#1BHINNEKA TUNGGAL IKA Republic of Indonesia Synergy to Drive National Economic Recovery, Mitigating Covid-19 Risk September 2020#2About Investor Relations Unit of the Republic of Indonesia BHINNEKA Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit - Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Rosita Dewi (International Department - Bank Indonesia, Phone: +6221 2981 8279) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +62213510714) Phone: +62213510714) E-mail: [email protected] This Presentation Book also can be downloaded from: http://www.bi.go.id/en/iru/presentation/red/Default.aspx 1#3What's New in This Edition Authorities' Concerted Efforts toward Covid-19 and Its Progress Fiscal Policy Updates ...page 60-72 ...page 11-32 0 0 Bank Indonesia Board of Meeting Decision ...page 97 BHINNIKA 2#4Overview Institutional and Governance Effectiveness: 1 Accelerated Reforms Agenda with 4 Institutional Improvement Economic Factor: 2 Stable Growth Prospects 5 Amid Temporary Moderation 3 External Factor: Improved External Resilience 6 Fiscal Performance and Flexibility: The Design of Economic Recovery Program Commitment to Sustainability and Climate Change Mitigation Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector 7 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNIKA 3#5Section 1 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement BHINNEKA TUNGGAL IKA#6Rank 40 50 238288 30 Higher rank is better 60 70 Global Competitiveness Index¹ 2007-2008 2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016 Improving Global Perception ...with recent improvements on corruption perception index and governance indicator BHINNIKA 36 41 2016-2017 2017-2018 2018* 2019* Ease of Doing Business² 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 0 20 Higher rank is better (rankings at the time of annual report publication) 40 60 45 50 80 72 73 73 91 100 120 140 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long-term growth. 160 90 India Indonesia Philippines Bulgaria - Colombia Indonesia India Philippines Bulgaria Colombia Corruption Perception Index4 Worldwide Governance Indicators³ 60 44 59 Higher score is better 52 42 22 ཆེཅེ 51 46 40 43 45 38 43 42 41 41 40 38 37 36 36 30 36 28 34 34 Higher rank is better 15 32 2010 2011 2012 2013 2014 2015 2016 2017 2018 30 Voice and Accountability Government Effectiveness Rule of Law Political Stability/Absence of Violence Regulatory Quality 2012 2013 2014 2015 2016 2017 2018 2019 Control of Corruption Indonesia India ⚫Philippines Bulgaria Colombia 1. Source: World Economic Forum - The Global Competitiveness Report 2019; Source: World Bank - Doing Business 2020 Report; 2. 3. Source: World Bank - The Worldwide Governance Indicators 2019 Update; 4. Source: Transparency International - Corruption Perceptions Index 2019 Report LO 5#7Continuous Improvement of Investment Climate ...another leap on Indonesia's Rank on Ease of Doing Business (EODB)* BHINNEKA EoDB 2020 Rank EoDB 2019 Rank Change in Rank EoDB 2020 Points EoDB 2019 Points Change in Points - Overall 73 73 0 ( 69.6 68.0 1.6 Starting a business 140 134 81.2 81.2 0.0 Dealing with Construction Permits 110 112 2 66.8 66.6 0.2 Getting Electricity 33 33 87.3 86.4 0.9 Registering Property 106 100 6 60.0 61.7 1.7 Getting Credit 48 44 4 70.0 70.0 0.0 Protecting Minority Investors 37 51 14 70.0 63.3 6.7 Paying Taxes 81 112 31 75.8 68.0 7.8 Trading Across Borders 116 116 67.5 67.3 0.2 Enforcing Contracts 139 146 7 49.1 47.2 1.9 Resolving Insolvency 38 36 2 68.1 67.9 0.2 * Higher rank is better, EoDB 2020 was published in October 2019 Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB Structural reforms will continue including in the budget and real sectors Source: World Bank Co 6#8Indonesia Has Been Rated as Investment Grade Country since 2017 BBB+ BBB BBB- Investment Grade Below Investment Grade BB+ BB BB- B+ BHINNIKA Fitch Ratings BBB / Stable JCRA R& August 2020, Rating Affirmed at BBB/Stable S&P Fitch The affirmation of the rating is underpinned by a favorable medium- term growth outlook and a low government debt burden compared with "BBB" category peers. Moody' 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 S&P Global Ratings BBB / Negative April 2020, Rating Affirmed at BBB, Outlook Revised from Stable to Negative "The affirmation reflects Indonesia's stable institutional settings, strong growth prospects, and historically prudent fiscal policy settings. The negative outlook reflects S&P expectation that Indonesia faces additional fiscal and external risks related to the COVID-19 pandemic in the next 24 months." MOODY'S Feb 2020, Rating Affirmed at Baa2/Stable Baa2/Stable "The affirmation of the ratings is underpinned by a number of credit strengths - including Indonesia's robust and stable growth rates and a low government debt burden, preserved by consistent fiscal discipline and emphasis on macroeconomic stability - as well as persistent credit challenges." R&I March 2020, Rating Upgraded at BBB+/Stable JCR BBB+ / Stable "The upgrade reflects the firm implementation of policies to strengthen economic growth potential on the back of a solidified political foundation. As the global spread of the novel coronavirus could strain growth in the Indonesia economy, the government and the central bank are working to shore up the economy and maintain macroeconomic stability. Given the country's underlying economic strength which remains intact, R&I expects the economy to start to recover if the epidemic is brought under control" January 2020, Rating Upgraded at BBB+/Stable BBB+ / Stable "The ratings mainly reflect the country's solid domestic consumption-led economic growth, restrained budget deficit and public debt, and resilience to external shocks supported by flexible exchange rate and credible monetary policies and accumulation of foreign exchange reserves. Since its previous rating review, JCR has been paying particular attention to the continuing reform initiatives pushed by the administration of President Joko Widodo and the content and progress of the economic policy taken by his second administration which took office in October 2019. Among the reform agenda, infrastructure development has continued to progress faster than JCR had expected.". 7#9Concerted Efforts to Mitigate Covid-19 Risk General Measures 1 Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. 8 Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. BHINNIKA 2 Extension of the emergency status for COVID-19 until 29th May 2020. 3 Permission for civil servants to work from home, while maintaining the continuity of public services. 10 10 4 Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds. 12 5 Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols. 6 Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities. 9 11 13 Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations. Establishment of Contingency Plans in the regions level. Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production. 14 7 Conducting Rapid Test in 17 provinces with positive patients of Covid-19. Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel. 8#10Government Measures to Mitigate Covid-19 Risk Fiscal and Non Fiscal Stimuli Fiscal Stimuli Phase 1 1 Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. Fiscal Stimuli Phase 2 1 Relaxation of Income Tax (PPh Article 21). 2 Increased disbursements of the Noncash Food Assistance Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. 2 Relaxation of Income Tax on Imports (PPh Article 22). 3 Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion. 3 Relaxation of Income Tax (PPh Article 25). 4 Provided incentives for domestic and international travellers. 4 Relaxation of Value Added Tax (VAT) Restitution. BHINNIKA 5 Reduced the air passenger service fee (PSF) by 20% for March-May 2020. 6 Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020. Non-Fiscal Stimuli 1 Reduce and simplify restrictions on export activities to maintain export performance and competitiveness. 7 Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities. 2 Reduce and simplify restrictions on import activities to ensure the availability of raw materials. 9#11Bank Indonesia's Measures to Mitigate Covid-19 Risk To maintain Monetary and Financial Market Stability BHINNEKA Measures Launched on March 2, 2020 1 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms 1 Measures Launched on March 18-19, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. 2 2 Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Reducing the foreign currency reserve requirement ratio for conventional commercial banks from 8% to 4%, effective 16th March 2020. 3 3 Reducing the rupiah reserve requirement ratio by 50bps for banks engaged in export-import financing activity in coordination with the Government. 4 5 4 Expanding the types of underlying transactions available to foreign investors as hedging alternatives against rupiah holdings in Indonesia. 6 5 Global investors may utilise global and domestic custodian banks for investment activity in Indonesia. 7 Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- month tenors from three times per week to daily auctions in order to ensure adequate liquidity. Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market. Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings. Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors. Strengthening payment system policy to support COVID-19 mitigation efforts. Source: Bank Indonesia 10#12Main Programs & Strategies in Facing the Covid-19 Pandemic MAIN PROGRAMS 1 Safe Indonesia - Indonesian are Safe From Covid-19 2 3 4 Two Strategies Facing the Covid-19 Pandemic Maintaining Life (Health) Maintaining Livelihoods BHINNEKA Healthy Indonesia - Health Service Reform Based On Mutual Cooperation Powerful Indonesia - People's Purchasing Power Improvement Program Growing Indonesia - Program For Increasing State Revenue • Overcoming/suppressing viruses and anticipating new cases Expanding testing, quarantine and treatment capacity and health protocols Get medicine, and do research Increase capacity and services in the health sector Planning vaccine production and distribution Support and help the community Support and help affected businesses to re-open and expand Priority for job creation, assistance, upskill Maintaining the availability of liquidity and financial system safety nets Public infrastructure investment, both hard and network infrastructure LO 5 Working Indonesia - Workforce Acceleration Program Source: Coordinating Ministry for Economic Affairs Covid-19 Handling Task Force National Economic Recovery & Transformation Task Force 11#13COVID-19 Handling and National Economic Recovery Committee: Integrating Economic and Health Policies BHINNI • • Presiden Joko Widodo has signed Presidential Regulation No.82/2020 on the Covid-19 Response and National Economic Recovery Committee, enacted on July 2020 The government hopes that all efforts and steps in formulating and implementing programs and policies can be carried out in a more coordinated and integrated manner, so that they can accelerate national economic recovery and save the economy from potential economic crises. PRESIDENT Policy Committee COMMITTEE COMPOSITION Chairman Coordinating Minister of Economic Affairs Vice Chairman I Coordinating Minister for Maritime and Investment Vice Chairman II Vice Chairman III Coordinating Minister for Politics, Law and Security Coordinating Minister for Human Development and Culture Minister of Finance Minister of Health Vice Chairman IV (Chairman: Coordinating Minister of Economic Affairs) Vice Chairman V Vice Chairman VI Chief Executive Executive Secretary I Executive Secretary II Minister of Home Affairs Minister of State-owned Enterprises Raden Pardede Secretary of Economic Affairs COVID-19 Handling Task Force (Chairman: Head of BNPB) National Economic Recovery and Transformation Task Force (Chairman: Vice Minister BUMN I) Preparing strategic policy recommendation Is to the President TASKS Integrate and determine the steps for implementing strategic policies and the necessary breakthroughs Monitor and evaluate the implementation of strategic policies Source: Coordinating Ministry for Economic Affairs 12#14Illustration of Health And Economic Recovery In One Wheel Brake Health Safety Net Need to step on the brakes to suppress (contain) the BHINNEKA Gas Pedal ➤ Social Safety Net ➤ Real Sector Safety Net covid-19 contagion Need: Brake fluid ➤ Medicine Health Workers Vaccine 20 Strong Brake SEATBELT: Driver safety while driving Financial Sector Safety Nets Source: Coordinating Ministry for Economic Affairs Oil/Gas ➤ Source of funding Make sure the drain is smooth and doesn't leak Step on The Gas! 13#15Economic Recovery and Covid-19 Handling Requires a Medium- Term Plan (up to 2023/2024) COVID-19 Cases vaccines invented Goal/Minimum The spread of COVID-19 will and distributed → Target: Recover to Pre-COVID condition keep increasing until the vaccine is found and distributed BHINNEKA Pre- Covid 6th month 12-18 months of 2020 SURVIVE MAINTAIN LIVELIHOOD A period of endurance and stress Adapt & Adjust Economic Condition Source: Coordinating Ministry for Economic Affairs 6th month of 2021 12th month of 2021 2022 - 2023 Transformation Period medium term Plan 2024 14#16Committee's Priority Policies/Program Main Key 1. Healthy Indonesia ↓ Public trust → Activity increases → Public consumption increases Driving investment Capacity utilization increases 2. Working Indonesia ↓ Purchasing power of the middle to lower class increased → Public consumption increases Creating jobs Driving investment Capacity utilization increases Source: Coordinating Ministry for Economic Affairs BHINNEKA 3. Growing Indonesia Socio-economic Transformation. Don't waste the opportunity to carry out this post- pandemic transformation 15#17Covid-19 Handling Strategy Reducing the spread Implementation Improvement ЗТ of Covid-19 (Involving various elements of society) Decreased Mortality Rate 1 2 3 A 23A TEST TRACE TREAT Campaign Massive Program 3M Put on a mask Wash hands Keep the distance Source: Coordinating Ministry for Economic Affairs Improvement of Health Service Facilities & Health Worker Support BHINNIKA 16#18Main Program Policy Matrix: Timetable and Intensity Program 2020 2021 2022 1. Health くくく 2. Social Assistance 3. Labor Intensive くくく 4. Relaxation Rules くく ✓ ✓ 5. Restructuring (MSMEs) ✓✓ ✓ ✓ Fund Placement + 6. ✓✓ く ✓✓ く Guarantee Economic Transformation 7. (Making Indonesia 4.0) Program Intensity ✓✓✓ High くく Moderate Index Source: Coordinating Ministry for Economic Affairs BHINNEKA 2023 > > > ✓✓✓ Low 17#19The Latest Programs under National Economic Recovery 100006 BUR AYAM KHAS REBON HONGGO MAMPR BHINNIKA Wage Subsidy Assistance Program (BSU) Employees): for Workers (Private Wages under IDR. 5 million, who are under pressure due to Covid- 19, Active workers (paying dues) BPJS TK, the process of cleansing BPJS TK data as much as 15.7 million Payment of IDR 600,000 per month for 1 worker for 4 months in 2 stages (Q3 and Q4). An expansion program for providing loans to households and victims of layoffs with an interest of 0% using an expanded KUR scheme The initial stage is with a target of reaching 2 million customers by 2020. With an estimated loan ceiling of IDR 6-10 million. of labor-intensive Escalation programs (mainly PUPR, Agriculture, Rural). The Labor Intensive Program, which is already running, can soon be expanded in intensity, so as to reduce unemployment pressure and increase people's income and purchasing power Source: Coordinating Ministry for Economic Affairs 18#20Government Support for MSMEs During the Covid-19 Pandemic BHINNEKA In the form of relaxation of asset quality assessments, postponement of principal & interest subsidies, low-interest working capital loans guaranteed by Askrindo and Jamkrindo, tax incentives for MSMEs borne by the government, and Productive Presidential Assistance for Micro Enterprises MSMES CREDIT RESTRUCTURING ASSET QUALITY 1 ASSESSMENT According to POJK No. WORKING CAPITAL CREDIT 2 POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES 3 LOW INTEREST Placement of Rp30 Trillion Government Funds at Bank Himbara Asset 11/POJK.03/2020 & 14/POJK.05/2020 Arrangement: Quality the Loans IDR 10 billion can be based only on accuracy of principal interest payments Restructurisation: is The credit quality for affected debtors determined to be current since restructuring The restructuring is carried out without a ceiling limit / type of financing KUR Super Mikro : Loan up to IDR 10 million Interest subsidy will be 19%, debtors pays 0% interest from Aug - Dec 2020. • KUR MKM (SMEs): Loan up to Rp10 million up to IDR 500 million Postponement of installments and a 6% interest subsidy for the period from Apr-Dec 2020 to 0%. • • Loan Rp500 million up to IDR 10 billion Postponement of installments and interest subsidies from 3% to 3% for the period Apr-Jun 2020 and interest subsidies from 2% to 4% for the period Jul-Sep 2020. UMI, Mekaar, Pegadaian (Pawnshop) • • 4 5 Postponement of principal installments and interest subsidies for 6 months from Apr-Sep 2020 Fintech Loan, Co-op, Farmers, LPDB, LPMUKP, UMKM PEMDA 6 GUARANTEE Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT Income Tax for MSMEs is borne by Government MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). Relaxation is given a 6% interest subsidy for 6 months MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE Direct assistance to 12 million Micro-Business Actors in the amount of IDR 2.4 million per recipient Source: Coordinating Ministry for Economic Affairs 19#21Government Assistance in the form of Salaries / Wages Subsidy BHINNEKA Regulated in Regulation of the Minister of Manpower (Permenaker) No.14/2020 concerning Wage Subsidized Government Assistance AIM: To protect, maintain, and increase the economic capacity of workers / laborers in the handling due to Covid-19 Salary/Wage Subsidy Budget IDR37.87 Trillion with a benefit of IDR 2.4 million per worker Recipient Target 15.7 million Given in the form of money amounting to IDR600,000 per month for 4 months and to be paid every two months Recipient Requirements 1 Indonesian citizens proven by NIK (ID Number) 2 Registered as an active participant in the BPJS Ketenagakerjaan social security program 3 Workers/Laborers who receive Salaries / Wages 4 Registered in social security program membership until June 2020 5 Salaries/wages below IDR5 million according to the latest salary / wages reported by the employer to BPJS Ketenagakerjaan 6 Have an active bank account Source: National Economic Recovery and Transformation Task Force 20#22Internet Data Assistance BHINNIY Internet quota assistance for students from elementary to higher education, teachers and lecturers to support the implementation of effective teaching and learning activities. VE BUDGET IDR6.73 Trillion Period of Implementation Oct-Dec 2020 MAIN TARGET 48 Million students, teachers, & lecturers STUDENTS Early Childhood Education 20 GB/MONTH 5 GB General Quota . STUDENTS Elementary to Senior High School 35 GB/MONTH • 5 GB General Quota TEACHERS Early Childhood to Senior High School 42 GB/MONTH LECTURERS & UNIVERSITY STUDENT 50 GB/MONTH 5 GB General Quota • 5 GB General Quota • • 15 GB Study Quota Duration : 4 Months • • 30 GB Study Quota Duration : 4 Months • 37 GB Study Quota Duration 4 Months • 45 GB Study Quota ⚫ Duration : 4 Months Internet quota assistance consists of: . GENERAL QUOTA- Quota that can be used to access all webpages and applications STUDY QUOTA- Quota that can only be used to access learning pages and applications Source: National Economic Recovery and Transformation Task Force 21#23Presidential Assistance for Productive Micro Enterprises (BPUM) BHINNEKA Social assistance of IDR 2.4 Million per business actor provided to Ultra Micro & Micro businesses that are not currently receiving credit from banks. Existing Programs Expansion Programs Grant (one-time distribution) of IDR2.4 million per Micro Business Actor The target is 12 million micro business actors who are not currently receiving working capital credit and investment from banks The initial stage is 9.1 million micro-entrepreneurs Budget Value: IDR22 Trillion Implementation Time: August - September 2020 The target is expanded to 12 million Micro Business Actors The additional budget needed is ranging from IDR6 Trillion to IDR28 Trillion Implementation Time: October - December 2020 Source: National Economic Recovery and Transformation Task Force 22#24Apart from financial support, affected MSME workers are also encouraged to take advantage of the pre-employment card program 1 Training Fee Assistance: IDR1.000.000 BHINNIKA 2 Training Incentives: IDR600.000/month for 4 months 3 Job Survey Incentives: IDR50.000/survey for 3x survey Total benefits per beneficiary: IDR3.550.000 Initial scheme The target recipient is 2 million people Job seekers Workers/Laborers affected by layoffs Workers who need increased competence >26 Million registrants Target Beneficiaries and the realization Covid Scheme Target recipient +/- 5.6 million people Prioritize : Employees who are laid off * Affected UKM actors *To be more precise on target, data from Ministries / Institutions including BPJS Ketenagakerjaan is needed Realization as of 18 September, 2020 2.39 million of 514 Districts / Cities 4.68 Million recipients Pre-employment Card 1.45 million Participants complete the training Participants have received incentives Source: Coordinating Ministry for Economic Affairs 23#25Integration of Various Types of Social Assistance and Financing for Super Micro and MSMEs is Continually Encouraged • • BHINNE Super micro, micro and small businesses that are un-bankable have begun to be empowered by the Government with the Productive Presidential Assistance & Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR. KUR Super Micro scheme, people enjoy loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and medium enterprises (UMKM) is given a subsidy of 6% until 31 Dec 2020 A Commercial Financing Patterns Social Assistance F Productive Presidential Assistance & Pre- employment Card Unbanked CSR E B Fully commercial loan Subsidized loan Special scheme of commercial loan Rolling soft loan C D Bankable MSMEs Financing Partnership and Community Development Program (PKBL) & Private CSR Mekaar UMi BWM LPDB* KUR Super Micro People's Business Credit (KUR) Regular Commercial Facilities Social grants Private PKBL & CSR Funds Interest Subsidy from the Government Government Guarantee Market Mechanism Business Ability *Fostering Prosperous Family (Mekaar), Micro Waqf Bank (BMW), Ultra Micro (UMI), Revolving Fund Management Agency (LPBD) Source: Coordinating Ministry for Economic Affairs 24#26Exit Strategy The Urgency of Exit Strategy for Indonesia The Indonesian economy is experiencing very heavy pressures, both in the supply side (business, industry - production) and in the demand side (people's purchasing power - consumption) Health Issues → Potential Economic and/or Financial Crisis → Potential Social Problems. The possibility of shifting community groups due to prolonged lockdown Middle income class Vulnerable community Low saving Informal sector Poor People zero saving Informal sector BHINNEKA New Normal Implementation in Indonesia New Normal is a Scenario to Maintain a Balance between Health Aspects that must be safeguarded, and Social-Economic Aspects that must continue to maintain welfare (livelihood) The New Normal Scenario is implemented by: Data-based Public Health Indicators: Epidemiology Poverty Line ■ Public Health Surveillance ■ Health Care Facilities which becomes a Necessary Condition that must be met. Requires readiness from the Public Sector to be opened : ■ wealth to survive (especially informal workers) are very small Health protocol (SOP) in each public sector ☐ Community awareness, compliance and discipline 56.50% or 74.03 million Indonesian work in informal sectors with an average income of USD 100 - 200 per month. Savings and the accumulation of The fiscal capacity of the state is very limited The Government is unable to fund all communities affected by COVID-19. Social Aid is prepared within a limited period (3 months, 6 months) Source: Coordinating Ministry for Economic Affairs 25#27New Normal Achieving Productive and Safe Indonesia from Covid-19 BHINNIKA • Covid-19 Cases • Necessary Conditions A declining number of cases, number of suspects, and deaths within 14 days Rt 1 Monitoring of the virus / Public Health The number of tests and contact tracing increases (not only in big cities but also in regions) The application of the use of masks is increasingly expanded (mask for all) Health services capacity ► Medical personnel, PPE Availability of drugs, ICU room, ventilator • Business sector preparation • Establishing new SOPs/guidelines at work (temperature measurement, masks at work, distance keeping, etc.) Public Response ► ► Discipline the application of new protocols for activities Submission of information that is accurate, official and transparent by the government to the public New Protocol (General) Under the Decree of the Minister of Health (KMK) number HK.01.07/MENKES/ 328/2020, the new protocol includes: Make sure to clean your hands with soap and clean water Wear a mask when doing activities outside (mask for all) Apply physical distancing (1.5-2 m) Self-isolation if exposed to positive cases and illness Temperature check-in each building Source: Coordinating Ministry for Economic Affairs 26#28Indonesia Manufacturing PM! 800 55 50,8 600 50 45 400 40 200 35 0 30 27,5 25 With The NER (PEN) Program and New Normal Programs, Economic Activity Began to Rise BHINNE A number of indicators in June 2020 began to show positive signals of improvement in economic activity such as manufacturing PMI, Consumer Confidence Index, Retail Sales and Car Sales, Business Activity Survey, and Consumer Price Index 125 10 Vehicle Sales Retail Sales Growth (% YoY) 0,0 15 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Motorcycle Sales (thousand) Car Sales (% YoY) - rhs Jul-20 20,0 -57,8 -40,0 0 -60,0 -5 -10,1 -80,0 -10 -100,0 -15 -20 -25 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 N Jun-200 Jul-20 Aug-20 -20,6 Consumer Confidence Index 15,00 Business Activity Survey 0,5 Core Inflation 3 140 130 120 110 100 90 80 70 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Source: Coordinating Ministry for Economic Affairs Jan-20 Mar-20 10,00 5,00 0,00 86,9 -5,00 -10,00 83,8 77,8 -15,00 May-20 Jul-20 Q1-2019 Q2-2019 Q3-2019 Q4-2019 Q1-2020 Q3-2020 Q2-2023 Z 0,4 0,3 0,2 -5,1 0,1 0 W 0,02 Mei Jun 2020 (%, yoy) - rhs 2018 2019 2020 Okt 2,5 0,29 2 Nov Des 27 1,5 1#29Protocols in Every Economic-Social Sector Sector GENERAL Protocol Decree of the Minister of Health (KMK) number HK / 01.07 / MENKES / 328/2020 about Covid-19 Prevention and Control Guidelines in Office and Industrial Workplaces in Supporting Business Sustainability in Pandemic Situations Regulate: . Rules at Work Important Point • Rules for Workers . Alleged Covid-19 Confirmation) • BHINNIKA Management (OTG, PDP, ODP, or Coordination between workplace and Regional Government INDUSTRY Minister of Industry Circular No.4 / 2020 about Implementation of Factory Operations in the Corona Virus Disease-19 Public Health Emergency • Rules for Workers Regulate: • Rules for Industrial Estates • Cleaning and Disinfection Guide • Social Distancing Guide TOURISM TRANSPORTATION TRADE • Standard Operational Procedure (SOP) is in the process of harmonization with the Task Force Transportation Minister Regulation No.18 of 2020 about Transportation Control in order to Prevent the Spread of Covid-19 Virus SOP on Health Protocol for Modern and People's/Traditional Market and Retail - Ministry of Trade . Protocol on Prevention of Covid-19 Distribution in Shopping Centers Source: Association of Indonesian Shopping Center Management Arranging SOPs for Hotels, Homestay, Restaurants, Travel Attractions, Art Venues, Film Production, TV Coverage Regulate: • Transportation control for the whole region • Transportation control in areas designated as PSBB (Large- scale Social Restrictions) • Transportation control for homecoming activities in 2020 Regulate: • Rules in the Market Environment • Rules for Traders and Management • Rules for Consumers Operating Time • Source: Coordinating Ministry for Economic Affairs 28#30Government Measures to Mitigate Covid-19 Risk Government Regulation In UU 2/2020, Previously Perppu No.1 2020 Regulates two topics: (1) National Budget (APBN) and (2) Financial Sector Policy National Budget (APBN) Financial Sector Policy 1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 1. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 2. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Lending to LPS. 5. Issuance of SUN and SBSN can be purchased by BI, BUMN, colDRorate investors and / or retail investors. 3. 6. Use of alternative budget sources for example SAL, education endowment funds, and funds managed by the Public Service Agency. 4. 7. Taxation Policy: a) Decrease in ColDRorate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19. Source: Coordinating Ministry for Economic Affairs BHINNIKA Improved Coordination among KSSK members Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys SUN on the primary market, lending to LPS and OJK may request a merger or consolidation of Financial Services Institutions. Foreign exchange management (LLD) management for residents Increase public confidence without causing moral hazard. 29#31Government Measures to Mitigate Covid-19 Risk Budget Refocusing Policy BHINNIKA I. II. III. Presidential Regulation (Perpres) No 7/2020 on Taskforce to Manage COVID-19 Outbreak → Renewed through Presidential Regulation (Perpres) No 9/2020 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources Presidential Instruction (Inpres) No 4/2020 concerning Refocusing of Activities, Reallocation of Ministry/Agency Budget, and Procurement of Goods and Services in the Framework of Mitigating COVID-19 Outbreak and Ministry of Finance Circular (SE) No 6/2020 on Refocusing Activity and Reallocation of Ministry/Agency Budget in the Framework of Mitigating COVID-19 Outbreak 1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak in accordance with COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly, simply and accountably) Policy to support efforts to adjust regional allocations and relax transfers for handling Covid-19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation (Permendagri) 20/2020 on acceleration of COVID-19 Mitigation in the Scope of Regional Government IV. Government Regulation Number 23 of 2020 for Implementation of the National Economic Recovery Program in the Context of Supporting State Financial Policies for Handling Corona Virus Disease 2019 (COVID-19) and/ or Facing Threats that Harm Nation Source: Coordinating Ministry for Economic Affairs 30#32Fiscal Incentives: Super Deduction For Research & Development BHINNIKA The Government developing a super deduction tax scheme to provide businesses with incentives to conduct research and development in the hopes of spurring innovation Object Certain R&D activities in Indonesia, the costs of which are charged within a certain period. Subject Domestic colDRorate taxpayers who carry out certain research and development (R&D) activities in Indonesia. Income Tax Law (Law No.7/1983 jo. Law No. 36/2018) Article 35: Matters that have not been sufficiently regulated by law are further regulated by Government Regulation Law No. 45/2019 Amount of facilities (proposed) Stages Real Cost RPMK 100% Additional: Commercialisasion 100% Registration of Intellectual Property Rights (IPR) in the form of Patents or Plant Variety Protection Rights (PVT) in the country 50% Registration of IPR abroad / product innovation 25% Collaboration with government / private R&D institutions 25% Total 300% Source: Coordinating Ministry for Economic Affairs Article 29C: Facility for reducing gross income for domestic taxpayers conducting certain research and development activities in Indonesia ■ The maximum gross income reduction facility is 300% of the cost ■ Further arrangements through technical regulations Technical Regulations (RPMK) In the process of coordinating the drafting of the Minister of Finance Regulation (IDRMK) with the Ministry of Finance, the Ministry of Research and Technology, and the Ministry of Industry#33National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 8 AA INDUSTRIAL CONDITIONS BHINNEKA 7 SECTORS FOCUS raw Food and Beverage Textiles and Clothing Import Reduction STRATEGIC STEPS through Import Substitution in Industries with Large Import Value Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers • • Require to deepen Industrial Structure Necessary to be independent on materials and production Unsupportive regulations and incentives. • The P3DN Program is not yet optimal 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Automotive Encouraging the Deepening of Industrial Structure Chemical Electronic Utilisation 60% (2020) Utilisation 75% (2021) Utilisation 85% (2022) Pharmacy Medical Devices Absorption of workers affected by layoffs Increased domestic spending capacity • Increase in the export market Source: Ministry of Industry 32#34Medium-Term National Development Plan (RPJMN) 2020-2024 President's Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation". President's Missions Top 5 Presidential Priorities 7 RPJMN Development Agenda 1 Improving the Quality of the Indonesian Labour Force 1 HR Development Strengthening Economic Resilience to Achieve Superior Economic Growth Developing More Remote Regions to Reduce Economic Gaps and Improve Equality BHINNIKA 2 Achieving Productive, Independent and Competitive Economic Structure 3 Attaining Equitable and Prosperous National 2 Development Infrastructure Development Achieving Sustainable Environmental 4 Climate 5 Developing Cultural Progress Regulation 3 Simplification Reflecting the Nation's Personality 6 Developing a Dignified and Trustworthy Legal System Free from Corruption 4 Protection of All Nations and Simplification of Bureaucracy C 7 Provision of Security to All Citizens 00 8 Attaining Good, Effective, and Reliable Governance Achieving Synergy of Governmental 9 Framework with the Regional Government Source: National Development Planning Agency Economic 5 Transformation Improvement of Quality and Competitiveness of the Labour Force Engaging in Mental Revolution and Culture Development Strengthening Infrastructure to Support Economic Development and Improve Basic Services Conservation of Environment, Supporting Climate Change, and Enhancing Disaster Resilience Enhancing Political, Legal, Defense and Stability and Transforming Public Services 33#35Simplifying Regulations through Omnibus Laws Omnibus Laws Group a Diverse Range of Issues into Legislation, Aimed at Creating Jobs and Empowering SMEs. $ Taxes 1) Investment Funding 2) Territorial System Omnibus Law Priority Sectors ப் TAX Labour 6 Pillars of Omnibus Law Perpajakan (Taxation) 3) Personal Taxpayer 4) Taxpayer Compliance Financial Sector¹ 5) Equity of Business 6) Taxation Facility 11 Clusters of Omnibus Law Cipta Lapangan Kerja (Job Creation) 1) Simplification of Licensing 4) Ease, Empowerment and Protection of MSMEs 2) Investment Requirements 3) Employment 5) Ease of Doing Business 6) Research and Innovation Support 7) Government Administration 8) Imposition of Sanctions 9) Land Acquisition 10) Government Investment and Projects 11) Economic Zone BHINNEKA Following the inauguration of his second presidential term in October 2019, President Joko Widodo announced his administration's plans to continue regulatory reform by focusing on initiatives such as developing a dynamic and qualified workforce, promoting industry cooperation through technology, further enhancing infrastructure development and economic reform as well as simplifying regulations and bureaucracy. ■To achieve such ends, President Widodo's Government subsequently prepared three bills of omnibus laws, namely an omnibus bill on job creation, an omnibus bill on development and strengthening the financial sector and an omnibus bill on tax provision. ■Omnibus laws refer to laws that group diverse and unrelated issues which are drawn into a bill which is accepted in a single vote by a legislature. 1Under discussion Source: Coordinating Ministry for Economic Affairs 34#36The Economic Policy Packages RHINNIKA "To improve national industry competitiveness, export and investment to generate significant economic growth" Harmonizing Regulations Ensuring Law Enforceability Phase I (9 Sept '15) Improving national industry competitiveness Phase II (29 Sept '15) Easing permit requirement and simplifying export proceeds requirement Phase III (7 Oct '15) Simplifying Bureaucratic Process Phase IX (27 Jan '16) Accelerating electricity generation, stabilizing meat prices and improving rural-urban logistics sector Phase X (11 Feb '16) Revising the Negative investment List and improving protection for SMEs Phase XI (29 Mar '16) Financial services facilitation, export financing and elimination of business unnecessary burden Phase IV (15 Oct '15) Social safety net and betterment of people welfare Phase V (22 Oct '15) Improving industry and investment climate through tax incentives and deregulation on sharia banking Phase VI (5 Nov '15) Stimulating economic activities in border areas and facilitating strategic commodities availability Phase VII (7 Dec '15) Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals Phase VIII (21 Dec '15) Resolving land acquisition disputes, intensifying domestic oil production, stimulating domestic parts and aviation industries Stimulating national economy through facilitation to SMEs and industries Phase XII (28 Apr'16) Improving Indonesia's rank on Ease of Doing Business (EODB) Phase XIII (24 Aug '16) Low Cost Housing for Low-Income Communities Phase XIV (10 Nov '16) Roadmap for E-commerce Phase XV (15 Jun '17) Improving logistics Phase XVI (16 Nov '18) Improving the competitiveness and domestic economy In addition to the 16 Policy Packages, on August 31, 2017 the Government has issued a Presidential Regulation No.91/2017 for enhancing business license service standard Source: Coordinating Ministry for Economic Affairs 35#37Enhancing Business License Service Standard Presidential Regulation to Accelerate Ease of Doing Business has been launched Main Policy Policy Goals Improve efficient, streamlined, & integrated business license service standards Provide business licensing process assurance in terms of the costs and lead times Overcome the barriers to doing business in Indonesia 1 2 4 6 3 5 Accelerate the business licensing process = 1st Phase Forming a Task Force to identify & overcome the end-to-end licensing barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing Source: Coordinating Ministry for Economic Affairs Increase coordination & synergy between central & regional government Implement integrated licensing process (single submission) 2nd Phase Business license regulatory reforms Implementation of the Single Submission system Note: 1st and 2nd Phase are implemented in parallel BHINNIKA 36#38Improving Investment Climate Online Single Submission (OSS) Has Been Launched... BHINNIKA OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors Environment & Forestry Sector Electricity Sector Public Works & Housing Sector Health Sector Industry Sector Marine & Fishery Sector Medicine & Food Sector Transportation Sector Trade Sector Information & Communication Other Sector The Advantage of Using OSS Business licenses can be secured in under an hour 良 More practical Standardized business licenses are available Source: Coordinating Ministry for Economic Affairs Accessible at anytime and anywhere Ellectronically integrated Sector The whole licensing process is monitored by the Task Force 37#39Improving Investment Climate ...Bonded Logistic Center to Improve Indonesia's Competitiveness BHINNIKA Bonded Logistic Center the (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as of part implementation of the 1st Economic Policy Package. PLB facility aims to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and medium industries; increase investment; and to make Indonesia to become a logistics hub in Asia Pacific. To date, 52 Bonded Logistic Center has been launched to support various industries. Small and medium industry Food & beverages industry Oil and Personal care/ home care industry Synthetic gas, and mining textile (chemical substances) industry Auto- motive industry Textile industry. (cotton) industry Aircraft MRO Heavy Equipment industry Defence industry industry 38#40Improving Investment Climate ...revising the Negative Investment List Introduction of New Foreign Ownership Regulation for Strategic Sectors Cold storage Before After Sports Center, Film Processing Lab, Crumb Rubber Before After Before Pharmaceutical Raw Materials Restaurants, Bars After Before Manufacturing After 33% 100% 100% 100% 49% 51% 85% 100% Key Reforms in Negative Foreign Investment List Revision of "Partnership" category to refer to partnership with Micro, Small and Medium Enterprises (MSMEs) Grandfather Law: If a particular sector is tightened in future, existing foreign investor does not need to comply with tighter stake Strengthen implementation of negative investment law through active roles from ministries, agencies and regional governments Toll Road Operator, Telecommunication Testing Company Before After 100% 95% Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Before Conventions After 67% 67% 33% 51% Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Telecommunication Provider Consultancy for Construction¹ with Integrated Services Before After Before After Before After 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) 49% 67% 67% 67% 55% 65% BHINNEKA 39#41Investment Realization (Q2-2020) Direct Investments IDR tn BHINNEKA Top 8 FDI Realization by Sectors (Q2-2020 vs Q2-2019) 94,3 - 97,6 Other Services US$263.4 mn 23.5% Metal, Except Machinery, and Equipment Industry US$1,326.8 mn 54.7% Electricity, Gas, and Water Supply US$1,463.1 mn 8.3% 240 220 FDI DDI TOTAL 191,9 200 180 160 140 120 100 80 60 40 20 0 Q1Q2 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 Q1Q2 2013 2014 2015 2016 2017 2018 2019 2020 Food Industry US$504.3 mn 55.9% IDR210.7tn IDR191.9tn Investment Decreasing Realization ذالة 4.3% Q2-2019 Q2-2020 Investmen IDR98tn IDR97.6tn Realization (FDI) Q2-2019 Q2-2020 Decreasing 7% Investment Realization (DDI) IDR112.7tn IDR94.3tn II Q2-2019 Q2-2020 Decreasing 1.4% Source: Investment Coordinating Board (BKPM), compared to Q2-2019 period ansportation, Warehouse, and Telecommunication US$648.5 mn 31.7% EXP Investment Realization Mining US$391.6 mn 41.8% Chemical and Pharmaceutical Industry US$346.5 mn 11.4% Housing, Industrial Estate, and Office Building US$526.2 mn -15.3% 40#421st Semester 2020 Investment Realization (excluding the upstream oil and gas sector and financial services) 49.3% Investment Realization (1st Semester 2020) IDR402.6 T Domestic Investment (PDMN) IDR207.0 (51.4%) Foreign Investment (PMA) IDR195.6T (48.6%) BHINNIKA 2020 INVESTMENT REALIZATION TARGET IDR817.2 T Indonesian Workers' Absorption (1st Quarter 2020) (2nd Quarter 2020) 303,085 263,109 Source: Investment Coordinating Board of the Republic of Indonesia 41#431st Semester 2020 Investment Realization Development (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD million) 4,673.4 Singapore 34.4% 2,426.5 China 17.9% Hong Kong 1,797.1 13.2% Japan 8.9% 1,213 Malaysia 795.6 5.9% Others 2,677.6 19.7% Source: Investment Coordinating Board of the Republic of Indonesia By Geography IDR33.6 T (8.3%) IDR34.2 T (8.5%) IDR18.3 T (4.6%) IDR97.4 T (24.2%) IDR208.9 T (51.9%) IDR10.2 (2.5%) Others IDR192.9 T (47.9%) By Location BHINNEKA Investment Distribution Outside Java IDR193.7T (48.1%) Java IDR208.9 T (51.9%) East Java IDR51T (12.7%) By Sector Primary IDR52.1T (12.9%) West Java IDR57.9T (14.4%) I Riau IDR22.8T (5.6%) Central Java DKI Jakarta IDR50.2T (12.5%) IDR27.8T (6.9%) Tertiary IDR220.9T(54.9%) Secondary IDR129.6T(32.2%) 42#44Potential Investment Realization Reaches IDR 708 T IDR 708T Potential Investment Realization +Rp 410T (58%) The potential value facilitated Solving stalled investment issues is one strategy to attract investors Klaten, Central Java Dumai, Riau Indonesian government does not only facilitates large investment issues, but also medium & small investments Source: Investment Coordinating Board of the Republic of Indonesia BHINNEKA Companies that had been facilitated: IDR 211.9T Rosneft LOTTE CHEMICAL ID R61.2T VALE PT VALE INDONESIA TO ID R39.2T IDR21.7T HYUNDAI NINDYA YTL Power (Tanjung Jati Power) IDR38.0T KOBEXINDO we grow together IDR 14.0T <tlb ID R9.5T Bengkulu Electric Power IDR5.2T (Galempa IDR2.0T Sejahtera ANJ Bersama) Agri Masdar A HUBADALA PT Sumber Mutiara Indah IDR1.8T Perdana (SMIP) IDR 1.8T Minahasa Cahaya Lestari IDR 1.8T Others IDR 1.4T MALUNDO IDR 1.1T 43#45Strategy to Maintain Investment Climate During COVID-19 Pandemic 1 Investment inquiries facilitation of existing operating companies 2 Investment potential facilitation from existing companies not yet been executed 3 Bring in new investments 4 Providing incentives for existing companies' expansion Source: Investment Coordinating Board of the Republic of Indonesia BHINNIKA 44#46Investment Realization Facilitation Services During COVID-19 Pandemic & 1 Companies Operation Support Optimizing facilitation for companies that accelerate the development and operation of business activities through the issuance of letters of support to companies while still observing the COVID-19 protocol 2 Visa Recommendations for Company Leaders Providing Visa recommendations for foreign companies' leader visit to related to their industry exploration/relocation and company operations. Including to obtain an entry permit / visit visa during large scale social restriction (PSBB). 3 Visa recommendations for foreign skilled workers Providing Visa recommendations for foreign skilled workers who will enter the country related to their investment realization / implementation Escorting Existing Investment Realization 4 Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation Optimization of Business Licensing Services 5 BKPM continues to provide business licensing services amid the COVID-19 Pandemic. The average business license issued during the pandemic both online and offline is 4000-5000 permits per day. Source: Investment Coordinating Board of the Republic of Indonesia (BKPM) 00 BHINNIKA 45#47Section 2 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IKA#48Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia 4th Most Populous country in the World; 64% in Manageable Inflation Rate productive age Rising Middle Class and Affluent Customers From commodity-based to manufacturing and service sectors via infrastructure development From consumption-led to investment-led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Tax base to be broadened from one reduce dependency on commodities BHINNEKA Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration Fuel subsidies significantly reduced and spending redirected to more productive allocation Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP New Economic Structure High Infrastructure Investments Continuing from 2015 policy, infrastructure 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 47#49Indonesia's GDP Growth Momentum Moderated BHINNE Strong GDP Growth1 QoQ YOY 5,2 4,9 5,2 5,0 4,9 5,0 5,0 5,1 5,2 5,1 5,3 5,2 5,2 5,1 5,1 5,0 5,0 4,0 3,1 3,2 3,1 3,1 3,0 % 7,0 5,0 5,1 4,9 4,9 5,0 4,8 4,7 4,8 3,8 3,3 3,7 3,3 3,0 1,0 0,0 -1,0 (0,2) (0,4) (0,3) (1,7) (1,8) (0,4) (1,7) (0,5) (1,7) -3,0 (2,1) (1.72.4) -5,0 -7,0 2015 2016 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 2014 2017 2018 2019 2020 Favourable GDP Growth Compared to Peers² % 10,00 8,00 6,00 4,00 2,00 (4,2) (5,3) 8,20 5,03 5,91 7,62 7,43 4,23 1,87 065 0,50 Indonesia's economy contracted 5.32% (yoy) in Q2/2020 period after expanding 2.97% (yoy) in Q1/2020. The recent contraction is consistent with global economic weaknesses stemming from the COVID-19 pandemic as well as containment measures in the form of large-scale social restrictions to break the domestic chain of transmission. Through its policy mix, Bank Indonesia will continue to strengthen synergy with the Government and other relevant authorities in order to ensure the effectiveness of various policies implemented to build economic recovery momentum • Domestic economic growth has declined across all GDP components from the expenditure side. Household consumption contracted 5.51% (yoy) compared with positive 2.83% (yoy) in the first quarter of 2020. Likewise, investment posted an 8.61% (yoy) contraction, down from 1.70% (yoy) in the previous period. Muted government stimuli in line with seasonal trends have also fed through to a 6.90% (yoy) contraction of government consumption, falling steeply from 3.75% (yoy) in the first quarter of 2020. In addition, exports experienced an 11.66% (yoy) contraction in the reporting period due to the shrinking global economy and sliding international commodity prices. Mirroring domestic demand and exports, imports recorded a 16.96% (yoy) contraction in the reporting period. • All economic sectors experienced a contraction in the second quarter of 2020, excluding Information and Communications; Water Supply; Health, Education and Financial Services; as well as Agriculture. Economic moderation has primarily been driven by Transportation and Storage, Trade and Accommodation, as well as Manufacturing. In contrast, the Information and Communications sector posted stronger growth in line with greater uptake of digital media in response to Work From Home (WFH) and School From Home (SFH) protocols. Furthermore, the Agricultural sector has been boosted by the ongoing harvesting season. Growth Prospect 2020 GDP growth Institutions (%YoY) -2,00 2020 Budget (Presidential Regulation 72/2020) -0,4-1,0 -4,00 Bank Indonesia 0,9-1,9 -6,00 2012 2013 2014 2015 2016 2017 2018 2019 2020* 2021* IMF (WEO June 2020) -0.3 World Bank (GEP June 2020) 0.0 Bulgaria Colombia India Indonesia Philippines ADB (ADOS June 2020) -1.0 12 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption Consensus Forecast (September 2020) -1.9 2. Source: World Economic Outlook Database - April 2020; * indicates estimated figure 48#50GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY) 1 BHINNIKA 2015 2016 2017 By expenditure HH. Consumption Non profit HH. Q1 consumption Q2 Q3 5.0 5.0 5.0 4.9 5.0 5.0 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 5.1 5.0 5.0 5.0 4.9 5.0 4.9 5.0 4.9 5.0 2018 Q2 Q3 Q4 Tot Q1 Q2 Q3 5.2 5.0 2019 2020 Q4 Tot Q1 Q2 Q3 Q4 Tot Q1 Q2 6.7 6.7 6.7 6.6 8.1 58 5.1 5.1 5,0 5,2 5,0 5,0 5,0 2,8 -5,5 8.5 6.0 5.3 6.9 8.1 8.8 8.6 10.8 9.1 17,0 15,3 7,4 3,5 10,6 -5,1 -7,8 Government 2.9 2.6 7.1 7.1 5.3 3.4 consumption 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 5.2 6.3 4.6 4.8 5,2 8,2 1,0 0,5 3,2 3,7 -6,9 Gross Fixed Cap. 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 7.9 5.8 6.9 6.0 6.6 5,0 4,6 4,2 4,1 4,4 1,7 -8,6 Formation Exports (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) 3.9 Imports (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) 2.7 GDP 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 (1.7) 8.4 2.7 16.5 8.4 8.9 (2.4) 4.8 0.2 15.4 11.9 8.1 12.5 14.9 13.8 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.8 7.5 8.3 4.6 6.5 -1,6 -1,7 0,1 -0,4 -0,9 0,2 -11,7 7.1 11.9 -7,5 -6.8 -8,3 -8,0 -7,7 -2,2 -17,0 5.2 5.2 5,1 5,1 5,0 5,0 5,0 3,0 -5,3 1. Source: Central Bureau of Statistics of Indonesia (BPS), ** Including non-profit household consumption GDP Growth by Sector (%, YoY) 2015 2016 2017 2018 2019 2020 By sectors Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 770 Tot Q4 Tot. Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Tot Q1 Q2 Q3 Tot Q4 Q1 Q2 Agriculture, forestry, and fishery 3.7 6.5 2.9 1.6 3.8 1.5 3.5 3.2 Mining and Quarrying 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.0 0.2 1.4 0.9 5.5 3.4 7.1 (1. 3) 3.3 2.8 2.4 3.9 3.4 4.7 3.6 3.8 3.9 1,8 5,3 3,1 4,3 3,6 0,0 2,2 2.1 1.8 0.0 0.7 1.1 Manufacturing Construction 4.1 4.2 4.6 4.4 4.3 4.7 4.6 6.0 5.4 6.8 7.1 6.4 6.8 5.1 4.5 5.0 3.3 4.2 5.2 6.0 7.0 4.3 4.3 3.5 4.9 7.0 4.5 4.3 4.6 7.2 6.8 7.4 5.7 Wholesale and Retail Trade, Repair of Car and 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 4.0 4.6 3.5 5.2 4.5 4.5 5.0 Motorcycle Transportation and 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 Storage Information and 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 communication Financial service 8.1 10. 5 8.8 8.9 8.2 8.5 8.5 8.7 6272 M 2.6 2.7 2.2 2.2 2,3 -0,7 2,3 3.9 4.4 4.2 4.3 3,9 5.8 5.6 6.1 5,9 3,5 4,1 0,9 1,2 0,4 -2,7 3,7 3,8 2,1 -6,2 5,7 5,6 5,8 5,8 2,9 -5,4 5.2 5.3 4.4 5.0 5,2 4,6 4,4 4,2 4,6 1,6 -7,6 5.7 5.5 7.1 5,5 5,9 6,7 7,6 6,4 1,3 -30,8 11.1 ∞ 8.8 8.3 9.6 7.8 5.1 8.1 7.1 7.0 9,1 9,6 9,2 8.6 2.6 10.3 12.8 8.6 Other Services* GDP Source: Central Bureau of Statistics of Indonesia (BPS) 5.1 6.5 4.8 5.5 5.4 9.3 13.6 9.0 6.0 5.6 4.5 4.2 3.8 4.9 4.2 3.5 8.9 6.0 5.9 6.1 4.8 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 3.8 5.5 4.3 6.0 4,6 5.4 5.2 5.1 5.1 3.1 3.1 6.2 4.2 7,2 4,5 6,1 2 - 9,7 9,4 9,8 10,9 8,5 6,6 10,6 1,0 6.2 6.7 6.4 6.2 6,8 7,3 5.3 5.2 5.2 5.2 5,1 5,1 5,0 5,0 5,0 6,4 6,2 6,7 4,6 -6,3 3,0 -5,3 *Other services consist of 10 sectors (according to Standard National 2008) 49#51• Majority of Regions Experienced Economic Growth Contraction BHINNIY Majority of provinces recorded a negative growth with the deepest contraction in Java and Balinusra region. The only two provinces of Papua and West Papua grew positively. The contraction in economic growth in various regions was influenced by lower domestic demand as a result of the large-scale social restrictions, amidst limited local Goverment fiscal stimulus. Nevertheless, a positive net exports recorded in several provinces on the back of positive growth in the mining sector. A WIDESPREAD ECONOMIC GROWTH CONTRACTION IN THE SECOND QUARTER OF 2020 SUMATRA 4.50 Aceh-1,82 N.Sumatra -2.37 -3.03 WV 4 H Riau -3.22 7719 W. Sumatra -4.91 Jambi-1.72 Riau Island-6.66 Bengkulu -0.48 Babel Island 4.98 5.Sumatra-1.73 Lampung-3.57 587 3.56 KALIMANTAN SULAWESI MALUKU AND PAPUA 14.35 N # West Kalimantan-3.40 Central Kalimantan-3.15 South Kalimantan -2.61 East Kalimantan-5.46 North Kalimantan-3.35 232 2018 3030 3019 7020 -141 North Sulawesi -3.89 Gorontalo-0.27 Central Sulawesi -0.06 West Sulawesi-0.78 South Sulawesi -3.87 South-East Sulawesi-2.39 AGDP 70% 6.0% RGDP 70% 50% RGDP 60% JAVA 1551 534 3:43 Banten -7.40 Jakarta -8.22 BALI-NUSA TENGGARA 40% RGDP <5.0% 0% AGDP <4.0% RGDP 0% West Java-5.98 Central lava-5.94 East Java-5.90 Yogyakarta -6.74 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 534 5:52 012 669 IV 2019 H 639 Bali-10.98 West Nusa Tenggara -1.41 East Nusa Tenggara -1.96 Maluku -0.92 North Maluku -0.16 Papua 4.52 West Papua 0.53 50#52Section 3 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA www#53External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments BHINNIKA Balance Of Payment Remains Solid 20 20 US$bn 10 15 5505 -5 -10 -15 131,72 9,25 миним Narrower Current Account Deficit 2013: CA Deficit (US$29.1bn) 2014: CA Deficit (US$26.7bn) 2015: CA Deficit (US$17.5bn) 2016: CA Deficit (US$16.9bn) 2017: 2018: CA Deficit CA Deficit (US$16.2bn) (US$30.6bn) 2020: CA Deficit 2019: CA Deficit (US$30.4bn) (US$6.6bn) US$bn 160 US$bn 8 10,52 120 (2,90) 80 40 6 4 -2 -4 202 46% 22 -6 -8 -12 -10 0 Q1 Q2 2020** 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03 04 01 02 03/04/01 02 2012 2013 2014 2015 2016 2017 2018 2019* W ----ན 3,99 0,0 -0,5 -1,18 -1,0 -1,5 -2,0 (6,17) -2,5 -3,0 -3,5 (2,15) -4,0 -4,5 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 Current Account Overall Balance Source: Bank Indonesia Trade Balance Surplus Continues Capital and Financial Account ■■■■•Reserve Asset (rhs) 2013 Goods 2014 Services 2015 2016 Primary Income 2017 2018 I Secondary Income 2019* Current Account (%GDP) (rhs) 2020** Source: Bank Indonesia Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of August 2020: US$137.0 bn (Equiv. to 9.0 months of imports + servicing of government debt) 2013: 2014: Deficit Deficit (US$4.10bn) (US$2.37bn) 2015: Surplus US$7.59bn 2016: Surplus US$8.83bn 2017: Surplus US$11.83bn 2018: Deficit (US$8.65bn) 2019: 2020: Deficit Surplus (US$3.24bn) (US$11.05bn) US$bn US$hn 4,00 2,33 130 OG Non-OG Total 3,00 120 2,00 110 100 1,00 90 0,00 80 -1,00 70 -2,00 60 -3,00 H H H H H H H H H H H H H H H N ¤ ¤ ¤ ¤ ¤ ¤ H H H H H H H H H H H H H H H H H N 50 2013 2014 2015 2016 2017 2018 2019 2020 Preliminary Figure Source: BPS Very Preliminary Figure FX Reserves (LHS) Month of Import & Debt Service (RHS) Month 15 14 13 12 11 10 9 8 7 1 4 7 10 14 7 10 1 4 7 10 1 4 7 10 1 2013 2014 2015 2016 4 7 10 14 7 10 1 4 7 10 1 4 7 2017 2018 2019 2020 Source: Bank Indonesia 4 2 1 52#5411-Oct IDR/US$ Movement of Rupiah Exchange Rate In Line with Fundamentals • Quarterly Average Monthly Average IDR/USD 14798 14.381 14.220 14.232 14254 14.113 14120 13.714 14.855 14134 14.141 data as of September 16th, 2020 19-Jan 8-Feb 28-Feb 20-Mar 9-Apr 29-Apr 19-May 15.179 15.711 14.673 14893 14.530 14639 14352 14.105 14064 14.031 14.006 8-Jun 28-Jun 18-Jul 7-Aug 27-Aug 16-Sep 6-Oct 26-Oct 15-Nov 5-Dec 12-Jul 1-Aug 21-Aug 10-Sep BHINNIKA 17.000 16.500 16.000 15.500 14.786 15.000 14.500 14835 14.000 13.500 13.000 Consistent with Bank Indonesia's stabilisation measures, rupiah exchange rates have remained relatively stable despite intense currency pressures during August and September 2020. As of 16th September 2020, the rupiah had depreciated 1.58% (ptp) compared with the end of July 2020 or by 6.42% relative to the end of December 2019. The rupiah lost value in August and September 2020 due to heightened global financial market uncertainty stemming from global factors as well as several domestic risks. Moving forward, Bank Indonesia expects the rupiah to regain lost value as the currency is still fundamentally undervalued, supported by low and stable inflation, a narrow current account deficit, highly attractive domestic financial assets for investment as well as a lower risk premium in Indonesia. Bank Indonesia will continue to strengthen exchange rate stabilisation policy in line with the rupiah's fundamental value and market mechanisms through effective monetary operations and by providing market liquidity. BRL TRY ZAR IDR -20,58 -14,84 -14,52 --13,38- -6,42 Rupiah Exchange Rate Fared Relatively Well Compared to Peers -23,6221,37 YTD 2020 vs 2019 % 35 THB INR -4,99 -4,34,97 1-2,89 14 -1,43 KRW point-to-point -2,91,68 ≈ ~ w w do 20 MYR SGD average -2,1402 -1,987 15 CNY 3,00 -1,24 10 JPY 3,26 10 1,23 PHP data as of September 16th, 2020 4,63 3,24 5 EUR 5,54 0,23 -30,0 -25,0 Source: Bank Indonesia -20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 Rupiah Exchange Rate Volatilty 32,5 data as of September 16th, 2020 2019 30 25,3 25 YTD 2020 Average YTD 2020 16,6 • Avg 2019 15,73 19,2 18,1 17,0 16,0 11,4 7,2 10,10 7,0 8,5 6,45,2 6,2 5,4 4,7 ZAR BRL TRY IDR THB PHP INR MYR 53#55Global Regional Ample Lines of Defense Against External Shocks Ample Reserves FX Reserve Swap Arrangement Bilateral Ample level of FX reserves to buffer against external shock FX Reserves as of of July 2020: US$137.0 bn Japan South Korea Australia Singapore • Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2018 The facility is available in USD and JPY Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion / IDR 115 trillion in March 2020 Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018 • Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2019 China Malaysia • Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in November 2018 Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019 ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Entitled to a maximum swap amount of USD600 million under ASA The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million Doubled to USD2 billion in 2005 Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement Came into effect in 2010 with a pool of US$120 bn and Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) Source: Bank Indonesia 54 BHINNEKA#56Solid Policy Coordination In Managing Financial Markets Volatility BHINNEKA The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financial System Stability Committee (KSSK) KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Gov't Securities Crisis Management Protocol (CMP) Indicators: - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities Policies to address the crisis at every level: - Repurchase the government securities at secondary market - Postpone or stop the issuance State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget CMP Implementing Crisis Management Protocol (CMP) State's Budget First Line of Defense Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related SOES (min. level Aware) BPJS (min. level Aware) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) BSF Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 55#57Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating BHINNIKA Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Uruguay Philippines 24,2 24,7 86,1 93,9 76,2 258; 10.2% 22,2 35,3 Indonesia 35,3 36.1 48,7 Colombia 53 ■2021F ≤ 3 months 42,7 2020F 53,6 Bulgaria 56,6 2019 56,3 2.260; 89.8% 0 20 40 60 80 100 Source: Moody's Credit View Fundamental Data, July 2020 Regulation on Prudential Principle in Managing External Debt Phase 1 Regulation Key Points Jan 1,2015 - Dec 31,2015 Phase 2 Jan 1,2016 - Dec 31,2016 Phase 3 Jan 1, 2017 & beyond Object of Regulation Governs all Foreign Currency Debt Hedging Ratio < 3 months > 3 6 months Liquidity Ratio (< 3 months) Credit Rating Hedging transaction to meet hedge ratio 20%* 20%* 50% Not applicable 25%** 25%** 70% Minimum rating of BB- Must be done with a bank in Indonesia not necessarily be done with a bank in Indonesia Sanction Source: Bank Indonesia As of Q IV-2015 Applied Hedging Ratio* Liquidity Ratio* 306; 12.2% 2.212; 87.8% 167; 6.6% > 3-6 months ■ Comply ■Not Comply *Data as of Q1 2020, with total population 2.518 corporates Source: Bank Indonesia 2.351; 93.4% 56#58BHINNEKA о 57 Healthy External Debt Composition External Debt Structure The Structure of External Debt is Dominated by Long-Term Debt ■Long Term External Debt Short Term External Debt 60% 81,778,879,378,378,879,882,182,984,484,083,984,385,984,385,485,484,484,984,484,583,5 Private External Debt Public External Debt 100% 90% 80% 100% 90% 80% 70% 57,458,652,650,046,444,245,949,551,249,649,350,250,150,350,649,947,248,148,248,749,3 70% 60% - 50% 40% 50% 40% 447,450,053,655,854,150,548,850,450,749,849,949,749,450,152,851,951,851,350,7 30% - 20% 42,641,4 10% 0% 2009 10% 18,321,220,721,721,220,217,917,115,616,016,115,714,115,714,614,615,615,115,615,516,5 30% Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* June 2020** July 2020** 2018 Q1-2019* 2017 Q2-2019* Q3-2019* Q4-2019* External Debt Remains Manageable Million USD 2010 2011 2012 2013 2014 2015 2016 20% 0% 2009 Q4-2019* Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* June 2020** July 2020** Q3-2019* Q2-2019* 2010 2011 2012 2013 2014 > 2015 2016 2017 2018 Q1-2019* % 37,340 34,5 35 197,5 30 177,3 183,3177,8 External Debt to GDP Ratio & Debt to Export Ratio % 36,0 36,8 36,5 36,2 36,1 2014 168,5172,1 External Debt/Export Ratio (rhs) External Debt/ GDP Ratio **Very Provisional Figures Axistitle Q1-2019* Q2-2019* Q3-2019* Q4-2019* Q1-2020* Q2-2020** % 36,1 External Debt External Debt Growth (rhs) 20,0 220 34,3 34,7 32,9 450.000 18,0 17,1 200 31,8 29,1 400.000 16,0 27,4 26,5 180 25,0 350.000 14,0 12.0 300.000 11,5 11,3 250.000 200.000 150.000 100.000 50.000 0 2009 2010 2011 Source: Bank Indonesia, External Debt Statistics of Indonesia, Aug 2020 2012 2013 2014 2015 2016 2017 2018 10,2 10,1 9,9 10,4 12,0 160 176,1 168,4 168,0 160,8 10,0 8,1 7,5 140 8,0 139,5 6,5 O 5,9 5,0 6,0 120 123,1 121,8 3,0 4,0 114,9 100 Q3-2019* Q4-2019* Q1-2020* Q2-2020** 0.6 2,0 0,0 00 80 2009 2010 2011 2012 2013 113,8 101,0 2015 2016 2017 2018 Q1-2019* Q2-2019* *Provisional Figures 10 LO 5#59Manageable External Debt Profile Short term non-bank corporate debt (non affiliation) represents only 9.2% of total private external debt 50.7% Public US$201.8bn or 49.3% Long Term 1 Private Bank US$157.1bn or 75.6% of Total Ext. of Private Ext. Debt Debt External Debt Position US$409.7bn 49.3% External Debt Position as of July 2020 1 Based on remaining maturity 75.6% US$207.9bn or 50.7% of total Ext. Debt 24.4% Affiliation US$18.5bn or 8.9% of Private Ext. Debt US$13.1bn or 6.3% of Private Ext. Debt 36.5% US$50.8bn or 24.4% of Private Ext. Debt 40.5% US$32.3bn or 15.5% of Private Ext. Debt 59.5% 63.5% Short-Term¹ Private Source: External Debt Statistics of Indonesia, September 2020 BHINNIKA Private Non-Bank US$19.2bn or 9.2% of Private Ext. Debt Non Affiliation 58#60Section 4 Fiscal Performance and Flexibility: The Design of Economic Recovery Program BHINNEKA TUNGGAL IKA www#61Covid-19 Handling Focus In Indonesia Pushing the economic stability with Protecting people's health and saving lives, maintaining purchasing power, and business continuity BHINNIKA The policy measures for handling and recovering the economy are focused at improving the demand side, and many target vulnerable communities and MSMEs EXPORT-IMPORT SUPPORTS Tax Incentives Customs and excise incentives Simplification & reduction of ber of import & export restrictions Accelerating the export-import process for Reputable Traders Improvement & acceleration of export-import services and supervision through the National Logistic Ecosystem (NLE) Maintaining the household consumptions Source: Ministry of Finance Preventing Bankruptcy Maintaining health/ public safety MAINTAIN THE CONSUMPTIONS Additional Groceries (basic food) Additional pre-work cards Electricity tariffs exemption Additional Family Hope Program (PKH) beneficiaries MAINTAIN THE PROUDCTIVITY Tax Incentives Customs and excise incentives Providing leniency requirements of credit/ financing/funding for MSMEs Providing payment relief for MSMEs Decreasing in benchmark interest rates Decreasing in Reserve Requirement 60#62The Government of Indonesia's Relief Program Budget To deal with health, social protection, and support of MSMEs, the business world, and local governments NATIONAL ECONOMIC RECOVERY PROGRAMS (PEN) Social Protection Business Incentives Corporate Financing Sectoral & Regional Gov't SMEs Health BHINNIKA IDR203.90T IDR120.61 T IDR53.57 T IDR106.11 T IDR123.46 T IDR87.55 T COVID-19 Handling Costs • Conditional Cash Transfer Program IDR37.40T; • Basic Foods IDR43.60T; • Social Assistance - Jabodetabek IDR6.80T; • Social Assistance Non Jabodetabek IDR32.40T; • Pre-Working IDR20.00T; • Electricity Discount • IDR6.90T; Logistical/Foods / Basic Foods UDR25.00T; Village Fund - Cash Transfer IDR31.80T • Government-Borne Income Tax IDR39.66T; • Income Tax Exemption on Import IDR14.75T; • Tax Deduction IDR14.40T; • VAT Return IDR5.80T; • Corporate IT Rate Reduction IDR20.00T; & • Other Stimulus IDR26.00T Labor Intensive- Fund Placement IDR3.42T; State Equity Participation (PMN) IDR20.50T; Working Capital Investment IDR29.65T •Line Ministries labor Intensive Program IDR18.44T; Housing Incentives IDR1.30T; ⚫Tourism IDR3.80T; • Regional Incentive Fund (DID) IDR5.00T; Physical Special Allocation Fund Reserve IDR8.70; Regional Loan Facility IDR1.00T; & • Diversification Reserve IDR58.87T Interests Subsidy IDR35.28T; •Fund Placement IDR78.78T; • Guarantee Return IDR5.00T; Working Capital Guarantee (Stop Loss) IDR1.0OT; • Government-Borne Final Income Tax IDR2.40T; & • Investment Financing to Cooperatives IDR1.00T • Expenditure for Covid-19 Handling IDR65.80T; • Incentives for Paramedic IDR5.90T; ⚫ Death Compensation IDRO.30T; National Health Insurance Fee IDR3.00T; • Covid-19 Task Force IDR3.50T; & • Tax Incentives in Health IDR9.05T IDR695.2 T Source: Ministry of Finance 61#63National Economic Recovery Program (PEN) Comprehensive coverage to mitigate the impact of COVID-19 on the economy BHINNIKA Demand Side IDR205.20 T Households Conditional Cash Transfer Program, Basic Foods, Social Assistance - Jabodetabek, Social Assistance Non-Jabodetabek, Pre-Working, Electricity Discount, Logistic/Foods/Basic Foods, Village Fund - Cash Transfer, Housing Incentives - Low Income Households PEN Funding IDR 607.65 T IDR205.2T MSMES Supply Side IDR402.45 T Interest subsidy, Fund Placement for SMEs, Fee for Guarantee Services (IJP) expenditure, Tax incentive, Working Capital Guarantee (Stop Loss), Investment Financing to Cooperatives through Cooperatives and SMEs Revolving Fund CORPORATION IDR123.46T Source: Ministry of Finance Fund Placement for labor intensive restructuring, State Equity Participation (PMA) and Debt Securities to State- Owned Asset Management Company, Tax Incentives, Labor Intensive program, Physical-Specific Allocation Fund reserve, Tourism Incentives IDR169.97T SOES State Equity Participation (PMA) and Working Capital Investment IDR12.0T Regional Government Regional Incentive Funds For Economic Recovery, Loan to Regional Government IDR15.00T Diversification Reserve IDR58.87T 62#64Perppu 1/2020 (Converted To Law 2/2020) as A Legal Basis for Government In Taking Quick and Extraordinary Steps in Overcoming the Impact of the Covid-19 Pandemic and National Economic Recovery BHINNEKA PERPPU 1/2020 (31st March 2020) Extraordinary Government Policy UU 2/2020 (18th May 2020) Legal Basis Perppu 1/2020 concerning State Financial Policy and Financial System Stability for Handling Covid-19 Pandemic and / or in the framework of Facing Threats that Harm National Economy and or Financial System Stability stipulated into Law 2/2020 State Deficit Budget 1.76% PDB 2020 Perpres 54/2020 Perpres 72/2020 Deficit 5.07% GDP Deficit 6.34% GDP The budget has been revised twice to the latest of Presidential Decree 72/2020, which has incorporated the national economic recovery initiation Undertaking Strategic Policies Refocusing and reallocation policies by suspending non- priority activities, such as official travel and other activities that cannot be carried out in the Covid-19 period. Providing stimulus, both in the form of additional spending, tax incentives, and government investment for handling Covid-19 and the National Economic Recovery Source: Ministry of Finance 63#65PROGRESS OF THE COVID-19 AND THE PEN PROGRAM The PEN Realization Already Shows The Acceleration BHINNIKA Budget IDR695.2 T ■ ■ DIPA (formally allocated) IDR410.78 T Without DIPA IDR159.7T (Tax Incentives & Placement of Fund) On the process of DIPA IDR124.69 T Realization: IDR265.76 T (38.2% of ceiling) PEN program budget disbursement: Health Budget Execution 30,9 (in IDR Trillion) 265.8 211.6 147.7 124.6 A 54.17 T A 63.93 T MoM A 23.05 T MOM MOM Increase Increase ID R20.32 T Increase Social protection IDR 135.23 T Smt. 1 July August 2-Sep Sectoral K/L & Local Govt Business Incentive IDR22.81 T IDR27.61T MSME Corporate financing: IDR59.81 T Provision of this program is based on the necessary circumstances Strategies to improve budget execution ■Extension of various programs until December 2020; ▪Speed up the process of proposing new program's cluster; ▪Redesign the programs to make them more effective; ■Streamline bureaucratic processes of the programs. As of September 21st 23#66STRATEGY TO SPUR RECOVERY THROUGH FISCAL POLICIES Q3 2020 is the key to avoid a recession; optimizing the role of government is important to stimulate the economy 2 • 1 PEN PROGRAM EXECUTION & ACCELERATION The existing program that already has State Budget Allocation (DIPA) needs to be accelerated and the accuracy of targeting continues to be improved at the next stage of distribution The new program that data and delivery mechanism are available will be executed. • New proposed programs that are not supported by valid data, and require complex regulatory changes, should be diverted to existing implemented programs STRENGTHENING GOVERNMENT CONSUMPTION (G) Personnel spending as an instrument to encourage growth: Accelerated disbursement of salaries 13 Acceleration spending to support new work patterns (WFH, WFS) Reallocation to support the digitalization of the bureaucracy; Shifting capex that is difficult to execute to a faster disbursement (aim to support the infrastructure for digitalizing public services). Relaxation of goods and services procurement policies 3 STRENGTHENING THE CONSUMPTION (C) • STRATEGY Accelerate social • BHINNIKA assistance spending Modification of social protection spending THROUGH several options: increasing the amount and frequency, and extending period. This can be done through the addition of a social protection program index that is relatively implementable (PKH, Basic Food Aid, Cash Transfer etc.) 65#67NEW PROPOSAL FOR THE USE OF COVID-19 HANDLING COSTS As the efforts to boost economic growth in the second semester BHINNISM NEEDA JOB! Health Social Securities 1. and Non-Medical Incentives for Medical 1. The utilization of food reserve/logistic fund 2. Personnel: • Incentives extension up to Dec 3. 2020 • Reward for Incentives for Medical and Non- Medical 2. Support for Hospitals by accelerating the procurement process for medical stuff and costs Social Security programs for middle income class Extension period of Electricity bill Discount 4. Additional Electricity bill Discount New proposals that have been budgeted: 1. Islamic Boarding School/Pesantren assistance for implementation of health protocols and online learning Rice aid for Family Hope Program beneficiaries claim for hospitalization 2. 3. New Normal Socialization 3. 4. Covid-19 Vaccine Cash transfer IDR500K for 9Mio Basic Food Supplies beneficiaries and non PKH Sectoral & Regional Gov't 1. Support for MSMEs (IDR2.4Mio per recipient) 2. Support for worker affected by Covid-19 (IDR600K/month for 4 months for those who registered in BP Jamsostek with salaries below IDR5Mio) 3. Buying Local Product Program for supporting the MSMEs and cashback program for MSMEs' consumers Note: The new proposal programs are funded by expansion reserves and unused government borne taxes Business Incentives 1. Exemption from applying the minimum account provisions for customers with electricity consumption below the minimum account 2. Exemption from social, business and industrial customer expense / subscription fees 66#682020 BUDGET REALIZATION AS OF AUGUST 2020 BHINNIKA 2019 2020 Budget Realization of August 31 Realization of % of Budget Growth (%) Budget % of Budget Growth (%) August 31 Revenue Domestic Revenue 2165.1 1190.2 55.0 3.2 1699.9 1034.1 60.8 (13.1) 2164.7 1189.7 55.0 3.6 1698.6 1030.2 60.6 (13.4) Taxation Revenue 1786.4 921.5 51.6 1.5 1404.5 798.1 56.8 (13.4) Tax Revenue 1577.6 802.5 50.9 0.4 1198.8 676.9 56.5 (15.6) Custom and Excise 208.8 119.0 57.0 10.1 205.7 121.2 58.9 1.8 Non Tax Revenue 378.3 268.2 70.9 11.6 294.1 232.1 78.9 (13.5) Grant 0.4 0.5 121.4 (89.5) 1.3 4.0 305.5 651.6 Expenditure 2461.1 1388.1 56.4 6.5 2739.2 1534.7 56.0 10.6 Central Government Expenditure 1634.3 857.5 52.5 6.9 1975.2 977.3 49.5 14.0 Ministerial Expenditure 855.4 481.6 56.3 9.0 836.4 517.2 61.8 7.4 Non Ministerial Expenditure 778.9 375.9 48.3 4.3 1138.9 460.1 40.4 22.4 Regional Transfer and Village Fund 826.8 530.6 64.2 5.8 763.9 557.4 73.0 5.0 Regional Transfer 756.8 488.4 64.5 5.0 692.7 504.7 72.9 3.3 Village Fund 70.0 42.2 60.3 16.4 71.2 52.7 74.0 41.2 Primary Balance (20.1) (25.5) 126,7 (317.1) (700.4) (304.0) 43.4 Surplus/(Deficit) to GDP Financing (296,0) (197.9) 66.9 31.5 (1039.2) (500.5) 48.2 152.9 (1.84) (1.25) (6.34) (3.05) 296,0 280.6 94.8 4.9 1039.2 667.8 64.3 138.0 67 67#69FISCAL POLICY DIRECTION IN 2021 Responding changes in economy, challenges, and support development targets ACCELERATING ECONOMIC RECOVERY AND STRENGTHENING REFORM Expansive Consolidative EFFECTIVENESS OF ACCELERATION EXIT STRATEGY MIDDLE CONTROLLING COVID-19 ECONOMIC RESTORATION (PEN) INCOME TRAP ANTICIPATING UNCERTAINTY BHINNIKA FISCAL FLEXIBILITY (PRUDENT & SUSTAINABLE) 68#70Macroeconomic Assumption and State Budget for 2021 Expansive-consolidative fiscal policy for the acceleration of Economic Recovery and strengthening the reforms DEVELOPMENT TARGET MACRO ASSUMPTION } Poverty level 9.2-9.7% STATE BUDGET 2021 In IDR trillion Growth: 5.0% Grant 0,9 Non tax Revenue 298.2 Inflation: REVENUE 3.0% Tax Revenue 1,743.6 Exchange rates: IDR14.600/USD 1,444.5 Unemployment Rate 7.7-9.1% % 10-year Gov't Bond: 7.29% GINI Ratio 0.377-0.379 Rp ICP (Oil Price): US$45 per barel Oil Lifting: DEFICIT FINANCING 705 thousand barrel/day (1,006.4) HDI 72.78-72.95 Gas Lifting: 1,006.4 (5.70% PDB) 1,007 thousand barrel (equal oil per day) EXPENDITURE 2,750.0 BHINNEKA Central Government Spending 1,954.5 Regional Transfer and Village Fund 795.5 69#71ALLOCATIONS FOR CONTROLLING COVID-19 AND 2021 PEN Gaining the momentum for economic recovery *) IDR356.5T IDR372.3T IDR25.40T HEALTH 1. the COVID-19 vaccine 2. Immunization, Lab, R & D 3. Reserve BPJS Contribution Assistance for PBPU / BP IDR14.90T IDR48.80T IDR110.20T BHINNEKA MSME 1. Regular KUR interest subsidy 2. Financing Support to MSME 3. Placement of funds in banking 4. Loss Limit Guarantee 5. PEN Financing Reserve SOCIAL PROTECTION 1. PKH 10 million KPM 2. SEMBAKO Card 18.8 million KPM 3. Pre Work 4. Village Fund (BLT Desa and supporting BUMDes) 5. Cash Social Assistance 10 million KPM @ IDR 200 thousand for 6 months IDR20.40T IDR136.70T CORPORATE FINANCE 1. PMN to Guarantee Institution (LPEI) 2. PMN to SOES carrying out assignments (HK, ITDC, Pelindo III, KIW) 3. Guarantee of backstop loss limit BUSINESS INCENTIVE 1. Tax borne by the government 2. 22 Import Income Tax Exemption 3. Preliminary VAT refund SECTORAL AND LOCAL GOV'T 1. Tourism Support 2. Food security 3. ICT development 4. Loans to the regions 5. Industrial Area 6. PEN Expenditure Proposal 7. Labor intensive program *) Temporary agreement on PEN budget allocation with additional PEN expenditure reserves of Rp15.8T 70#72STRATEGIC POLICY IN 2021 Supporting the accelerated recovery and the economic transformation 1 2 [+ 3 4 BHINNIKA EDUCATION (IDR550.0T) Strengthening the quality of education through increasing PISA scores and strengthening Early Childhood Education (PAUD) administration and increasing teacher competences HEALTH (IDR169.7T) Accelerating health recovery due to Covid-19, implementing National Health Insurance (JKN) reforms and preparing Health Security Preparedness SOCIAL PROTECTION (IDR421.7T) INFRASTRUCTURE (IDR413.8T) Supporting social protection reform comprehensive social protection system based on the life cycle and anticipating the aging population Provision of infrastructure for basic services, improving connectivity, and supporting economic recovery, and continuing pending priority programs 5 6 7 888 FOOD SECURITIES (IDR104.2T) Increase food production and support economic recovery through revitalizing the national food system and developing Food Estate TOURISM (IDR15.7T) Encouraging the recovery of the tourism sector with a focus on 5 areas and developing a PPP scheme ICT (IDR29.6T) Optimizing the use of ICT to support and improve the quality of public services (efficiency, convenience and acceleration) 71#73SUMMARY STATE BUDGET 2021 Accelerating Economic Recovery and Strengthening Reforms BHINNIKA 1. The global and domestic economy in 2021 will still be in uncertainty. Pandemic handling efforts and the availability of vaccines will determine the acceleration of economic recovery 2. The 2021 State Budget deficit of 5.70 percent of GDP is aimed at maintaining the momentum of economic growth, as well as avoiding opportunity losses in encouraging the achievement of national development targets 3. The 2021 State Budget will continue the expansionary-consolidative countercyclical policy by taking into account flexibility in responding to economic conditions and encouraging prudent and sustainable fiscal management 4. National development priorities will focus on Health, Education, Information and Communication Technology, Food Security, Social Protection, Infrastructure, and Tourism. 72#74State Budget Posture Amendment 2020 As a response to development needs for handling of pandemic COVID-19 2020 Law (UU) No.20/2019 • Deficit 1,76% BHINNIKA Presidential Regulation (Perpres) No.54/2020 • Deficit 5,07% Presidential Regulation (Perpres) No.72/2020 • Deficit 6,34% The Law on State Finance (Law No.17 of 2003) stipulates that the budget deficit is limited to a maximum of 3% of GDP and the amount of Government debt is a maximum of 60% of GDP. With extraordinary and very urgent conditions, the State Budget deficit policy exceeds the 3% limit, through the enactment of Perppu No.1 / 2020 (becoming Law No.2 / 2020). The magnitude of the 2023 state budget deficit will return a maximum of 3%. Responding to the development needs of the Covid-19 pandemic handling and to maintain the economy and financial system stability, including running the National Economic Recovery Program (PEN). Deficit 1,76% Deficit 6,34% Budget Deficit IDR 307,22 T IDR 1.039,22 T Source: Ministry of Finance Changes IDR 732,00 T▲ 73#75Financing Strategy 2020 Opportunistic, Measured, and Prudent Financing Strategies to support State Revenue and Expenditure Budget (APBN) 2020 in accelerating the handling of COVID-19 and protecting the economy from the threat of crisis Non-Debt Financing Sources Government Endowment Fund Post Fund sourced BLU Optimization of Debt and SAL Non-Debt Financing Budget Financing 2020 1 Sources Cash Loan Flexibility Upsize Program Loans from Development Partners, both bilateral and multilateral, ex. World Bank, ADB, AFD, KfW, JICA, EDCF, and AIIB Source: Ministry of Finance 2 3 Prioritize SBN publishing through market mechanisms BHINNIKA Flexibility of adding SBN Upsize the issuance of Domestic SBN and Foreign Denominated SBN (USD10-12 billion) with regard to financial market conditions Open opportunity for Private Placement requests from SOE/Institution ex. LPS, BPKH, and others 4 5 Bank Indonesia support as a last resort back stop financing source 74#76Government Securities For 2nd Semester according to Presidential Regulation 72/2020 Auction Foreign Denomina- ted GS Government Securities (GS) (gross) IDR 900.4 T Retail BHINNIKA The government can issue SBN for financing the PEN program purchased by Bank Indonesia in the primary market (Article 21 PP 23/2020). SKB between the Government & BI phase I has been agreed and carried out since the SBN auction April 21, 2020. As of June 2020, BI's total purchases of IDR 30.3 T *) *) exclude auction on June 30, 2020, which was part of the receipt of 2020 2nd Semester financing Phase II SKB has been signed, will be implemented in stages according to the real needs of financing Private Placement GS for BI Special Scheme With the purchase of SBN to BI through a private placement of IDR 397.56 T, the supply of SBN to the market in the Second Semester of around IDR 453 T is still quite reasonable: Plans for project foreign activities / 2020 in the amount of IDR29,5 T . • Project loan plans for 2nd semester IDR24,2 T Planned withdrawal of 2020 program loans totaling USD 7.3 billion. • Withdrawal of 2nd Semester program loans in the amount of eqv. USD5.5 billion. Source: Ministry of Finance 75#77Burden Sharing Scheme Between Ministry of Finance and Bank Indonesia Based on Usage Group: Public Goods vs Non-Public Goods Public Goods IDR 397.56 T וון IMPACT LOADS COVID-19 IDR903,46 T Health IDR 87.55 T Social Protection IDR 203.90 T Sectoral K/L, Local Govt IDR 106.11 T Burden Sharing Scheme 1. Public Goods Covered by Bl with rate based on Bl Reverse repo 3M BHINNEKA Issuance specifically to BI through private placement Non-Public Goods IDR 505.90 T Micro small and Medium Enterprises (MSME) IDR 123.46 T Corporation Non-MSME IDR 53.57 T Others IDR 328.87 T The Covid-19 impact burden consists of expenses for Public Goods and Non-Public Goods with different Burden Sharing Schemes for each usage group. 2. Non-Public Goods: • MSME Corporation N on-MSME 3. Non-Public Goods: Others Covered by Government with rate BI Reverse repo 3M minus 1%, and BI covered the remaining difference with market rate Full Covered by Government amounting market rate Issuance through market mechanism (auction, Green Shoe Option, Private Placement according to the SKB on April 16, 2020) 76#78Government Securities Financing Realization (as of July 31, 2020) 69.65% SUKUK 59.82% Issuance 2020 BHINNEKA 69,00% GS Matured 2020 57,02% GS Nett Government Securities (GS) Government Debt Securities (GDS) IDR Denominated GDS - Coupon GDS - Conventional T-Bills Private Placement Retail Bonds Foreign Denominated Bonds - SEC USD-EUR REG SHELF TAKE-DOWN* - Samurai Bond' -SEC USD REG SHELF TAKE-DOWN** - USD Onshore Bonds Special Instrumen (Trillion IDR) Realization (ao. Aug 31, 2020) 916.40 665.09 442.52 317.54 36.96 67.42 20.59 123.49 42.52 13.43 67.54 0.00 99.08 56,79% Sovereign Sharia Securities (Sukuk) 251.32 Domestic Sovereign Sharia Securitoes 215.65 GDS - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk - Retail Sukuk 142.22 12.14 - Private Placement Global Sukuk*** 61.30 35.66 * ** Dual-currency bonds issuance using SEC format amounted USD2 bn and EUR1 bn, settlement on January 14, 2020 (BI mid day exchange rate; 1 USD = 13,654 IDR & 1 EUR = 15,207.83 IDR) Global bonds issuance using SEC format amounted USD4.3 bn, settlement on April 15, 2020 (BI mid day exchange rate on April 15, 2020; 1 USD = 15,707 IDR) *** Global Sukuk issuance amounted USD2.5 bn on June 16, 2020, settlement on June 23, 2020 (BI mid day exchange rate on June 16, 2020; 1 USD = 14,265 IDR) **** Samurai bonds issuance using public offering amounted JPY100bn, settlement on July 8, 2020 (BI mid day exchange rate on July 2, 2020 : 1 JPY = 134.34 IDR) Source: Ministry of Finance 77#79GS Primary Market Performance 2019-2020 Through Auction [IDR Trillion] 400 350 300 250 200 100 150 2,11 3,112,80 2,12 215 Average Incoming Bid 2019 = IDR35.48T/ auction Average Awarded Bid 2019 = IDR14.14T /auction 5,14 i Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) 7,00 6,50 BHINNEKA 6,00 50 Jan-19 3,17 2,97 3,01 2,59 2,34 2,44 1,97 Feb-19 Mar-19 Apr-19 May-19 2,36 1,98 5,00 4,24 3,91 4,00 3,35 3,00 Jun-19 Jul-19 Source: Ministry of Finance Average incoming bid in 2020 = IDR57.42 tn/auction while average awarded bid in 2020 = IDR 14.86 tn/auction Aug-19 2,00 Sep-19 Oct-19 Nov-19 Jan-20 Feb-20 1,00 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 78#80Republic of Indonesia - USD3.1bn Equiv. Dual-Currency Offering BHINNIKA On January 7, 2020, the Republic of Indonesia priced a transaction comprising EUR1 bn and USD2 bn in senior unsecured notes. Issuer Issuer Rating Exp. Issue Rating Issue Aggregate Size Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Stable) BBB Fitch (Stable) Baa2 (Moody's) / BBB (S&P) / BBB (Fitch) U.S. SEC-registered shelf takedown Fixed rate senior unsecured notes USD3,100 mm equiv. EUR 7-year February 14, 2027 USD 10-year February 14, 2030 USD1,200 mm 2.850% p.a. (30/360) USD 30-year February 14, 2050 USD800 mm 3.500% p.a. (30/360) Transaction Highlights Leveraged a brief market window of stability to price inside fair value levels by 1 bp for the EUR tranche and at a de minimis concession inside 1 bp for the 10- and 30- year USD tranches Record-low yields, spreads, and coupons by EUR and USD financing by the Gol in each tenor High-quality and price-insensitive demand allowed compression of 27 bp for the EUR tranche and 25 bp and 20 bp for the 10- and 30-year USD tranches, respectively Harnessed a particularly strong bid for duration to price benchmarks which prompted a rally in the long-end of Indonesia's curve once the new bonds were freed to trade USD 30-year EUR 7-year USD 10-year Total Indications EUR3,300 mm Total Allocations EUR1,000 mm USD3,600 mm USD1,200 mm USD2,300 mm USD800 mm Number of Investors Oversubscription 171 142 124 3.3x 3.0x 2.8x Allocation by Geography 12% Old UST 30 (2.311%) 35% 42% 99.077% 3.550% p.a. Maturity Tranche Size Coupon Reoffer Price Reoffer Yield Benchmark (Yield) Spread to Benchmark Denominations Listing/Law Use of Proceeds EUR1,000 mm 0.900% p.a. (ACT/ACT) 99.638% 0.953% p.a. €MS (-0.077%) DBR 02/15/27 (-0.446%) €MS+103 bp DBR +239.9 bp EUR100K/EUR1k 99.737% 2.880% p.a. UST 10 (1.828%) + 105.2 bp USD200k/1k +123.9 bp USD200k/1k Singapore, Frankfurt Open Market listing / New York law For general purposes, including to partially fund general financing requirements Allocation by Type 70% 5% 3% 12% 18% 23% Asia Europe, Middle East and Africa 3% 1% 5% 11% 24% 36% U.S. 8% 1% 40% 31% 60% 59% 16% 64% 21% Source: Coordinating Ministry for Economic Affairs ■Asset Managers Banks Central Banks / Pension Funds / Sovereign Wealth Funds Insurance Private Bank and Other 79#81Republic of Indonesia - USD4.3bn Global Bonds Issuance 21% On April 7, 2020, the Republic of Indonesia priced a transaction comprising USD4.3bn in senior unsecured notes Investor Breakdown by Region Issuer Issuer Rating Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Stable) BBB Fitch (Stable) Investor Breakdown by Investor Type RI1030 9% 25% 18% 45% RI0470 26% 20% 44% Exp. Issue Rating RI1050 Format Baa2 Moody's/ BBB S&P / BBB Fitch U.S. SEC registered 2% Issue Senior unsecured fixed rate notes Pricing Date 52% Settlement Date Aggregate Size April 6, 2020 April 15, 2020 USD4,300 mm Maturity Long 10.5-year Oct 15, 2030 Tranche Size USD1,650 mm Long 30.5-year Oct 15, 2050 USD1,650 mm Long 50-year Apr 15, 2070 USD1,000 mm 4.200% 4.450% 99.150 99.009 4.250% 4.500% RI1030 4% 1% 10 2010 10% 1% 22% 20% 64% BHINNEKA RI1050 1% 2% 3% 1% 1% 11% RI0470 1% 1% 1% Coupon (p.a.) 3.850% Reoffer Price 99.573 38% Reoffer Yield (p.a.) 3.900% US ■ Europe ■Asia ex-Indonesia ■Indonesia Listing Law Singapore, Frankfurt Open Market New York ■Asset Managers ■Insurance/Pension Fund ■Central Bank/Sovereign Wealth Fund ■ Banks Use of Proceeds For general purposes of the Republic of Indonesia, including financing COVID-19 relief and recovery ■ Private Banks ■ Others 85% 71% Transaction Highlights ☐ Net proceeds will be used for general purposes of the Republic, including financing COVID-19 relief and recovery efforts for the Republic to contain the virus and mitigate its impact on Indonesia. ☐ The Republic's fiscal policy amidst volatile market conditions includes support for healthcare, the social safety net, and small and medium enterprises. ☐ The debut 50-year offering on strong demand in the long end of the curve. ☐ The transaction is the largest global offering by the Republic and demonstrates the Republic's ability to respond swiftly to markets and capture favorable issuance windows. Source: Ministry of Finance 80#82Republic of Indonesia - USD0.75bn Green Sukuk Global & USD1.75bn Sukuk Global Bonds Issuance Investors by Geography Issuer Issuer Rating 12% 11% 5-year 40% USD Format 8% 18% 32% 5% 34% 12% 10-year 33% 30-year 44% USD USD 31% Asia (ex-Indonesia) Indonesia ME/Islamic Europe US 10%5% Pricing Date Settlement Date Aggregate Size Investors by Type Maturity Green Investors Non-Green Investors 3% 1% 15% Tranche Size Coupon 34% 2% 5-year USD 54% 5-year USD Reoffer Spread 27% 3% 9% 66% Others Details 15% 38% 10-year USD 54% 30-year USD Listing 73% Asset Managers Central Banks / SWFs Private Banks / Others Source: Ministry of Finance Banks Insurance/Pension BHINNEKA Republic of Indonesia Baa2 Moody's (Stabil) BBB S&P (Negative) BBB Fitch (Stabil) 144A/Reg S, Senior, Unsecure, Wakala US$ Trust Certificate ("Sukuk") issued under a USD$2.5 billion Trust Certificated Issuance Programme 5Y Green Sukuk June 23, 2025 USDO,75bn 2.3% Fiixed UST +195.3bps June 16, 2020 June 23, 2020 USD2,5bn 10Y Sukuk USD June 23, 2030 USD1bn 2.8% Fixed UST +204.7bps 30Y Sukuk USD June 23, 2050 USDO,75bn 3.8% Fixed UST +227.7bps USD200k/ik denoms, English/Indonesia Law Singapore Stock Exchange and NASDAQ Dubai (dual listing) Transaction Highlights □ Second ROI transaction priced since COVID-19 pandemic The transaction is the lowest ever 5-year and 10-year yield achieved by the Government across both conventional and Sukuk issuances in the US$ market. The transaction is the first ever 30 year Sukuk issuance by the Government with the lowest coupon ever of Global Sukuk issuance in the world and the largest ever 30 year Sukuk from Asia. The transaction has oversubscription of 6.7 times. With the size of orderbook, Government can press the pricing down by 70 bps from the initial price guidance (IPG) and well below its indicative fair value. 81#83Republic of Indonesia - JPY100bn Samurai Bond Others 28% Cey Bank Others 43% Pension Fund Regional Bank 8% AM 23% Shinkin, etc 6% Others 35% Others 50% 0 LOY C Bank Issuer Bond Rating Format Pricing Date Republik of Indonesia Baa2 Moody's, BBB S&P, BBB Fitch Samurai Bond (Public Offering), Reg S only July 2, 2020 July 8, 2020 Settlement Date AM 37% Deal Size Shakin, etc 3Y FXD 5Y FXD JPY100bn 7Y FXD 10Y FXD 20Y FXD Maturity July 7, 2023 July 8, 2025 Tranche Size JPY 50.7bn JPY24.3bn JPY10.1bn July 8, 2027 July 8, 2030 JPY13.4bn July 6, 2040 JPY1.5bn Coupon 1.13% 1.35% 1.48% 1.59% 1.80% Reoffer Spread ΣΟΥ Lead Managers YSO+110bp YSO+130bp YSO+140bp YSO+145bp Daiwa/ MUMSS / Nomura / SMBC Nikko AM 66% Proper insura noe 100% O Source: Coordinating Ministry for Economic Affairs Transaction Highlights ☐ First Sovereign Samurai issuance in 2020 and the first issue from Asian after the pandemic declaration and part of the proceeds will be allocated to various projects in response to COVID- 19 ☐ Rol's achievements of successful pricing of benchmark sized transaction while significantly reducing average premium over its US dollar secondary curve across tenor, contributed to encourage the market and proved strong presence of Rol as a leading Samurai bond issuer. 82 BHINNIKA#84Disciplined and Sophisticated Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit BHINNEKA IDR Tn Government Debt/ GDP (%) 500 442 407 0,0% 362 5.000,0 29,40% 29,81% 30,18% 34,53% 849,5 358 400 35,00% 265 -0,5% 27,43% 28,33% 30,00% 24,74% 300 200 764,5 -1,0% 4.000,0 810,7 25,00% 100 19 14 746,2 -1,5% 3.000,0 734,8 755,1 677,6 4.745,5 2.000,0 4.014,8 3.612,7 3.248,6 20,00% (100) 15,00% (200) (300) (9) (7) (4) (20) (58) (69) (56) (66) -2,0% -1,8% -2,2% (227) -2,5% 10,00% 2.780,6 2.410,0 (400) -2,6% (298) -2,5% (308) -2,5% (341) (269) -3,0% 1.000,0 1.931,2 5,00% 2014 2015 2016 2017 2018 Bonds (Net) Loans (Net) 0,00% 2014 2015 2016 2017 2018 Bond Loan 2019*) Debt/GDP Ratio [RHS] August 2020**) Non Debt (Net) Budget Surplus/Deficit Fiscal Deficit (%GDP, RHS) Note: *) as of end of December 2019, **) Preliminary number using GDP assumption Weighted Average Debt Maturity of ~8.61 Years Well Diversified Across Different Currencies 9,6 9,39 9,4 9,13 9,2 9 8,8 8,68 8,6 8,4 % of Yearly Issuance 1% 100% 7% ATM 4% 64 1% 6% 4% di didi 1% 1% 1% 6% 5% 6% 4% 5% 5% 80% 31% 29% 30% 27% 26% 60% 8,61 8,52 8,37 8,2 8 40% 57% 59% 58% 62% 63% 20% 7,8 2015 2016 2017 2018 2019 Aug-20 0% 2016 2017 2018 2019 Aug-20 Source: Ministry of Finance IDR USD EUR JPY OTHER 83#85Well Balanced Maturity Profile with Strong Resilience Against External Shocks Declining Interest Rate Risks Declining Exchange Rate Risks BHINNIKA 25 25 50,00 44,55 20,65 42,57 41,26 19,22 19,74 41,03 20 18,3 37,86 37,07 17,52 40,00 16,13 13,72 15 30,00 12,14 10,57 10,57 9,75 10,2 10 20,00 12,23 12,06 12,13 12,23 12,8 11,43 5 10,00 0 0,00 2015 2016 2017 2018 2019 Aug-20 2015 2016 2017 2018 2019 Aug-20 VR Proportion Refixing Proportion FX to GDP Ratio ■FX Proportion Debt Maturity Profile Upcoming Maturities (Next 5 Years) IDR tn 600 45 500 40,4 41,03 40,91 ■IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 39,29 40 35,98 400 162 179 17888 186 34,67 35 300 131 30 13434 9197 25,01 25,5 24,34 24,26 200 51 100 95 48288242530258177758098763126 95 95 15635 75 98 99,2 25 22,69 21,4 བ。 19 2020 2021 2022 2023 2024 2025 2026 2027 2034 2035 2037 00 20366 20 33 87 2038 00 2039 2040 2041 2042 HYV 2043 CON 135 39 38 31 29 38 2044 NW 2045 2046 2047 NW 2048 N 2049-2070 15 9,92 10,63 9,38 8,35 8,07 10 6,46 5 Note: 1. *) as of end of December 2019, preliminary number and using GDP assumption Source: Ministry of Finance 2015 2016 2017 2018 1 Year 3 Year 5 Year 2019 Aug-20 84#86Holders of Tradable Central Government Securities More Balance Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities 100% Foreign Ownership of Gov't Domestic Debt Securities by Tenor 100% BHINNEKA 28,2% 80% 38,2% 37,5% 39,8% 37,7% 38,6% 36,0% 37,0% 34,8% 80% 38,6% 37,6% 44,7% 60% 37,8% 39,9% 36,8% 42,0% 40,3% 40% 60% 35,9% 34,1% 39,0% 37,4% 35,6% 36,8% 28,5% 39,8% 38,2% 37,5% 37,7% 38,6% 40% 28,2% 22,7% 20% 20% 35,9% 23,9% 22,5% 23,4% 20,3% 21,1% 17,8% 17,3% 22,0% 18,4% 11,8% 4,6% 5,3% 5,1% 1,3% 1,9% 6,7% 3,2% 3,5% 5,0% 4,3% 6,6% 2,4% 0% 0% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Aug-20 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Aug-20 10-1 >1-2 >2-5 >5-10 >10 ■Foreign Holders % Foreign Ownership of Total Domestic Non-Banks ■Domestic Banks Source: Ministry of Finance 85#87Ownership of IDR Tradable Central Government Securities (as of August 31, 2020) BHINNIKA Description Dec-16 Dec-17 Dec-18 Dec-19 6,74% Government Banks* Institution Govt Institutions (Bank Indonesia**) .35,90% BANK 57,36% NON-BANK Bank Indonesia (gross) GS used for Monetary Operation Non-Banks Mutual Funds 399.46 22.53% 491.61 23.41% 134.25 7.57% 141.83 6.75% 157.88 8.90% 179.84 8.56% 481.33 20.32% 253.47 10.70% 581.37 21.12% 262.49 9.54% (IDR tn) Aug-20 1,197.32 35.90% 224.91 6.74% 217.36 9.18% 273.21 9.93% 555.05 16.64% 85.66 4.83% Insurance Company and Pension Fund Foreign Holders Foreign Govt's & Central Banks MUTUAL FUND 4,50% INSURANCE & PENSION FUND 15,38% Individual Others FOREIGN 28,24% Total 23.63 1.33% 38.01 1.81% -36.11 -1.52% 10.72 0.39% 1,239.57 69.90% 1,466.33 69.83% 1,633.65 68.98% 1,908.88 69.34% 104 4.95% 118.63 5.01% 130.86 4.75% 150.03 4.50% 325.52 18.36% 348.86 16.61% 414.47 17.50% 471.67 17.13% 512.88 15.38% 665.81 37.55% 836.15 39.82% 893.25 37.71% 1,061.86 38.57% 941.94 28.24% 120.84 6.81% 146.88 6.99% 163.76 6.91% 194.45 7.06% 191.82 5.75% 57.75 3.26% 59.84 2.85% 73.07 3.09% 81.17 2.95% 115.44 3.46% 104.84 5.91% 117.48 5.60% 134.22 5.67% 163.32 5.93% 192.82 5.78% 1,773.28 100% 2,099.77 100% 2,368.45 100% 2,752.74 100% 3,335.34 100% 330.14 9.90% 1,913.11 57.36% 3,46% INDIVIDUAL OTHERS 5,78% IDR 1.092,02T on January 24, 2020, foreign holders reach a record high in nominal terms. 66,10% 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance Portion of foreign ownership in the mid & long term sector (≥ 5 years). 86#88Section 5 Commitment to Sustainability and Climate Change Mitigation BHINNEKA TUNGGAL IKA www#89Commitment to Sustainability and Climate Change Mitigation Republic of Indonesia's Commitment to Sustainability Including Climate Change Mitigation Background Forefront of Environmental Protection BHINNEKA Commitment to Sustainability Commitment to implement the United Nation's ("UN") Sustainable Development Goals ("SDG") in order to achieve the 2030 development agenda introduced by the UN. Through Presidential Regulation No. 59/2017 relating to the implementation of SDGs in Indonesia, the National Development Planning Agency was instructed to present a roadmap to implement the SDGs Indonesia's Environmental Law was enacted in 2009 based on the concept of sustainable development, prevention, precaution and a "polluter pays" principle. To better address environmental issues, the Ministry of Environment and the Ministry of Forestry were merged to become the Ministry of Environment and Forestry in October 2014 The President's Nawacita Programme The "Nine Agenda Priorities" of the President's priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs DECENT WORK AND ECONOME GROWTH 11 13 ACTION CLIMATE SUSTAINABLE ANDRE Indonesia's Environmental Commitment and Objectives DEVELOPMENT GOALS • • Mitigation Adopted the National Action Plan for Greenhouse Gas Emission Reduction in 2011. Focuses on reducing greenhouse gas emission through a National Determined Contribution with an unconditional reduction target of 29% by 2030 compared to the 2010 baseline. An additional 12% reduction is conditional on technology transfer, capacity building, results for payment and access to finance. Environmental Fund Management Agency (BPLDH): established in October 2019 with the vision to create a trusted institution to attract national and international donors as well as effectively mobilize public and private fund in order to support protection programmes. Adaptation the National Action Plan on Climate Change Adaptation: National framework for adaptation initiatives mainstreamed into National Development Plan. Medium Term Development Plan 2020-2024 (RPJMN): reflects Indonesia's strong commitment to shift to a low carbon development based approach to economic development and a more climate resilient path. Includes key priorities such as renewable energy and energy efficient development, forest conservation and reforestation, waste management, land intensification, food security as well as governance and institutionalization of investment and regulation. Biodiversity Indonesia is an archipelago made up of 17,504 islands with unique ecosystems containing a large number of diverse species. Indonesian Biodiversity Strategy and Action Plan 2015-2020: launched to provide an outline on how biodiversity could be utilized sustainably to improve economic and development opportunities. Source: Green Sukuk Report 2020, Bank Indonesia, Ministry of Finance 88#90Indonesia's Existing Green Bond and Sukuk Framework Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects BHINNIKA 1 2 3 Use of proceeds of Green Bond Project Evaluation and Selection Management of Proceeds and Green Sukuk Eligible Green Projects must fall into one of the nine eligible sectors Review and approval process by Ministry of Finance and National Development Planning Agency Management- Ministry of Finance The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance. Line Ministries The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects 4 Reporting Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report on the list of projects, amounts of proceeds allocated to such projects and estimation of beneficial impacts The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction Source: Indonesia's Green Bond & Green Sukuk Framework 89#91Indonesia's Existing Green Bond and Sukuk Framework (Cont'd) Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects Eligible Sectors Green Shading according to CICERO'S second-party opinion The Framework Excluded Use of Proceeds for Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) Dark Green Renewable Energy Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Medium to Dark Sustainable Transport Waste and Waste to Energy Management Green Tourism Sustainable Agriculture Light to Medium Energy efficiency Light Green 雨 Green Building Sustainable Management of Natural Resources New Fossil Fuel-Based Electric Power Large Scale Hydropower Plants > 30 MW Nuclear Assets BHINNEKA 90#92Indonesia's Green Initiatives: Financing Green Projects Development of Indonesia's Green Projects Financing The Republic of Indonesia has issued two sovereign global Green Sukuk, consecutively in February 2018 and 2019, with the total amount of USD 2 Billion 2019 Issuance USD 750 million (or IDR 11.25 trillion) 2018 Issuance USD 1.25 billion (or IDR 16.75 trillion) 29% allocated to Green investors* 29% allocated to Green investors* Each issuance comprised of: BHINNIKA Indonesia has continued to develop the Green market through the introduction of the first Retail Green Sukuk in the world (Savings Retail Sukuk, ST006) in November 2019. The ST006 is an investment instrument based on Sharia principles issued and sold to individual Indonesian citizens in the domestic market with an online platform. Allocation and impact of the Retail Green Sukuk is not included in the Green Sukuk Issuance Allocation and Impact Report issued in February 2020 Allocation by Sector 2018 Issuance 2019 Issuance 772.8062086 82% 51% refinancing existing projects and 49% financing new projects Allocation by Sector ll Renewable energy Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Energy efficiency B Waste and Waste to Energy Management Managed by 3 Ministries: 41.262.073 Sustainable Transport 89% Ministry of Transportation Ministry of Energy and Mineral Resources Ministry of Public Works and Housing 200,710,713 27% 380480724 48% 2096130 81217195 42775 1196 906 102519377 896 0250866 73107360 1796 5% 7% 2019 Issuance mitigation adaptation + Allocation by Activity 11% 83% 2018 Issuance mitigation adaptation Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC. Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project *These statistics are based on the HSBC's in house assessment of investor ESG/SRI appetite and sophistication, which is developed from Market Intelligence and our own understanding from client conversations. A green classification is assigned to investors taking into account whether they have Green/SRI fund and/or strategy, whether they are signatories of a variety of SRI initiatives and with awareness to their broader activities/public announcements in the SRI market. Classifications evolve over time 17% 91#93Indonesia's Green Initiatives: Projected Environmental Benefits Environmental Benefits Arising from Indonesia's Green Sukuk Issuance BHINNEKA AFFORDABLE AND CO2e emissions reduced, towards a low carbon future SUSTAINABLE DEVELOPMENT CLEAN ENERGY DECENT WORK AND ECONOMIC GROWTH 3,218,014.41 tonnes + Breakdown by Sector 1,319,620.41 355,394 1,319,620.41 1,543,000 GOALS 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 11 D 691.4 km of railway constructed, linking the nation 7,429 kWh of additional power generation capacity 2,056,200 of households benefitting from improved waste management Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) SUSTAINABLE CITIES AND COMMUNITIES 13 CLIMATE ACTION 92#94Tangible Results from Indonesia's Green Sukuk Initiatives Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance ने Renewable Energy Resilience to Climate Change Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Target Impact/ Emissions Reduction (2017) Across the country USD4.31 mil USD39.62 mil 134,872.41 tonnes of CO2e Across the country USD96.57 mil BHINNIKA Waste and Waste to Energy Management Across the country USD10.83 mil USD63.13 mil In order to achieve 48,000,000 tonnes target set in RAN-GRK Project Examples Financed/ Refinanced • Planning, Development and Supervision of New, Renewable Energy and Energy Conservation Infrastructure (Refinancing and Financing) Construction of new and renewable energy infrastructure, with a focus on areas outside current electricity coverage. The project aims to improve the electrification ratio in off- grid areas across the country. Power generation is sourced from solar, mini hydro, and micro hydro power plants*. Locations spread across 19 provinces in 2017 (Refinancing) and the 2019 development of such infrastructure are spread across all provinces (Financing) Construction of Flood Control Facilities (Financing) Construction of retention ponds/polders, flood canals, dikes, checkdam, and river maintenance and normalization. It aims to reduce the risk of flooding due to increased rainfall intensity and land use changes. Locations: West Java, Central Java, Yogyakarta, North Sumatera, West Sumatera, South Sulawesi, Maluku, Bali Improvement of Municipal Solid Waste Management System (Refinancing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal sites. Locations: All provinces except East Kalimantan • Improvement of Municipal Solid Waste Management System (Financing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal site. Locations spread across 11 provinces *Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the amount spent on each project 93#95Tangible Results from Indonesia's Green Sukuk Initiatives (Cont'd) Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance Proceeds from Indonesia's Green Sukuk Initiative has been Successfully Deployed to a Range of Eligible Green Projects Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Sustainable Transport Jakarta, Sumatera, Java USD288.77 mil USD77.95 mil Target Impact/ Emissions Reduction (2017) 1,543,000 tonnes of CO2e Energy Efficiency Across the country USD202.72 mil 355,394 tonnes of CO2e BHINNEKA Project Examples Financed/ Refinanced in 2019 • Development of Jabodetabek Urban Train (Refinancing) Construction of double-double track of the Jabodetabek urban railway network. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Construction and Management of Railways Infrastructure and Supporting Facilities in Sumatera (Refinancing and Financing) Construction of the Trans Sumatera Railway from Aceh to Lampung province. The Trans Sumatera Railway causes a mode shift from road transport to rail transport and logistics Locations: Aceh, North Sumatera, West Sumatera and South Sumatera Construction and Management of Double Track Railways Infrastructure and Supporting Facilities (Refinancing and Financing) The construction of the double track railway project in the Trans Java railway's northern section, upgrading the single-track railway. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Installation of Navigation Facilities (Refinancing) Construction, rehabilitation and replacement of marine navigation aids and the installation of solar cells to power marine navigation aids. The shift towards solar powered marine navigation aids reduces the use of fossil-fuel sources of power. Locations: spread across 21 provinces in 2017 Improvement of Land Transportation Traffic Management System (Refinancing) Installation of road traffic equipment such as traffic signs, area traffic control systems (ATCS) and navigation aids for river and take crossings (SBNP) with energy-saving sensors. Locations: Jakarta, West Java, Central Java, Yogyakarta, East Java Construction, Rehabilitation and Maintenance of Airport Infra-structures (Refinancing) The installation of solar-powered street lights and solar power plants. It improves the energy efficiency of airports and ensure electricity is sourced from renewable sources Locations: spread across 30 provinces in 2017 Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project 94#96Section 6 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA www#97Bank Indonesia's Policy Mix To Maintain Macroeconomic and Financial System Stability $ 102 1 Accommodative monetary policy consistent with controlled inflation in the target corridor, while serving as a pre-emptive measure to maintain domestic economic growth momentum Stabilize exchange rate consistent with fundamentals Optimize monetary operations in order to ensure market mechanisms and adequate liquidity in the money and foreign exchange markets Monetary Policy Controlling inflation: TPIP, TPID Structural reforms: Government Financial deepening & stability: KSSK (Financial System Stability Committee), OJK (Financial Services Authority) Coordinating efforts in reducing Current Account Deficit Source: Bank Indonesia Coordination with other Authorities 5 Macro- prudential Policy 4 Financial Market Deepening BHINNIKA Implementing Macro prudential Intermediation Ratio (RIM) Implementing Macro prudential Liquidity Buffer (MLB) 3 Payment System Policy Electronification: Social program, e- payment for Government Financial technology National Payment Gateway (NPG) QRIS (QR Indonesia Standard) Expanding National Clearing System (SKNBI) services Developing market instruments for financing infrastructure Developing financial market infrastructures Rupiah Interest Rate Swaps (IRS) and Overnight Index Swap (OIS) Domestic non-Deliverable Forward (DNDF) Developing the Commercial Papers (Surat Berharga Komersial) 96#98Bank Indonesia Policy Mix: September 2020 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA BHINNIKA The BI Board of Governors agreed on 16th and 17th September 2020 to hold the BI 7-Day Reverse Repo Rate at 4.00%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.25% and 4.75%. % Rp Holds BI7DRR at 4,00% Focusing on the quantity channel by providing liquidity to stimulate economic recovery from the COVID- 19, including BI supporting for the Government in accelerating state budget realization in 2020 Maintaining rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms Strengthening monetary operations strategy in order to accelerate monetary policy transmission and Extending the 50bps lower on rupiah reserve requirements, as an incentive for banks disbursing loans to small and medium enterprises (SMEs) and for export-import activity as well as to non-SMEs operating in priority sectors as stipulated in the national economic recovery program, from 31st Dec' 20 previously until 30th Jun'21; Accelerating development of money market instruments to support corporate and SME financing in line with the national economic recovery program; and Expanding QRIS acceptance in order to bolster the economic recovery and accelerate SME development by extending the 0% Merchant Discount Rate (MDR) for micro- businesses from 30th Sept 20 previously until 31st Dec'20. Source: Bank Indonesia 97#99Strengthened Monetary Expansion and Fiscal Synergy BHINNIKA PRINCIPLES OF FUNDING AND BURDEN SHARING PRUDENT Maintaining the credibility of Monetary Policy in the effort to Maintain Economic Stability MARKET MECHANISM TRADABLE & MARKETABLE MEASURED LAST RESORT SUN/SBSN tradable maintaining inflation in the target range Bl as the back-stop for Non-public Goods scheme One-off Policy in 2020 GOVERN Prioritize good governance SUSTAINABLE • Bank Indonesia continues to strengthen synergic monetary expansion through the acceleration of fiscal stimuli by the Government to drive the national economic recovery. Bank Indonesia continues its commitment to funding the 2020 state budget through SBN purchases in the primary market in accordance with Act No. 2 of 2020 through market mechanisms and private placements as part of the efforts to accelerate the national economic recovery program, while maintaining macroeconomic stability. As of 15th September 2020, Bank Indonesia had purchased Rp48.03 trillion of SBN in the primary market through mechanisms pursuant to the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 16th April 2020, through auction schemes, greenshoe options (GSO) and private placements. Funding realisation and burden sharing to fund Public Goods in the State Budget by Bank Indonesia through private placements based on the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020 currently stand at Rp99.08 trillion. Through Bank Indonesia's commitment to purchase SBN in the primary market, the Government can focus on accelerating state budget realisation in order to stimulate national economic recovery. In addition, Bank Indonesia has also realised burden sharing with the Government to fund Non-public Goods-SME totalling Rp44.38 trillion in accordance with the Joint Decree of the Minister of Finance and Governor of Bank Indonesia issued on 7th July 2020. 98#100Strengthening Bank Indonesia's Policy Mix to Mitigate COVID-19 BHINNEKA 1 3 Lower BI /-day Reverse Repo Rate (BI/DRR) Stabilization of Rupiah Money Market and forex Quantitative easing BGM 19-20 FEB, 2 MARCH, AND 18-19 MARCH 2020 1. lower BI7DRR by 25 bps in February to 4,75%, and other 25 bps in March to 4,50% 2. Lower a 50bps of daily rupiah reserve requirement (RR) for the banks engaged in export- import financing, and expanding rupiah RR cut for SME 3. Lower Foreign Exchange Reserve Requirement from 8% to 4% 4. Rupiah accounts (vostro) of foreign investors as underlying of DNDF 5. Domestic custodian bank for global investors 6. Triple intervention: spot, DNDF, & purchasing SBN in the secondary market Daily FX swap auction and Repo auction of SBN Relaxation of Macroprudential Policy 7. 6 Payment System BGM Board of Governors Meeting Source: Bank Indonesia 8. Liquidity injection through monetary operation 9. Relaxation of Macroprudential Intermediation Ratio 10. QRIS campaign to SME, traditional markets, students and worship places 11. Lower SKNBI cost BGM 13-14 APRIL AND 18-19 MAY 2020 1. Hold the BI 7-Day Reverse Repo Rate at 4.50% for external stability & stimulate growth 2. Strengthening the intensity of triple intervention policy 3. Providing liquidity for the banking industry on restructuring MSME loans and ultra-micro with formal loans 4. Lower the rupiah RR ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks 5. Strengthening Monetary operations and Islamic financial market deepening through FLisBI, PASBI and SiPA 6. Relaxing the additional demand deposit obligations on the MIR 7. Raised the MLB by 200bps for conventional commercial banks and by 50bps for Islamic banks 8. Increasing the non-cash payment instruments uptake 9. Strengthening policy mix and coordination with the Government & other authorities 10. Accelerating implementation of digital economy and finance BGM 17-18 JUNE 2020 AND 15-16 JULY 202 BGM 18-19 AUGUST 2020 1. Lower BI7DRR to 4,00%, 25 bps in June and 25 bps in July 1. Hold BI7DRR at 4,00% 2. Focusing on the quantity 2. Maintaining Rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms 3. Providing reserve requirement remuneration of 1.5% per year for banks meeting daily and average rupiah reserve requirements 4. Strengthening a synergized expansive monetary policy response with accelerated fiscal stimuli from the Government: ✓ firmly committed to funding the APBN 2020 through SBN purchases in the primary market to finance the budgets for healthcare, social protections, sectoral government ministries and agencies & local government 5. Burden sharing with the Government to accelerate MSME and corporate sector recoveries Expediting payment system digitalization to hasten the digital economy and finance implementation as part of the economic recovery efforts channel by providing liquidity to stimulate economic recovery from the COVID-19 pandemic, including BI supporting for the Government in accelerating state budget realization in 2020 3. Maintaining rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms 4. Strengthening monetary operations strategy in order to accelerate monetary policy transmission 5. Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles 6. Strengthening synergy with the banking industry, FinTech, Government and relevant authorities to accelerate digitalization, amongst others, by supporting SME digitalization and the Made in Indonesia National Movement (GERNAS BBI), while expanding community based QRIS acceptance and promoting the use of QRIS for e-commerce 99#101Bank Indonesia Policy Mix: May 2020 Mitigating the risk of COVID-19 transmission BBANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Mechanism for Bank Indonesia to purchase SBN in the primary market to finance the State Revenue and Expenditure Budget (APBN) - Above the Line BHINNISM In accordance with the joint decree issued by the Minister of Finance and Bank Indonesia Governor, SUN/SBSN purchases by Bank Indonesia in the primary market are based on general practices through transparent market mechanisms to maintain good governance. The mechanism for Bank Indonesia to purchase SUN/SBSN in the primary market is divided into three stages as follows: (i) Phase I: As a non-competitive bidder, Bank Indonesia can purchase SUN/SBSN in the primary market based on the following provisions: ■ Yield commensurate with the weighted average yield of the auction on the same day ■ Maximum SUN bid of up to 25% of the target auction maximum and maximum bid on SBSN > 1 year of up to 30% of the target auction maximum. (ii) Phase II: A greenshoe option based on the following provisions: ■ Yield commensurate with the weighted average yield of the auction on the previous day. ■ If the incoming bid is lower than the auction target, the maximum offer is the same as the previous offer. (iii) Phase III: Private placements based on the following provisions: Refer to the latest market price published by the Indonesia Bond Pricing Agency (IBPA). Private placements are implemented if the Government seeks additional financing based on the agreed terms and conditions. Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. SBN purchases by Bank Indonesia in the primary market as a follow-up action to Act No. 2 of 2020 currently stand at IDR23.98 trillion, with IDR166.21 trillion purchased in the secondary market for stabilisation purposes. Consequently, BI holdings of SBN were recorded at IDR443.48 trillion on 26th May 2020. 100#102Bank Indonesia Policy Mix: May 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA National Economic Recovery and state budget financing mechanism - Below the Line BHINNIS Bank Indonesia is providing liquidity to the banking industry through a repo mechanism for SBN in order to fund loan restructuring as part of the national economic recovery. If SBN purchases are insufficient, banks can apply to the government for fund placements, funded through SBN purchases by Bank Indonesia (below the line). In accordance with Government Regulation No. 23 of 2020, government fund placements will only occur at participating banks if SBN available for repo to Bank Indonesia are insufficient, provided the participating bank is healthy based on a soundness assessment conducted by OJK and is holding tradeable government securities (SBN), Bank Indonesia certificates of deposit (CD), Bank Indonesia Certificates (SBI), Bank Indonesia Sukuk (SukBI) and Islamic Bank Indonesia certificates (SBIS) that have not been repo totaling more than 6% of third party funds. Liquidity from Bank Indonesia to the banking industry for loan restructuring is provided through the following mechanisms: (i) Phase I: SBN Repo Total SBN held by the banking industry as of 14th May 2020 was recorded at IDR886.0 trillion. After meeting the Macroprudential Liquidity Buffer (MPLB) requirements for the banking industry, approximately IDR563.6 trillion must be repo to Bank Indonesia prior to applying for government fund placements. The current position of repo SBN to Bank Indonesia stands at IDR43.9 trillion. (ii) Phase II: Government fund placements in accordance with Government Regulation No. 23 of 2020 (iii) Phase III: Repo SBN - Macroprudential Liquidity Buffer (MPLB) Pursuant to Bank Indonesia regulations (Macroprudential Liquidity Buffer - MPLB), banks are required to maintain minimum SBN totaling 6% of deposits (IDR330 trillion) for liquidity management in addition to the 3.5% reserve requirements All SBN, totaling IDR300 trillion, can be repo through monetary operations in accordance with the Bank Indonesia Act before applying for short- term liquidity loan/financing facilities (PLJP/S).Bank Indonesia provide interest remuneration on the government account as a form of burden sharing to reduce the state budget burden. (iv) Phase IV: Short-term liquidity loan/financing facilities (PLJP/S) in accordance with Act No. 2 of 2020 Banks can apply for the short-term liquidity loan/financing facilities (PLJP/S) if the SBN already repoed are nearly depleted. Pursuant to Act No. 2 of 2020, short-term liquidity loan/financing facilities (PLJP/S) are only available to solvent and healthy banks based on OJK requirements and assessments, with adequate repayment capacity and guaranteed by current loans registered at Bank Indonesia. 101#103Bank Indonesia Policy Mix: April 2020 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA BHINNIKA The BI Board of Governors agreed on 13th and 14th April 2020 to hold the BI 7-Day Reverse Repo Rate at 4.50%, while also maintaining the Deposit Facility (DF) and Lending Facility (LF) rates at 3.75% and 5.25%. Rupiah Reserve Requirement Lowered by 200 bps 1) To stabilize and strengthen rupiah exchange rates, Bank Indonesia has strengthened the intensity of triple intervention policy through the spot and Domestic Non-Deliverable Forward (DNDF) markets, as well as purchasing SBN in the secondary market. 2) To support national economic recovery efforts from the deleterious COVID-19 impact, Bank Indonesia will increase monetary easing through quantitative easing as follows: a. Expand monetary operations by providing banks and the corporates a term-repo mechanism with SUN/SBSN underlying transactions of tenors up to one year. b. Lower the rupiah reserve requirement ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. c. Relax the additional demand deposit obligations to meet the Macroprudential Intermediation Ratio (MIR) for conventional commercial banks as well as Islamic banks/Islamic business units for a period of one year, effective from 1st May 2020. 3) To strengthen liquidity management in the banking industry and in relation to the lower rupiah requirements, Bank Indonesia has raised the Macroprudential Liquidity Buffer (MLB) by 200bps for conventional commercial banks and by 50bps for Islamic banks/Islamic business units, effective from 1st May 2020. The banking industry is required to meet the additional MLB through purchases of government issued SUN/SBSN in the primary market. 4) To increase the uptake of non-cash payment instruments in order to mitigate the COVID-19 impact, Bank Indonesia is increasing various payment system policy instruments as follows: a. Supporting government programs to accelerate non-cash social aid program (bansos) disbursements to members of the public in conjunction with payment system service providers by expediting the electronification of relevant social programs, including the Family Hope Program (PKH), Noncash Food Assistance Program (BPNT), Pre-Employment Card and Smart Indonesian Card (KIP). b. Increasing public socialization activities in collaboration with payment system service providers to increase the uptake of non-cash payment instruments through digital banking, electronic money and broader QRIS acceptance. c. Relaxing credit card policy by lowering the upper limit for credit card interest, minimum payment requirements and the penalties for late payments, while supporting credit card issuer policy to extend the due date for customers. 02#104Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA BHINNISM As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate the COVID-19 impact is as follows: 1) Lower the BI 7-Day (Reverse) Repo Rate in February and March by 25bps respectively; 2) Intensify triple intervention policy in the spot and DNDF markets and purchasing SBN in the secondary market; 3) Reduce the foreign currency reserve requirements for conventional commercial banks from 8% to 4%; 4) Extend the SBN repo tenor and provide daily auctions to loosen rupiah liquidity as well as increase the frequency of FX Swap auctions to daily in order to ensure adequate liquidity; 5) Expand the types of underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia; 6) Lower the rupiah reserve requirements by 50bps for banks that are engaged in export-import financing, as well as the financing of MSMEs and other priority sectors; 7) Loosen the Macroprudential Intermediation Ratio (MIR); 8) Provide hygienic currency fit for circulation, reduce the costs of the National Clearing System (SKNBI), maintain a QRIS Merchant Deposit Rate (MDR) of 0% for micro-merchants, and support non-cash disbursements of various government programs, including the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), as well as the Pre-Employment Card and College Smart Indonesia Card. Bank Indonesia reiterated that rupiah exchange rates are currently adequate and the outlook scenario formulated for the main macroeconomic indicators is a form of forward-looking anticipatory measure towards prevention through joint efforts, while Bank Indonesia continues to maintain rupiah stability. 103#105Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission BB BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA BHINNISM As a follow-up measure to strengthen monetary and financial market stability in conjunction with the Coordinating Ministry of Economic Affairs, Ministry of Finance, Indonesian Financial Services Authority (OJK) and Deposit Insurance Corporation (LPS), the Governor of Bank Indonesia, Perry Warjiyo, on April 1st 2020 delivered The policy mix implemented by Bank Indonesia to mitigate the COVID-19 impact is as follows: Bank Indonesia also backs promulgation of the Government Regulation in Lieu of Law in order to relax prevailing laws to mitigate the COVID-19 impact as an anticipatory measure in conjunction with the Government, OJK and LPS. COVID-19 handling requires extraordinary measures, unconventional policies and policies that exceed previous jurisdiction. To that end, Bank Indonesia has reiterated its authority in accordance with Government Regulation in Lieu of Law (Perppu) No. 1 of 2020 as follows: 1) Expansion of BI authority to purchase long-term government securities (SBN) and government Islamic securities (SBSN) in the primary market in order to assist the Government finance the handling of the COVID-19 impact on financial system stability. 2) SBN will be purchased in the primary market by Bank Indonesia as a last resort if the market is unable to fully absorb the SBN issued by the Government. Further provisions will be regulated in conjunction with the Minister of Finance and the Governor of Bank Indonesia based on the following considerations: financial market conditions and the impact on inflation. 3) As an anticipatory measure, Bank Indonesia will purchase repo securities held by the Deposit Insurance Corporation (LPS) in order to finance the handling of solvency issues at systemic and non-systemic banks; 4) Provision of short-term liquidity loan or short-term liquidity financing facilities in compliance with sharia principles to systemic and non-systemic banks; 5) Foreign exchange flow management for residents. The use of foreign exchange by residents, including provisions for the surrender, repatriation and conversion of foreign exchange to maintain macroeconomic and financial system stability as follows: 6) Bank Indonesia would like to stress that this measure is not a form of foreign exchange control but policy to manage foreign exchange applicable only to residents (excluding non-residents/foreign investors). Foreign portfolio investment and foreign direct investment (FDI) are still required for the Indonesian economy, thus existing policy permitting the free flow of foreign exchange by foreign investors remains effective. 7) Regulating foreign exchange amongst residents is consistent with international prudential principles for macroeconomic management, particularly under economic distress, such as the current COVID-19 pandemic. 104#106Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Bank Indonesia has agreed a repurchase agreement line (repo line) with the US Federal reserve worth USD60 billion BHINNIS The agreement may be used by Bank Indonesia to fulfil US dollar liquidity if required. The repo line facility for Foreign and International Monetary Authorities (FIMA) has only been extended to a few central banks, thus indicating confidence in Indonesia's economic outlook and the macroeconomic policies implemented. In addition, Bank Indonesia has also established repo line facilities with several other institutions, namely the Bank for International Settlements (BIS), worth USD2.5 billion, the Monetary Authority of Singapore (MAS), USD3 billion, as well as other central banks in the region valued at USD500 million-USD1 billion. The agreements will strengthen Bank Indonesia's second line of defence, encompassing Bilateral Currency Swap Arrangements (BCSA) with several other central banks, namely the People's Bank of China (PBOC), worth CNY200 billion (equivalent to USD30 billion), the Bank of Japan (BOJ), USD22.76 billion, Bank of Korea, KRW10.7 trillion (equivalent to IDR115 trillion), and the Monetary Authority of Singapore (MAS), USD10 billion. 105#107Bank Indonesia Policy Mix: April 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA Bank Indonesia Issued Implementing Provisions for Auction of Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the Primary Market BHINNISM Bank Indonesia issued Board Member of Governors Regulation No. 22/5/PADG/2020 on Auction of Government Debt Securities and/or Government Islamic Securities in the Primary Market to Maintain State Financial Management Sustainability as Implementation of Government Regulation in Lieu of Law Number 1 of 2020 on State Financial Policy and Stability of Financial Systems for the Management of Corona Virus Disease 2019 (Covid-19) and/or Encounter the Threat to National Economy and/or Stability of Financial Systems. The regulation starts to take effect on 20 April 2020. The regulation serves as a follow-up to Government Regulation in Lieu of Law Number 1 of 2020, granting authority to Bank Indonesia among others to purchase Government Debt Securities (SUN) and/or Government Islamic Securities (SBSN) in the primary market. It is necessary as a funding source for the government to recover the national economy including maintaining state financial management sustainability including SUN and/or SBSN issued in response to COVID-19 pandemic. Purchase of SUN and/or SBSN in the primary market is based on principle that Bank Indonesia is a last resort if the market capacity is unable to purchase them and/or result in high yield increase. Further, this regulation specifies the following: 1) Bank Indonesia holds auction of SUN and/or SBSN and auction of additional SUN and/or SBSN for long-term SUN and/or SBSN in the primary market as a follow-up to the implementation of Government Regulation in Lieu of Law Number 1 of 2020. 2) Provisions for offer quote and participants of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Finance Minister Regulation on auction of SUN and/or SBSN in the domestic primary market. 3) Bank Indonesia may quote an offer to purchase long-term SUN and/or SBSN in auction of SUN and/or SBSN and auction of additional SUN and/or SBSN in the following manners: a. directly without using the main dealer and/or SBSN main dealer; b. non-competitive bid. 4) Implementation of auction of SUN and/or SBSN and auction of additional SUN and/or SBSN refer to the applicable Bank Indonesia provisions for auction of Government securities in the primary market provided that they are not in contravention of this regulation. 106#108Bank Indonesia Policy Mix: March 2020 Mitigating the risk of COVID-19 transmission BHINNIKA B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA To strengthen coordination and the various policy measures already taken, Bank Indonesia on March 2nd 2020 introduced a variety of five follow-up policy measures to maintain monetary and financial market stability as well as mitigate the COVID-19 risks 1) Intensify triple intervention policy to ensure rupiah exchange rates move in line with the currency's fundamental value and market mechanisms. To that end, Bank Indonesia will optimize its intervention strategy in the DNDF market, spot market and SBN market in order to minimize the risk of increasing rupiah exchange rate volatility. 2) Lower the FX reserve requirements for commercial banks from 8% to 4%, effective 16th March 2020, which will increase FX liquidity in the banking industry by around USD3.2 billion and simultaneously alleviate foreign exchange market pressures. 3) Lower the rupiah reserve requirements by 50bps for banks financing export-import activity in coordination with the Government. Effective from 1st April 2020 for a period of nine months before a further review, this policy is expected to facilitate export-import activity through lower costs/fees. 4) Expand the range of underlying transactions available to foreign investors in order to provide alternative hedging instruments against rupiah holdings. 5) Reaffirm that global investors can utilize global and domestic custodian banks to conduct investment activity in Indonesia. 107#109Bank Indonesia Policy Mix: March 2020 Mitigating the risk of COVID-19 transmission B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA BHINNIKA Bank Indonesia on the Board of Governors Meeting 18th and 19th March 2020 has reinforced its policy mix towards mitigating the risk of COVID-19 transmission, while maintaining money market and financial system stability and catalyzing economic growth momentum through the following policy measures: 1) Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms, including the spot and DNDF markets as well as purchasing SBN in the secondary market. 2) Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry, effective from 20th March 2020. 3) Increasing the frequency of FX swap auctions for 1, 3, 6 and 12-month tenors from three times per week to daily auctions in order to ensure adequate liquidity, effective from 19th March 2020. 4) Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market, while encouraging the banks to utilize the foreign currency reserve requirements lowered by Bank Indonesia for domestic purposes. 5) Expediting the enforcement of domestic vostro rupiah accounts for foreign investors as underlying transactions for Domestic Non-Deliverable Forwards (DNDF), thus increasing hedging alternatives against rupiah holdings in Indonesia, which has been brought forward from 1st April 2020 to no later than 23rd March 2020. 6) Expanding the incentive of a 50bps daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors, effective from 1st April 2020. 7) Strengthening payment system policy to support COVID-19 mitigation efforts by: providing hygienic currency fit for circulation, alternative cash and backup services, and urging the public to prioritize non-cash payment transactions; encouraging the use of non-cash payment channels by reducing the cost of the National Clearing System (SKNBI) from the banking industry to Bank Indonesia from IDR600 to IDR1 and from customers to the banking industry from a maximum of IDR3,500 to IDR2,900, effective from 1st April 2020 until 31st December 2020; and supporting non-cash disbursements for government programs, such as the Family Hope Program (PKH) and Noncash Food Assistance Program (BPNT), Pre-Employment Card and College Smart Indonesia Card. 108#110Principles of Average Reserve Requirement Ratios Improvement BHINNIKA • • • Considerations for the Average Reserve Requirement Ratios Improvement Improvement in average reserve requirement is a follow up to the monetary policy operational framework reform implemented by Bank Indonesia since 2016. was Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP reserve requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. The current improvement aims to elevate flexibility in banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness of monetary policy transmission in maintaining economic stability. Substance a. Additional rupiah average reserve requirement for conventional commercial banks b. Annulment of demand deposit renumeration c. Implementation of foreign exchange average reserve requirement for conventional commercial banks d. Implementation of average reserve requirement for Islamic banks Old New Effective Date Fixed RR: 5% Fixed RR: 4.5% Average RR: 1.5% RR: 6.5% Average RR: 2% RR: 6.5% 16th July 2018 2.5% (from 1.5% RR) 0% Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% Average RR: 2% RR: 8%* Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% Average RR: 2% RR: 5%* 16th July 2018 1st October 2018 1st October 2018 * Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 109#111Relaxing Reserve Requirement Ratios BHINNEKA Lower reserve requirements, effective 1st May 2020 Regulation 1 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 2 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 3 4 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export- import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% Source: Bank Indonesia 110#112Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) Considerations for Macroprudential Instruments Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) BHINNIKA 1 2 3 4 Striving to stimulate the bank intermediation function and liquidity management, Bank Indonesia issued Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018 and Board of Governors Regulation (PADG) No. 20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also overcoming the issue of liquidity procyclicality. This macroprudential policy instrument is countercyclical and can be adjusted in line with prevailing economic and financial dynamics. Source: Bank Indonesia 111#113Principles of Macroprudential Intermediation Ratio (MIR)* BHINNE Regulation MIR (Conventional Commercial Bank) 1 MIR Accounting Formula Credit + Owned Bond Deposit + Issued Bond MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit + Issued Sharia Bond 2 Rate and Parameters . Ceiling 94% • Ceiling 94% • Floor 84% • Minimum Capital Adequacy Requirement 14% • For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank 3 Scope of credit/financing and deposits to calculate MIR / MIR Sharia 4 Source of Data 5 Criteria for securities held · Floor 84% . Minimum Capital Adequacy Requirement 14% • Upper disincentive parameter 0.2 Lower disincentive parameter 0.1 . Credit: rupiah and foreign currency • Deposits in rupiah and a foreign currency: (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds Monthly Commercial Bank Reports • Corporate bonds and/or corporate sukuk • Issued by a nonbank corporation and by a resident • Upper disincentive parameter 0.2 Lower disincentive parameter 0.1 • Financing: rupiah and foreign currency • Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds Monthly Sharia Bank Reports Corporate bonds and/or corporate sukuk • Offered to the public through a public offering • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 112#114Principles of Macroprudential Intermediation Ratio (MIR)* BHINNE Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) Percentage of the securities 100% held 7 Criteria for securities issued • medium-term notes (MTN), floating rate notes (FRN) • sharia-compliant medium-term notes (MTN) and/or and/or bonds other than subordinated bonds sukuk other than subordinated sukuk • Issued by a nonbank corporation and by a resident . Offered to the public through a public offering 8 Securities Reporting 0 10 10 • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution Scope of deposits to meet DD MIR/DD MIR Sharia . Relaxation of DD MIR/Sharia DD MIR Offline delivery mechanism (email) Average daily total deposits in rupiah at all branch • Average daily total deposits in rupiah at all branch offices in Indonesia offices and sharia business units in Indonesia • Including rupiah liabilities to a resident and non- • resident third-party nonbank, consisting of: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation • The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK) • Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 113#115Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* BHINNE Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backgrounds • • . In response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. BI relaxed MIR/sharia MIR policy in March 2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity. Considering the potential of bank funding sources that are not included in the MIR ratio, for example the expanding share of loans/financing received by banks, BI decides to adjust MIR/sharia MIR policy in order to optimize loans/financing received for bank lending. This policy to stimulate credit growth will comply with prudential principles. Therefore, BI is only encouraging banks with low non- performing loans and adequate capital resilience to expand credit/financing. Main Regulatory Points Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; C. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and Loans/financing received based on a loan agreement. e. Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: Credit + Owned Bond Deposit + Issued Bond + Loan/Financing Received Lower disincentive parameter Upper disincentive parameter MIR/sharia MIR RR= MIR/Sharia MIR Target - ) x Deposit MIR/sharia MIR RR= Lower Disincentives Parameter x (Lower Bound of MIR/Sharia MIR 0.2 x (Bank's MIR/sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 14% KPMM ≤ 19% KPMM 19% - Upper Bound of Lower Disincentives Parameter 0.00 *This disincentive applies for banks with CAR below 14%. 0.00 0.10 0.15 *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA). 114#116Principles of Macroprudential Liquidity Buffer (MLB) BHINNEKA 1 Rate Regulation 2 Components MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks) 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) • • Securities denominated in rupiah held by a conventional • Sharia-complaint securities denominated in rupiah commercial bank that may be used for monetary held by an Sharia bank that may be used for sharia- operations (including SBI/SDBI/SBN); and compliant monetary operations (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia- compliant monetary operations (including SBIS/SBSN) 3 Calculation Formula 4 Flexibility LO Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities held by commercial bank to rupiah deposits an Sharia bank to rupiah deposits Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits 5 Sources of Data Deposits on • Monthly Commercial Bank Reports Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Monthly Sharia Bank Reports • Rupiah deposits to calculate MLB are the average daily Rupiah deposits to calculate sharia MLB are the total deposits at all branches in Indonesia • Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities average daily total deposits at all branches in Indonesia • Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 115#117Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy Regulation 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020. Before After 6% of rupiah deposits 4% of rupiah deposits 2 Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits Credit card policy, effective 1st May 2020. Regulation 1 Lower upper limit on credit card interest BHINNIKA Before After Effective Period 2.25% per month 2% per month 1st May 2020 2 Temporary reduction of minimum payment requirements 10% 5% 3 Temporary reduction of late payment 3% or maximum of IDR150,000 1% or maximum of IDR100,000 penalties 4 Supporting credit card issuer policy to extend the due date for customers Issuer discretion 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 116#118Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* BHINNIKA The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection* 1. Increasing opportunities of first time buyers to fulfill their housing needs through housing loan, specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio for property financing as shown in the table below. 2. Relaxing the amount of loan/financing facility through indent mechanism to a maximum of 5 facilities without taking account of the orders 3. Adjusting the arrangement of stages and amount of property loan/financing disbursement of indent property: PROPERTY LOAN & PROPERTY FINANCING BASED ON MURABAHAH & ISTISHNA DEEDS PROPERTY FINANCING BASED ON MMQ & IMBT DEEDS Current Regulation Current Regulation Relaxation Current Regulation Stage and Disbursement Rate House/Office House/Shop Conditions Relaxation PROPERTY TYPE PROPERTY TYPE Property Loan & (m²) Financing Property Loan & Financing Property Financing Property Financing (m²) 1 Ill etc T Il etc 11 Il etc Max. Cumulative disbursement up to 40% of ceiling Max Cumulative disbursement up to 80% of ceiling Max Cumulative disbursement up to 90% of celling Max Cumulative disbursement up to 100% of ceiling etc HOUSE HOUSE Type >70m² 85% 80% 75% 80% Type 22-70m² 85% 60% 85% Type>70m² Type 22-70m² 90% 85% 80% 85% 90% 85% 90% Type <=21m² Type <=21m² APARTMENT APARTMENT Apartment Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 70% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max Cumulative disbursement up to 100% of ceiling Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Type >70m² 85% 80% 75% 80% Type >70m² 90% 85% 80% 85% Relaxation Type 22-70m² 90% 85% 80% 85% Type 22-70m² 90% 85% 80% 85% Type <=21m² 85% 80% 85% Type <=21m² 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% "-"The LTV rate depends on each bank's risk management Stage and Disbursement Rate House/Office House/Shop House Max Cumulative disbursement up to 30% of ceiling Max Cumulative disbursement up to 50% of ceiling Max Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of ceiling Roof toop finished Letter of acceptance accompanied with deeds of purchase and coverote Conditions After loan deeds Footing finished *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia 117#119Relaxing the Loan-to-Value (LTV) and Financing-to-Value (FTV) Ratios* 1. Prudential aspects of Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: İ. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. BHINNIKA 2. 3. 4. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. Banks are required to comply with prudential principles when disbursing loans. Gradual loan liquidation is only allowed for developers that comply with bank's risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debtor and developer/seller's bank account. Source: Bank Indonesia LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. 118#120Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* BHINNE Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. Policy Backgrounds In response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. low As a prudential mitigation, those relaxations will be given to borrower with strong repayment capacity and credit/financing risk. BI will regularly evaluate this policy at least once a year. Main Regulatory Points 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing. a. BI decides to relax the LTV ratio for property loans and FTV ratio for property financing by 5% from current ratio as follows: Landed House Type >70 Type >21-70 Type $21 Table 1. Current LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Financing based on Akad Murabahah & Akad 1 Istishna 80% 85% Apartment Type >70 80% Type 21-70 85% Type 521 85% Office House 85% Type >70 Property Financing based on akad MMQ & akad IMBT 1 Does Not Meet NPL/NPF Criteria Property Financing Property Financing based on akad MMQ & akad IMBT based on Akad Murabahah & Akad Istichna 22 1 2 33 1 2 23 65% 90% 80% 70% 80% 60% 70% 85% 75% 80% 65% 70% 85% BOX 70% 60% 85% 75% 65% 85% 9056 8096 70% 90% 8096 7076 85% 80% 7006 80% 70% 85% 80% 7016 80% 70% Table 2. Adjusted LTV/FTV Ratio Meets NPL/NPI Criteria Property Loan & Property Property Financing Does Not Meet NPL/NPF Criteria Property Financing Financing based on Akad based on akad Murabahah & Akad based on Akad Murabshah & Akad based on akad MMO MMQ & akad IMBT Istishna letichna 프고 22 1 85% 90% 1 Property Financing & akad IMBT 23 1 고 23 90% 85% 95% 75% 95% 65% 75% 90% 80% 70% 85% 75% Landed House Type >21-70 Type 21 Apartment Type 70 85% 90% 8.5% 7.5% 65% 90% 80% 70% Type >21-70 90% 90% 95% 85% 75% 95% 85% 75% Type s21 90% 90% 8596 75% 85% 75% Office House 90% 90% 85% 75% - 85% 75% . *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia 119#121Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* BHINNEKA Main Regulatory Points 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria refers to the standards/certificates issued by a nationally or environmental institution. internationally recognized b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. i. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows: ■ For buildings < 2500m², the bank may conduct a self- assessment using the tools/applications provided by a recognized institution. ■ For buildings > 2500m², the assessment must be conducted by a recognized institution; ■ For new buildings constructed in an area by one developer or group of developers, the assessment must be conducted by a recognized institution and the certificate must be submitted by the developer Additional incentive for green property on LTV ratio for property loans and FTV ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows: *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia Landed House Type 570 Type >21-70 Type ≤21 Apartment Type >70 Type >21-70 Type £21 Office House Table 3. LTV/FTV Ratio for Green Property Meets NPL/NPF Criteria Property Loan & Property Property Financing Financing based on Akad Murabahah & Akad Istishna Does Not Meet NPL/NPF Criteria Property Financing Property Financing based on akad MMQ & akad IMBT based on akad MMQ & akad IMBT based on Akad Murabahah & Akad Istishna 22 1 22 1 2 23 1 2 90% 95% 23 95% 90% 80% 70% 95% 85% 75% 90% 80% 90% 80% 90% 95% 90% 80% 70% 95% 85% 75% 95% 195% 90% 80% 90% 80% 95% 95% 90% 20% 90% 20% 95% 95% 90% 80% 90% 80% 3. Adjustment of Down Payments on Automotive Loans/Financing a. Down Payments on Automotive Loans/Financing is adjusted as follows: i. Relaxation on the down payments of automotive loans or automotive financing 5%-10% from current regulations; ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment of down payments of automotive loans/financing in points a and b is as follows: Table 4. Current Down Payment on Automotive Loan or Financing Cument Down Payment Table 5. Adjusted Down Payment on Automotive Loan or Financing Adjusted Down Payment Meets NP/PE Does Not Meet Criteria Does Not Meet NPL/NPF Mests NPU/NPF Criteria NPL/NPF Criteria Criteria 2-Wheeled 20% 2-Wheeled 15% 3-Wheeled or more (non productive] 25% 30% 3-Wheeled or more (non productivel 15% 25% 3-Wheeled or more productive) 20% 3-Wheeled or more (productive) 10% 15% 120 157#122Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* Main Regulatory Points 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. ii. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Table 6. Down Payment on Green Automotive Loan or Financing Down Payment on Green Automotive Loan or Financing Meets NPL/NPF Criteria 10% Does Not Meet NPL/NPF Criteria 15% 20% BHINNEKA 2-Wheeled 3-Wheeled or more (non productivel 3-Wheeled or more (productive] 10% 5% 10% Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2nd, 2019 *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia 121#123Adjustment of Minimum Down Payments on Green Automotive Loans/Financing (Effective 1st October 2020) BHINNIY Bank Indonesia adjusts macroprudential policy in automotive sectors by: (Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles. Main Regulatory Points 1. Adjustment of Minimum Down Payments on Green Automotive Loans/FinancingThe green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. Type of Green Motor Vehicle Current regulation New Regulation *) (PBI No. 21/13/PBI/2019) *) Two-wheel 10% 0% Three-wheel or more (non- 10% 0% commercial) Three-wheel or more 5% 0% (commercial) 1. Applicable to banks with a non-performing loans (NPL) ratio below 5% 2. Effective 1st October 2020 Requirements: 1. Gross NPL ratio on total credit <5%; and 2. Net NPL ratio on automotive loan <5% Source: Bank Indonesia 122#124Principles of Domestic Non Deliverable Forward (DNDF) Transaction BHINNIKA Purposes 1. To support the effort of stabilizing 2. 3. the Rupiah exchange rate through the additional of alternative hedging instruments To support the development and deepening of the domestic financial market To increase the confidence of exporters, importers, and investors in conducting economic and investment activities through the flexibility of hedging transactions against Rupiah currency risk General Provisions * Domestic Non-Deliverable Forward Transaction (DNDF Transaction) Plain vanilla derivative transaction of foreign exchange against rupiah in the form of forward transaction with fixing mechanism in the domestic market Forward Transactions Forward Transactions are sell/purchase foreign currencies against rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date Fixing Mechanism Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date) Other Definitions The definition of derivative transaction of foreign exchange against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah Source: Bank Indonesia 123#125Principles of Domestic Non Deliverable Forward (DNDF) Transaction BHINNEKA Bank can perform DNDF Transactions as follows: Transaction between: III 1. Must have Underlying Transactions: Including all following activities : a. b. C. Trade of goods and services Investments, loans, capital, and other investements. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Bank Customer Can only be performed to hedge rupiah exchange rate III Bank Foreign Party - Source: Bank Indonesia risk. ✓ Excluding following activities: a. b. C. d. ه نه ة ن ف ة e. f. g. Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies Intercompany loan Money changer activities. 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions III III Bank - Bank 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions 124#126Principles of Domestic Non Deliverable Forward (DNDF) Transaction Source: Bank Indonesia Transaction Settlement • Use Fixing mechanism Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR Settlement currency: IDR Roll over and early termination are not allowed Roll over and early termination for DNDF is prohibited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging Customer/ Foreign Party Overseas Bank Hedging Cover Hedging Bank Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. BHINNIKA 125#127Amendment on DNDF Regulation *to provide more flexibility in DNDF transaction *to increase liquidity and efficiency in domestic foreign exchange market BI Regulation No. 20/10/PBI/2018 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 Article 3 BHINNIKA 1. Sell FX/IDR through DNDF up to $5 mio can be done without underlying documents Article 6 2. DNDF can be terminated (unwind); Article 11 3. Underlying documents must be final (firm) with additional supporting documents 4. Not Regulated; Article 11 *Effective on May 17th, 2019; English version of the regulation is available in Bl website. 3. Underlying documents for buy FX/IDR for DNDF is : . Final (firm commitment) + Supporting documents 4. Underlying documents for sell FX/IDR for DNDF above threshold $5 mio can be: • Final (firm commitment) + Supporting documents Projection (anticipatory basis) + Supporting documents Article 11 5. In using estimate underlying transaction documents in the form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. Source: Bank Indonesia 126#128Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) As hedging instruments against Rupiah interest rate changes IRS market development OIS market development We're Here 3 BHINNIKA IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest Improvement of IRS transaction liquidity rate OIS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) Encourage price transparency in the rupiah money market Strengthen monetary policy transmission Provide alternative hedging instruments against rupiah interest rate changes Support securities market deepening in Indonesia 127#129OIS and IRS Transactions: General Provisions Market Players. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Market Conventions Transaction Needs Analysis. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is required to have an analysis on the need of rupiah interest rate derivative transactions. Calculation Base ACT/360 Interest Payment based on Netting BHINNEKA OIS Quotation rates based on 2 decimals Market Conventions. When performing IRS and OIS transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Settlement. Settlement can be performed as a netting payment and every transaction has to be settled in Rupiah. Close-out netting can be applied under predetermined conditions. IndONIA Index with 5 decimals Compound Floating Rates (CFR) based on 5 decimals Notional of Net interest payment in IDR with O decimals Settlement Date = 1 business days after Maturity Date (MD) Quotation : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, OIS settlement will only be done at the end of the OIS tenor (MD+1bd). Source: Bank Indonesia 128#130Stable Monetary Environment Despite Challenges Well Maintained Inflation Ensured Price Stability (%) 20 8,38 8,36 18 16 14 12 10 86420864202 -2 (%) 9,00 Strengthened Monetary Policy Framework 19 August 2016 8,00 CPI (%, yoy) rhs The New Core (%, yoy) - Ihs 8,00 Monetary Operation -Volatile Food (%, yoy) - Ihs2 7,00 7,00 LF Rate: 7.00 | Framework Administered (%, yoy) - Ihs 6,00 BI Rate: 6.50 3,61 6,00 5,00 3,35 3,02 3,13 4,00 2,72 5,00 3,00 1,32 2,00 4,00 1,00 0,00 3,00 2013 2014 2015 2016 2017 2018 Rupiah Exchange Rate Fared Relatively Well Compared to Peers YTD 2020 vs 2019 2019 August-2020 Jan-16 Mar-16 LF Rate Credit Growth Profile %,yoy BI Rate LF Rate: 4.75 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Sep-17 Nov-17 BI-7Day RR Rate Jan-18 Jan-18 Mar-18 May-18 Jul-18 Sep-18 Nov-18 Jan-19 DF Rate Mar-19 May-19 Jul-19 Sep-19 LF Rate (Dummy) Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 DF Rate: 3.25 BRL -23,6221,37 20 TRY ZAR -20,58 -14,84 -14,52. --13,38-· 18 IDR -6,42 THB INR KRW point-to-point MYR SGD average =2,97.. -4,34 -4,99 2,89 -2,91,68 -2,1102 -1,87 15 -1,43 13 10 8 5 CNY 3,00 m -1,24 JPY 3,26 1,23 PHP data as of September 16th, 2020 3,2463 30 EUR 5,54 ■ 0,23 -3 -30,0 -25,0 -20,0 -15,0 -10,0 -5,0 0,0 5,0 10,0 Source: Bank Indonesia Total Growth Working Capital Loans Investment Loans Consumption Loans 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 2015 2016 2017 2018 2019 2020 1129 5.9 1,5 1,4 -0,9 BI 7 Day RR Rate: 4.00 BHINNIKA#131Regional Inflation Remains Under Control ...supported by low inflation in all regions LOW INFLATION IN ALL REGIONS, AUGUST 2020 (%, YOY) NATIONAL INFLATION AUGUST 1.32% (yoy) Inf≥ 4% 3% ≤ Inf<4% 2% Inf<3% Inf<2% SUMATRA 0.29 Aceh 1.6 North Sumatra -0.4 Riau 0.8 West Sumatra -0.3 Lampung 1.6 Riau Islands -0.3 Bengkulu 0.7 Babel Islands -0.6 South Sumatra 0.8 Jambi 0.4 1.17 Gorontalo 0.4 North Sulawesi-0.4 Central Sulawesi 1.6 West Sulawesi 2.4 South Sulawesi 1.4 South-East Sulawesi 1.9 KALIMANTAN 1.11 West Kalimantan 18 South Kalimantan 1.2 East Kalimantan 0.6 Central Kalimantan 1.6 North Kalimantan 1.2 SULAWESI JAVA 1.64 Banten 1.5 DKI Jakarta 1.8 West Java 1.7 Central Java 1.3 East Java 1.4 DI Yogyakarta 1.6 BALI-NUSA TENGGARA 0.48 Bali 0.5 West Nusa Tenggara 0.3 East Nusa Tenggara 0.8 MALUKU-PAPUA 1.39 Maluku 1.6 North Maluku 0.5 Papua 1.7 West Papua 1.2 Source: Central Bureau of Statistics of Indonesia (BPS), calculated BHINNIKA 130#1324 Strategies to Achieve the Inflation Target 2018-2019 Target Achieving inflation at 3,5%±1% Maintaining core inflation Maintaining volatile food stability at 4-5% Controlling administered price inflation 2020-2021 Target Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining volatile food inflation less than 4% Controlling administered price inflation 4 Strategies BHINNIKA 1. Price Affordability 2. Supply Availability 3. Well Managed Distribution 4. Effective Communication Stabilizing the price Managing demand side Strengthening production, Government food reserves and food export- import management Strengthening institution Encouraging trade cooperation between regions Improving trade infrastructure Improving data quality Strengthening central-regional coordination Source: Bank Indonesia 131#133Improving the Effectiveness of Monetary Policy Transmission Source: Bank Indonesia Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars; (1) implementation of BI 7day Reverse Repo Rate; (2) implementation of reserve requirement averaging; and (3) continue to implement money market deepening program. Implementation of BI 7 Day Reverse Repo Rate BB Reformulation of Monetary Policy Operational Framework Implementation of Reserve Requirement (RR) Averaging Implementation of Money Market Deepening Program Enhancement of monetary policy signal Enhancement of banking liquidity management Enhancement of instruments and transactions BHINNEKA 132#134Enhancement of Monetary Operations Framework BHINNIKA 3 2 STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement. ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties 4 MOVING FROM AXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS Source: Bank Indonesia PREVIOUS JIBOR • • Can be traded among contributor banks for 10 minutes. • Up to the amount of IDR10 billion. • Up to 1-month tenor. CURRENT JIBOR (as per June 1st, 2016) • • Can be traded among contributor banks for 20 minutes. Up to a total of IDR20 billion. Up to 3-month tenor. 133#1350 IDR Tn ■IPO 180 160 140 120 100 80 60 40 20 Jan-18 distribution due to the covid-19 pandemic IDR Tn Bank Loans 6.000 5.000 4.000 3.000 2.000 1.000 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Rights Issue 2016 2017 2018 2019 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 -30 Source: Financial Service Authority (OJK) Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Corporate Bond & Sukuk Aug-19 Sep-19 Oct-19 Financial Intermediation Still Manages To Grow Banking intermediation manages to grow positively in July 2020, while multi-finance financing contracts as economy yet to fully recover... Banking loans in July-20 managed to grow by 1.53% amidst pressure on credit Growth of financing distributed by multi-finance companies contracts by 10.23% in July 2020 in line with slowing economic activity YoY Growth (rhs) YOY 5.536 IDR tn 16% 14% 500 12% 400 10% 300 8% - 6% 200 1,53% 4% 100 2% 0% 0 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Capital raising through corporate issuance continues to increase. As of 25 Aug'20, the total of capital raising reaches IDR 63.7 Tn. General insurance starts to pick up in July 2020, while life insurance premium still experience contraction. 3,5 30 48,5 11,7 -10 10 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 50 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Financing YOY Growth (rhs) 10% 8% 400 6% 4% 2% 0% -2% -4% -6% -8% -10,28% -10% Sep-19 Oct-19 Nov-19 Life Insurance Premium Growth General & Reinsurance Premium Growth Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar 20 Apr-20 -10,69 134 -20 2,22 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 -12% BHINNIKA#1360 Jan-18 2 4 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 0 00 20 18 16 14 12 10 Aug-18 24 22 Sep-18 Oct-18 Nov-18 Dec-18 6 Profitability of the banking sector has maintained high and stable *) ■Net Interest Margin Return on Assets Feb-19 Mar- Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Resilient Financial Institutions Domestic financial institutions remain stable amidst the pandemic, supported by strong capitalization, sufficient profitability and leverage... CAR of the banking sector remains high and stable at 23.10% with Tier-1 capital at 21.40% as of July 2020 *) ■CAR Tier 1 26 RBC of the insurance industry remains high and well above the minimum threshold (120%) *) Life Insurance (Lhs) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 4,44 3 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 0 1,90 1 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 2 900 23,10 800 21,4 700 600 500 400 300 200 100 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 General Insurance (rhs) 400 321 350 300 250 502 - 200 150 $100 Gearing ratio of multi-finance companies is steadily maintained at a level of below three times in July 2020 *) 4 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 GT-AON Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 135 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 2,47 Apr-20 May-20 Jun-20 Jul-20 0 50 BHINNIKA#1370 Jan-18 Feb-18 Mar-18 1 Apr-18 2 3 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 4 Dec-18 % 5 Manageable Credit Risks with Adequate Liquidity % % % 27,15 250 140 30 130 120 110 100 ឮ ឬ ឬ ៖ ន ន 8 8 9 Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs) 25 200 20 128,01 150 15 threshold LA to Deposit (rhs) = 10% 100 10 5 50 threshold LA/ NCD= 50% Jan-18 Feb-18- Mar-18 - Apr-18- May-18 - Jun-18- Jul-18 Aug-18- Sep-18- Oct-18- Nov-18- Dec-18 - Jan-19- Feb-19- Mar-19 - Apr-19- May-19- Jun-19- Jul-19- Aug-19- Sep-19- Oct-19- Nov-19 Dec-19- Jan-20- Feb-20 - Mar-20- Apr-20- May-20- Jun-20 0 о Jul-20 NPL Net Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Financial Institutions are equipped with ample liquidity, while credit risk is maintained at reasonable levels... The ratio of liquid assets to deposit and non-core deposits in the banking sector is maintained well above the threshold *) Investment adequacy ratio in the insurance industry is steadily maintained above 100% (threshold) *) ■NPL Gross LO 5 3,22 4 3 2 1 1,12 NPL ratios are still manageable below the threshold, at 3.22% gross and 1.12% net as of July 2020 *) Due to credit relaxation in place and contraction of multi-finance's financing, the NPF increases in July-20 to 5.5% *) 6 5,50 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 Jun-19 Jul-19 May-19 Aug-19 Sep-19 Oct-19 Jul-18 Jul-18 Sep-18- Aug-18 Sep-18- Oct-18 PT-120 Nov-18 Dec-18 Jan-19 Feb-19- Mar-19 Apr-19- May-19- Jun-19- Jul-19 Nov-19 Dec-19 Jan-20 Feb-20 - Mar-20 Apr-20 May-20 Jun-20 Jul-20 136 Aug-19 Sep-19- Oct-19 - Nov-19- Life Insurance Dec-19- Jan-20- Feb-201 Mar-20 Apr-20- May-20- Jun-20 Jul-20- General Insurance 184,40 105,77 BHINNEKA#1380 300 Jan-18 Feb-18 Mar-18 600 Apr-18 900 May-18 Jun-18 1.200 Jul-18 Aug-18 IDR Tn 1.500 Sep-18 Oct-18 0 1 2 Jan-18 Feb-18 Mar-18 Apr-18 May-18 3 Jun-18 Jul-18 4 Aug-18 Sep-18 of 20%*) % 5 Oct-18 Manageable Market Risks Amidst rising global pressure, the risk profile of domestic financial institutions remains at manageable levels... Net open position in the banking sector is maintained far below the maximum limit Mutual funds' net asset value (NAV) continuously grow with low volatility Insurance & pension fund investment value is steadily increasing *) Insurance Pension Funds (rhs) Nov-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 IDR Tn 250 1155,15 400 225 200 350 175 150 125 300 100 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 282,7 250 25 200 OGO G 75 50 0 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-20 IDR Tn 610 560 510 1,99 460 410 360 310 260 Jan-19 Feb-19 Mar-19 - Apr-19 May-19- Domestic Debt Jun-19 - Jul-19 Aug-19- Sep-19- Oct-19 Nov-19 NAV Mutual Funds As of 1 September, 2020 The exposures of multi-finance companies to foreign debt have largely been mitigated by company hedging measures IDR Tn Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20- Jul-20 Aug-20 Foreign Debt 155,21 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 137 109,41 JCI (rhs) 7.000 6.000 5.000 4.000 3.000 2.000 1.000 0 BHINNIKA#13940 20 0 -20 -40 -60 -80 -100 -120 -140 Jan-19 Source: Bloomberg and Ministry of Finance لس Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Domestic Capital Market Performance Amid Global Challenges New normal has raised positivism towards the markets, but effect of new cases and rising number of Covid-19's still remains... Domestic financial market continues to grow positively from its month-to-month performance Positive sentiment is returning to domestic capital market with the dominance of domestic investors INDO HKN Stock Index Performance as of 7 September '20 (compared to 7 August '20) 320 WORLD 1,74 300 THAI S KOREA -0,94 1,14 280 1,87 0,67 SIN PHIL CHIN -1,45 -1,04 0,04 MAL -3,98 JPN 3,92 220 EU US BRAZ -0,63 -1,49 2,55 Comp Bond Index Comp Stock Index (rhs) 7000 295,45 6500 6000 5.230,20 5500 260 5000 4500 240 4000 3500 200 3000 Oct-18 Jan-19 Apr-19 Jul-19 Oct-19 Jan-20 Apr-20 Jul-20 TURK 2,43 Non-resident portfolios' sell-off are decreasing, Gov't Debt Securities recorded IDR2.34 Trillion inflow as of 4 Sep'20 Government's bond yields declines in line with strengthening expectation of rupiah against the US dollar 80 ■Gov't Debt Securities ■ Equity Yield (%) 60 5-yr Yield 10-yr Yield 20-yr Yield .... IDR (rhs) Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 5 10 2,34 9 -3,20 8 00 60 7 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18- Sep-18- Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20- Sep-20 138 20.000 18.000 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 BHINNIKA#140Stimuli to Support Indonesia's Financial Industry OJK and other government institutions have worked intensively to minimize the impact of COVID-19 on the economy 2 BHINNIKA 1 Maintaining business fundamental of the real sector KANN Bank NBFI OJK Regulation No. 11/POJK.03/2020: "National Economic Stimulus as A Countercyclical Policy of The Impacts of COVID-19 Outbreak" • Relaxation of credit assessment and credit restructuring to debtors who are affected by COVID-19. - Credit assessment (up to IDR10 billion) is based only on the punctuality of debtors to pay their debts and interests. This applies to Commercial and Sharia Banks With maximum 1 year period of credit restructuring *) OJK Regulation No.18/POJK.03/2020: "Written Orders to Handle Bank Problems" ◉ Stabilizing financial sector particularly in banking sector amid COVID-19 outbreak by allowing merger, consolidation, acquisition, and/or integration to banks permitted by OJK. *) OJK Regulation No. 14/POJK.05/2020: "Countercyclical Policy as an Impact of COVID-19 for Non-Bank Financial Institution (NBFI)" Extended deadline of report submission Relaxation of financing assessment Financing Restructuring - Regulating loan restructuring, deadline of periodic reports, - Conducting fit and proper tests, - Determination of asset quality of financing, Calculation of solvency level of insurance companies, - Calculation of pension fund quality, and - Implementation of asset management provisions. Maintaining financial market stability OJK Circular Letter No. 3/SEOJK.04/2020: "Other Conditions as Significantly Fluctuating Market Condition on Stock Buyback issued by Issuers or Public Companies" Prohibition of short-selling Asymmetric Auto Rejection (current auto rejection limits under 7%) 30-minute Trading Halt for 5% decrease in IHSG Negation of trade in the pre-opening session Stock buyback without prior general shareholders meeting *) OJK Regulation No.15/POJK.04/2020: "Plan and Organization of the General Meeting of Shareholders of Public Companies" Aimed to enhance the participation of shareholders in General Shareholders Meeting (RUPS) by allowing electronic authorization to third parties. *) OJK Regulation No.16/POJK.04/2020: "The Implementation of Electronic General Shareholders Meeting (GSM)" Regulating the implementation of electronic corporate decision making by requiring a member of the board of director/commissioner in charge of GSM, while other electronic attendances are counted as fulfillment of attendance quorum. *) OJK Regulation No.17/POJK.04/2020: “Material Transaction and Changes in Business Activities' Improving the definition and procedure of Material Transaction, as well as the effectiveness of regulation to enhance the protection of public shareholders and the quality of information disclosure in Material Transaction and Business Activities Changes. ☐ " Source: Financial Service Authority (OJK) *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities. 139#141Further Stimuli to Provide Liquidity and Capital in Banking Industry BHINNEKA Relaxation for Conventional and Sharia Banks (Reporting/Treatment/Governance of Restructured Credit/Financing) Adjustment of Banking Provisions Implementation during Relaxation Period Deferral of Basel III Reforms Implementation (valid until 31 December 2022) Restructured credit/financing is excluded from the Loan at Risk (LAR) in the assessment of banks performance. Banks are also allowed to approve credit restructuring with several alternative governance by considering the necessary principle. i. Eliminating the obligation to fulfill Capital Conservation Buffer by 2.5 percent of Risk Weighted Assets (ATMR) for BUKU 3 and BUKU 4 banks (until 31 March 2021) ii. Maintaining the obligation of fulfilling Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) for BUKU 3, BUKU 4, and foreign banks at a minimum level of 85 percent (until 31 March 2021) iii. Dismissing the quality assessment of Foreclosed Collateral (AYDA) based on the period of ownership (until 31 March 2021) iv. Reducing the obligation of education funds provision to less than 5 percent i. The deferment reforms include Risk-Weighted Assets (RWA) for operational risk, credit risk, market risk, and Credit Valuation Adjustment (CVA) ii. Until then, the Capital Adequacy Requirement still refers to the current RWA standard. Relaxation for Rural and Rural Sharia Banks i. Relaxing the General Loan Loss Provision (PPAP) to less than 0.5% ii. Exemption of Interbank Placement for Legal Lending Limit (BPMK) and Maximum Limit of Fund Channeling (BPMD) to a maximum 30% of capital iii. Temporary Halt on Foreclosed Collateral (AYDA) calculation based on period of ownership iv. Providing 5% less on Education, Training, and Human Resource Fund from the previous year Source: Financial Service Authority (OJK) 140#142OJK's Role in the National Economic Recovery Program (PEN) BHINNIKA National Economic Recovery Program (PEN) PP No. 23/2020 OJK carry out efforts to support the economic recovery, through: Fund Placement Placement of funds by the Government to provide liquidity support to banks conducting loan restructuring and to provide additional credit / working capital financing OJK supports the program through Liquidity Buffer and Credit Restructuring to Banks and Multi- Finance Companies Providing Interest Subsidies for MSMEs Article 20 Paragraph 2 Government Regulations No. 23 of 2020 All debtors with credits up to IDR500 million will be given interest subsidies while debtors with credits up to IDR10 billion will go through the same mechanism with credit restructuring program. The program is eligible for debtors of banks/multi-finance companies with Performing Loan (Kol 1 and Kol 2) before COVID-19, valid from 29 February 2020. • • Targeted Beneficiaries MSMEs debtors with credits up to IDR10 billion Debtors of housing loans (KPR) up to type 70 • Debtors of motorcycle loans for productive activities, including online transportation and informal business • Other Requirements Obedient taxpayer Excluded from National Blacklist (DHN) Source: Financial Service Authority (OJK) OJK's Role Providing necessary information in the implementation of interest subsidies based on the procedure which will be arranged through Joint Decision Letter (SKB) Mechanism The provision regarding the budgeting, implementation, and responsibility mechanism of interest subsidies and debtor requirements are regulated in the Minister of Finance Regulation (PMK) 141#143Strategic Policies in Financial Sector Providing financing alternatives for Goverment Priority Sectors Providing financial access to MSMEs especially in remote areas Improvement of business process in the industry Source: Financial Service Authority (OJK) .11$ Supporting acceleration of $national economic growth Preparing financial services industry to cope with Industrial Revolution 4.0 BHINNIKA 142#144Continuous Program on Capital Market Deepening ...continuously strengthened, including through capital market deepening initiatives Enhancing the supply-side ■ Product: QIB offering and private placements, private fund, asset-backed securities, REITs, infrastructure fund, IGBF (Indonesia Government Bonds Future) & equity crowdfunding. Issuer: Financial conglomerates, big bank debtors, local government, IDX incubators, SMEs, SOES & big tax payers. ☐ Strengthening market infrastructure Development of Integrated Licensing (SPRINT). ■ Enhancement of electronic reporting system. Development of electronic public offering. ☐ Integrated data warehouse and supervisory system. ☐ ☐ ☐ BHINNEKA Enhancing the demand-side Enhancing the role of the domestic institutional investors (insurers & pension funds) in capital markets. Development of the domestic investor base (conducting investor education programs). Simplification in opening securities account. Development of regional securities companies. Development of e-bookbuilding. Strengthening governance & customer protection ■ Development of market players' capacity ■ Enhancement of GCG for publicly-listed companies ■ Establishment of disgorgement fund ☐ Online marketing initiative Source: Financial Service Authority (OJK) 143#145Enhancing Financial Literacy & Inclusion OJK strives to build a strong foundation for financial inclusion programs, to ensure access to financial products & services by Indonesians of all social classes. Such initiatives also include the enhancement of financial literacy and financial consumer protection. BHINNIKA Developing Enhancing the role of the financial education models utilizing various delivery "Investment Alert Taskforce" channels Developing micro-credit products with additional business support ("KUR Klaster") Promoting the establishment of Islamic microfinance institutions ("Bank Wakaf Mikro") Strengthening the role of Financial Access Acceleration Taskforce (TPAKD) in local areas The result of OJK's 2019 national survey demonstrated an improvement in financial literacy & inclusion among Indonesians compared to that of 2016. 21.8% 29.7% 38.03% 59.7% 67.8% 76.19% Financial Literacy 2013 2016 2019 Financial 2013 2016 2019 Target: 35% Inclusion 2019 2019 Target: 75% Source: Financial Service Authority (OJK) 144#146A Comprehensive Financial Deepening Program ...strategy to tackle challenges in deepening Indonesia's financial markets BHINNIKA In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate "The National Strategy of Financial Market Development" Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR 1 2 ECONOMIC FUNDING & RISK 3 Pilars MANAGEMENT GOGGEND MARKET INFRASTRUCTURE DEVELOPMENT STRATEGIC ACTION PLAN 3 POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market FX Market Bond Market Stock Market Syariah Market Structure Product Market Fund 7 Elements of Financial Market Ecosystem Instrument Intermediaries Source: Bank Indonesia Market Infrastructure Benchmark Rate & Standardization Regulatory Framework Coordination & Education 145#147BI's Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA) BHINNEKA Bl supports government's program of shifting social assistance to targeted non cash social assistance disbursement through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG subsidy. Pilot Project Source: Bank Indonesia NCSA Programs Family Hope Program (Program Keluarga Harapan -PKH) Smart Indonesia Program (Program Indonesia Pintar-PIP) KANTU KELSARSA SEMINTERA Kartu indonesia Pintar 9876543210 XXYYZZ 12345678 Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) LPG Subsidy T T 2016-2020 Gradual Implementation Full Implementation Interconnected & interoperable payment system 146#148Progress of NCSA Programs BHINNIKA • • Family Hope Program (Program Keluarga Harapan - PKH) The Family Hope Program (PKH) is a program that provides cash to very poor households. IDR1.89 million /year will be granted for each household. PKH will be granted every February, May, August, and November. As of December 2017, PKH has been distributed to 6.0 million households on non-cash basis. • In 2018, PKH has been distributed to 10 million households on non-cash basis. • In 2019, PKH has been distributed to 9.84 million house hold on noncash basis with total realization of IDR32.75T. KARTU KELUARGA SEJAHTERA 12345678 12345678 AGIT DAMALANus • Non Cash Food Assistance (Bantuan Pangan Non Tunai - BPNT) BPNT is a poverty alleviation and social protection program that is managed by the central government. It provides subsidized rice and eggs to low income households. IDR110 thousand/ month will be granted for each household as BPNT that can be used in certain stores which called e-warong. As of December 2017, BPNT was distributed to 1.2 million households in 44 cities. In 2018, BPNT has been distributed to 10.1 million households (65.1% of the target of 15.5 million households target). • In 2019, BPNT has been distributed to 15 million household on non cash basis with total realization of IDR15.44T Source: Bank Indonesia 147#149Stronger Fundamentals Facing the Headwinds Inflation Rate (%) IDR Movement (%) Inflation controlled within the target range IDR depreciated year-to-date in September 2020 1998 -197 1998 82,4 2008 2008 12,1 August '20 1.32 (yoy) 1998 16-Sep-20 -35 -6,42 (ytd) -250 -200 -150 -100 -50 0 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 2008 3,8 July 2020 3,22 0 10 20 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 30 30 40 Government Debt/GDP Consistently well-maintained 8.6x 1998 3.1x 2008 3.1x 100.0% 1998 27.4% 2008 34.53% Q2-2020 Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 9.0 months of import and external debt repayment 1998 2008 August'20 17,4 50,2 More Liquid Market (%) Overnight interbank money market rate is 62 relatively lower 10,5 3.31 1998 2008 August '20 137 External Debt/GDP Slightly higher than 2008, but significantly lower than 1998 116.8% 1998 33.2% 2008 37.3% August 2020 Q2-2020 BHINNEKA 148#150Outlook of Domestic Economy Remains Robust ...domestic economic growth is predicted to be moderated in 2020 and rebound in 2021 BHINNEKA 2019 and 2020 Economic Outlook ● Bank Indonesia projects economic growth in 2020 at the range 0.9%-1.9%, revised down from around 2.3%. • Bank Indonesia projects inflation in 2020 within the target range, namely 3.0%±1%. ● Bank Indonesia projects current account below level 1.5% of GDP in 2020, revised down from around 1.5% of GDP. • Bank Indonesia projects growth of outstanding loans disbursed by the banking industry in 2020 in the 6-8% range, revised down from 9-11% previously, in line with the revised economic growth projection in 2020. 2018 Realization LOAN π Rp Economic Growth Inflation CAD (% of GDP) Credit Growth 5.17% 3.13% 2.98% 11.75% 2019 Realization 5.02% 2.72% 2.71% 6.08% 2020 0.9%-1.9% 3.0±1% below 1.5% 6.0-8.0% Source Bank Indonesia 149#151Section 7 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA www#152The Government has Enacted Various Reforms to Accelerate Infrastructure Provision $ Fiscal Reforms Viability Gap Funding (VGF) Increase project financial feasibility by contributing up to 49% of the construction cost (MoF Reg. No. 223/2012) Availability Payment Issuance of regulatory framework to allow annuity payment by the Government during concession period to concessionaire since project operation based on infrastructure service availability (MoF Reg. No. 190/2015 for Central Gov'r and MOHA Reg. No. 96/2016 for Regional Gov't.) Land Revolving Fund A revolving-fund sourced from State Budget, to accelerate land acquisition (MoF Reg. No. 220/2010) Risk-sharing Guidelines IIGF has issued risk allocation and mitigation guidelines for PPP project Tax Incentives (Tax Holiday) MoF Reg. No.35/2018 allowed 100% Tax Holiday for 17 Pioneering Industries for 5 - 20 years depending on the investment value KPPIP Institutional Reforms KPPIP is actively involved in accelerating delivery of priority infrastructure projects PT. Sarana Multi Infrastruktur Merging between PT. SMI and Gov't Investment Center (PIP) to become an infrastructure funding company Indonesia Infras. Guarantee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects PPP Unit Provide facilities to help GCA on preparing PPP project (PDF/TA) BLU LMAN The State Asset Management Agency (BLU LMAN) is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process Indonesia Infrastructure Guarantee Fund (IIGF) IIGF has the potential to provide project guarantee for non-PPP projects 4/4 Regulatory Reforms Direct Lending BHINNIKA Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects (Presidential Reg. No. 82/2015) Land Acquisition TUNGGAL IKA Stipulate land acquisition acceleration based on Law No. 2/2012 (Presidential Reg. No. 148/2015) and land acquisition fee payment for impacted community (Presidential Reg. No.56/2017) Economy Packages Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 151#153Policy reforms are aiming to create a more conducive investment climate for infrastructure delivery Some of Most Recent Reforms BHINNIKA Presidential Reg. No. 20/2018 on Use of Foreign Labor - released on March 2018 This regulation aims at simplifying the permit application process for foreign workers, hence making the process more efficient and faster, in order to rise foreign direct investment in Indonesia Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN - released on June 2017 This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. MoF No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation - released on May 2017 The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) - released on April 2017 The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects and Asset Management of Land Acquisition by State Asset Management Agency - released on February 2017 The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 152#154Reforms Along the Project's Life Cycle ...to encourage and accelerate infrastructure project using PPP scheme Government of Indonesia Project Development Facility (PDF) Viability Funding Gap (VGF) Guarantee Fund Tax Facilities Availability Payment Land Acquisition Preparation Bidding Process Construction BHINNIKA Project development facility contributing to assist GCA on PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI PT IIF, and Ministry of Finance A facility with contribution to construction cost to increase project financial viability Managing Entitiy: Ministry of Finance based on GCA proposal Gov't. commitment: 49% max. Per project cost Guaranteeing Govt. contractual obligations under infrastructure concession agreements and Mof Regulation No 130/PMK. 08/2016 re: Govt guarantee for electricity project acceleration Managing entity: IIGF and MoF Govt's comitment: US$ 450 mn MoF Reg. No. 159/PMK.010/2015 re: tax holiday for pioneer sector, such as base metal, oil refinery, basic petrochemical, machinery, renewable energy, & telco equipment industries. Sector will be further expanded Managing entitiy: Ministry of Finance A scheme in which concessionaires receive sum of money periodically from central or regional government after the completion of an asset. MoF Regulation, and MOHA Regulation on Availability Payment has been ratified. Managing entity: Ministry of Finance & Ministry of Home Affairs A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing enitiy: Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN Gov't. commitment: US$ 12 mn (2016) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 153#155Efforts to Accelerate Infrastructure Provision BHINNEKA Regulation improvement to accelerate land procurement process The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete the land acquisition process. For its implementation, the Law No. 2 of 2012 was supported by the Presidential Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The Amendment to the Regulation allows a Business Entity to allocate funding for a land acquisition which can be reimbursed by the Government following the completion of land acquisition process. With this Regulation, the land acquisition process is expected not to be delayed by the unallocated budget or the delay on the budget disbursement. Law No. 2/2012 was successfully applied in: - 1. Palembang Indralaya section of the Trans Sumatera Toll Road Project 2. Java North Line Double Track Rail Project PLANNING not regulated PREPARATION max 289 days EXECUTION max 257 days ASSIGNMENT OF RIGHTS max 37 days Timetable (working days) with an assumption that there is rejection from land owners TOTAL 583 DAYS Without rejection, the estimated completion days can be reduced by 15%-20% of the maximum number of days above Land Procurement Process as Stipulated in Law No. 2 of 2012 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 154#156Efforts to Accelerate Infrastructure Provision ...the establishment of Indonesia Asset Management Agency (LMAN) Government has established State Asset Management Unit (LMAN) as a solution to accelerate the land acquisition through the provision of land acquisition fund G BHINNEKA Land Acquisition Budgeting Scheme LMAN at a Glance 1. LMAN was established in December 2015 through the issuance of MoF Reg. 219/2015 concerning State Assets Management 2. In 2016, BLU LMAN was mandated to provide land acquisition fund as a support to Ministry of Public Works due to US$ 1,081 Mio shortage of fund to acquire land for priority toll roads 3. The scope of support is broaden for all National Strategic Projects through the issuance of MoF Reg. 21/2017 concerning land acquisition financing guideline for PSN 4. In January 2018, LMAN has disbursed up to US$ 881.48 Million (IDR 11.9 Trillion) through bridging finance scheme for 27 toll road projects, and planned to start the implementation of direct payment scheme 1. Unutilized fund can be allocated for the following year 2. Non-project-specific land acquisition fund allocation. Unused allocated fund can flexibly be made available for the other project 3. Land acquisition fund for PSN projects is managed under one agency This LMAN initiative provides better flexibility, coordination and management of land acquisition fund provision for National Strategic Projects (PSN) Source: Ministry of Finance 155#157New Fundamental Regulations Have Been Initiated in 2017 to accelerate infrastructure projects delivery 1 2 Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. 3 4 Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. MoF No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects and Asset Management of Land Acquisition by State Asset Management Agency The implementing regulation of Presidential Reg. No.102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) BHINNEKA 156#158Under Presidential Reg. No.56/2018, PSN list has been revised into 223 Projects and 3 Programs 53 53 Projects Sumatra US$43.6 B 89 27 12 Projects 17 Projects Projects Sulawesi Kalimantan US$23.4 B US$35.7 B Maluku & Papua US$34.5 B Projects 3 Programs National 12 Projects Java US$72.7 B US$100.7 B 13 Projects BHINNIKA A Bali & Nusa Tenggara US$0.7 B Exchange rate: US$ 1 = IDR 13,500 PSN includes 15 sectors at project level and 3 sectors at program level Project Road 69 Projects Dams 51 Projects SEZs & IES 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation 8 Projects ☑ Airports 7 Projects Program Electricity 4 1 Program Aeroplane Industry 1 Program Sea Dike Education 1 Projects 1 Projects Smelter Technology Housing 6 Projects 4 Projects 3 Projects Fisheries/Farming 1 Projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Irigation 6 Projects Economic Equality 1 Program 157#159PSN may receive privileges as stipulated in the Presidential Reg. No. 3/2016 j.o. the Presidential Reg. No. 58/2017 Acceleration of Non- State Budget Projects Determination of National Strategic Projects Permit & Non-permit Completion BHINNIKA Settlement of Legal Issues 12 01 11 Accelerate Goods and PSN Facilities 02 Spatial Planning Service Procurement 10 03 Problems and Hindrance Completion 09 04 Land clearing acceleration 08 05 95 SOE's Assignment 07 06 Local Content Utilization Additional Facilities Projects Monitoring via KPPIP IT System Government Guarantee Provision Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 158#160Progress on 223 Projects and 3 Programs PSN BHINNI From 2016 December 2019, there were 92 projects¹ completed with an estimated investment value of US$ 34.6 Billion 15 18 12 26 27 15 29 57 31 19 36 10 33 45 18 20 46 14 5 16 + 17 59 National 2 13 14 Completed 2016 20 Projects (US$ 2.5 Bn) 7 Airports 1 Toll Road 6 Dam 1 Seaports 1 Gas Pipe + 4 National Border Completed 2017 10 Projects (US$ 4.5 Bn) Completed 2018 32 Projects (US$ 15.4 Bn) Exchange rate: US$ 1 = IDR 13,500 Completed by December 2019 30 Projects (US$ 12.2 Bn) 2 Toll Road ⚫ 2 Railway . 1 Airports 4 Airports " 1 Access Road • 4 Dam • 4 Industrial Zone • 9 National Road 1 Airports 1 Irrigation 4 Smelter • . 1 Gas Facility + 10 Toll Road 1 Fishery Center 6 Industrial Zone 2 Smelter • 3 National Border • 5 SEZ • 4 Dam • 1 Dam • 1 Irrigation 2 Technology 2 railways ⚫ 1 seaport ¹In cumulative, including projects that are already taken out in 2016 and 2017 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019 159#161Progress on 223 Projects and 3 Programs PSN Realization of PSN Progress Estimation Legend BHINNIKA 1st PSN list Revision: Addition of 55 projects + 1 aircraft industry program 2016 20 projects US$ 2.5 Billion 2017 2nd PSN list Revision: Addition of 2 projects + 1 economic equality program 30 projects US$ 4.5 Billion 37 projects + 1 program 35 GW 2018 62 projects US$ 15.4 Billion 32 projects + 1 electricity program + 1 economic equality program 2019 92 projects US$ 34.6 Billion 27 projects + 1 program 35 GW + 1 economic equality program 2020 Completed 144 projects US$ 59.3 Billion Construction and partial operation phase 96 projects +1 program 35 GW 30 projects + 3 program 119 projects 100 projects 98 projects 59 projects 13 projects 6 projects 59 projects + 1 aircraft industry 6 projects 53 projects +1 aircraft industry 6 projects 30 projects +1 aircraft industry program 81 projects program program 15 projects 29 projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) as of end of December 2019 Construction Transaction 6 projects 14 projects Preparation Taken out from PSN list 160#162Energy Sector: the Progress of 35.000 MW Program BHINNIKA Average economic growth of 6.7% requires 7,000 MW / year or 35,000 MW/ 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024) Debottlenecking through regulation: 1. Regulation No.1/2015 concerning electricity supply cooperation & joint utilization of the electrical network among license holders. 2. Regulation No.3/2015, concerning Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection & Appointment. Cabinet Meeting Progress of 35,000 MW Launching 35.000 MW by the President in Goa Beach Sanden DIY 17 Dec '14 Jan '15 Cabinet Meeting "There's electricity crisis in Indonesia, requires construction of large capacity plant " Sumatera PLN: 1,100 MW Kalimantan PLN: 900 MW Private: 1,735 MW Transmission: 5,604 ckt.km Substation: 3,500 MVA Private: 8,990 MW Transmission: 18,729 ckt.km Substation: 35,521 MVA Jawa & Bali PLN: 5,000 MW Private: 13,697 MW Transmission: 9,185 ckt.km Substation: 66,265 MVA Sulawesi Jan '15 35,000 MW Program Distribution PLN: 2,000 MW Private: 1,470 MW Substation: 4,390 MVA Papua PLN 220 MW Transmission: 5,275 ckt.km Maluku Private: O MW Transmission: 364 ckt.km Substation: 460 MVA Nusa Tenggara PLN: 670 MW Private: O MW Transmission: 2,347 ckt.km Substation: 1,410 MVA PLN: 260 MW Private: 12 MW Transmission: 653 ckt.km Substation: 620 MVA Source: PLN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) The progress so far: 16 Mar '15 4 May '15 June 17 No Phase MW di % 1234 5 Operating 3,792 11 Construction 22,739 62 Signed Power-purchase Agreement 6,923 21 Procurement 1,279 4 Planning 734 2 Note : Progress of 35,000 MW Electricity Program as of August 2019 161#163Energy Sector: the Progress of 35.000 MW Program BHINNIKA December 2016 November 2017 December 2018 December 2019 2% 3% 3% 8% 2% 19% 16% 6% 9% 28% 5% 3% 19% 30% 38% 24% 44% 32% 52% 57% 706 MW in operating phase 998 MW in operating phase 2,899 MW in operating phase 10,141 MW in construction phase 8,478 MW signed Power-purchase Agreement 10,560 MW in procurement phase 5,824 MW in planning phase 15,676 MW in construction phase 13,782 MW signed Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase 18,207 MW in construction phase 11,467 MW signed Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 6,811 MW in operating phase 20,168 MW in construction phase 6,678 MW signed Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 162#164Acceleration of 35.000 MW Program BHINNIKA The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects Government Support (outside Guarantee) Provision of Primary Energy Provision of Renewable Energy Simplicity of Permits and non-Licensing Spatial Planning Land acquisition Resolution on Legal Matters Government Assignment Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content. 1 EPC Powerplant and Transmission PT PLN Provision of Electricity 2A PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance Strengthen Equity Strengthen PLN's Balance Sheet Loan from independent lenders Equity Injection by the Government Refinancing Hedging Bond issuance by PT PLN Asset Revaluation Direct Lending Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2B Independent Power Producer PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter 163#165Significant Progress on Infrastructure Projects Roads Dams Trans-Sumatra Toll Road Merah Putih Bridge, Ambon Drinking Water Processing Jatigede Dam (Operational) Umbulan Drinking Water Provision System, East Java Transportation Jakarta MRT Project² Terminal 3 Ultimate Soekarno-Hatta² New Tanjung Priok Port Project² Nop Goliat Dekai, Papua RHINNIKA Improving Monitoring System on Infrastructure Projects¹ KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects' latest status which can be effectively utilized for monitoring and decision- making purposes. Database Project information such as map, track, existing study and latest project status. 2 Platform data outlook that is efficient and functional using a user- friendly framework. 4 17 2 1 An integrated IT system with monitoring capacity for stakeholders, so that they can have real time data. 3 Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 164#166Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth Infrastructure Development is a Key Priority Infrastructure Development in order to: 1. Accelerate growth particularly in rural areas 2. Support industrial development and tourism 3. Reduce unemployment and poverty • Infrastructure fundraising needs: $357.9 bn (or equivalent to IDR4,796.2 tn) 245 National Strategy Projects under National Medium Term Plan for 2015 - 2019 with an estimated total cost of IDR4, 197 tn (USD313 bn) Broad Objective Core Mandates ● 37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion) ●Majority of 37 priority projects are expected to commence commercial operation by 2018- 2022 Additional Mandates BHINNEKA Establishment of PPP Unit Champion project preparation and acceleration of the PPP agenda in Indonesia Improve quality of project selection under KPPIP - OBC criteria Support project preparation through PDF support and highly qualified transaction advisors Act on behalf the Minister of Finance in providing government support and approvals for projects Coordinate all public finance instruments Provide input for PPP Policy program Development and Regulations Implement capacity building for Govt. Contracting Agency (GCAs) One stop shop for PPP promotion & Information Budget Central & regional budget (special allocation fund & rural transfer) ● Primarily to support basic infrastructure projects: Food security: Irrigation, dams etc. Maritime: Seaports, shipyards etc. Connectivity: Village roads, public transportation etc. Public Private Partnership Certain infrastructure projects to be funded and operated through a partnership between the Indonesian government and the private sector Projects ready for auction under the PPP Scheme: Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung Railway projects such as an express line into Soekarno-Hatta International Airport Water supply projects such as the West Semarang Project Various government support for PPP: Project Development Facility (PDF): Helps Government Contracting Agencies (GCAS) in project preparation and transaction Viability Gap Fund: improves financial viability of PPP projects Government Guarantees: Supports PPP projects' bankability by providing sovereign guarantees Infrastructure Financing Fund: Provided through PT SMI and IIGF Availability Payment (AP): GCA pays private partner based of availability of infrastructure services SOE & Private Sector Government to inject capital into SOEs: Intended multiplier effect to develop more infrastructure projects • Key focus areas: Infrastructure and maritime development Transportation and connectivity Food security Medium term infrastructure developments to focus on: Water Supply Airports Seaports Electricity and power plants Housing Mining Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity Source: Ministry of Finance; Bappenas; KPPIP: "Komite Kebijakan Percepatan Penyediaan Infrastruktur" or National Committee for the Acceleration of Infrastructure Delivery 165#167Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Government Guarantee Program Contingent Liabilities from Government Guarantee as of Q1 2020 ** BHINNEKA ⚫ Power (Electricity) - Full credit guarantee for PT PLN's debt payment obligation under FTP 1 10,000MW and 35GW programs*. No. Central Government Guarantee for Infrastructure Programs Guarantee Documents Exposure/ Outstanding (USD bn) = • Clean Water Guarantee for 70% of PDAM's debt principal payment obligations. 1 2 Coal Power Plant 10,000 MW Fast Track Program (FTP 1) Clean Water Supply Program 16 1.41 6 0.01 • Toll road - Credit Guarantee Full credit guarantee for PT Hutama Karya's debt payment obligations for the development of Sumatra Toll Roads. 3 Direct Lending from International Financial Institution to SOES 6 1.70 4 Sumatra Toll Road 10 2.99 ⚫ Infrastructure - Full credit guarantee on SOE's borrowing from international financial institution & guarantee for PT SMI's local infrastructure financing. 5 Renewable energy, Coals & Gas Power Plant 10,000 MW (FTP 2) 7 3.86 Public Transportation (Light Rail Transit) Full credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. 6 Public-Private Partnerships (PPP) 7 4.73 7 Regional Infrastructure Financing 1 0.19 8 Public Transportation (Light Rail Transit) 1 0.24 Business Viability Guarantee (BVG) ⚫ Power (Electricity) - Guarantee for PT PLN's obligations under Power Purchase Agreements with IPPS (off-take and political risk) under FTP-2 10.000MW and 35GW programs* 9 Electricity Infrastructure Fast Track Program (35GW) 6 4.36 Total 60 19.49 PPP Guarantee Political Risk Guarantee Infrastructure Guarantee for Government-related entities obligations (line ministries, local governments, SOES, local SOEs) under PPP contracts/agreements - Infrastructure Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees *) MOF provides both credit guarantees and BVGs for 35GW program Source: Ministry of Finance From 2008 to Q1-2020 **, the government has issued 85 guarantee documents with total value of USD36.17 billion, there were 28 guarantee documents worth USD3.54 billion have been expired. The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. Beginning in 2008 the Government has allocated a contingent budget with respect to these guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund. This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees. **) As of end June 2020; currency conversion of IDR14,302.00/USD1 and IDR16,080.46/EUR1 166#168Government Financial Facilities for PPP Projects Financial Facilities to Attract More Private Participation More Funding Schemes are on the Pipelines Viability Gap Fund (VGF) Project Development Facility (PDF) LCS Government Guarantees (directly by MoF or through IIGF) (Limited Concession Scheme) BHINNIKA Project Financing funded by the private sector through the granting of concessions for an operating asset owned by the Government/SOE (based on the policy of the Government) to the private sector to be operated & managed. • • • Scheme Characteristics Asset is owned by public sector Operating asset, not greenfield project Records positive cash flow for the last several years Predicted revenue Availability Payment Financing from Schemes PT. SMI and PT. IIF Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: PINA (Non-Government Budget Infrastructure Financing) Project Financing funded by any source of funds other than Government's budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas. Scheme Characteristics • Asset is owned by private sector . Greenfield/brownfield / operating projects Source: Ministry of Finance 167#169Progress of PPP Infrastructure Projects Successful Projects Reaching Financial Close in 2016 and 2017 No Project Name Project Cost (IDR tn) Financial Facilities 1 Central Java Power Plant 40 Guarantee (MoF & IIGF) 2 Palapa Ring - West Package 1.28 3 Palapa Ring Central Package 1.38 4 Palapa Ring - East Package 5.13 5 LO Umbulan Water 2.1 PDF, IIGF Guarantee & AP PDF, IIGF Guarantee & AP PDF, IIGF Guarantee & AP PDF, VGF & IIGF Guarantee Signed PPP Projects in 2016 and 2017 Status FC on June 6th, 2016; Construction 30%; COD Target: May 2020 FC on August 11th, 2016; COD target: February 2018 FC on September 29th, 2016; COD target: March 2018 FC on March 29th, 2017; COD target: September 2018 FC on August 30th, 2016; COD target: July 2019 BHINNEK No Project Name Project Cost Financial Facilities Status (IDR tn) 1 Batang-Semarang Toll Road 11 IIGF Guarantee 2 Manado-Bitung Toll Road 5.1 IIGF Guarantee 3 Samarinda-Balikpapan Toll Road 9.9 IIGF Guarantee 4 Pandaan-Malang Toll Road 5.9 IIGF Guarantee 5 Serpong-Balaraja Toll Road 6.0 6 Jakarta-Cikampek Elevated Toll Road 14.8 Co guarantee (MoF & IIGF) 7 Krian-Legundi-Krian Toll Road 9.0 Co guarantee (MoF & IIGF) 8 00 Serang-Panimbang Toll Road 5.3 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on April 27th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP & guarantee contracts signed on June 8th, 2016 PPP contracts signed on June 8th, 2016 PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 PPP & guarantee contracts both signed on December 5th, 2016 and February 22nd, 2017 PPP & guarantee contracts signed on February 22nd, 2017 9 Cileunyi-Sumedang-Dawuan Toll Road 8.2 Co guarantee (MoF & IIGF) PPP & guarantee contracts signed on February 22nd, 2017 Source: Ministry of Finance, as of July 2017 168#170New Guarantee Schemes for Non-PPP Projects BHINNEKA Guarantee on SOE Direct Lending from International Financial Institutions (IFIs) The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing, State finance soundness Guarantee for Regional Infrastructure Financing Provision with 3 main principles: Fiscal sustainability Best practice of fiscal risk management Based on Government Regulation No. 95/2015 and Ministry of Finance Regulation No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried out by PIP (Government Investment Center). The Government had issued Ministry of Finance Regulation No 174 of 2016 to provide guarantee to PT SMI on the assignment of regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. The objective is to give stimulus to the acceleration of local infrastructure development through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in order to meet local infrastructure development needs and to reduce reliance on state/local budget. 169#171www.indonesia.travel wonderful indonesia indonesia.travel @indtravel g+ indonesiatravel @indtravel