macroprudential Liquidity Buffer (SMLB) at 4.5% with repo flexibility at 4.5% ■Accelerating payment system digitalization to stimulate economic recovery and implementation of the Indonesia Payment System Blueprint 2025 A 1 2 Strengthen and expand digitalization through social programs, e-payment for Government Increase the number of participants, expand services and garner greater acceptance of BI-FAST for more efficient transactions between banks and members of the public Expanding cross-border QRIS by, among others, accelerating implementation, piloting local currency settlement (LCS) with other Asian countries and organising National QRIS Week 4 Money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for the exchange rate in the FX market Accelerate key infrastructure development, including Electronic Trading Platforms (ETP) and a Central Counterparty (CCP) Continue to develop the Money Market Development Blueprint 2025 Promote inclusiveness and the green economy in finance ■Controlling inflation through Inflation Control Team in national and regional level, and accelerating implementation of the National Movement for Food Inflation Control (GNPIP) ■Support the national economic recovery program through cooperation and collaboration with the MOF Strengthening the coordination with the Government and related authorities to revive bank intermediation function ■Strengthening policy coordination with the Government and Financial System Stability Committee to maintain macroeconomic and financial system stability 105 Source: Bank Indonesia 5#107Bank Indonesia Policy Mix: JULY 2023 Maintaining Stability and Reviving Growth BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 24th and 25th July 2023 to hold the BI 7-Day Reverse Repo Rate (BI7DRR) at 5.75%, while also maintaining the Deposit Facility (DF) rate at 5.00% and Lending Facility (LF) rate at 6.50%. % Hold the BI 7-Day Reverse Repo Rate at 5.75% Issuing regulations concerning instruments to repatriate the foreign exchange proceeds of natural resources exports into the Indonesian financial system based on three governing principles, : (i) compliance with the provisions contained in Government Regulation No. 36 of 2023, (ii) leveraging the foreign exchange proceeds of natural resources exports for domestic purposes, (iii) the in types of instruments permitted remain compliance with principles and (ii), as well as in accordance with economic and financial developments. Source: Bank Indonesia market Rp Strengthening rupiah stabilisation policy through: (i) foreign exchange market intervention, including spot and Domestic Non-Deliverable Forward (DNDF) transactions, as well as buying/selling government securities (SBN) in the secondary market, and (ii) the twist operation by selling short-term SBN in the secondary market to increase the attractiveness of SBN yields for foreign portfolio investment inflows. Continuing prime lending rate (PLR) transparency policy with a focus on interest rates in downstream sectors Strengthening macroprudential policy stimuli to revive bank lending through implementation of Macroprudential Liquidity Incentive Policy (KLM) for Conventional Commercial Banks and Sharia Banks/Business Units, effective from 1st October 2023, as follows: Honing the liquidity incentives for banks disbursing loans/financing to downstream mineral and coal mining sectors and downstream non, and ultra-micro enterprises) as well as the green economy and finance. Increasing the total incentive up to a maximum of 4% from 2.8% previously, Implementing Macroprudential Liquidity Incentive Policy by reducing the reserve balances held at Bank Indonesia required to meet average rupiah reserve requirements Honing the payment system digitalisation strategy to expand digital economic and financial inclusion by: . Strengthening the QRIS Merchant Discount Rate (MDR) for the micro-enterprise segment based on value per transaction progressively as follows: (a) transactions up to Rp100,000 (one hundred thousand rupiah) subject to 0% MDR, and (b) transactions exceeding Rp100,000 (one hundred thousand rupiah) subject to 0.3% MDR, effective based on industry system readiness from 1st September and 30th November 2023 at the latest. Accelerating QRIS by expanding the innovative features of QRIS Tuntas (cash withdrawals and deposits) as well as expanding cross-border QRIS payments. Hosting National QRIS Week and the Indonesia Sovereign Rupiah Festival to celebrate RI Independence Day. 106#108Monetary Policy will focus on stability to stabilize Rupiah and manage inflation towards the target corridor, as part of mitigation measures against the impact of global spillovers. MITIGATING THE IMPACT OF GLOBAL SHOCK SPILLOVER STAGNATION - RECESSION- HIGH INFLATION GLOBAL POLICY RATE "HIGHER FOR LONGER STRONG US DOLLAR AND WEAKENING CURRENCY ACROSS THE WORLD MONETARY POLICY TRILEMMA POLICY RATE FOR INFLATION Monetary Policy "Pro Stability": Front Loaded, Pre-emptive, Forward Looking HIGH RISK PERCEPTION AND "CASH IS THE KING" TARGET Policy Rate B17DRR Exchange Rate Stabilization 1 CORE INFLATION WITHIN TARGET 3+1% ON THE FIRST HALF OF 2023 AND RUPIAH EXCHANGE RATE STABILIZATION POLICY On a front loaded, pre-emptive and forward looking basis to lower inflation expectation and core inflation ealier, in the first half of 2023 Stabilization of Rupiah exchange rate to control inflation, particularly imported inflation, through spot intervention, DNDF, and SBN transaction in secondary market SBN sale/purchase in secondary market to maintain the attractiveness of SBN yield to draw foreign portfolio investment in order to strengthen the stabilization of Rupiah exchange rate 2 COORDINATION WITH GOVERNMENT 1. Inflation control with TPIP/TPID and GNPIP 2. Fiscal-Monetary coordination 3. Development of priority sector B Twist Operation RUPIAH STABILIZATION FOREIGN EXCHANGE RESERVE ADEQUACY STRENGTHEN THE STRATEGY OF INTEGRATED MONETARY POLICY MANAGEMENT OPTIMIZATION OF FOREIGN EXCHANGE RESERVE MANAGEMENT Source: Bank Indonesia RUPIAH AND FOREIGN CURRENCY MONEY MARKET DEEPENING SYNERGY AND COORDINATION 107#109Manageable Monetary Environment amid Heightened Global Uncertainty Well Maintained Inflation Ensured Price Stability Strengthened Monetary Policy Framework 19 August 2016 | LF Rate: 7.00 The New Monetary Operation Framework (%) 20 18 16 14 12 10 8,00 CPI (%, yoy) rhs •Core (%, yoy) - lhs 9,21 7,00 Volatile Food (%, yoy) - lhs2 6,00 42 8 6 H Administered (%, yoy) - lhs 5,00 4,00 3,52 3,00 2,58 2,00 0 1,2 2013 2014 2015 2016 2017 2018 2019 2020 2021 Jun-23 Rupiah Exchange Rate Volatilty 30,91 22,60 21,50 21,03 12,24 11,98 BI Rate: 6.50 Jan-16 Apr-16 Jul-16 Q4-2016 Q3-2017 Credit Growth Profile Q2-2018 LF Rate: 6.50 BI 7Day RR Rate: 5.75 DF Rate: 5.00 Q1-2019 Q4-2019 Jun-20 Mar-20 Sep-20 Dec-20 Mar-21 Jun-21 Sep-21 Dec-21 Mar-22 Jun-22 Sep-22 Dec-22 Mar-23 Jun-23 % yoy % 20,0 84,59 90 ■May-23 80 15,0 ■Jun-23 70 10,0 ■Jul-23 60 5,0 24 Juli 2023 50 40 0,0 12,09 10,00 6,49 17,04 12,85 18,88 13,46 14,33 4,22 11,65 11,54 7,49 5,39 \7,00 8,45 7,29 2,90 30 Total Growth -5,0 20 Investment Loans 5,853,67 5,43 7,459,12 4,81 10 10 -10,0 Source: Reuters, Bloomberg (calculated) BRL ZAR TRY IDR KRW THB MYR INR SGD PHP -Working Capital Loans Consumption Loans Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 96 9,03 5,96 7,76 108#110Banking Intermediation Despite the challenging global economic environment, Bank loans continued to grow, driven by investment and business lending, with relatively stable growth in funding. YOY 14% 12% 10% * * * * * -2% -4% -6% LOAN In May 2023, bank loans and Third-Party Funds (Total Deposits) grew at a slower pace by 9.93% (yoy) and 6.55% (yoy), respectively. Loan Third-Party Fund (Deposits) YOY 20% 15% 9,93% 10% 6,55% 5% Majority types of loans continued their positive trend, particularly Investment loans, which grew by 12.69% (yoy) in May 2023 Working Capital Consumption Investment - - - Total Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul20 Oct-20 Jan-21 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 Apr-23 Loan growth by segmentation continued to improve in May 2023, with major contribution from Corporation loans, which grew by 10.13% (yoy). 0% 90 5. Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 -5% -10% LOAN Apr-20 Jul-20 Oct-20 Jan-31 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 Apr-23 Third-Party Funds (Total Deposits) grew stable in May 2023, mainly supported by Deposits growth, which increased by 8.37% (yoy), respectively. YOY MSMEs Consumption 18% 13% 8% 3% -2% -7% -12% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Source: Financial Services Authority (OJK) Corporation - - - Total YOY 30% 10,13% 9,93% 25% 9,62% 20% 7,61% 15% 10% 5% Jul21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 0% 90 -5% 5. Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Deposits Demand Deposits Apr-20 Jul20 Oct-20 Jan-21 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Jul22 Savings -Third-Party Fund Oct-22 Jan-23 Apr-23 8,37% 8,35% 6,55% 2,91% 109 12,69% 9,93% 9,62% 7,39% 199#111% 180 160 Jan-19 140 120 100 80 60 threshold LA/ NCD= 50% 40 *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Source: Financial Services Authority (OJK) 1 Apr-19 Banking Risk Profile and Profitability The banking industry has ample liquidity, robust capitalization, and manageable credit risk. Profitability is consistently maintained at a steady level. The banking NPL ratio continued to further decline to 2.52% gross and 0.77% net as of May 2023, significantly below the threshold. % 5 ■NPL Net 4 3 ■NPL Gross 2,52 20 2 0,77 15 10 Jan-19 Apr-19 25.21% and Tier-1 capital stood at 23.69% as of May 2023. % CAR ■Tier 1 25 The banking sector's Capital Adequacy Ratio (CAR) was steady with a value of Liquid Assets to Non-Core Deposits and Liquid Assets to Third-Party Funds (Total Deposits) remained well above the thresholds. Liquid Assets/Non-Core Deposit (LA/NCD) Liquid Assets/Third-Party Fund (LA/TPF) (rhs) The banking industry's Net Interest Margin and Return on Assets remained steady at 4.79% and 2.69%, respectively, as of May 2023. Net Interest Margin Return on Assets 4,79 4 6 27,52 123,27 20 15 threshold LA to TPF (rhs) = 10% 10 de o no nosong 5 0 % 40 35 4 30 25 2 о Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Net Open Position was maintained well below the maximum limit of 20% $ and stood at 1.57% in May 2023. % 3210 Jan-19 Apr-19. Jul 19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21. Apr-21. Jul-21 Oct-21 Jan-22 Apr-22. Jul-22 Oct-22 Jan-23 Apr-23. 1,57 Jul-19 Oct 19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Apr-21 Jul21 Jul22 Oct-22 Jan-23 Apr-23 Oct-21 Jan-22 Apr-22 Jul22 2,69 Oct-22 Jan-23 Apr-23 25,21 23,69#112Jan-19 1 Apr-19 2 3 4 Oct-19 Jan-20 Apr-20 Jul20 0 100 200 300 Jan-19 Apr-19 Jul-19 IDR tn Net Financing 500 400 Multi-finance Companies The performance of multi-finance companies continues to improve, as shown by growing financing, a manageable Non-Performing Financing (NPF) ratio, and a stable gearing ratio. In May 2023, net financing continued its increasing trend and stood at IDR441.23 Tn or growing by 16.38% yoy. The Non-Performing Financing ratio of multi-finance companies remained manageable at 2.63% in May 2023, well below the 5% threshold. Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul21 Oct-21 YoY 16,38% Growth (rhs) The gearing ratio of multi-finance companies stood at 2.20 times or well below the threshold in May 2023. *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Source: Financial Services Authority (OJK) Oct-20 Jan-21 Apr-21 Jul-21 Oct-21. Jan-22 Apr-22 Jul22 Oct-22. Jan-23 Apr-23 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 2,20 200 150 0 50 100 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-23 15% 441,2310% 5% de de de 0% -5% 9 5 4 3 2- -10% -15% 1 -20% IDR Trillion 250 Apr-20 Domestic Debt % Multi-finance companies' exposure to foreign debt experienced a declining trend in May 2023 whereas domestic debt continued to increase. Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Apr-22 Jul-22 Foreign Debt 221,67 Oct-22 Jan-23 Apr-23 54,93 2,63#113Jan-19 Apr-19 Jul-19 Source: Financial Services Authority (OJK) Oct-19 Jan-20 Apr-20 Jul-20 IDR Tn 40 30 2105050 35 In May 2023, insurance premiums marked a total increase of IDR21.08 Tn (mtm) with General and Life insurance added premiums at IDR6.85 Tn and IDR14.23 Tn, respectively. General insurance Life insurance Insurance and Pension Funds Insurance and pension funds continue to improve, shown by adequate performance and manageable risks. Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 Jul-21 Oct-21 Jan-22 Risk-Based Capital (RBC) of the insurance industry remained well above the minimum threshold with Life Insurance at 462.8% and General Insurance at 307.07% in May 2023. Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 2° % Life Insurance (Lhs) General Insurance (rhs) % IDR Tn 900 400 800 700 307,07 350 300 1.500 600 462,8 250 1.200 500 400 200 900 300 threshold Insurance RBC (rhs)=120% 150 600 T 200 threshold Insurance RBC (Lhs)=120% 100 100 50 300 0 0 Oct-20 Jan-21 Apr-21 Jul21 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 Apr-23 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 240 220 200 180 160 140 120 100 14,23 80 60 40 6,85 20 Oct-20 Jan-21 Apr-21 Jul-21 0 % In May 2023, the Investment Adequacy Ratio of both Life Insurance and General Insurance stayed well above the threshold at 131.31% and 196.98%, respectively. Life Insurance General Insurance 196,98 threshold Investment Adequacy Ratio= 100% Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul20 Oct-20 Jan-21- Apr-21 Jul21 Oct-21 Jan-22 Insurance In May 2023, pension fund and insurance investment values continued the upward trend and stood at IDR343.42 Tn and IDR1,497.9 Tn, respectively. Oct-21 Apr-22- Pension Funds (rhs) IDR Tn 1497,9 400 343,42 350 Jan-22 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 200 250 300 Jul22 Oct-22 Jan-23 Apr-23 131,31#1145 6 Jul-19 Sep-19 7 8 9 Yield (%) 10 As of 6 Jul, 2023 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Domestic Capital Market Performance Indonesia's capital market continued to maintain its stability despite global challenges 10000 Some global stocks rallied following the report of US job data. However, most emerging markets fell into the negative territory. Stock Index Performance as of 14 July 2023 (compared to 30 Dec'22) 8000 JPN 24,13% S KOR 17,52% 7500 TURK 16,15% 7000 GER WORLD 15,66% 15,00% 6500 FRAN 14,19% 6000 BRAZ 8,68% CHIN 4,81% 5500 US 3,76% PHIL 5000 0,89% IN DO 0,28% 4500 SIN -0,07% HKN 4000 -1,86% UK -3,00% (% YTD) 3500 MAL -5,58% THAI -9,10% 3000 -15% -5% 5% 15% 25% 35% 45% 5-yr Yield Government bond yields remained competitive, followed by a stable rupiah as the risk premium was maintained. Source: Reuters, Financial Services Authority (OJK) Nov-20 Jan-21 Mar-21 May-21 20-yr Yield 10-yr Yield USD/IDR ...... IDR (rhs) 700 18.000 600 14.000 500 400 10.000 300 200 6.000 100 2.000 0 Jul-21 Sep-21 Nov-21 Jan-22 Mar-22 May-22 Jul22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 Jul23 Jun-20 The domestic capital market showed a mixed performance with composite bond maintained its positive trend since the beginning of the year. 380,00 Comp Stock Index (rhs) Comp Bond Index 360,00 340,00 320,00 300,00 280,00 260,00 240,00 220,00 Jul-19 Sep-19- Nov-19 Jan-20 Mar-20- May-20- Jul-20 Sep-20- Nov-20 Jan-21 Mar-21 May-21- Jul-21- Sep-21 Nov-21- Jan-22- Mar-22 May-22- Jul-22 Sep-22 Nov-22 Jan-23 Mar-23 May-23- Jul23 IDR Tn The Net Asset Value (NAV) of equity mutual funds was stable with low volatility, reflecting a steady movement in the capital market. NAV Equity Mutual Funds Aug-20 Oct-20 Dec-20 Feb-21 Apr-21- Jun-21 Aug-21 Oct-21 Dec-21- Feb-22 Apr-22- Jun-22 Aug-22 As of 6 Jul, 2023 200,00 JCI (rhs) 8.000 7.000 6.000 5.000 - 4.000 - 3.000 As of 27 June, 2023 - 2.000 1.000 0 Oct-22- Dec-22 Feb-23 Apr-23- Jun-23-#115Domestic Capital Market Performance Several capital market indicators recorded positive performance and remained stable. IDR Tn 60 40 ET 20 0 -20 -40 -60 -80 -100 -120 -140 Jul-19 Oct-19 Jan-20 Non-resident portfolios of government bonds recorded a YTD net buy of IDR98.33 Tn (YTD)*, while equity market recorded a YTD net buy of IDR16.54 Tn**. ■Gov't Debt Securities Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 וויו Jul21 Oct-21 Jan-22 8 Total securities issuance reached IDR154.14 Tn (YTD) as of 4 July 2023. ■Equity IDR Tn ΠΙΡΟ Rights Issue Corporate Bond & Sukuk 220 200 180 YTD as of of 4 July, 2023 160 156,33 140 120 100 *As of 3 July, 2023 80 **As of 5 July, 2023 60 78,37 33,03 74,28 36,1 43,76 40 20 Apr-22 Jul-22 Oct-22 Jan-23 Apr-23 Jul-23 0 2016 2017 2018 2019 2020 2021 2022 2023* Capital Market Investors continued to grow to 11.23 million by the end of June 2023, representing a 15.38% (yoy) increase. 12 Total Investor (million) 10 6 3,88 4 2,48 1,62 2 11,23 10,31 2017 2020 Oct-21 Jan-22 Apr-22 Jul22 Oct-22 Jan-23 Apr-23 Source: Financial Services Authority (OJK), KSEI#116Source: Financial Services Authority (OJK) 0 10 20 30 10 40 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 50 50 Apr-20 Number of Investors IDR Tn 60 Fintech (Peer to Peer Lending and Securities Crowdfunding) Peer to Peer Lending (P2PL) Fintech intermediation grows with a manageable NPL ratio and Securities Crowdfunding fundraising continues to rise. LOAN The outstanding loan of P2PL Fintech remained steady and stood at IDR51.46 Tn or grew by 28.11% (yoy) as of May 2023. The Non-Performing Loan ratio of P2PL Fintech remained manageable at 3.36% in May 2023. Jul20 Oct-20 YOY Outstanding Loan Growth 200% 10% 51,46 150% 8% 100% 6% 28,11% 50% 4% 0% 2% -50% -100% 0% Jan-21 Apr-21 Ju-21 increased to 156,155 and 419, respectively, as of 27 June 2023. Oct-21 Jan-22 Apr-22 Jul22 The total number of investors and issuers in Securities Crowdfunding Number of Issuers Oct-22 Jan-23 Apr-23 IDR Bn Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 May-21 Jul-21 Sep-21 180.000 1.000 160.000 900 140.000 800 156.155 120.000 *Accumulation as of 27 June 2023 *Accumulation as of 27 June 2023 700 100.000 127.810 600 80.000 500 400 60.000 184,90 93.777 1.380 5.063 51.414 300 419 40.000 20.000 340 200 64,15 127 195 14 49 100 6,47 ill 896,80 735,76 413,19 0 T 0 T * 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 Nov-21 Jan-22 Mar-22 Peer to Peer NPL Ratio Continuing the positive trend, the total value of SCF fundraising stood at IDR896.80 billion as of 27 June 2023. Total Fundraising May-22 Jul22 Sep-22 Nov-22 Jan-23 Mar-23 May-23 3,36%#117OJK Policy Directions 2023 to increase bank lending to support the national economic recovery, while maintaining financial system stability • Strengthening the Financial Services Sector Strengthening capital and consolidation in the Enhancing product and service innovations banking sector Strengthening supervision Maintaining Economic Growth Financial Restoring public trust in the insurance industry Implementation of Statements of Strengthening the role of actuaries • Accounting Standards (PSAK) 74 • • governance and integrated • Increasing investors' interest in green and sustainable instruments as well as Shari'a investmeants • Enhancing the attractiveness of domestic financial market Funding source diversification in the multi-finance industry • Supporting the Government's strategic policies and programs • • Massive education programs to enhance financial literacy • Enhancing financial access for MSMEs Strengthening complaint handling and dispute resolution as well as civil lawsuits by OJK • Improving Services and Strengthening OJK's Capacity Enhancing Financial Information Services System (SLIK) to create a level playing field Expediting single window licensing Facilitating coordination among the financial services industry, authorities, and other relevant institutions Strengthening integrity and professionalism Implementing Anti-Bribery Management System (SMAP) Harmonizing standards rules with international Integrated data and information management Development of SupTech and RegTech In consumer protection, OJK will focus on creating swift and just resolutions for financial consumers, imposing still financial penalties to create deterrent effects on violators, eradicating illegal investments, and establishing service centers to channel consumer complaints at all OJK offices across Indonesia. In the implementation of Financial Sector Omnibus Law (P2SK Law), OJK hopes for stakeholders' active participation in the P2SK Law implementation process, including synergy with relevant authorities and institutions during the regulatory and supervisory transition process. Other important measures include Shari'a financial sector landscape restructuring through spin-offs and banking consolidation, preparing for the implementation of the Insurance Policy Holder Protection Program, strengthening market conduct supervision, and gradually extending activities and financial products to encompass areas, such as carbon exchanges, bullion activities, digital and crypto assets. Source: Financial Services Authority (OJK)#118OJK Policy Directions 2023 Extended Loans and Financing Restructuring Policy As global economic uncertainties remain high and economic sectors face different impacts due to the scarring effect of the Covid-19 pandemic, OJK extended the loans/financing restructuring policy until 31 March 2024 to targeted sectors as follows: Targeted Segments of Covid-19 Restructured Loan MSME segment (covering all sectors) Accommodation and food service activities Source: Financial Services Authority (OJK) Ө Labor-intensive industries, such as textile and textile products and footwear industries 117#119Act No. 4/2023 - Financial Sector Reform • FUNDAMENTAL ISSUES Short-term financing is still dominated by Banks Small non-bank asset portion should be enlarged to finance development - • Limited financial instruments – huge potential for market deepening . Digital assets: high risk and complex financial instruments Weak governance and law enforcement in the financial sector EXTERNAL CHALLENGES Technology Disruptions New financial risks from climate change and current geopolitical situation OBJECTIVE: Optimizing financial intermediation and financing portfolio for productive sectors; improving financial access, inclusion and literacy, and consumer protection; expanding long-term financing resources; enhancing competitiveness and efficiency of the financial sector; and strengthening the authorities and responsibilities of financial regulators. OTORITAS JASA KEUANGAN Indonesia Financial Services Authority Strengthening OJK's role in some areas, including integrated supervision, financial conglomerate supervision, market conduct supervision, consumer protection, etc. Giving new mandates among others: cooperative in the financial sector, digital assets, carbon exchange, bullion activities. BANK INDONESIA The Central Bank of The Republic of Indonesia Strengthening BI's role in some areas, such as maintaining financial system stability to support sustainable economic growth, maintaining the smooth running of the payment system, implementing macroprudential policies. LEMBAGA PENJAMIN SIMPANAN Indonesia Deposit Insurance Corporation Strengthening the role of IDIC in deposit guarantee and bank resolution. Giving a new mandate: IDIC establishes policies and implement the insurance policy guarantee program. KEMENTERIAN KEUANGAN The Ministry of Finance Strengthening the role of the Ministry of Finance as a coordinator for Financial System Stability Committee and Sustainable Finance committee. The MoF coordinates with OJK, BI, and IDIC in some areas, including financial literacy and inclusion, financial sector development, etc. Source: Financial Services Authority (OJK) 118#120Act No. 4/2023 - Substances Act No. 4/2023 modifies, removes, and/or establishes new provisions for 17 existing laws in the financial sector and repeals one law. The Act also introduces new provisions regarding a) Financing Service Business, b) Consumer Protection in the Financial Sector, c) Technological Innovation in the Financial Sector, d) Human Resources, e) Financial Reporting, and f) Mutual Insurance. CHAPTER I General Provisions CHAPTER II. Principles, Purposes, Objectives and Scope CHAPTER III Institutional Aspect CHAPTER IV Bank CHAPTER V Capital Market, Money Market and Foreign Exchange Market CHAPTER VI Insurance CHAPTER VII Mutual Insurance CHAPTER VIII Policy Guarantee Program CHAPTER IX Guarantee Agencies CHAPTER X Financing Service Business CHAPTER XI Bullion Business Activity CHAPTER XII Pension Fund, Old Age Protection Program, and Pension Program CHAPTER XIII Cooperative in the Financial Services Sector CHAPTER XIV Microfinance Institution CHAPTER XV Financial Conglomerate CHAPTER XVI Financial Sector Technology Innovation CHAPTER XVII Sustainable Finance Implementation CHAPTER XVIII Financial Literacy, Financial Inclusion and Consumer Protection CHAPTER XIX Access to Micro, Small, and Medium Financing CHAPTER XX Human Resources CHAPTER XXI Financial System Stability CHAPTER XXII Indonesia's Export Financing Institutions CHAPTER XXIII Administrative Sanction CHAPTER XXIV Criminal Provisions CHAPTER XXV Other Provisions CHAPTER XXVI Transition Provisions CHAPTER XXVII Closing Provisions Source: Financial Services Authority (OJK) 119#121Macroprudential Policy remains accommodative in 2023 to increase bank lending to support the national economic recovery, while maintaining financial system stability MACRO-FINANCIAL LINKAGES: OPPORTUNITIES AND CHALLENGES ECONOMIC GROWTH AND INFLATION- PERFORMANCE OF CORPORATE AND HOUSEHOLD MACROPRUDENTIAL POLICY TRILEMMA BALANCED INTERMEDIATION NORMALIZATION OF FISCAL AND MONETARY POLICY EXCHANGE RATE VOLATILITY AND FOREIGN DEBT INCREASE OF SBN YIELD AND MARKED TO MARKET BALANCE SHEET MACROPRUDENTIAL POLICY "Pro Growth" Balanced Intermediation, Sound and Resilience Financial System, Economic-Financial Inclusion TARGET Accomodative Macroprudential Policy Macro systemic surveillance on financial system stability Economic and Financial Inclusion Policy 1 CREDIT GROWTH AT 10-12%, MAINTAINED FINANCIAL SYSTEM STABILITY'S RESILIENCE AGAINST RISKS, AND GROWING MSMEs Loosening all instrument of macroprudential policy and providing incentive on credit/financing provision to banks Strengthening systemic surveillance on banks' resilience against liquidity risks, market risks (exchange rate and SBN yield), and credit risks Expanding MSMEs Go Export and Go Digital program, as well as strengthening financial literacy and consumer protection on products under Bank Indonesia's licensing 2 FINANCIAL SYSTEM STABILITY COMMITTEE (KSSK) 1. Strengthening resilience and financial system stability risk's prevention 2. Increasing credit/financing to real sector 3. Financial sector reform B OK MAINTAINED FINANCIAL STABILITY ECONOMIC AND FINANCIAL INCLUSION Source: Bank Indonesia CREDIT SUPPLY BANK 미미미미미 MIR MPLB CCyB RR Incentive Transparency of SBDK LTV & DP CREDIT DEMAND RPIM Policy Synergy CORPORATE ㅁㅁㅁ FINANCING 120#122Bank Indonesia's Comprehensive Financial Deepening Program Strengthening the Effectiveness of Monetary Policy Operations and Transmission, integrated with the modern and efficient money market to support the financing of the economy STRENGTHENING INTEGRATED MONETARY OPERATION STRATEGY OPTIMIZATION OF FOREIGN EXCHANGE RESERVE ASSET MANAGEMENT MONEY MARKET AND FOREIGN EXCHANGE MARKET SINERGY & COORDINATION DEEPENING Money Market Deepening Policy "Pro-Growth": Integrated, Modern, Efficient 3 BPPU MAIN 2025 TARGET INITIATIVES PARTICIPANT L23 PRODUCT PRICING INFRASTRUCTURE 1 INTEGRATION OF MODERN AND EFFICIENT MONEY MARKET WITH MONETARY MANAGEMENT TO IMPROVE MONETARY OPERATION TRANSMISSION AND ECONOMIC FINANCING Consolidation of monetary operation participants and market participants having classification primary dealer (PD) into systemic, critical, and general in line with SIFIs, cross-border and future "wholesalers Accelerating the development of strategic money market instrument for effective monetary policy instrument, rupiah stability, hedging and short term financing Developing efficient market mechanism to support interest rate structure formation (IndONIA and Repo), exchange rate (DNDF), and hedging (interest rate swap and exchange rate) Infrastructure of monetary operation, money market and payment system which are 31 (integrated, interoperable, Interconnected) as pre-requisite for CBDC 2 COORDINATION FORUM FOR DEVELOPMENT FINANCING THROUGH FINANCIAL MARKETS (FK-PPPK) 1. Stabilization of Financial Market 2. Development of Economic Financing Instruments 3. Financial Literacy and Consumer Protection B CIK LPS Source: Bank Indonesia 121#123Bank Indonesia's Continue to Expand Payment System Digitalization in 2023 ..to accelerate payment system digitalization for further integration in the national economic-financial digital ecosystem, developing Digital Rupiah, as well as expanding cross-border payment system cooperation. NATIONAL DIGITAL FINANCE AND ECONOMY: OPPORTUNITIES AND CHALLENGES CLEAR VISION AND POLICY ON THE DIGITALIZATION OF THE NATIONAL PAYMENT SYSTEM POLICY TRILLEM PAYMENT SYSTEM SOUND, COMPETTITE AND INNOVATIVE PROMENT SYSTEM INDUSTRY PAYMENT SYSTEM INDUSTRY 1 3 SOUND EFFICIENT, AND RUR MARKET PRACTICE 2 31 ENTEGRA ACTIVE INDUSTRY PARTICIPATION IN THE DIGITALIZATION OF FINANCIAL SERVICES AND PAYMENTS TO CONSUMERS INTERORABLE INTERCONNECTED SAFE, AND ROBUST PAYMENT SYSTEMS INFRASTRUCTURE ACCELERATION OF PUBLIC ACCEPTATION OF FAST. CONVENIENT, AFFORDABLE SECURE, AND RELIABLE DIGITAL PAYMENT TRANSACTIONS DIGITAL TECHNOLOGY SPACE VS HIGH INVESTMENT COSTS. HUMAN RESOURCE SCARCITY, AND CYBER RISK "Pro-Growth" Payment System Policy: National Digital Economic-Financial Integration, Digital Rupiah TARGET Strong, Competitive, and Innovative of Payment System Industry 31 Payment System Infrastructure (Integrated Interoperable, Interconnected Efficient, Healthy, Transparent of Payment System Pricing Policy Digital Rupiah Design, Process, & Technology 1 ACCELERATION OF NATIONAL DIGITAL ECONOMIC-FINANCE INTEGRATION RUPIAH DIGITAL DEVELOPMENT. INTERNATIONAL PAYMENT COOPERATION Acceleration of regulatory reform and end-to-end consolidation of the payment system industry to build indonesia unicorns that are strong, competitive, innovative, and ready to become Digital Rupiah "wholesalers Development of 31 integrated, Interoperable, Interconnected netall and wholesale payment system infrastructure to accelerate national digital economic-financial integration and Digital Rupiah Issuance Emfident, pro-business, and transwent payment system Pricing Policy in accordance with payment service clusters to support national interests, consumers, and industrial competitiveness nationally and regionally Finalization of conceptual design, development of business models and wholesaler participants, development of the Digital Ruplah technology platform PENETRATION OF GLOBAL DIGITAL FINANCE PLAYERS, THE NEEDS FOR INTERNATIONAL COOPERATION 2 SYNERGY AND COORDINATION BANK INDONESIA-GOVERNMENT: ELECTRONIFICATION OF SOCIAL ASSISTANT AND GOVERNMENT FINANCE BANK INDONESIA-INDUSTRE IMPLEMENTATION OF BSPI 2023 AND RUPIAH DIGITAL DEVELOPMENT 5. BANK INDONESIA-DJK: STRENGTHENING OF ITSK REGULATION AND SUPERVISION (DIGITAL FINANCIAL INNOVATION BANK INDONESIA-INTERNATIONAL: INTERNATIONAL PAYMENT COOPERATION AND DEVELOPMENT OF CROC 5 Initiatives Indonesia Payment System Blueprint 2025 Source: Bank Indonesia BSPI 2025 Open Banking Retail Payment System Financial Market Infrastructure Data Regulatory, Licensing. and Supervisory 122#124Jakarta - Special Capital District of Indonesia indonesia.travel @indtravel indonesiatravel @indtravel www.indonesia travel wonderful indonesia Indoersio KEMPINSE *