#1Fiscal & Economic Updates October 2021 "Maintaining The Momentum of Recovery"#2CUD The Team Investor Relation Unit Abdurohman Director for Center of Macroeconomic Policy Putri Rizki Yulianti Coordinator of Investor Relation Unit Suhendi Saputro Head of Knowledge Management Hilda Choirunnisah Staff Andi Yoga Trihartanto Staff Riznaldi Akbar Advisor Indra Budi Sucahyo Analyst Adi Triyono Staff Should you have further questions, please do not hesitate to contact us: https://fiskal.kemenkeu.go.id/informasi-publik/investor-relation-unit [email protected]#3Disclaimer This presentation was prepared by the Fiscal Policy Agency, Ministry of Finance, Republic of Indonesia. This presentation is for your information and is subject to change without notice. By accessing this presentation, you are agreeing to be bound by the restrictions set out below. Any failure to comply with these restrictions may constitute a violation of applicable securities laws. This presentation contains forward looking statements that involve risk and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risk, uncertainties and other factors that may cause the actual result performance or achievements of the Republic Indonesia to be materially different from those. This presentation may not be reproduced, disseminated or quoted without the prior written consent of the Ministry of Finance of Indonesia. Relaying copies of this presentation to other persons elsewhere is prohibited. Should you have further questions, please do not hesitate to contact us: https://fiskal.kemenkeu.go.id/informasi-publik/investor-relation-unit NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN ANY JURISDICTION IN WHICH SUCH PUBLICATION OR DISTRIBUTION WOULD BE PROHIBITED BY APPLICABLE LAW [email protected]#4DEVELOPMENT OF THE COVID-19 PANDEMIC AND RECENT ECONOMIC UPDATES#5THE GLOBAL ECONOMY IS PROJECTED TO RECOVER IN 2021 & 2022 However, the momentum has weakened with elevating uncertainty GLOBAL GROWTH AND TRADE PROJECTION BY IMF (%, YOY) HAGARA DARA RANCA IMF REGIONAL ECONOMIC GROWTH PROJECTIONS (%, YOY) United States Emerging & Developing Asia Latin America & The Caribbean 7.2 6.3 5.4 6 5.2 World Trade Volume World Economic Growth 63 3.0 2.2 9.7 0.1 2.8 0.9 6.7 5.9 4.9 2019 2020 2021f 2022f 1.5 -3.1 -3.5 -0.9 7.0 2019 2020 2021f 2022f 2019 2020 2021f 2022f 2019 2020 2021f 2022f Euro Area ASEAN-5 5.0 4.3 4.9 5.8 3.1 Sub-Saharan Africa 3.7 3.8 2.9 -3.4 -1.7 -8.2 World economic growth and trade is projected to recover in 2021 and 2022. Supported by vaccinations, stimulus, and improving socio-economic activities amidst the adaptation of new norms. 2019 -6.3 2020 2021f 2022f 2019 2020 2021f 2022f 2019 2020 2021f 2022f The downward revision for 2021 reflects a downgrade for advanced economies—in part due to supply disruptions—and for low-income developing countries, largely due to worsening pandemic dynamics. • This is partially offset by stronger near-term prospects among some commodity-exporting emerging market and developing economies. Rapid spread of Delta and risks stemming from new variants have raised uncertainty. Source WEO IMF, October 2021#6RISK AND UNCERTAINTY RELATED TO COVID-19 PANDEMIC REMAIN, PARTICULARLY THE EMERGENCE OF NEW VARIANTS. As of 26 October 2021 Total Cases 245,28 million Total Recovery Total Death 4,98 million (2,03%) The appearance new variants of the Covid-19 Active Cases 222,35 million (90,65%) 17,95 million (7,32%) Epicenter: INDIA 30000 Epicenter: US 25000 10000 800000 Epicenter: Daily cases - - 7DMA 700000 US & Europe Delta variant Daily Death-7DMA (rhs) spreading in India Delta variant spreading globally سنة VACCINATION Epicenter: Developing Countries Epicenter: US Epicenter: Europe 600000 500000 400000 300000 200000 100000 Epicenter: China 0 31-Dec 14-Jan 28-Jan 11-Feb 25-Feb 10-Mar 24-Mar 7-Apr 21-Apr 5-May 19-May Source: worldometers.info, ourworldindata, WHO 2-Jun 16-Jun 30-Jun 14-Jul 28-Jul 11-Aug 25-Aug 8-Sep 22-Sep 6-Oct 20-Oct ΛΟΝ-Ε 17-Nov 1-Dec 15-Dec 29-Dec 12-Jan 26-Jan 9-Feb 23-Feb 9-Mar 23-Mar 6-Apr 20-Apr 4-May 18-May 1-Jun 15-Jun 29-Jun 13-Jul 27-Jul 10-Aug 24-Aug 7-Sep 21-Sep 5-Oct 19-Oct HASARA DARA RAKA Increasing border reopening (supported by mass vaccination worldwide) is expected to strengthen economic recovery Delta variant has spread out globally since June which led most countries to impose stricter border restrictions, including entry bans for high-risk countries. International Travel Control - 1 June 2021 44 Countries 46 46 67 27 20000 15000 419,017 (7dma) Screening Quarantine Ban on High Total border closure from High Risk Risk Regions Regions Tighter Restrictions Imposed As COVID-19 pressures subside with sharp decline in daily cases, countries begin to ease their restriction levels. International Travel Control - 5 Oct 2021 6,961 (7dma) 56 Countries 56 37 15 0 Screening Quarantine Ban on High from High Risk Risk Regions Regions Total border closure#7INDONESIA HAS BEEN ABLE TO COPE WELL WITH THE 2ND WAVE OF COVID-19 Broad-based and stronger recovery is expected this year onwards Daily Cases and Deaths Have Much Passed Over the Peak of the Second Wave of COVID-19 Vaccine rollout has been progressing quite significantly, reaching 2 millions per day Active Cases Have Decline Markedly, Especially in Java-Bali Which Covers More Than 60% of the National Economy Peak 600,000 Active cases July 24: 574,135 2,500,000 GDP Share 2020 60,000 Peak Daily cases 15 July: 56,757 7dma cases 18 July: 50,039 50,000 7dma death 2 Aug: 1,789 40,000 500,000 400,000 30,000 Daily Cases 300,000 7 DMA Cases 20,000 7DMA Deaths As of Oct 26 200,000 686 10,000 32 100,000 39.4% 60.6% 2,000,000 Java-Bali 1,500,000 Non Java-Bali Total Active Cases Oct 26: 12,989 1,000,000 500,000 7DMA Vaccination As of 26 Oct 1,899,641 M-20 M-20 J-20 0 ཁྭ བྲྀ བྲྀ ཙྭ བྷྲ་བྷྲ་ཛྙྰ་ཊུ་ཊུ་ཊུ J-21 F-21 M-21 M-21 A-21 A-21 M-21 M-21 M-21 J-21 J-21 J-21 J-21 A-21 A-21 S-21 S-21 0-21 • Daily cases and death rates have declined markedly owing to proper restriction measures. Containment efforts will continuously be improved. • Covid-19 active cases have decreased significantly, especially in Java-Bali which covers more than 60% of the national economy. That said, a stronger recovery ahead is expected to happen. • Vigilance and discipline must be maintained with 5M and 3T. • Vaccination still has to be accelerated to reach the target of 208 million people by the end of 2021. Source: worldmeters.info, Ministry of Health#8GLOBAL MANUFACTURING ACTIVITY CONTINUED TO EXPAND IN THE LAST 15 MONTHS Indonesia's manufacturing activity rebounded to expansionary zone after falling to contractionary zone due to the 2nd wave of the Covid-19 pandemic. SEPTEMBER 2021 MANUFACTURING PMI HASARA DARA RAKA INDONESIA 65 60 55 50 45 40 35 30 25 65 60 52.2 55 50 45 40 35 30 25 GLOBAL ASEAN-5 Vietnam Malaysia -Thailand Indonesia -Filipina 65 54.1 55 45 35 25 52,2 50,9 48,9 48,1 40,2 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 Big Countries AS- Eropa -Jepang Korsel -Tiongkok -India 65 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 • . Indonesia's manufacturing activities bounced back after two months in contraction. The easing of restrictions measures with significant improvement of Covid-19 situation led to a stronger manufacturing activity. ASEAN PMI Manufacturing shows a mixed situation. While Indonesia and the Philippines has recorded expansion, Thailand and Malaysia were on the rise toward expansionary zone. Vietnam's manufacturing activity remained in a deep contraction zone. • • Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21 The Global PMI in September 2021 continued to record expansionary although trended down slightly in the few months. Europe and US have contributed to strong global manufacturing expansion, while China's PMI improved at the neutral level (50), after contracted in previous month 55 Besides the risks of the Covid-19 pandemic, the issue of supply shock disruption continues, putting pressures on global inflation, which could hamper the speed of economic recovery. 45 35 Source: Bloomberg, IHS Markit 60,7 58,6 53,7 52,4 51,5 50,0 25 Sep-19 Jan-20 May-20 Sep-20 Jan-21 May-21 Sep-21#9• • -35 F-20 -30 -25 A-20 -20 -15 20 J-20 As of October 19, 2021 -10 A-20 -5 0 0-20 5 D-20 The Change of People Mobility (7DMA) F-21 RESTAINED BY THE 2ND WAVE OF COVID-19, MOBILITY INDEX HAS CONTINUED TO STRENGTHENED SINCE MID AUGUST A-21 J-21 A-21 0-21 (17.83) -30 -50 F-20 -40 A-20 J-20 0 0.21 -20 A-20 -10 10 Retail and Recreation A-21 J-21 A-21 0-21 30 3.00 20 (24.43) -10 -30 -20 Grocery and Pharmacy 40 10 0 значим Чи 9.00 22.57 After experiencing a downward trend to -17.8 in July, the people mobility has consistently increased until mid October. Consumption-related mobility also increases in August to October, mainly in retail, recreation, and grocery and pharmacy. This development is in line with relatively better COVID-19 situation. -40 F-20 A-20 J-20 A-20 0-20 D-20 6 F-21 A-21 J-21 A-21 0-21 NAGARA DARA RAKA#1020 30 AFTER FALLING AMID THE 2ND WAVE COVID-19, VARIOUS INDICATORS BEGAN TO STRENGTHEN SIGNIFICANTLY Economic activities strengthen as mobility restriction was eased amid significant decline in the Covid-19 daily cases In September, electricity consumption growth remained on positive territory (3.9% YoY), driven mainly by industrial sector which grew by 11,5%. Electricity Consumption 40 Consumption activity trended up since late July, especially on the middle class, reflected on Mandiri Spending Index (as of Oct 3rd) Bank Mandiri Spending Index 130% 80 Export continued to record a very strong growth, resulting in trade surplus for 17 months in a row. N(%) (10) (20) (30) 10 M (40) Jan Feb Mar Apr May Jun 2020 լոր Aug Sep Oct Nov 1.5 100% 3.9 3.6 90% 80% 110% 120% -20 70% Bisnis (16,4%) Indust Total Number of Transaction Index Value of Transaction Index Total (100%) -40 60% Dec Jan Feb Mar Apr May June July Aug Sep 2021 50% 40% Mar 22, 20 May 17, 20 Jul 12, 20 Sep 6, 20 Nov 1, 20 Dec 27, 20 Feb 21, 21 Apr 18, 21 Jun 13, 21 Aug 8, 21 Oct 3, 21 -60 0 40 60 20 Export (% yoy) Import (% yoy) J-20 F-20 M-20 A-20 M-20 J-20 J-20 A-20 S-20 0-20 N-20 D-20 J-21 F-21 M-21 A-21 M-21 J-21 J-21 A-21 S-21 10 47.6 40.3#11140 CONSUMPTION ACTIVITY HAS GRADUALLY IMPROVED This is in line with the improving condition of the Covid-19 pandemic 300 120 Consumer Confidence 250 Retail Sales 95.5 Index (RSI) 100 Index 200 80 60 40 20 0 JAN MAR MAY JUL 2019 SEP NOV Jan Mar May Jul Sep 2020 ΛΟΝ Jan Mar May 2021 inf 150 77.3 100 Sep 0 50 JAN MAR MAY JUL SEP NOV Jan Mar 2019 May 20 15 250 10 UN WA 10 -1.8 0 0 -2.9 -5 RSI (oy, RHS) ༞ཋ -10 -10 -20 W -15 -30 -20 -25 -40 2020 Inf Sep Nov Jan Mar May 2021 լո Sep* Jan Feb Mar Apr May Jun 2020 լոր Aug Sep Oct Oct ΛΟΝ Electricity Consumption (%yoy) Dec Dec Jan Jan Feb Mar Mar Industry (16.4%) Business (30.9%) Total (100%) Consumer Confidence Index inched up in September, indicating public optimism has improved after the peak period of delta variant Retail Sales Index is expected to increase in September owing to the easing mobility restrictions in most regions. Electricity consumption growth remained in positive territory in September contributed mainly by robust industrial activities and business sector. Source: Bank Indonesia, PLN 2021 Jul Aug Sep NAGARA DARA RAKA 11.5 3.6 m m 3.9#12150 100 50 0 -50 -100 -150 INVESTMENT INDICATORS STARTED TO PICK UP AGAIN After experiencing a drop in July due to mobility restriction, investment activities began to strengthen Cement Consumption and Iron& Steel Volume Import (% YoY) 40 40 Iron and Steel Import Volume Cement Consumption - RHS Commercial Car Sales (%, YoY) 1000 50 913.6 40 800 20 600 30 20 4.1 0 400 5.0 10 0 -10 143.1 200 -20 -20 60.3 -30 0 -40 -40 -200 -50 J F M A M J J A S O N D J F M A M J J A S 2020 2021 J F M A M J J A S O N D J F M A M J J A S 2020 2021 Capital Goods Import (%, YoY) NAGARA DARA RAKA 10.1 или J F M A M J JASON D J F M A M J J A S 2020 2021 . • Investment activities show an improvement, especially in construction sector, indicated by cement sales and iron & steel volume import, which grew by 4.1% (yoy) and 5.0%, respectively, in September. Sales of commercial vehicles and imports of capital goods also continued to record positive growth, indicating stronger investment activities. 12#13DESPITE A SLOW DOWN IN Q3, DOMESTIC AND FOREIGN INVESTMENT REMAINED RELATIVELY SOLID In the first three quarter of 2021, total investment recorded by the Investment Board recorded 7,8% growth, higher than 2,1% in 2020. 2020 Investment Realization Q1 2021 Q2 2021 Q3 2021 Cumulative up to Q3 2021 IDR T %,yoy IDR T %, yoy IDR T %, yoy IDR T %,yoy IDR T %,yoy DDI 413.5 7.0 108.0 -4.2 106.2 12.7 113.5 10.3 327.7 5.8 FDI 412.8 -2.4 111.7 14.0 116.8 19.6 103.2 -2.7 331.7 9.9 Total 826.3 2.1 219.7 4.3 223.0 16.2 216.7 3.7 659.4 7.8 5 Largest Sector Investment Realization in Q3 2021 (IDR trillion) (share, %) Investment Realization in Q3 2021 by Province 28.1 26.6 25.1 21 19.4 Othes, 50.30% (13.0) (12.3) (11.6) (9.7) (8.9) Banten; 6.50% Residential, Industrial and Office Transportation, Metal Mining Other Services Warehouse, and Industry Telecommunication areas West Java, 16.00% Jakarta, 11% East Java, 8.30% Riau; 7.60% NAGARA DARA RAKA Rising trend of the investment activities was somewhat halted by the Delta variant pandemic. In Q3 2021, investment recorded by the Investment Board slowed down to 3.7% (yoy) compared to 16,2% in the previous quarter. Cumulatively, however, total investment in the first three. quarters of 2021 remained relatively strong, grew by 7,8%, in which domestic (DDI) and foreign investment (FDI) posted 5,8% and 9,9% growth rate, respectively. Four major sectors of investment; (i) residential, industrial and office areas, (ii) transportation, warehouse and telecommunication, (iii) metal industry, and (iv) mining. The government efforts to further improve the ease of doing business are continued. Completion of the operational regulation of the Job Creation Law has continued to progress well, in tandem with the launch of a risk-based Online Single Submission (OSS) platform in August 2021. It is hoped that the integration and centralization of permits in a platform will shorten significantly licensing times.#14RELATIVELY CONDUCTIVE FINANCIAL MARKETS DUE TO EASING GLOBAL PRESSURE JCI accelerates on the back of rising commodity prices, Rupiah moves relatively stable, increasing appetite for foreign investors into the domestic market 7000 JCI 6500 6000 5500 5000 4500 4000 3500 60 30 0 -30 -60 -90 -120 -150 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 -MSCI EM (rs) Nov-20 Dec-20 Jan-21- Feb-21 Mar-21 Apr-21 JCI and Rupiah Exchange Rate May-21 Jun-21 Jul-21 Aug-21 Sep-21 Capital Flow (IDR Trillion) Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 Oct-21 1600 105 6643.7 100 1100 95 90 600 85 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 160 19.1 6.9 150 7.4 140 130 120 -14.3 110 130.4 100 90 May-21 Jul-21 Sep-21 80 O N 2020-J -DXY -JISDOR (rs) 17000 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 MA M Billion USD Feb-21 Mar-21 Apr-21 14162 May-21 Jun-21 Jul-21 Aug-21 Sep-21 Oct-21 16000 15000 14000 13000 Pressures on global markets has eased as owing to the temporary agreement on the US debt ceiling, better communication of the Fed tapering off policy, and better resolution of the Evergrande case in China. The JCI has been on the rising trend as commodity prices continued to soared. The IDR has been relatively stable but slightly in an appreciating trend entering Q4 2021 in line with the declining trend of the dollar index and positive investor perception with strengthening domestic economy. While capital flows to domestic financial markets remain relatively small, sustained Foreign Reserves 10.0 8.6 11 8.6 10 9 8 138.8 146.97 6 surplus in the merchandise trade has resulted in stronger foreign exchange 137.3 5 reserves. 4 3 - ND M MA M 22 Months of Import & External Debt Installments (LHS)#15THE ECONOMY IS PROJECTED TO SUSTAIN ITS RECOVERY PROCESS Q3 2021: Although domestic demand was somewhat restrained by the mobility restrictions (PPKM) in July- August, continued strong export performance will support Q3 GDP growth. Q4 2021: The economy is projected to rebound with a normalizing activities as the Covid-19 pandemic is successfully contained. However, several risks need to be anticipated, especially risks related the Chinese slowdown and resurgence of Covid-19 around the upcoming Christmas and new year festival. Overall 2021, the economy is projected to sustain its recovery. Continued success in containing the Covid-19 is critically important along with the effective recovery measures carried out by the government. ECONOMIC GROWTH (% YOY) 3.0 -0.7 -2.2 -3.5 -5.3 Q1 Q2 Q3 2020 7.1 4.5 2021 Growth Outlook 4.0% 40 Q4 Q1 Q2 Q3^ 2021 Source: Statistics Indonesia & Ministry of Finance ^MoF latest projection update (October 2021) NAGARA DARA RAKA#16CREDIT RATING AGENCIES MAINTAINED INDONESIA'S CREDIT RATING AMIDST MASSIVE DOWNGRADES DUE TO THE IMPACT OF THE COVID-19 PANDEMIC Affirmation of Indonesia's rating by S&P and R&I confirms that the recovery is on track: Handling COVID-19 & Vaccination, Macro Fiscal Stable, Structural Reform - Job Creation Law S&P Global Ratings Affirms BBB negative 22 April 2021 The country's economy is stabilizing, and gradual fiscal consolidation and improved trade flows are likely over the next three to four years R&I Affirms BBB+ stable 22 April 2021 Indonesia's economy will likely return to a pre-coronavirus growth level in one to two years. The government's structural reform efforts are also expected to boost growth potential in the medium to long term. Fitch Ratings Affirms BBB stable Rating Action during the 2020 Pandemic Rating 124 Downgrades 133 124 51 by Fitch 35 by Moody's 38 by S&P NAGARA DARA RANCA Revised Outlook Negative 51 by Fitch 36 by Moody's 46 by S&P Covid-19 Pandemic has brought a significant pressure on sovereign rating → the pandemic had a major impact, especially on countries' fiscal conditions The rating action in 2020 is more than during the 2008 GFC crisis In 2021, the three rating agencies have taken 34 Rating Action Downgrades and 21 Revised Negative Outlook (as of Oct 21, 2021) Indonesia's Rating Position 22 March 2021 Indonesia's rating balances a favorable medium-term growth outlook and a low debt to GDP ratio against dependence on external financing and lagging structural features compared with 'BBB' peers, such as GDP per capita MOODY'S Baa2 stable Annual Credit Analysis, 16 February 2021 The credit profile of Indonesia is supported by its large economy, low fiscal deficits and modest debt burden, that counterbalance reliance on external funding and a degree of economic concentration to commodity cycles. Sovereign Credit Rating Agency Outlook Rating Date of Rating Action Moody's Baa2 Stable 14 Feb 2020 JCR Agency BBB+ Stable 1 Dec 2020 Fitch BBB Stable 22 March 2021 S&P BBB R&I BBB+ Negative Stable 22 April 2021 22 April 2021 16#172021 BUDGET & STRUCTURAL REFORM FOR RECOVERY#18INDONESIA QUICK AND RESPONSIVE POLICY DURING COVID-19 PANDEMIC Flexible fiscal policy to support pandemic handling and recovery to pave the way toward economic transformation Responsive Fiscal Policy 2020 EXTRAORDINARY POLICY Immediate response to Covid-19: Health Measures, Protecting People and Business 2020 President President APBN Regulation Regulation No.54 No.72 Realization -1,76 -5,07 2021 SURVIVING & FACILITATING RECOVERY Health measures, Vaccine Rollout, social protection, support to businesses, structural reforms Fiscal Deficit Dynamic For COVID-19 handling and economic recovery 2021 Note of Proposed 2022 SUSTAINING & ACCELERATING RECOVERY Sustaining and accelerating Recovery, further structural reform 2023 NAGARA BARA RAKA G STRONGER & RESILIENT ECONOMY, FISCAL CONSOLIDATION REBUILDING FISCAL DISCIPLINE TOWARDS LONG- TERM SUSTAINABLE BUDGET KEM-PPKF* KEM PPKF Budget APBN Outlook APBN 2022 • Deficit 3% of GDP in 2023; -3,21 -4,17 -4.7 -5.5 -5.7 -5.8 4,85% • Manageable debt risk STRONG AND CONTINOUS ECONOMIC -6,34 -6,14 EFFECTIVE COVID-19 PANDEMIC HANDLING Mass Vaccination 5M Internalization RECOVERY 3T Implementation FRAMEWORK ECONOMIC JUMP START • Social assitances . Support to businesses (tax incentives, subsidies & guarantee scheme) • Integrated Policy Package (KSSK) STRUCTURAL REFORM Omnibus law on job creation (including INA, OSS) Fiscal Reform Financial Sector Reform 18#19FLEXIBLE GOVERNMENT BUDGET IN RESPONSE TO SHOCKS & UNCERTAINTIES As countercyclical instrument to respond to the resurgence of COVID-19 as well as to stabilize and sustain the recovery 1st case in Indonesia confirmed and Large social declared President announces phase restriction was 'new normal' 100,000 cases confirmed Several region loosened the mobility restriction 1st stage of vaccination rolled out and PPKM was imposed Emergency PPKM was imposed 'Delta Varian' confirmed in Indonesia Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 May-21 Jun-21 Jul-21 Aug-21 Sep-21 MAR-APR JUNE JUL-DES JAN FEB-MAR JUL IDR 46.5 T Government announced measures to mitigate pandemic risk on domestic economy IDR 695.2.4 T National Economic Recovery Program (PEN) was enacted through PP 23/2020 while the budget 2020 was revised IDR 575.2 T Reallocating and refocusing budget between cluster to finance urgent programs. At the end of year, some of health measures budget for vaccination are carried forward to 2021 PEN 2020 IDR 403.94T The budget was adjusted in August 2020 with the easing of COVID-19 in Aug - Sept 2020 IDR 699.43T PEN budget was increased due to surging cases of Covid-19 and vaccination program. IDR 744.75 T PEN is strengthened due to the new wave caused by the delta variant. Social restriction (PPKM) has been imposed, social protection has been re- expanded. PEN 2021#20STRONGER RECOVERY COMBINED WITH SOCIAL PROTECTION PROGRAMS WERE ABLE TO REDUCE UNEMPLOYMENT AND POVERTY The Social Protection Policy since 2020 and expanded today, has been playing a very important role in protecting the poor and vulnerable Hardship Relief Food and Education Support Support to the Workforce Conditional Cash Transfer (PKH) 10 million families Cash Transfer 10 million families Village Funds Cash Transfers 8 million families Electricity Discount 32.6 million beneficiaries Staple Food Card 24.7 million families Food Assistance 28.8 million families Internet Quota Subsidy for Online Learning 38.1 million people Pre-Employment Card 5.9 million people Wage Subsidy 8.8 million workers The impact of the pandemic on people's welfare can be restrained and begin to gradually recover OPEN UNEMPLOYMENT RATE (TPT) February 2021 6.26% (TPT) 8.75 million ppl The economic recovery has created 2.61 million new jobs in the period Sept 20 - Feb 21 POVERTY RATE March 2021 10.14% 27.54 million ppl Declining rate on Feb 21 compare to Aug 20 0,81 p.p 1.02 million ppl Declining rate on Mar 21 compare to Sept 20 0,05 p.p 0,01 million ppl Meanwhile, The quality of human resources as reflected in Human Development Index is maintained amid the pandemic through the provision of health services and adequate education even during the pandemic Note: the figure above is the 2021 target as of July 2021, the number of basic food card recipients is a combination of 18.8 million regular staple food card recipients and an additional 5.9 million recipients during the restriction mobility period source: Statistic Indonesia, Ministry of Finance 20#21AS OF SEPTEMBER 2021, STATE BUDGET CONTINUES ITS GOOD PERFORMANCE Revenue and Expenditure signaled that economic recovery continue to take place 2020 2021 Account (IDR T) Budge t¹ Realized As of Sep % of Budget YoY (%) Budget Realized As of % of Budget YoY (%) Sep Revenue Tax Revenue 1,700.0 1,160 68.2 (13.6) 1,743.6 1,354.8 77.7 16.8 1,198.8 750.6 62.6 (16.9) 1,229.6 850.1 69.1 13.2 Customs & Excise 205.7 141.8 68.9 3.8 215.0 182.9 85.1 29.0 Non Tax Revenue 294.1 261.8 89.0 (13.2) 298.2 320.8 107.6 22.5 Expenditure 2,739.2 1,841.3 67.2 15.5 2,750.0 1,806.8 65.7 (1.9) Central Government Expenditure 1,975.2 1,211.6 61.3 21.2 1,954.5 1,265.3 64.7 4.4 Regional Transfer & Village 764 629.7 82.4 5.8 795.5 541.5 68.1 (14.0) Funds Primary Balance Surplus (Deficit) % to GDP Financing -700.4 (446.5) 63.8 931.6 (633.1) (198.3) 31.3 (55.6) -1,039.2 (681.4) 65.6 169.9 (1,006.4) (452.0) 44.9 (33.7) (6.34) (4.41) (5.70) (2.74) 1,039.2 784.6 75.5 154.9 1,006.4 621.9 61.8 (20.7) Note (1) Presidential Regulation 72/2020 NAGARA DARA RAKA Revenue • As of September 2021, Government revenue keeps performing strongly, rising at 16.8% (yoy), equivalent to 77.7% from the budget, reconfirming a strong economic recovery. • This strong revenue collection is in line with improving economic and strong international trade activities, nearly reaches the pre-pandemic level. • In particular to the Non-tax revenue which is contributed mainly by the natural resources component, it is mainly due to the rising commodity prices. Expenditures • Government spending slightly contracted by 1.9% (yoy) in September 2021, mainly due to base effect as the disbursement of the recovery related spending was relatively high in September 2020. • Government spending are focused mainly to support the containment of COVID-19 pandemic and economic recovery efforts, both at the central and regional levels. Financing • The overall and primary budget deficit are on-track. • Debt financing was maintained, supported by a conducive domestic financial market. • Investment Financing proceeds according to progress, in line with the regulatory preparation process 21#22GOVERNMENT BUDGET REMAINS FLEXIBLE AND RESPONSIVE TO THE DYNAMICS OF COVID19 As of October 22nd, the realization of the National Economic Recovery program amounted IDR 433.91 T or 58.3% of its plan The allocation of the 2021 The National Economic Recovery program (IDR774.75 T) increased compared to the realization of the 2020 (IDR575.2 T) HASARA DARA RAKA • . • HEALTH SECTOR Budget: IDR214.96 T Realization: IDR116.82T (54.3%) of budget Vaccine Procurement (121.41m Doses) Medical Facilities and Infrastructure • Treatment costs (580.29 thousand Patients) . • Incentives (1.26 million) & death compensation for 446 health workers Health Insurance Aid for Non- Wage Workers (34.71m people) SOCIAL PROTECTION Budget: IDR186.64 T Realization: IDR125.10T (67%) of budget Conditional Cash Transfer (10m families) Staple Food Assistance (17.3m Families) Pre-Employment Card (5.91m People) Cash Transfer (9.99m Families) & Village Fund Cash Transfer (5.62m Families) Internet Subsidy (60.46m People) Electricity Bill Discount (32.6m Beneficiary) Job Loss Guarantee Contribution (6.65m Workers) MSMES SUPPORT Budget: IDR162.40 T Realization: IDR63.20T (38.9%) of budget • • Ultra-Micro business assistance (12.71m businesses) PRIORITY PROGRAMMES Budget: IDR117.94T Realization: IDR68.07T (57.7%) of budget • Tourism Supports Food Security/Food Estate • Guarantee Fee subsidy for • Loan Facility for Regional MSMEs (2.24 M recipient) and for firms (36 recipient) Liquidity support for the banking sector (IDR 442.19T for 5.43M Debtors) • . • Interest subsidy for MSMEs credit (6.02m businesses) and non MSMEs credit (7.2M businesses) Capital Injection to HK, Pelindo III and KIW IDR8.39T Street vendors support (554.1 th businesses) Govt IDR10T through PT. SMI Labor Intensive Program (1.05m workers) Other Priority Programs • • • BUSINESS INCENTIVES Budget: IDR62.83T Realization: IDR60.73T (96.7%) of budget Income Tax subsidy for employers (81.980) and MSMEs (124,209) Income Tax Exemption on Import (9,490 taxpayers) VAT Refund (2.419 taxpayers) Tax discount for Automotive (6 sellers) VAT discount for property sector (768 sellers) Subsidy on Import Duty (IDRO.15T) 22#23THE COLLABORATION OF GOVERNMENT, CENTRAL BANK, OJK, IDIC IN SUPPORTING ECONOMIC STABILITY AND RECOVERY INTEGRATED & COORDINATED MEASURES BY FINANCIAL SYSTEM STABILITY COMMITTEE (KSSK) NAGARA DARA RANGE • Central Bank Monetary: stabilizing exchange rate, participation in gov't bond primary market, lowering policy rate, QE Macroprudential: Sectoral RIM, relaxing reserve requirement rates Payment system: accelerating electronic transaction system, fintech Indonesia Deposit Insurance Corporation Lowering premium Relaxing payment period for insurance premium and reporting schedule of single customer view system Government Cash flow support: Tax expenditures, tax incentives, electricity bills discount Financing support: Interest subsidy for MSME loan, guarantee of working capital loan • Recovery programs: Labor intensive programs, support for tourism • • Financial Services Authority Relaxing loan restructuring regulation Relaxing maximum limit of credit exposure on certain sectors Relaxing risk-weighted assets for property and automotive loan • Policies with direct implication to the economy in both supply and demand side Stimulating banks' role as intermediary agent in providing financing support to businesses to sustain the recovery process Stronger and more sustainable economic recovery Enablers: • · Accelerated vaccination Implementation of Job Creation Law 23#24STRUCTURAL ECONOMIC REFORM STARTED WITH THE ENACTION OF LAW NO 11/2020 ON JOB CREATION Investment Growth & Licensing Simplification SOEs Simplification and Protection Creating New Jobs Human Resources Ease of Doing Business Special Economic Zones (KEK) Research and Innovation Support Increasing EoDB and Business Certainty Land Management Government Administration Simplifying Regulation and Licensing Increasing Investment Climate Government Investment Authority & National Strategic Program Law Enforcement and Protection *Government has completed several operational regulations of Law No 11/2020, consisting of 47 Government Regulation (PP) and 4 Presidential Decree (Perpres) 24#25ESTABLISHMENT OF INDONESIA INVESTMENT AUTHORITY (INA) AS INDONESIA'S SWF Strong institutions with good corporate governance to gain global investors' trust Government Investment Objectives (Pasal 154 ayat 2 UU Cipta Kerja) Receive economic benefits, social benefits, and / or other benefits that are predetermined Indonesia Investment Authority a form of implementing government investment Characteristics and Advantages INA's Target 自 Contribute to the development of the national economy in general and state revenues in particular Focus in Capital Maximation Economic Goals Balanced with Commercial Benefits Governance Following International Business Practices A Strong Legal Foundation for Certainty Optimize of Central Government Investment Value Increase Foreign Direct Investment (FDI) Receiving benefits; and / or Flexibility in Investing Strong support from the State Carrying out public benefits (creating jobs). Able to capture Investors Appetite Strong Independence and Professional Management Enhance the improvement of the investment climate *In "Pasal 154 ayat (3) UU Cipta Kerja", Central Government investment is carried out by the Minister of Finance and Investment Institutions (IIA) 25#262022 GOVERNMENT BUDGET FOCUSED ON SUPPORTING ECONOMIC RECOVERY AND FACILITATING STRUCTURAL REFORM Fiscal consolidation is carry on while anticipating the uncertainty APBN 5.0 NAGARA DARA RAKA 4.5 5,2 3.7 5,5 (2.20) • Covid-19 handling and vaccination are the key for the economic recovery о (2.10) (348.7) (5,82) (4,85) O (6,14) о Risks and uncertainty stemming from the Covid-19 in 2022 need to be anticipated • The main theme of the 2022 Fiscal Policy is to sustain the Economic Recovery and Facilitate Structural Reform Deficit (IDR T) Economic growth (%) (868,0) Deficit to GDP (%) (947.7) (961,5) 2019 2020 2021 2022 outlook RAPBN • The 2022 budget focuses on health sector and social protection while also provides flexibility to anticipate uncertainties In 2023 fiscal deficit at <3% of GDP according to the mandate of Law 2/2020. In 2022 budget, the deficit is maintained at around 4.85% of GDP to give a smooth transition for fiscal consolidation. 26#272022 BUDGET POSTURE Fiscal deficit of 4.85% of GDP with flexibility to anticipate uncertainties 2019 2020 2021 2022 Account (IDR T) Proposed Audited Audited Growth (%) Outlook Growth (%) Budget Growth (%) State Revenue* 1,960.6 1,647.8 (16.0) 1,735.7 5.3 1,840.7 6.0 Tax Revenue 1,546.1 1,285.1 (16.9) 1,375.8 7.1 1,506.9 9.5 Non Tax Revenue 409.0 343.8 (15.9) 357.2 3.9 333.2 (6.7) State Expenditure 2,309.3 2,595.5 12.4 2,697.2 3.9 2,708.7 0.4 Central Government 1,496.3 1,833.0 22.5 1,927.0 5.1 1,938.3 0.6 Expenditure Regional Transfer & 813.0 762.5 Village Funds (6.2) 770.3 1.0 770.4 0.02 Primary Balance (73.1) (633.6) 766.8 (595.3) (6.0) (462.2) (22.4) Surplus (Deficit) (348.7) (947.7) 171.8 (961.5) 1.5 (868.0) (9.7) % to GDP (2.20) (6.14) (5.82) (4.85) Financing 402.1 1,193.3 196.8 961.5 (19.4) 868.0 (9.7) MACROECONOMIC ASSUMPTIONS Economic Growth Inflation Exchange Rate 10-year T-Bonds Rate ICP (USD/barrel) 55-65 Oil Lifting ('000 barrels per day) 680-705 ('000 barrels oil Gov't Revenue IDR 1,840.7 T ☐ Tax Revenue is projected at IDR 1,506.9 T supported by sustained recovery and gain from the tax reform. ☐ Non-tax revenue is expected at IDR 333.2 T owing to recurring non-service revenue and optimization government share of oil and gas revenue. Gov't Expenditure IDR 2,708.7 T Directed to support health care, social protection and economic recovery □ Central government expenditure IDR 1,938.3 T, of which: - Expenditure reserve IDR 61.8 T - Health spending and vaccination in PEN Program IDR 44.0T ☐ Transfer to Region and Village Funds IDR 770.4 T Gas Lifting equivalent per day) 987-1,007 Deficit and Budget Financing IDR 868.0 T (decreased by 9.7%) Fiscal deficit is expected at 4.85% of GDP Financed with efficient and prudent financing sources, including the use of financing surplus (SAL) 2021 Outlook 3.7-4.5% 1.8-2.5% 14,200-14,600 6.34-7.24% 2022 As agreed with Parliament 5.2% 3% 14,350 6.80% 63 703 1,036#28ACCELERATING STRUCTURAL REFORMS IS A KEY TO ENHANCE MEDIUM TO LONG-TERM GROWTH The Covid-19 pandemic has underscored the urgency to accelerate the structural reforms Key for Further Strong and Sustainable Economy in Medium Term Maintaining growth momentum through promoting growth engine: consumption, investment, export & production sectors $= Structural reforms for improving productivity: Implementation of Job Creation Law, SWF / INA, Risk- Based OSS System Increasing investment & export competitiveness: creating quality jobs and sustainable economic recovery Economic Growth Decomposition (%) 5.8 5.5 5.0 2.6 3.0 2.4 1.0 0.9 0.9 2.2 1.6 1.7 2.1 0.7 -2.1 Business as usual Reform Scenario -5.0 Structural reforms along with fiscal reforms (APBN) 2010-2019 focus on priority areas: Health, Education, Social Protection, Infrastructure, Tax Reform and Regional Government Revenue Sharing Law (HKPD) Productivity Source: Statistics Indonesia, MoF Calculation COVID-19 2020 2021-2025 Projection Labor Capital ◆ Growth (Average) NAGARA DARA RANGE 28#292021 STATE BUDGET REALIZATION#30GOVERNMENT BUDGET PERFORMANCE STRENGTHENED SIGNIFICANTLY DESPITE OF DELTA VARIANT CHALLENGES State Expenditure and Investment Financing grew significantly and brought positive impact to Indonesian people ($ NAGARA DARA RAKA State Expenditure IDR1,806.8T (Grew by minus 1.9%) Line Ministries' Expenditure Grew by 16.1% Driven by capital expenditure (infrastructure, connectivity projects, and equipment), material expenditure (vaccination, medical treatment claims, productive relief programs), disbursement of various protection programs) Non-Line Ministries Expenditure Grew by minus 8.3% Driven by pension benefits, energy dan fertilizer subsidies, and pre-work cards. Regional Transfer and Village Fund Grew by minus 14.0% Some local governments have not fully submitted all requirements needed Investment Financing Grew by 172.0% Including Investment to LMAN to support National Strategic Projects, support for housing development, emergency hospital development, regional PEN Loan, and international development cooperation fund The hard work of the state budget was supported by an excellent performance of the Covid-19 handling and economic recovery programs Realization of PEN as of October 22, 2021 reached IDR433.91T (58.3% of the ceiling of IDR744.77T) 30#31NET RECEIPT OF THE MAJORITY TAXES KEPT IMPROVING Major sources of taxes showed positive growth in September. (share) 2.3% Income Tax Art 21 12.80% 8.2% 5.0% -4.5% -5.6% Income Tax Art 22 6.8% 2.97% -51.7% (Imported Goods) -41.9% -38.5% -0.3% 14.5% Personal Income Tax 1.12% -63.7% 2.0% 99.3% 7.0% 66.0% Corporate Income Tax 15.10% 11.2% -30.4% -40.5% 21.4% Income Tax Art 26 5.22% -6.5% 0.9% Final Income Tax 9.51% -7.0% Domestic VAT 13.9% 24.22% -9.4% Import VAT 15.69% -18.0% 31.4% 25.5% 1.6% -1.9% 3.9% 0.6% 18.5% 17.0% 4.1% 29.5% 48.4% 34.8% 8.2% g Jan-Sep '21 g Jan-Sep '20 g Q3-21 g Q2-21 g Q1-21 NAGARA DARA RAKA 251.8% ■ Seasonal transactions influenced the performance of Income Tax art 21 (payment for teachers' certificate allowance and bonus for employers) as well as Income Tax art. 26 (changes in dividend payment date) Income Tax Art 22 on imported goods and Import VAT grew significantly, reflecting import activities are still strong. Discontinuation of tax facilities in some sectors drove an improvement in Income Tax art. 22 on imported goods and Corporate Income Tax. ■Domestic VAT performance was supported by economic recovery, especially household consumption and government expenditure. 31#32NET REVENUE FROM MAJOR SECTORS CONTINUED TO IMPROVE Most sectors showed positive growth in Q3 2021 (share) 13.7% Manufacturing 29.7% -17.1% Trade 21.4% -18.5% Financial Services & -3.8% 13.7% Insurance -5.5% Construction & -3.0% 5.6% Real Estate -18.1% Transportation & 4.6% Warehousing -4.1% 5.0% Mining 4.3% -12.4% 31.7% 17.0% -7.3% 20.3% 40.4% 30.3% -5.5% -3.6% 3.6% -14.6% 27.9% -12.1% -19.3% 17.7% 21.4% 20.0% 9.0% NAGARA DARA RAKA 20.6% 6.2% 9.6% 317,6% The Improving performance of the manufacturing and trade sectors was supported by the recovering global demand, which boosts production, consumption, export, and import activities. ✓ Financial services contracted due to a decrease in Notice of Tax Underpayment Assessment (SKPKB) ✓ Mining performance was supported by increasing global demand and commodity prices. ✓ Transportation started to recover, in line with an increase in people mobility, especially in maritime sub-sector ✓ ICT sector continued the double-digit growth performance as the need for ICT during the pandemic was still high The recovering construction activities, together with VAT cut for house purchases, supported the performance of Construction and Real Estate. Corporate Services 4.3% -42.7% 38.4% -18.0% -7.3% Information & Communication -1.2% | 28.2% 3.5% 4.8% -9.0% -12.6% g Jan-Sep '21 g Jan-Sep '20 g Q3-21 g Q2-21 g Q1-21 Note: Sectoral Revenues do not include Property Tax, Tax borne by Govt (DTP), and Oil & Gas Income Tax 32#3320 Growth 2020 10 4.9 13.3 Growth 2021 3.4 9.5 7.6 0 -4.6 -2.5 -0.5 -3.1 -10 -6.1 -4.8 -5.6 -15.6 -10.8 -12.0 -20 -15.3 -14.7 -16.9 Jan Feb Mar Apr May Jun Jul Aug Sep Manufacturing Trade 30% 10% -10% -30% 30% 13.7% 10% -10% -30% 20.2% TAX REVENUE GROWTH IS GETTING CLOSER TO ITS TARGET Target growth 2021: 14,7% - Tax receipt increased consistently, booked growth of 13.3% in September (ytd). This makes the realization closed to the target of 14.7% in the 2021 state budget. This improvement was also reflected by major sectors that grew positively. Even though some other sectors contracted, the realization up to September was way better compared to in early 2021. Financial Services And Insurance Construction and Real Estate 30% 30% 10% 10% -3,0% -10% -10% -3.8% -30% -30% Jan Feb Mar Apr Mei Jun Jul Ags Sep ICT Jan Feb Mar Apr Mei Jun Jul Ags Sep Transportation and Warehousing Jan Feb Mar Apr Mei Jun Jul Ags Sep Jan Feb Mar Apr Mei Jun Jul Ags Sep Mining Corporate Services 30% 17,7% 30% 38.4% 30% 40% 5.0% 10% 10% 10% -1,2% -10% -10% -10% -10% -30% -30% -60% -30% Jan Feb Mar Apr Mei Jun Jul Ags Sep Jan Feb Mar Apr Mei Jun Jul Ags Sep Jan Feb Mar Apr Mei Jun Jul Ags Sep Jan Feb Mar Apr Mei Jun Jul Ags Sep 33#34CUSTOMS AND EXCISE REVENUE PER 30 SEPTEMBER 2021 GROWING SIGNIFICANTLY Driven by positive performance of all components of acceptance ☑ NAGARA DARA RAKA Customs and Excise Revenue Rp182.9 T(85.1% of the Budget target, grew 28.9%) Import Duty grows 13.7% Influenced by the trend of national import performance which continues to increase. • Excise duty grows 15.1% • Effectiveness of policies (tariff adjustment) and supervision (Gempur Operation) in the field of Excise; Improving conditions for the national pandemic, especially relaxation (opening) of tourist destinations. Export Duty grew 910.6% Encouraged by the increase in exports of copper commodities and the high price of palm oil products. DGCE revenue is still growing, driven by the positive trend of customs and excise which continues to grow, as well as convincing performance of Export duty. 34#35REVENUE OF IMPORT DUTIES AND EXPORT DUTIES GREW POSITIVE Growth of Import Duty drove by an increase in national import activity; Export Duty grew significantly, contributed by Export Duty for palm and copper products. MONTHLY IMPORT DUTIES REALIZATION Import Duties Realization 2019 Import Duties Realization 2021 (trillion rupiah) Import Duties Realization 2020 Accumulative 3.47 Growth (yoy) EXPORT DUTIES PERFORMANCE, JAN- SEP (trillion rupiah) 2021 performance is the best in history 22.56 3.02 2.72 13.94% Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Des Growth in Revenue of 5.18 2.63 2.28 2.23 2017 2018 Import Duties is influenced by the performance of national imports, which have improved, the performance of the September Import Duty is also influenced by the extra effort of the tax court decision; Export Duty Revenue throughout 2021 grew significantly, influenced by the increase in prices (commodities) and volume of: ✓ Export Duty revenue performance, which amounted to Rp22.56 T or grew by 910.56% (ytd), was the best compared to the previous few years; ✓ The increase in commodity prices (palm and metals) can be optimized from the national industry. 2019 COMMODITIES BOOM $ fil 910.56% 2020 2021 CPO Base Metal CPO prices continue to increase due to tight supplies Base metal prices skyrocket due to the energy crisis and decarbonisation policies 35#36TOBACCO PRODUCT EXCISE REVENUE IS GROWING Driven by tariff adjustment policies and effectiveness of supervision Performance until Sep 2019 102.7T 2020 111.5 T 2021 128.3 T REVENUE PERFORMANCE ON EXCISE OF TOBACCO PRODUCTS (Trillion Rupiah) Jan Feb Mar Apr May Jun Jul Aug Accm Growth 2021 vs 2019 2019 2020 ■2021 Accm Growth 2021 vs 2020 Performance until Sep 2019 250.2 MBtg 2020 226.2 MBtg 2021 235.8 MBtg PERFORMANCE OF TOBACCO PRODUCTS PRODUCTION (Billion Stems/MBtg) 31.82 25.0% 15.1% 17.2 17.1 13.7 Sep 1. Revenues up to September 2021 grew 15.1% (ytd: 2020), influenced by the effects of tariff adjustment policies and improved production performance; 2. Receipts for September 2021 were affected by advance settlement from October and an increase in orders for June bands by 31.9% (yoy) maturing in Sept. 1. Accumulative production performance up to September 2021 grew by 4.3% (ytd: 2020); 4.3% 2. The growth in production is driven by the positive -5.7% 27.27 29.85 Jan Feb Mar Apr May Jun Jul Aug Sep Accm Growth 2021 vs 2019 2019 2020 2021 Accm Growth 2021 vs 2020 performance of Groups 2 and 3, the impact of the effectiveness of supervision that suppresses the circulation of illegal cigarettes; 3. However, the production of tobacco products in 2021 is still lower than the pre-pandemic period in 2019. 36#37PERFORMANCE OF SUPERVISION NOT ONLY PROTECTING COMMUNITY/INDUSTRY BUT ALSO THE STATE REVENUE TOP 10 ENFORCEMENT Estimated value of goods ENFORCEMENT IN 2021 Number of Enforcement 4000 3586 21,062 21,964 21,306 3000 resulting from enforcement Billion rupiah 14.543 8,204 2000 11760 1000 0 Cigarettes, 49.01% Other Goods, 25.87% Textiles, 1.74% Drug, 1.52% Land cle. Water Vehicles, 5.89% Alcoholic Beverages, 5.65% Narcotic Drugs, 5.30% Seeds, 1.57% Iron/ Steel, Machine, 1.14% 1.06% 2018 2019 2020 2021 NUMBER OF ENFORCEMENT IMPORT Jan Feb Mar Apr Mei Jun n Sept Ags 5,691 6,367 2018 2019 2020 2021 EXPORT FACILITIES 9.653 (45.31%) 10.866 (51.00%) EXCISE • The trend of enforcement action is increasing; Supervision is carried out to protect the community and domestic industry; 347 (1.63%) Efforts to take action, mostly (49.01%) were 440 (2.07%) carried out on tobacco products (cigarettes); Supervision efforts also contribute to revenue (excise) because it effectively eradicates the circulation of illegal cigarettes (Operasi Gempur) and keeps cigarettes circulating in the community are legal cigarettes. 37#38THE RESILIENCE OF INDUSTRY IN BONDED ZONES CONTINUES TO IMPROVE AND POSITIVELY IMPACT ON THE LABOR ABSORPTION EXPORT AND IMPORT Import Export (BILLION USD) Beginning of COVID-19 21.67 THE NUMBER OF LABOR (MILLION PEOPLE) 18 18 1266 14,79 17 1.7 8,32 16 3.81 Q1' 19 Q2' 19 Q3' 19 Q4' 19 Q1' 20 Q2' 20 Q3' 20 Q4' 20 Q1' 21 Q2' 21 Q3' 21 6.57 Q1 Q2 Q3 2021 2020 19 18 Q4 KEMENTERIAN KEUANGAN • The resilience of industry in bonded zones continue showing improvement trend since Q1- 2020 until Q3-2021, as can be seen from the performance in the 2021 compare to 2020, as well as to 2019 • Workers in bonded zone were under pressure in 2020, affected by the pandemic. However, in Q4-2020 there was an improvement in labor absorption and continued until Q3-2021 Labor absorption in bonded zones and export facilities was higher in 2021 compare to 2020 Source: IKC, PPS as of 30 September 2021 estimated 42#39THE REALIZATION OF NON-TAX REVENUE AS OF SEPTEMBER 2021 REACHED 107.6% OF APBN The realization grew by 22.5% mainly supported by increasing of natural resources management and other services Non-Tax Revenue IDR 320.8 T (107.6% of allocation in APBN) Oil and Gas Grew by 16.4% (82.7% of allocation in APBN) The increase in Oil and Gas was mainly due to the increase in ICP in the last 10 months NAGARA DARA RAKA Non-Oil and Gas Grew by 78.3% (119.8% of allocation in APBN) Increasing commodity prices: coal, gold, silver, copper, tin and nickel prices Supported by rising forestry and geothermal sectors: increased production of timber, use of forest area, and increase in revenue from geothermal exploitation BU Non-Tax Revenue Restricted State Assets (112.9% of allocation in APBN) Influenced by the decline in the performance of banking SOEs in 2020 due to the pandemic and the absence of depositing BI mn surplus Other Non-Tax Revenue Grew by 32.9% (93.2% of allocation in APBN) Increase in Sales of Coal Mining Products, Crude Oil Revenue, and other services of Line Ministries (radio frequency, agrarian services, and Police) Revenue of Public Service Agency Grew by 94.0% (157.7% of allocation in APBN) Increase in revenue from the oil palm plantation funds, education services, and telecommunications services 39#40THE REALIZATION OF LINE MINISTRIES' OPERATIONAL SPED UP TO September GREW BY 42.4% YOY (2020: 9.1%) Influenced by the acceleration of payments for several PEN 2021 programs Operational (Good and Services) Spending Realization HASARA DARA RANCA Operational Spending Realization by Line Ministries (IDR Trillion) IDR Trillion Up to Sept 2021 317.1 Up to Sept 2020 222.7 +9.1% Operational Spending Realization by Program (Trillion IDR) Operational & Non- 123.5 Operational Goods 80.40 24.0 Maintenance 18.1% 20.40 Business Travelling 14.9 11.70 27.5% Public Service Agency's Goods 58.4 40.10 Submitted to the Community/Local Gov't 76.5 54.00 Ministry of Health 2020 2021 Ministry of Public Works and Housing 18.5 78.8 19.4 28.1 326.6% 45% +42.4% 87.9% of Budget 1.91% of GDP Ministry of Religious Affairs (MORA) 13.1 14.6 Ministry of Finance 11.2% 24.2 42.2 74.5% CPO Fund 16.2 35.7 53.5% Patient treatment claim, Health Staff Incentives, MORA's School operational Assistance ■Realization up to Sept 2021 Realization up to Sept 2020 Benefits to The Community Vaccine shots to People Vaccine 1 (91.1 Million) Vaccine 2 (51.1 Million) total vaccine doses 107.3 million valued at IDR21.1T Assistance for 12.7 million Micro Business Actors Total valued at IDR15.2 T DO 511.7 thousand Covid-19 patients who get treatment costs Total valued IDR33.6 T 7.7 million private school students (MORA) have received School Operational Assistance IDR8.3 45.5% 41.8% Assistance for Micro Enterprises, vaccines procurement, Internet Quota subsidy, Wage subsidy T The distribution volume of subsidies for the difference in biodiesel prices is 6.94 million kiloliters valued at IDR 35.7T#41REALIZATION OF CAPITAL EXPENDITURE GREW SIGNIFICANTLY BY 62.2% (YOY) Primarily for the payment of advanced basic infrastructure projects in 2020 and connectivity infrastructure and equipment procurement Capital Expenditure Realization IDR Trillion Up to Sept 2021 HAGARA DARA RANCA Capital Expenditure Realization by Line Ministries (IDR Trillion) Ministry of Public Works and Housing Indonesia National Police +62.2% 28.2 50.7 79.9% 2020 2021 8.5 19.2 126.3% Up to Sept 2020 Growth -9.0% 2015 - 2019 (average) at 42.0% of Budget Capital Expenditure Realization by Program Ministry of Defense 16.3 18.5 13.4% Ministry of Transportation 8.3 9.0 8.9% Benefits to The Community (IDR Trillion) Machine Tools Buildings 15.1 10.9 45.3 70.4% 26.6 38.6% Roads, Irrigation, 52.6 Internet Networks 30.0 I Realization up to Sept 2021 75.1% Realization up to Sept 2020 Dam construction progress at 69.28% of 10 new dams and 43 follow-ups valued at IDR 11.94 T Irrigation network Progress at 67.80% of 600 km Progress 72.19% of 3,900 km valued at IDR4.40 T ကိုကား Road Construction Progress at 55.46% POLICE 213.63 km Road Preservation reached 78.29% of 57,793.54 km valued at IDR 17.90 T Hospital Construction at 33% of 21 hospitals and medical equipment, valued at IDR 0.31T Railroad progress at 68.23% from the target 216.84 km'sp, valued at IDR 1.9T Bridge construction reached 57.80% of 18,945.24 m, Bridge Preservation at 73.08% of 508,614.39 km valued at IDR 3.57 T Modernization of Police's tools, facilities and infrastructure reached 89.8% of 29,372 units valued at IDR 16.16 T Modernization of main equipment and weapon, tools, and others Defense Facilities reached 5.80% of 8,412 units valued at IDR 12.4 T#42THE REALIZATION OF SOCIAL PROTECTION BUDGET UP TO 30 SEPTEMBER 2021 Used for the distribution of PEN Program assistance as a cushion for poor and vulnerable families affected by the Covid-19 pandemic Social Protection Budget Realization up to 30 Sept 2021 HAGARA DARA RANCA Utilization of Social Protection Budget in the Line Ministries Spending (Trillion IDR) Transfer to Region and Village Fund; 14.9 Ministry of Social Affairs Family Hope Program/Program Keluarga Harapan for 10 million families valued at IDR 20.7 T for 17.1 million families valued at IDR 29.2 T Line Ministries; 141 IDR 304.1 Trillion (86.2% of Budget) Non Line Ministries; 148.3 Food Card SEMBAKO Cash Transfer Utilization of Social Protection Budget in Non-Line Ministries Spending Ministry of Cooperatives and SMEs Electricity Discount Interest subsidy for MSMEs for 32.6 million Customers valued at IDR 5.63 T valued at IDR 14.51 T Ultra Micro Business Assistance Ministry of Labor Kartu Pra-Kerja Pre-Employment Program Utilization of Social Protection Budget in Transfer to Region for 5.97 million participants valued at IDR21.2 T Wage Subsidy Village Fund BANTUAN LANGSUNG TUNAI DANA DESA BLT-DANA DESA Cash Transfer for 5.6 million families valued at IDR14.9 T for 10.0 million families valued at IDR 17.23 T for 12.7 million businessmen IDR 1.2 M for each businessman for 5.07 million workers IDR 1M for each worker (paid two months at a time) 42#43THE REALIZATION OF ENERGY SUBSIDY INCREASED COMPARED TO 2020 Influenced by economic prices and the realization of the distribution of the volume of subsidized goods Energy Subsidy NAGARA DARA RARA (IDR Trillion) Non-Energy Subsidy (IDR Trillion) Realization up to Sept % of Budget Realization up to Sept % of the Budget 2021 79.8% 88.2 2021 67.5% 43.8 +18.3% +10.1% 2020 78.0% 74.6 -15.1% 2020 41.2% 39.7 +7.8% Higher realization of energy subsidies, including the realization of electricity discounts for households and MSMEs of IDR 5.6 T The higher realization of Non-Energy Subsidies was supported by the acceleration of implementation at the beginning of the year, especially for PEN programs, such as the KUR Interest Subsidy and the IJP Subsidy. Subsidy Distribution up to Aug 2020 2021 Subsidy Distribution up to Aug 2020 2021 Fuel (Diesel and Kerosene) (thousand KL) 9,335.8 10,244.6 KUR interest rate subsidy (million debtors) 3.9 5.6 LPG 3 kg 4,701.5 4,921.4 3kg (million kg) KUR Distribution 130.7 209.2 (IDR Trillion) Subsidized Electricity Costumers 36.65 37.84 (million costumers) Down payment assistance 23.5 99.4 Volume of electricity subsidy (SBUM) 40.23 41.74 (thousand houses) consumption subsidy (Twh) 43#44TRANSFER TO REGION AND VILLAGE FUND (TKDD) REALIZATION 2020-2021 AS 30 SEPTEMBER TKDD 2021 disbursement is still slightly lower than 2020 TKDD Realization and percentage to APBN HIGHLIGHT 2020: Perpres 72/2020 2021: Perpes 113/2020 TKDD 2020 2021 Growth IDR 629.70 T 541.47 T (14.0) 82.4 % IDR 69.99 T 68.1 % 60.05 T Revenue Sharing (DBH) (14.2) 81.0 % 58.9 % IDR 321.30 T 306.29 T General Allocation Fund (DAU) (4.7) 83.6 % 78.5 % Physical Special Allocation Fund (DAK Fisik) IDR 49.89 T 20.54 T (58.8) 92.8 % 31.5 % Non-Physical Special Allocation IDR 99.11 T 89.25 T (9.9) Fund (DAK NF) 77.0 % 68.0 % IDR 16.02 T 8.28 T Regional Incentive Fund (DID) (48.3) 86.6 % 61.3 % Special Autonomy & Privilege Fund for Yogyakarta IDR 15.72 T 6.90 T (56.1) 75.3 % 32.4 % IDR 57.67 T 50.17 T Village Fund (13.0) 81.0 % 69.7 % * Notes: TKDD allocation 2021 have been adjusted based on refocusing program HAGARA DARA RANGA . TKDD disbursement as September 30, 2021 amounting to 68.1% of the total allocation. Distribution of Revenue Sharing (DBH) and General Allocation Fund (DAU) was lower since 90 local governments have not submitted distribution requirements • The distribution of Physical Special Allocation Fund (DAK Fisik), Regional Incentive Fund (DID) and Village Fund were lower related to the easing of disbursement requirement in 2020 • Village fund disbursement was lower since the recipient number of village cash transfer was rationalized in line with the economic recovery 44#45-2,11% 603.57 T LOCAL SPENDING REALIZATION AS OF SEPTEMBER 2021 STILL LOWER Realization of health and social spending were still lower than last year Local Spending as of September THE TYPE OF SPENDING Personnel Exp 258.43 T 265.87T Operational Exp 155.18 T 137.73T (12.7%) (12.9%) 2021 Allocation: 1217.74T 50.57T (4.2%) As of September 2020 49.56% of allocation Capital Exp 55.39T (5.2%) 616.59 T Other Exp 139.40T 157.59 T (11.4%) (14.7%) Pagu Belanja: 1069,80 T 57.64% of allocation As of September 2021 As of September 2020 HASARA DARARARA SPENDING BY FUNCTION Education As of September 2021 As of September 2020 183.96 T 15.1% of allocation 181.42T 17.0% of allocation 1.4% ✓ Realization of education spending as of September 2021 grew 1.4% (y.o.y) with the largest absorption in personnel spending for salaries of teachers and educators. ✓ Health spending grew -3.7%. The local government needs to accelerate the use of the budget for handling Covid-19, vaccine support, and health care. ✓ Social protection spending grew by -27.4% with an absorption of 0.5% of allocation. The local government needs to encourage the absorption of social assistance to help people affected by the pandemic. Health As of September 2021 As of September 2020 Social As of September 2021 As of September 2020 95.36 T 7.8% of allocation 98.99 T 9.3% of allocation 6.67 T 0.5% of allocation 9.19 T 0.9% of allocation -3.7% -27.4% 45#4620% 0% 60% AS OF SEPTEMBER 2021, THE REALIZATION OF REGIONAL REVENUE WAS HIGHER COMPARED TO REGIONAL SPENDING The realization of regional revenue (61.2%) is higher than the realization of regional expenditure (49.6%). HASARA DARA RANCA The difference between revenue and expenditure realization was the highest in DI Yogyakarta (20.39%) and the lowest in South-East Sulawesi (-0.62%). Although the realization of income (including income from TKDD) is quite high, this is not accompanied by the realization of expenditure. The relatively low realization of spending indicates that spending has not been optimal, and also has an impact on the high value of local government deposits in banking. 80% % Revenue Realization % Spending Realization 40% Aceh North Sumatera West Sumatera Riau Jambi South Sumatera Bengkulu Lampung DKI West Java Central Java DIY East Java West Kalimantan Central Kalimantan South Kalimantan East Kalimantan North Sulawesi Central Sulawesi South Sulawesi South East Sulawes Bali West Nusa Tenggara East Nusa Tenggara Maluku Papua Noth Maluku Banten Babel Gorontalo Riau Island West Papua West Sulawesi Noth Kalimantan 46#47• Aceh North Sumatera West Sumatera Riau Jambi 100 200 300 2019 2020 2021 LOCAL GOVERNMENT DEPOSITS Local Government Saving 2019 - 30 September 2021 0 Jan Feb Mar Apr Mei Jun Jul 2019 153.47 176.03 2020 151.83 165.02 2021 133.50 163.95 200.02 177.52 182.33 228.97 197.63 231.70 190.98 165.59 196.21 194.54 172.55 190.13 225.47 188.30 Agt Sep 220.05 245.58 227.14 239.53 173.73 178.95 194.12 Okt Nov Des 261.23 238.75 101.52 247.45 218.60 93.96 Bengkulu South Sumatera Lampung DKI West Java Central Java DIY East Java Comparation Local Government Deposit and Operational Expenditure for 3 months* (IDR Billion) East Kalimantan West Kalimantan South Kalimantan Central Kalimantan North Sulawesi Savings *Operational Expenditure for 3 months: Estimated personnel expenditure needs and expenditure on goods and services for the next 3 months South Sulawesi Central Sulawesi South-East Sulawesi Bali West Nusa Tenggara East Nusa Tenggara Papua Maluku North Maluku Banten Operational Spending Babel Gorontalo Riau Island West Papua West Sulawesi North Kalimantan HASARA DARA RAKA In September 2021, the position of local government deposits was IDR 194.12 trillion, increased by IDR 15.16 trillion (8.47%) from the position in August 2021. Compared to the position of September 2020 (y.o.y), in September 2021 there was also a decrease of IDR 45.4 trillion (-18.96%). The average balance at the end of the year for the last 3 years is IDR 96 trillion. There are still provinces with greater savings than operating costs for the next 3 months. The highest gap was in East Java (IDR 11.80 T) and the lowest was in Lampung (IDR - 968.45 B). The absorption of capital expenditure (26.0%) was low, so that the budget will be realized optimally in October - December following the completion of work The utilization of cash in the regions needs to be optimized, including for procurement in operational spending 47#48THE DEVELOPMENT OF COVID-19 HANDLING EXPENDITURE AND HEALTH WORKERS INCENTIVES IN THE REGION COMING FROM EARMARK DAU/DBH 2021 . Realization of DAU/DBH Earmarks for Covid-19 Handling from March to 30 September increased from IDR 1.31 trillion to IDR 14.71 trillion or an 11-fold increase, with an average growth of 51.29% per month In general, the absorption of health and other priorities spending related to COVID-19 handling from DAU/DBH Earmarking was still low, with the realization of IDR 14.7 Trillion (37.6% of allocation). . . With the current method, the realization of incentive payments for regional health workers was improved as the rapid increase in realization from June by IDR 0.6 T to IDR 4.9 T at the end of September. In general, the absorption of health and other priorities spending for Health Worker Incentives from DAU/DBH Earmarking was still low, with the realization of IDR 4.9 trillion (53.6% of allocation). Realization of General Allocation Fund Earmark on Pandemic Handling Average growth 51.29% Realization of Health Workers Incentives in the Region Average Growth 142% per month 6000 IDR Trillion March 1.31 2.23 3.63 April May June July August Realization (IDR Billion) Growth (%) 5000 4,910.87 14.71 September 4,910.87 11.70 20% 9.83 August 6.40 4,086.70 88% IDR Billion 4000 3000 2000 July 2,177.20 246% 1000 82.7 251.4 629.5 June 629.5 0 150% September May 251.4 204% April 82.7 Average 142% • Data as of 30 September 2021 based on 542 report of the regions Including of allocation coming from DBH and APBD April May June July August September 4,086.70 2,177.20 48#49THE REALIZATION OF REGIONAL ECONOMIC RECOVERY FROM EARMARK OF DAU/ DBH IN 2021 • • Realization of DAU/DBH Earmarks for Covid-19 Handling from March to September increased from IDR 0.6 Trillion to IDR 9.2 Trillion, with an average growth of 43.5% per month In general, the realization of economic recovery program in the region including social protection and economic incentives was is still low. The total realization which coming from the DTU earmark was IDR 9.22 trillion (36.39% of allocation). IDR Trillion 10.00 8.00 The Realization of Economic Recovery Spending in the Region Average growth 43.5% each month 9.22 8.61 6.79 6.00 5.02 4.00 3.40 1.69 2.00 0.61 0.00 March April May June July August September 49 NAGARA DARA RARGA#50REALIZATION OF INVESTMENT FINANCING RP75.1 T Disbursement to PT HK, PT PLN, PT SMF, PT PAL, PT Pelindo III, PT KIW, BLU LPDP, BLU PPDPP, BLULMAN, LDKPI BLU, and Regional PEN Loans LPDP PPDPP LMAN Regional PEN Loans 20.0 15.1 11.1 10.0 PT HK 6.2 PT PLN 5.0 PT SM F 2.3 LDKPI 2.0 PT PAL .3 PT Pelindo III 1.2 PT KIW 1.0 Realization of Investment Financing As of 30 September 2020 2021 11% 40% The realization of investment is accelerated, for faster utilization. لنا 4 Governance is improved with the Key Performance Indicator (KPI) of Investment Financing Disbursement of Investment Financing allocation is based on performance and urgency analysis Investment Financing Realization in September of Rp13.32 T Capital Injection (PMN) to PT PLN Rp5.OT To accelerate the progress of achieving the electrification ratio, reduce the funding gap to support the development of electricity infrastructure, and improve PLN'S DER. PMN to PT SMF Rp2.25 T SMF To help reduce the housing backlog, especially for low-income people. ppdpp BLU PPDPP: Rp2.62T To implement the Housing Financing Liquidity Facility program and increase low income people's accessibility to housing loans. PMN to PT KIWRp0.97 T NAGARA DARA RAKA For the development of the Batang Integrated Industrial KIW Estate (KITB) of Central Java Province. PMN to PT Pelindo III Rp1.2T To continue the construction work of Benoa Harbor. PELINDO III NDONESIA PMN to PT PAL Rp1.28T For the preparation of infrastructure for the construction and maintenance of submarines in order to improve the mastery of submarine construction technology. 50#51THE STATE EXPENDITURE AND INVESTMENT ARE FULFILLED BY REVENUE AND FINANCING Improved spending and investment performance for handling the Covid-19 pandemic and economic recovery accompanied by more optimal Tax and Non-Tax Revenues and financing support TAX REVENUE Increased NAGARA DARA RAKA EXPENDITURE Budget: IDR2,750.0T Realization: IDR1,806.8T (65.7%) 1.9% YoY CG Spending: IDR1,265.3T 4.4% Regional Transfer: IDR541.5T (14.0%) Budget Deficit and Primary Balance Deficit: IDR452.0T (2.74% to GDP) Primary Balance: IDR198.3T FINANCING INVESTMENT Increased Budget: IDR187.1T Realization: IDR75.2T (40.1%) 172% YOY Budget: IDR1,006.4T Realization: IDR621.9T (61.8%) Budget: IDR1,229.6T Realization: IDR850.1T (69.1%) 13.2% YoY CUSTOMS and EXCISE Increased Budget: IDR215.OT Realization: IDR182.9.0T (85.1%) 29.0% YoY NON-TAX REVENUE Increased Budget: IDR298.2T Realization: IDR320.8T (107.6%) 22.5% YoY 51#52Budget Financing (IDR T) Debt Financing BUDGET FINANCING SUPPORTS THE ECONOMIC RECOVERY Financing performance was on track, supported by conducive market and synergy between authority Budget Financing Realization: IDR621.9T 2020 2021 Realization as of Sep % of Budget YOY (%) Budget Realization as of Sep % of Budget YOY (%) 810.0 66.4 154.8 1,177.4 647.2 55.0 (20.1) or 61.8% of its target Government Bond (net) 790.6 67.4 139.2 1,207.3 666.7 55.2 (15.7) ▼ 20.6% (YoY) Government Borrowing (net) 19.4 41.5 (253.4) (29.9) (19.5) 65.0 (200.4) Investment Financing (27.2) 10.6 145.5 (184.5) (75.2) 40.7 175.8 Government Lending 2.0 35.2 102.5 0.4 2.1 683.0 49.6 Guarantee (0.4) 71.3 (2.7) Other Financing 0.2 0.2 677.9 15.8 46.7 296.4 27,233.6 Total 784.6 75.5 154.9 1,006.4 621.9 61.8 (20.7) • The conducive domestic financial market and strong Indonesian fundamentals have had a positive impact on the primary SBN market and supported the well-maintained performance of SBN auctions. In 2021, BI's participation has reached IDR142.74 T, consisting of SUN of IDR97.507 T and SBSN of IDR45.237 T. • The issuance of SBN to BI according to SKB III will be carried out in November and December. The target for the SBN auction is lowered to optimize the Government's liquidity, however, it is necessary to watch out for tapering effect at the end of the year and the potential for yield increases. Acceleration of investment financing to support financing of priority sectors, such as education and infrastructure. 52#53MACROECONOMIC INDICATORS DEVELOPMENT 6.36 (ytd)** 72.2(eop) Economic Indicator Development 2021 Economic growth: Second Quarter 2021 GDP grew by 7.07%. The 2021 GDP outlook figure is in the range of 3.7-4.5% Inflation rate: inflation in September was recorded at 0.04% (mtm) driven by the deflation on volatile food group and slower inflation on core inflation, while the administered prices group increased. Rupiah Exchange Rate: The rupiah was steady in early October 2021, and the average was recorded at IDR14,325(ytd). Up to October 11, 2021, the Rupiah (ytd) depreciated by 2.26% compared to the initial exchange rate in 2021. SBN 10 Years: The weighted average yield of 10-Year Government Securities is 6.36% (ytd). The last auction was on October 12, 2021, with a yield of 6.21%. Indonesian Crude Oil Prices: The ICP price increased compared to previous month, due to decreased global oil supply. Oil and Gas Lifting: Oil and gas lifting up to August 2021 is 652.6 thousand bpd and 1,039 thousand bpd, respectively 2020 2021 INDICATOR Realization State Budget Up to September Economic Growth -2.07 5.0 3.10 (ytd) (%, yoy) Inflation 1.6 3.0 (%, yoy) Exchange Rates 0.80 (ytd) 1.60 (yoy) 14,210(eop)* 14,578 14,600 (Rp/US$) 14,325(ytd)* 10-years treasury bond yield 6.21 (eop)** n/a 7.2 (%) ICP (Oil Price) 40.4 45 (US$/Barrel) 65.2 (ytd) Oil Lifting 652.6(eop)* *** 706 705 (thousand barrel per day) 660 (ytd) Gas lifting 1,039 (eop)* *** 975 1,007 (thousand barrel – equal oil per day) 1,010 (ytd) *as of Oct 11, 2021 **the latest auction was in Sept 12th, 2021 *** as of Aug 2021 53#54THE LAW ON HARMONIZATION OF TAX REGULATIONS#55DEMOGRAPHY INDONESIA 2045 309 Million population 52% Productive age PREREQUISITE solid infrastructure 75% Living in cities 80% Middle income • • • ECONOMY World's 4th largest Per capita income: US$29,300 More productive economic structure Advanced services sector human capital development innovation & technology adoption stronger regional development Robust economic policy - sound budget macro stability political stability Source: Ministry of Finance Estimation 55#56COMPREHENSIVE STRUCTURAL REFORMS ARE NEEDED TO CAPITALIZE DEMOGRAPHIC DIVIDENT Fiscal reform will facilitate further structural reforms Human Capital Improve the quality of education, health, and effectiveness of social protection to improve the quality of human resources. FISCAL REFORM Tax reform, improvement of spending quality (spending better) & innovative financing Continue the acceleration of infrastructure development through digital infrastructure and logistics efficiency, as well as connectivity. Infrastructure development (Physical capital) Real Sector Reform through Omnibus Law on Job Creation L Deregulation Simplification of Bureucracy Transformation of Economy ■ Job Creation ■ Ease of Starting Business ◉ Support the Eradication of Corruption Investment ecosystem improvement • Business licensing . Employments • MSME Supports • . Ease of Doing Business Research & innovation Land procurement Economic zones • Central government investment & national strategic projects acceleration Government • administration Imposition of Sanctions Financial Sector Reform • Deep financial markets – Depth Broadly accessible financial sector - Access • Efficient, strong and stable financial system – Efficiency • . 56#57MINISTRY OF FINANCE INDONESIA FAVORABLE DEMOGRAPHIC CHANGES AS AN OPPORTUNE MOMMENT FOR TAX REFORM Increasing middle-class group could be capitalized to strengthen government revenues in the future The share of the aspiring and middle-class group continues to increase (%) 7,0 10,2 16,6 22,5 41,2 44,2 44,5 47,0 22,5% Share of Middle Income Population in 2018 increased 15.5 ppt from total population in 2002 Consumption of the aspiring and middle-class group increases significantly (IDR Trillion) 350 300 250 250 200 51,8 45,5 38,5 30,0 Source: Workl Bank (2020) Rp Triliun 150 100 50 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Poor and Vulnerable Aspiring Middle Class Middle Class Upper Class Through tax reforms, state revenue could be strengthened along with favorable demographic changes. 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Poor and Vulnerable Aspiring Middle Class Middle Class Stronger consumption on the back of rising middle- class group could boost tax revenue, particularly VAT and personal income tax. 57#58MINISTRY OF FINANCE INDONESIA TAX REFORM PROMOTES A FAIRER, HEALTHIER, EFFECTIVE, AND ACCOUNTABLE TAX SYSTEM Flexible to changes in the structure, technology and business activities Flexibility Non distortionary effect Neutrality Tax System Efficiency Minimal compliance and collection cost Effective as a policy instrument to create fairness Effectiveness and Fairness Stability Adequate and sustainable Certainty and Simplicity Easy, simple and ensure legal certainty 58#59MINISTRY OF FINANCE INDONESIA THE URGENCY OF TAX REFORM Stronger and Broader Tax Base ✰ Growing consumption Higher Income Per Capita Healthier and Sustainable Budget Stronger State Revenue ✰ Low Budget Risk and managable financing risk High Economic Growth Boost investment and job creation Improve ease of doing ܀ business TOWARDS FAIR, HEALTHY, EFFECTIVE, AND ACCOUNTABLE TAX SYSTEM TAX REFORM Policy Reforms Administration Reforms Broadening tax base . Simpler and more efficient tax administration . Enhance competitiveness • Ensuring legal certainty • More efficient and effective tax incentives which are in line with global tax dynamics . Utilizing financial data and information • . Tax incentives are more prioritized for high value-added sectors with larger job creation Flexible to changes of the economic structure, business activities including digital economy • In line with global tax changes and best practices • Reducing excessive tax exemptions and distortionary effect . High tax compliance. . Improving tax progressivity. 59#60TAX REFORM STRENGTHENS THE STATE BUDGET FUNCTION TO ENHANCE SOCIAL WELFARE The State Budget as an instrument to realize fair and ALLOCATION Public Goods prosperous society $ श्री DISTRIBUTION Income Redistribution STABILIZATION Economic Stability & Growth ■ Over the last 10 years, state revenue has been in downward trend to around 10% of GDP limiting fiscal space. In response to Covid-19 crisis, the state budget is used as countercyclical measures to tackle the health crisis, provide lifeline support to poor and vulnerable family and businesses, and facilitate economic recovery. ■ Fiscal reform is aimed to strengthen long-term fiscal sustainability to facilitate comprehensive structural reforms in order to enhance long- term potential growth. 60#61LAW ON HARMONIZATION OF TAX REGULATIONS 1 Principles a. fairness 3c b. simplicity c. efficiency d. law certainty e. beneficial f. national interest Contents 2 Objectives a. Increasing economic growth and support accelerated economic recovery b. Optimizing state revenue c. Realizing a fair taxation system and legal certainty d. Implementing administrative reforms, consolidated tax policies, and expanded tax base e. Improving voluntary compliance of taxpayers a. Revision on the General Provisions and Tax Procedures Laws (UU KUP), effective from enactment date b. Revision on the Income Tax Law (UU PPh), effective from 2022 fiscal year c. Revision on the Value Added Tax Law (UU PPN), effective from 1 April 2022 d. Taxpayer Voluntary Disclosure Program, from 1 January to 30 June 2022 e. Carbon Tax, effective from 1 April 2022 f. Revision on the Excise Law (UU Cukai), effective from the enactment date 61#621. INCOME TAX Income Tax Income Range 1. Individual Income Tax Rates Change in individual income tax rate and brackets to promote fairness. Rate Bracket HPP LAW Income Range Rate Rate | 0-Rp50 million 5% 0 - Rp60 million 5% || > Rp50 - 250 million 15% > Rp60 - 250 million 15% III > Rp250-500 million 25% > Rp250-500 million 25% IV > Rp500 million 30% > Rp500 million - 5 billion 30% V >Rp5 billion 35% Individual income tax is imposed to income exceeding Non-Taxable Income (PTKP). In the HPP Law, no change made to the amount of annual PTKP. For individual taxpayers: Rp54 million. Additional for Married taxpayer: Rp4.5 Million Additional for combined-income from working wife: Rp54 million Additional for each dependent: Rp4.5 million (maximum 3 people). 62#631. INCOME TAX Example for Individual Income Tax Calculation Assumption: Single Individual (TK/0) (in Rupiah) Monthly Income 5 million 9 million 10 million 15 million Yearly Income 60 million 108 million 120 million 180 million PTKP (TK/O) 54 million 54 million 54 million 54 million Taxable Income (PKP) 6 million 54 million 66 million 126 million Income Income Tax Law HPP Law HPP Law Tax Law Income Tax Law HPP Law 5% x 50 5% x 6 million = 5% x 6 million = million = Income Tax Calculation 300 thousand 300 thousand 5% x 54 million = 2,7 million 5% x 50 million = 2,5 million 5% x 60 million = 3 million 2,5 million Income Tax Law 5% x 50 million = 2,5 million HPP Law 5% x 60 million = 15% x 4 million = 600 thousand Total Amount of 300 thousand 300 thousand 3,1 million Income Tax 2,7 million 15% x 16 million = 2,4 million 15% x 6 million 900 thousand = 15% x 76 million million = 11,4 3 million 15% x 66 million = 9,9 million 4,9 million 3,9 million 13,9 million 12,9 million Individual taxpayers that earn up to 4.5 million per month still do not pay Income tax at all. Individual taxpayers with annual income between 50 - 60 million above PTKP get a tax discount from the previous rate 15% to 5% 63#641. INCOME TAX Example for Individual Income Tax Calculation Assumption: Married Individual with 1 dependent (K/1) Monthly (in Rupiah) 6 million 10 million 11 million 16 million Income Yearly Income 72 million 120 million 132 million 192 million PTKP (K/1) 63 million 63 million 63 million 63 million Taxable Income (PKP) 9 million 57 million 69 million 129 million Income Tax Law Income Tax HPP Law HPP Law Law Income Tax Law HPP Law Income Tax Law HPP Law 5% x 9 million 5% x 9 million 5% x 60 million Income Tax Calculation = = 450 thousand 5% x 50 million 5% x 57 million = 2,5 million = 2,9 million 5% x 50 million = 2,5 million = 5% x 50 million = 2,5 million 450 thousand 3 million 15% x 7 million = 1,1 million 15% x 19 million = 2,9 million 15% x 9 million = 1,4 million million = million 15% x 79 11,9 5% x 60 million = 3 million 15% x 69 million = 10,4 million Total Amount of 450 thousand 450 thousand 3,6 million 2,9 million 5,4 million 4,4 million 14,4 million 13,4 million Income Tax Individual taxpayers that earn up to 4.5 million per month still do not pay Income tax at all. Individual taxpayers with annual income between 50 - 60 million above PTKP get a tax discount from the previous rate 15% to 5% 64#651. INCOME TAX 2. Taxation for Fringe Benefit Fringe Benefit is tax deductible for the employer (provider) and taxable for the employee (recipient). Some benefits are exempted as income for the employee: a. Provision of food/beverages for all employees b. Fringe benefit in certain areas c. Fringe benefit required for the work, for example: work safety equipment or uniforms d. Fringe benefit from Central/Local Government Budget e. Fringe benefit with certain types and limitations. 65#661. INCOME TAX 3. Non-taxable Gross-turnover Threshold for Individual Taxpayers. Individual entrepreneurs that calculated their Income Tax with final tax rate at 0,5% (GR 23/2018) and generates annual revenue up to Rp500 million are not taxable. Example: Income tax calculation for Mr.A, grocery store entrepreneur in 2022 Fiscal Year: Cumulative Gross- No Month Gross-turnover (Rp) turnover Non-Taxable Gross- turnover (Rp) Taxable Gross- turnover (Rp) Final Income tax Final Income tax after HPP Law (Rp) Before HPP Law (Rp) (Rp) 1 January 100.000.000 100.000.000 0 0 500,000 2 February 100.000.000 200.000.000 0 0 500,000 3 March 100.000.000 300.000.000 0 0 500,000 4 April 100.000.000 400.000.000 0 0 500,000 500.000.000 5 May 100.000.000 500.000.000 0 0 500,000 6 June 100.000.000 600.000.000 100.000.000 500,000 500,000 7 July 100.000.000 700.000.000 100.000.000 500,000 500,000 8 August 100.000.000 800.000.000 100.000.000 500,000 500,000 9 September 100.000.000 900.000.000 100.000.000 500,000 500,000 10 October 100.000.000 1.000.000.000 100.000.000 500,000 500,000 11 November 100.000.000 1.100.000.000 100.000.000 500,000 500,000 12 December 100.000.000 1,200.000.000 1.200.000.000| 100.000.000 500,000 500,000 700.000.000 3,500,000 6,000,000 Total By HPP Law Implementation: • Up to the first 5 months, Mr. A's gross-turnover has not reached Rp500 million, so he does not have to pay income tax The total income tax borne by Mr. A has decreased by Rp2.5 million from the previous Rp6 million to Rp3.5 million 66#671. INCOME TAX 4. Corporate Income Tax (CIT) Rate CIT will still be 22% for fiscal year 2022 onwards. CIT Rate Comparison of average CIT rates CIT Rate Regions 2017 2018 2019 2020 2021 CIT Rate Fiscal Year Income Tax HPP Law Law Year 2020 2021 22% OECD countries (%) American countries (%) G-20 countries (%) 23,95 23,53 23,12 22,88 22,81 28,29 28,11 27,36 27,33 27,16 Year 2022 onwards. 20% 22% ASEAN countries (%) Source: KPMG, processed 25,92 22,67 25,29 24,90 24,60 24,17 22,67 22,67 22,17 22,17 . • State revenues optimization is important to build a fair and healthy state's budget while maintaining sustainable economic growth. Change in non-taxable revenue threshold and tax rate have been made in the HPP Law, in accordance with the current conditions. Domestic MSME businesses still eligible for income tax rate reduction by 50%, as stipulated in the Article 31E of Income Tax Law. Individuals with the gross turnover up to Rp500 million are eligible for tax exemption. Thus, as one of the HPP Law's objectives to optimize state revenues by considering fairness principle, CIT rate is maintained at 22% from 2022 onwards. 67#682. VALUE ADDED TAX 1. Non-VAT-Taxable and VAT Facilities. a. VAT facilities are provided for basic goods, health services, education services, social services, and several other types of services. Low-middle income people are still not pay VAT on consumption of basic needs, education services, health services, and social services. b. Reductions of the non-VAT-taxable and VAT facilities are implemented to promote fairness and improve facilities' accuracy in while supporting the interests of society and business sector. C. This arrangement is intended to expand the VAT base while considering fairness and usefulness, especially in supporting the general welfare and national interests. The purpose of this policy is to optimize state revenues while still realizing a fair tax system with legal certainty. 2. VAT Rate and VAT Ease & Simplicity a. General Rate VAT Law HPP Law Rate Effective Rate Effective 10% Until March 2022 11% 12% From 1 April 2022 No later than 1 January 2025 b. Specific Rate For convenience in collecting VAT, a 'final' VAT rate is applied to certain types of goods/services or certain business sectors, for example 1%, 2% or 3% of business gross turnover, which is regulated by Minister of Finance Regulation (PMK). 68#693. GENERAL PROVISIONS AND TAX PROCEDURES (KUP) 1. ID Number as Individual Taxpayer Number . . The integration of the population database with the tax administration system aims to make it easier for individual taxpayers to fulfill their tax rights and obligations, and for administrative simplicity and supporting the national interest. The policy does not immediately causes every individual to pay income tax. They become taxpayers when: a. Earn annual income above non-taxable income threshold (PTKP), or b. Generates gross turnover above Rp500million in a taxable year for entrepreneurs utilizing final tax rate at 0,5% (PP-23/2018). 2. The amount of fine at the time of tax examination or tax appeal To promote fairness and legal certainty, the amount of fines at the time of tax examination and tax appeal are reduced. The policy align with the spirit of provisions in the Job Creation Law. a. Fine of tax audit and fine for taxpayers not submitting tax filing and not maintaining bookkeeping. b. Fine after legal remedies, but the objection/court decision confirms the DGT's decision. Items KUP Law HPP Law Action KUP Law HPP Law Underpaid Income 50% Tax Monthly interest equals to benchmark rate+20% uplift factor (max. 24 months) Objection 50% 30% Under-withheld 100% Income Tax Undeposited 100% Monthly interest equals to benchmark rate+20% uplift factor (max. 24 months) 75% Appeal 100% 60% Judicial Review 100% 60% withheld Income Tax Underpaid VAT & 100% 75% Luxury Tax 69#703. GENERAL PROVISIONS AND TAX PROCEDURES (KUP) 3. Taxpayer Representative To promote fairness and legal certainty, a taxpayer's representatives can be anyone, as long as they meet the requirements for taxation competence, except when the appointed representative is the husband, wife, or blood relative of 2 (two) degrees 4. Enforcement of Tax Criminal Law by prioritizing Recovery of State Revenue Loss a. To promote justice and legal certainty, until the trial stage, taxpayers are allowed to return losses to state income by paying tax principal and sanctions as consideration for being prosecuted without being sentenced to imprisonment. b. Changes in sanctions to be paid: Actions Negligence tax crime Deliberate tax crime Tax crime of making a fictitious tax invoice/proof of income tax withholding KUP Law Paying tax principal + 3x underpaid tax penalty Paying tax principal + 3x underpaid tax penalty Paying tax principal + 3x underpaid tax penalty HPP Law Paying tax principal + 1x underpaid tax penalty Paying tax principal + 3x underpaid tax penalty Paying tax principal + 4x underpaid tax penalty 70#713. GENERAL PROVISIONS AND TAX PROCEDURES (KUP) 5. Other Provisions in General Provision and Tax Procedures Law, including: Appointment of Other Party as Tax Withholder/Collector The government may appoint another party (for example, electronic transaction provider) as a Tax Withholder/Collector for transactions involving such other parties. This is a solution for the development of increasingly dynamic economic transactions, including those involving providers of electronic transactions, so tax collection can be carried out efficiently, simply, and effectively. International Cooperation for Tax Collection To realize the benefits and as a form of Indonesia's active role in global tax cooperation, active collection assistance can be carried out to partner countries, and requests for tax collection assistance to partner countries are carried out reciprocally. Mutual Agreement Procedures/MAP To provide justice and legal certainty, the Law defines the parties that can apply for a MAP and regulates that they can submit MAP request simultaneously with an Objection or Appeal. Key arrangements include: a. The MAP will continue if the material in the appeal/review decision is not the material submitted by the МАР, b. The MAP will be terminated if the material in the appeal/review is the material submitted by the MAP, c. MAP results include tax return/tax collection basis 71#724. VOLUNTARY DISCLOSURE PROGRAM (VDP) 1. The program aims to improve taxpayers' voluntary compliance based on simplicity, legal certainty, and usefulness. 2. The program provides opportunities for taxpayers to voluntarily report or disclose unfulfilled tax obligations through: a. Payment of Income Tax based on the disclosure of assets that were not or have not been fully reported by the participants of the Tax Amnesty program; and b. Payment of Income Tax based on the disclosure of assets that have not been reported in the Annual Individual Income Tax Return for Fiscal Year 2020. 3. The program is implemented for 6 months (1 January 2022 to 30 June 2022) 4. VDP consists of 2 policies: Details Subjects Asset Base Final Rate Policy I Individual and Corporate Taxpayers Participated in Tax Amnesty Asset as of 31 December 2015 which has not been disclosed in tax amnesty program • 11% for declaration 8% for domestic assets and repatriated foreign assets 6% for domestic assets and repatriated foreign assets which is invested in govt. securities/downstream/renewable energy Policy II Individual Taxpayers Assets acquired in 2016-2020 which has not been reported in 2020 tax return (SPT) • 18% for declaration • 14% for domestic assets and repatriated foreign assets • 12% for for repatriated foreign assets and domestic assets which is invested in govt. securities/downstream/renewable energy 72#734. VOLUNTARY DISCLOSURE PROGRAM (Illustration) POLICY I • Mr. A participated in the 2015 Tax Amnesty program. However, he did not disclose a house with a value as of 31 December 2015 of Rp2 billion. Therefore, Mr. A participated in the Voluntary Disclosure Program to avoid sanctions under the Tax Amnesty Law. Mr. A intends to only declare the domestic assets without investing in SBN/downstream/renewable energy, so Mr. A pays Final Income Tax at a rate of 8% of Rp160 million (8% x Rp2 billion) POLICY II . . Mr. B owns 2 houses and a bank account in Indonesia, obtained from 2016 to 2020. The 2 houses have been reported in the 2020 Annual tax return, worth Rp3 billion, but a bank account worth Rp1 billion has not been reported in the 2020 Annual SPT. Mr. B will participate in the Voluntary Disclosure Program and intends to invest his money in SBN, so Mr. B pays Final Income Tax at a rate of 12% of Rp120 million (12% x Rp1 billion). 73#745. CARBON TAX 1. Background a. To mitigate the risk of climate change and disasters in Indonesia, It is required to control the increase of greenhouse gas emissions in the atmosphere which cause the rise of the global temperature. b. Indonesia has been committed to reduce greenhouse gas (GHG) emissions by 29% (with own efforts) or 41% (with international supports) by 2030 under the Paris Agreement. C. Climate mitigation actions in Indonesia requires significant fundings. d. Economic players need to change their behaviour towards low-carbon activities. 2. Provisions in the Law on Harmonization of Tax Regulations a. A carbon tax will be implemented on a gradual basis according to a roadmap that will consider the development of a carbon market, achievement of NDC targets, sector readiness, and economic conditions. b. The implementation of a carbon tax will consider the principles of justice and affordability, taking into account the business climate and low-income people. C. The carbon tax rate is equal to the carbon price in the carbon market or higher, but with a minimum rate of Rp30.00 per kilogram of carbon dioxide equivalent (CO2e). d. The law takes effect on 1 April 2022 for the coal-fired power plant sector with a cap and tax mechanism. The scheme is in line with the implementation of the carbon market, which has already been running in the coal- fired power plant sector. 74#75CARBON TAX ROAD MAP AND CARBON TAX - CARBON TRADE IMPLEMENTATION SCHEME Carbon Tax Roadmap 2021: • Discussion and determination of the HPP Law, one of the provisions is the carbon tax • Finalization of the Presidential Regulation on Carbon Economic Value Carbon Tax – Carbon Trade Scheme Cap and Trade Cap and tax SIE/ SPE Development of technical mechanism for Carbon Tax and Carbon Exchange Emission Deficit Cap SIE/ Carbon trading piloting in the power sector by the Ministry of Energy and Mineral Resources at an average price Rp30.000/tCO2e SPE SIE/ SPE } Carbon Tax SIE/ SPE • 2022: Determination of the cap for the coal power generation sector by the Ministry of Energy and Mineral Resources • As of 1 April 2022, implementation of carbon tax (cap & tax) limited to coal powerplant at Rp30.000/tCO2e 2025: • Full implementation of carbon trading through carbon exchange Expansion of the carbon tax taxation sector in stages according to sector readiness Determination of implementing regulations for carbon tax management (cap & tax) for other sectors Emission Surplus Trading SIE/SPE A B Entities emitting more than the cap are required to purchase an emission permit (SIE) from entities that emit under the cap or purchase an emission reduction certificate (SPE/carbon offset) Trading SIE/SPE A C In the event that the entity is unable to purchase an emission permit (SIE) or emission reduction certificate (SPE) for emissions above the full cap then the remaining emissions. will be subject to carbon tax 75#766. EXCISE 6. Excise Law Amendment a. Strengthening the mechanism for determining excisable goods: adding or reducing the types of excisable goods is submitted by the government to the House of Representatives (DPR) to be discussed and agreed upon in the preparation of the Budget Plan (RAPBN). b. In adding or reducing the types of excisable goods, the concern including: • • Actual conditions amidst the COVID-19 pandemic • Economic recovery measures Policies in the fields of health, environment, and other policies, in a sustainable manner c. Applying criminal sanctions as a last resort (ultimum remedium) in excise crime for violations of permits, releasing excisable goods, unpackaged excisable goods, excisable goods originating from criminal acts, and the sale and purchase of excise stamps. d. Adjustment of the ultimum remedium administrative sanctions for excise crime as follows:: Recovery of State Revenue Loss During Examination HPP Law Excise Law Not regulated Penalty of 3x Excise that should be paid During Investigation Pays Excise + penalty of 4x underpaid Excise Penalty of 4x Excise that should be paid. 76#77TAX REVENUE STARTED TO INCREASE BY STRENGTHENED TAX REFORM Law On Harmonization Of Tax Regulations Strengthens Tax Reform Taxation Revenue and Tax Ratio 2021-2025 Macroeconomic Analysis 3,800 12.0 11.0 10.12 ✓ Economic growth is relatively unaffected ✓ Impact on Inflation is limited, < 0.5% ✓ Provide positive contribution to MSMEs with 3,300 9.53 9.22 9.29 10.0 8.58 2,800 Rp Trillion 8.44 8.46 8.51 9.0 8.56 2,323.1 8.0 2,300 2,013.2 1,969.8 1,811.1 1,798.2 7.0 1,800 1,649.3 1,649.0 1,510.0 6.0 1,413.7 1,300 5.0 a turnover threshold of Rp500 million . The 2021 tax revenue is estimated at Rp1,413.7 T (based on the realization until August 2021). • Ongoing tax reforms will increase tax revenues in 2021. 800 4.0 2021 2022 2023 2024 2025 Baseline Reform+HPP Tax ratio baseline -Tax Ratio reform+HPP • • Taxation in the 2022 State Budget is Rp1,510.0 T (tax ratio 8.44% of GDP) ⇒ exclude the impact of the HPP Law. Without reform and the HPP Law, tax ratio 2021-2025 will stagnate in 8.4%- 8.6% of GDP. With the reform and implementation of the HPP Law, the tax ratio is estimated to reach 9.22% of GDP (in 2022) and 10.12% of GDP (in 2025). • Coretax will accelerate the achievement of the tax ratio to around 10% more in 2024. % GDP 77