#1April 2021 BHINNEKA TUNGGAL IKA Republic of Indonesia Promoting Recovery: Policy Synergy to Maintain Macroeconomic Stability and Growth Momentum#2About Investor Relations Unit of the Republic of Indonesia Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to address concerns of investors, especially financial market investors. As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Financial Services Authority, Ministry of Trade, Ministry of State Owned Enterprises, and Ministry of Energy and Mineral Resources. IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of banks/financial institutions to Bank Indonesia and other relevant government offices. Published by Investor Relations Unit - Republic of Indonesia Website: http://www.bi.go.id/en/iru/default.aspx Contact: Rosita Dewi (International Department - Bank Indonesia, Ph.: +6221 2981 8232) Thasya Pauline (Deputy Ministry for Macroeconomic and Finance Coordinator - Coordinating Ministry for Economic Affairs, Ph. +6221 352 1843) Putri Rizki Yulianti (Fiscal Policy Office - Ministry of Finance, Ph.: +6221 345 0012) Subhan Noor (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Ph.: +6221 351 0714) E-mail: [email protected] This Presentation Book also can be downloaded from: https://www.bi.go.id/en/iru/presentation/default.aspx 1#3What's New in This Edition 0 Economic Recovery Program and Its Updates ...page 8-25 Indonesia's Sovereign Credit Rating ...page 29 Fiscal Policy Updates ...page 68-80 Financing Policy Updates ...page 81-92 Investment Realisation ...page 43-46 Bank Indonesia Board of Meeting Decision ...page 103-104 2#4Overview 1 Fiscal Performance and Flexibility: Economic Recovery Program and Its Updates 5 Strong Commitment in Maintaining Fiscal Credibility Institutional and Governance Effectiveness: 2 Accelerated Reforms Agenda with 6 Institutional Improvement Economic Factor: 3 Stable Growth Prospects 7 Amid Temporary Moderation External Factor: 4 Improved External Resilience 8 Commitment to Sustainability and Climate Change Mitigation Monetary and Financial Factor: Credible Monetary Policy and Favourable Financial Sector Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision 13#5Section 1 Economic Recovery Program and Its Updates BHINNEKA TUNGGAL IKA#6Concerted Efforts to Mitigate Covid-19 Risk General Measures 1 Establishment of a COVID-19 Task Force to Accelerate Coronavirus Disease 2019 (COVID-19) Handling. 80 2 Extension of the emergency status for COVID-19 until 29th May 2020. 9 3 Permission for civil servants to work from home, while maintaining the continuity of public services. 10 Decentralized tests by increasing the number of Covid-19 test laboratories throughout Indonesia. Providing Designated Hospitals, including additional designated hospital in Galang Island. Utilization of four (4) of ten (10) Wisma Atlet Kemayoran Towers (former Athletes Hotel) as emergency hospital. 4 Promoting massive prevention of the spread of Covid-19; application of health protocols in public areas, public transportation, and offices; calls for carrying out social distancing and the prohibition of carrying out activities that involve large crowds. 11 Preparation of 606 health workers and 192 non-health workers in Wisma Atlet Kemayoran and recruitment of 328 medical volunteers and 2590 non-medical personnel in the field of logistics and operations. 12 Establishment of Contingency Plans in the regions level. 5 Closing and limiting the mobility of Indonesian citizens abroad and foreigners to enter Indonesian territory with strict immigration and health protocols. 13 6 Evacuation of Indonesian citizens from affected countries and strict quarantine processes with complete medical facilities. 7 Conducting Rapid Test in 17 provinces with positive patients of Covid-19. 14 Preparation of drugs that have been used for Covid-19 patients in China according to doctor's prescription. The drug has been distributed to designated facilities and its stock is continuously being augmented with domestic pharmaceutical production. Speed up the procurement and distribution of personal protective equipment for designated hospitals and the provision of incentives for medical personnel. Source: Bank Indonesia 5 LO#7Bank Indonesia's Measures to Mitigate Covid-19 Risk To maintain Monetary and Financial Market Stability 1 Measures Launched on March 2, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms Reducing the foreign currency reserve requirement ratio for 2 conventional commercial banks from 8% to 4%, effective 16th March 2020. Reducing the rupiah reserve requirement ratio by 50bps for 3 banks engaged in export-import financing activity in coordination with the Government. Expanding the types of underlying transactions available to 4 foreign investors as hedging alternatives against rupiah holdings in Indonesia. 1 2 Measures Launched on March 18-19, 2020 Strengthening the intensity of triple intervention policy to maintain rupiah exchange rate stability in line with the currency's fundamental value and market mechanisms. Extending the SBN repo tenor to 12 months and providing daily auctions to loosen rupiah liquidity in the banking industry. Increasing the frequency of FX swap auctions for 1, 3, 6 and 12- 3 month tenors from three times per week to daily auctions in order to ensure adequate liquidity. 4 Strengthening foreign currency term deposit instruments in order to enhance foreign currency liquidity management in the domestic market. Expediting the enforcement of domestic vostro rupiah accounts 5 for foreign investors as underlying transactions for Domestic NDF, thus increasing hedging alternatives against rupiah holdings. 6 Expanding the incentive of a 50bps looser daily rupiah reserve requirement beyond banks that are engaged in export-import financing to include the financing of MSMEs and other priority sectors. 5 Global investors may utilise global and domestic custodian banks for investment activity in Indonesia. 7 Source: Bank Indonesia Strengthening payment system policy to support COVID-19 mitigation efforts. 6 CO#8Government Measures to Mitigate Covid-19 Risk Fiscal and Non Fiscal Stimuli Fiscal Stimuli Phase 1 Fiscal Stimuli Phase 2 1 Brought forward the launch of the Pre-Employment Card in Bali, North Sulawesi and the Riau Islands. 1 Relaxation of Income Tax (PPh Article 21). Increased disbursements of the Noncash Food Assistance 2 Program (BPNT) from IDR150,000 to IDR200,000 for a six- month period commencing March 2020. 2 Relaxation of Income Tax on Imports (PPh Article 22). 3 Provided a stimulus package for housing in the form of an IDR800 billion subsidy as well as a subsidy on down payments totalling IDR700 billion. 3 Relaxation of Income Tax (PPh Article 25). 4 4 Provided incentives for domestic and international travellers. Relaxation of Value Added Tax (VAT) Restitution. 5 Reduced the air passenger service fee (PSF) by 20% for March-May 2020. 6 Discounted the price of aviation fuel at airports located around nine travel destinations for March-May 2020. 7 Non-Fiscal Stimuli 1 Reduce and simplify restrictions on export activities to maintain export performance and competitiveness. Subsidised or provided grants totalling IDR3.3 trillion to local governments affected by lower tax revenues food service activities. Source: Bank Indonesia 2 Reduce and simplify restrictions on import activities to ensure the availability of raw materials. 7#9Government Measures to Mitigate Covid-19 Risk Government Regulation In UU 2/2020, Previously Perppu No.1 2020 Regulates two topics: (1) State Financial Policy (2) Stability of Financial System State Financial Policy Stability of Financial System 1. Relaxation Deficit exceeds 3%, but starting in 2023 it returns to the maximum level of 3%. 2. Relaxation is related to the allocation/reallocation of expenditure between institutions, between functions, and between programs and mandatory spending. 3. Relaxation of allocation / reallocation of Regional Government Expenditures. 4. Providing loans to the Indonesia Deposit Insurance Corporation ("IDIC") 5. Issuance of Government bond can be purchased by Bank Indonesia, SOES, corporate investors and/or retail investors 6. Use of alternative budget sources for example ASL, education endowment funds, and funds managed by the Public Service Agency. 7. Taxation Policy: a) Decrease in Corporate Income Tax Rates gradually to 20% starting in 2022; b) Taxation Incentives in the Capital Market for public ownership <40%; c) Taxation of Electronic Transactions; d) Extension of tax administration time; e) Customs facilities in the context of COVID-19. 1. Improved Coordination among The Financial System Stability Committee ("FSSC") members 2. Provide the necessary authority to 4 institutions to prevent a crisis (forward looking) in the KSSK forum for example to issue instruments, BI buys government bond on the primary market, lending to "IDIC" and "FSA" may request a merger or consolidation of Financial Services Institutions. Foreign exchange management (LLD) management for residents 3. 4. Increase public confidence without causing moral hazard. Source: Coordinating Ministry for Economic Affairs 00 8#10Government Measures to Mitigate Covid-19 Risk Budget Refocusing Policy I. Presidential Regulation No. 7/2020 on Taskforce to Manage COVID-19 Outbreak →> 9/2020 Renewed through Presidential Regulation No. 1. Answer to the President → Director (Chair: Coordinating Minister for Economic Affairs) and Implementer (Chair: Head of Indonesian National Board for Disaster Management), focusing on accelerating the mitigation of COVID-19 through synergy between ministries and government 2. Funding comes from the state budget, regional budget, and other legal sources II. Presidential Instruction No 4/2020 concerning Refocusing of Activities, Reallocation of Ministry/Agency Budget, and Procurement of Goods and Services in the Framework of Mitigating COVID-19 Outbreak and Ministry of Finance Circular (SE) No 6/2020 on Refocusing Activity and Reallocation of Ministry/Agency Budget in the Framework of Mitigating COVID-19 Outbreak 1. Minister / Head of Institution prioritizes the use of budget allocations for the acceleration of mitigating COVID-19 outbreak following COVID-19 Handling Protocol 2. Done through a budget revision mechanism (done quickly and accountably) III. Policy to support efforts to adjust regional allocations and relax transfers for handling Covid-19 1. Minister of Finance Regulation (PMK)19/2020 concerning Distribution and Use of Profit-Sharing Fund (DBH), General Allocation Fund (DAU), and Regional Incentive Fund (DID) budget year 2020 in the context of COVID-19 Countermeasures; 2. Minister of Finance Decree (KMK) 6/2020 concerning Distribution of Physical Special Allocation Fund (DAK) on Health and Health Operational Assistance (BOK) in the framework of Prevention and/or Handling of COVID-19; 3. Ministry of Home Affairs Regulation 20/2020 on the acceleration of COVID-19 Mitigation in the Scope of Regional Government IV. Government Regulation No. 43 of 2020 concerning Amendments to Government Regulation No. 23 of 2020 concerning Implementation of the National Economic Recovery Program to support the country's financial policies for handling the 2019 Corona Virus Disease pandemic and/or facing threats that endanger the national economy and/or financial system stability and save the national economy Source: Coordinating Ministry for Economic Affairs 9#11Covid-19 Handling Fund and National Economic Recovery Health Sector (COVID-19 Handling) Reducing the Spread of Covid-19 Government Responsibilities: 3T . • . Test of Covid-19 for Public Tracing for Every Positive Result, and Treat Every Case Well Community Responsibilities: 3M • Put on a mask Wash Hands • Keep the distance Comittee (Chairman: Coordinating Minister for Economic Affairs) Vice Chairman • Coord. Minister for Maritime and Investment • Coord. Minister for Politics, Law, and Security • Coord. Minister for Human Development and Culture • Minister of Finance Vice Chairman • Minister of Health • Minister of Home Affairs • Exceutive Secretary I • Exceutive Secretary II Vice Chairman + Executive Team Leader Minister of SOES Economy Sector (National Economic Recovery/PEN) Intensification of National Economic Recovery Program Acceleration of government spending in the 1st quarter of 2021 Labor-intensive program and development of National Strategic Projects the Strengthened support for the manufacturing sector Stimulate household consumption • • • Vaccination Acceleration Increase the procurement of vaccine supplies Improve vaccinators, cold storage, and vaccination sites Accelerate the vaccination program for the private sector Community Activity Restriction (PPKM) Risk zoning and micro-level monitoring The application of the area is evaluated every two weeks with the addition of provinces. Health and Economic Policies need to Integrated to Encounter Covid-19 COVID-19 Task Force (Chairman: Chairman of BNPB) PEN Task Force (Chairman: SOES Vice Minister) 1. Health PEN and Covid- 19 Stimulus Budget 2020 TOTAL IDR 695,2 T (Realization: IDR 579,8 T) IDR 63,51 T 2021* IDR 699,43 T 2. Social Protection IDR 220,39 T IDR 175,5 T IDR 150,88 T 3. Business Incentives IDR 56,12 T IDR 56,72 T 4. Support for MSMEs and IDR 173,17 T IDR 191,13 T Corporations 5. Priority Program IDR 66,59 T IDR 125,17 T Source: Coordinating Ministry for Economic Affairs as of 23 April 2021 (Source: MoF) 10#12Illustration of Health And Economic Recovery In One Wheel Brake ➤ Health Safety Net Need to step on the brakes to suppress (contain) the covid-19 contagion Need: Brake fluid ➤ Medicine Health Workers ➤ Vaccine R Strong Brake SEATBELT: Driver safety while driving Financial Sector Safety Nets Source: Coordinating Ministry for Economic Affairs Gas Pedal ➤ Social Safety Net ➤ Real Sector Safety Net Oil/Gas ➤ Source of funding ➤ Make sure the drain is smooth and doesn't leak Step on The Gas! 11#13Economic Recovery and Covid-19 Handling Requires a Medium-Term Plan (up to 2023/2024) COVID-19 Cases Pre- Covid הוד The spread of COVID-19 will keep increasing until the vaccine is found and distributed month 12-18 months of 2020 SURVIVE vaccines invented and distributed → MAINTAIN LIVELIHOOD A period of endurance and stress Adapt & Adjust Economic Condition Source: Coordinating Ministry for Economic Affairs month of 2021 12th month of 2021 Transformation Period Goal/Minimum Target: Recover to Pre-COVID condition 2022 2023 medium term Plan 2024 12#14Covid-19 Vaccination Will Restore Public Confidence Health Workers will get the priority, followed by Public Officers / Services and the Elderly Vaccination Targets & Needs 181.5 SINOVAC Procurement of Vaccines Total Firm Order (FO): 329.5 millions doses Total additional options (AO): 334 millions doses Total potential for procurement: 663.5 millions doses FO: 125.5 million doses NOVAVAC FO: 50 million doses COVAX FO: 54 million doses ASTRAZENECA FO: 50 million doses million people AO: 100 million doses AO: 80 million doses AO: 54 million doses AO: 50 million doses "Gotong Royong❞ 426.8 million doses Vaccine is a special vaccine program for workers whose "Gotong Royong" Vaccine (20 million doses) Sinopharm Sputnik V implementation is the responsibility of the company 15 million 20 million History of Vaccines Arrival in Indonesia Total Dosage 1.2 M Туре Ready To Use Date (06/12/20) 1.8 M Ready To Use (31/12/20) 16,5 M Bulk (Raw Materials) (12/01/21) 11 M Bulk (Raw Materials) (02/02/21) sinovac 10 M Bulk (Raw Materials) (02/03/21) 16 M Bulk (Raw Materials) (25/03/21) 6 M Bulk (Raw Materials) (18/04/21) Source: Coordinating Ministry for Economic Affairs Vaccination Stages: 1 HEALTH WORKERS Vaccinations are carried out for health workers in 34 provinces 1.5 M VACCINATION PERIOD JAN-FEB 2021 3 VULNERABLE COMMUNITIES Communities in areas with a high risk of transmission 63,9 M 2 PUBLIC OFFICERS 17.3 M ELDERLY 21.6 M VACCINATION PERIOD FEB-JUN 2021 OTHER COMMUNITIES With a cluster approach according to vaccine availability 77.7 M VACCINATION PERIOD APR 2021 - DEC 2021 + AstraZeneca Total Dosage Type Date 1.1 M Efficacy: 70,4%* 3.8 M Ready (08/0 To Use 3/21) Ready (26/0 To Use 4/21) Total Vaccine 3 M Finished Vaccine Sinovac; 4,9 M Astrazeneca; 59,5 M semi-finished Vaccine Sinovac#15Progress of Vaccination Implementation Since January 2021, health workers have carried out the first phase of vaccination. Currently, the elderly and public officials are conducting the second phase of vaccination. As of April 29, 2021, the 1st vaccination dose was 12.31 million people, and the 2nd dose vaccination was 7.58 million people. PHASE-1 VACCINATION PHASE-2 VACCINATION NO Period Capacity Vaccination Target Vaccination Target Vaccination Target 1.5 million 1. Jan-Feb 10 M Doses 38.9 million 10.000- 100.000/day (Public Officers & Elderly) 2. March-April 30 M Doses (Health Workers) 100.000- 500.000/day Vaccination-1 Vaccination-2 3. May-June 50 M Doses 500.000- 1.000.000/day Vaccination-1 Vaccination-2 Public 8.29 Million 4.73 Million Officers (47,9%) (27,3%) 4. July-Dec 250 M Doses 1.000.000- 1.500.000/day 1.47 Million 1.35 Million. 2.52 Million 1.49 Million Elderly (101,5%) (92,1%) (11,7%) (6,9%) vaccine trends 750k The method of vaccination service phase-2 is delivered through health facilities (government, private), institutions (TNI (Military), POLRI (National Police), SOEs), on-site mass vaccination, mobile mass vaccination Source: Coordinating Ministry for Economic Affairs Prospective Recipients of Phase-2 Vaccines Elderly 500k Public Market Trader Transportation 250k Educator Religious leaders Tourism 0 People's representatives Journalists & Media Workers Athlete State officials Public Servant Government employees Security 22 Jan 2021 31 Jan 2021 04 Apr 2021 13 Apr 2021 13 Jan 202... 09 Feb 2021 18 Feb 2021 27 Feb 2021 08 Mar 2021 17 Mar 2021 26 Mar 2021 22 Apr 2021 14#16Community Activity Restriction (PPKM) as a Support for Government Vaccination Program The purpose of the micro PPKM is to suppress positive cases of covid-19 as a precondition for success for handling Covid-19 and for national economic recovery 0000 Community Activity Restriction (PPKM) Micro-Scale PPKM will be continued and evaluated every 2 weeks and 5 provinces will be added every week to all provinces. • • • Periode: PPKM Period I-II: 11 Jan-8 Feb 2021 O Micro-Scale PPKM I: 9-22 Feb 2021 Micro-Scale PPKM II: 22 Feb - 8 Mar 2021 - • Micro-Scale PPKM III: 9 Mar – 22 Mar 2021 • • Micro-Scale PPKM IV: 23 Mar - 5 Apr 2021 Micro-Scale PPKM V: 6 Apr-19 Apr 2021 Micro-Scale PPKM V : 20 Apr- 3 May 2021 PPKM criteria, namely: 1. The active case rate is above the national average 2. The death rate is above the national average 3. The cure rate is below the national average cure rate 4. The occupancy rate of hospital beds (Bed Occupancy Ratio / BOR) for intensive care units (ICU) and isolation rooms is above 70 percent Red Higher Community Transmission > 5 houses in a neighborhood that have positive confirmed cases during the last 7 days Micro PPKM Control Scenarios Orange Moderate Community Transmission If there are 3-5 houses in a neighborhood that have positive confirmed cases during the last 7 days Yellow Low Community Transmission If there are 1-2 houses in a neighborhood that have positive confirmed cases during the last 7 days Green No Active Cases If there are no house in a neighborhood that have positive confirmed cases during the last 7 days Fulfillment of Basic Needs for Self Isolation Target: Citizens who are confirmed positive, close contacts, and suspects Assistance: Rice (10 kg Pack) and Masks during the self-isolation period (14 days) Evaluation of Micro-Scale PPKM V (6 - 19 April 2021) • Active Cases decreased from 114,566 (7.4%) to 104,319 (6.8%) • Cure rate increased from 89.9% to 94.7% Death rate remains 2.7% Source: Coordinating Ministry for Economic Affairs#17• • Implementation of Micro Scale Community Activity Restriction (PPKM) Shows a Good Progress (part 1) Since Feb 9, 2021, Indonesia has implemented community activity restriction in the level of a neighbour-hood (community-watch). This policy is very effective. The number of new confirmed cases of Covid-19 at the implementation of the Micro Scale PPKM (9 Feb-21 Mar 2021), shows a trend of decreasing cases PPKM DKI Jakarta West Java Banten Micro PPKM PPKM Micro PPKM PPKM Micro PPKM PPKM Central Java DI Yogyakarta Micro PPKM PPKM Micro PPKM III IV I IV I IV I IV January February March April I II III IV I III IV I II III IV I II III IV January February March April III IV I IV V V January February March April January February March April IV I IITIVE I II III IV Januari Februari Maret April East Java Bali PPKM Micro PPKM PPKM Micro PPKM North Sumatera East Kalimantan South Sulawesi PPKM Micro PPKM PPKM Micro PPKM PPKM Micro PPKM VIVI IV I II III IV January February March April I VIVIVIILIV VIVIVI V I II IV I IV I IV I IIIIV January February March April January February March April January February March April January February March April 16#18• • Implementation of Micro Scale Community Activity Restriction (PPKM) Shows a Good Progress (part 2) Since Feb 9, 2021, Indonesia has implemented community activity restriction in the level of a neighbour-hood (community-watch). This policy is very effective. The number of new confirmed cases of Covid-19 at the implementation of the Micro Scale PPKM (9 Feb-21 Mar 2021), shows a trend of decreasing cases South Kalimantan Central Kalimantan North Sulawesi 、 PPKM Micro PPKM PPKM Micro PPKM PPKM Micro PPKM |||||||||||||||IV I II III IV January February March April |||||||V||||||||||||IV I II IILIV January February March April | || || | || || | || ||V I II III IV January February March April SUMATERA SELATAN Aceh Riau South Sumatera PANCACITA PPKM Micro PPKM PPKM Micro PPKM | || || | || HIVI IV I II III IV January February March April PPKM East Nusa Tenggara West Nusa Tenggara PPKM Micro PPKM PPKM Micro PPKM | || ||| IV | || ||| IV | || ||| IV I II III IV January February March April North Kalimantan Micro PPKM PPKM Micro PPKM |||||||||||||||||||IV I II III IV January February March April PAPUA Papua PPKM Micro PPKM |||||||||||IVI IV I II III IV January February March April January February March April n ||||||||||||||||| IV I II III IV January February March April ||||||||||VIV I II III IV January February March April 17#19• Breakthroughs to Strengthen Support for Corporate Loans and the Hotel, Restaurant, and Cafe Sector by 2021 The Government provides support for Corporate Business People in the form of Government Guarantees to protect, maintain, and increase the economic capacity of Business Actors from the real sector and the financial industry in carrying out their business. The government also provides incentives for businesses affected by the COVID-19 pandemic, such as the hotel, restaurant and cafe sector Relaxation on the Terms of Corporate Credit Guarantee Program PMK 32/2021 Affirmation of relaxation of restructuring and new loans from Financial Services Authority (OJK) Change of Guarantee Process Simplify the terms and stages of Credit Guarantee Hotel, Restaurant and Café Sector Incentives Fund Placement and Guarantee Schemes for Hospitality SMEs credit schemes and guarantees for restaurants and cafes $1 18#20Policy Synergy in the Property and Automotive Sector The government, together with BI and OJK, have provided a stimulus to the property and automotive sectors to encourage public consumption and at the same time improve the performance of the business sector. 2 Government B Bank Indonesia QJ OJK Automotive Sector Giving VAT Incentives on Luxury Goods Borne by the Government for Motor Vehicles through PMK No. 20 of 2021 • Expanded to: Car which produced within the country with an engine capacity of 1,501 < CC <2 500 with local purchases > 60%. • The PPnBM Discount stimulus is given in stages: As for 4x2: 50% during April-Aug and 25% for Sep-Dec 2021. ➤ As for 4x4: 25% during Apr-Aug and 12.5% during Sep-Dec 2021. Relaxation of down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles, while maintaining prudential principles and risk management as stipulated by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Letter of the Chief Executive of Banking Supervision and Non-Bank Financial Institutions : • Relaxation of Risk Weighting Policy for Credit Risk Weighted Assets / Motor Vehicle Financing Exemption from the Maximum Credit Lending Limit to Battery- Based Electric Motor Vehicle Manufacturers Property Sector Giving Government-Borne VAT Incentives Borne by the Government for the Submission of Landed Houses and Apartment Residential Units through PMK No. 21 of 2021 Relaxation of Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property, while maintaining prudential principles and risk management, as stipulated by PBI No. 23/2/PBI/2021 effective 1st Mar 2021 31st Dec 2021. Relaxation of Risk Weighted Assets for Credit / Mortgage Funding Depends on the LTV / FTV Ratio through the Letter of the Chief Executive of Banking and IKNB Supervision. Source: Coordinating Ministry for Economic Affairs 19#21The Pre-Employment Card Program Successfully Helped Indonesian Workers During the Pandemic Period The Pre-employment Card is a program from the government for job seekers to workers affected by Covid-19 to improve skills through training as well as get incentives. Realization 2020 Registration 43,8 M Registrant in Pre-Employment Card Websites From all Cities and Regencies in Indonesia Recipients 5,5 M Pre-Employment Card Recipient (Batch 1-11)* 5,316,499 Recipients Has received an incentive 34 Province 514 Cities and Regencies 13.4 T Incentives Have Been Disbursed Pre-Employment Card Program Ecosystem 7 Digital Platform 150 Training Institutions • 4 Educational Institutions • 3 Job Portals 5 Payment Partners Semester | Pre-Employment Card Program in 2021 Budget: IDR 10 trillion Benefit value: Rp1 million training assistance Total post-training incentives IDR 2.4 million (IDR 600 thousand x 4 months) Post-survey incentives total IDR 150 thousand (IDR 50,000 x 3 surveys) Batch 12: 600,000 attendees Target audience: 2.7 million people Kartu Pra-kerja 88.9% 81.2% 17% SEMI-SOCIAL ASSISTANCE: Provides skills while protecting purchasing power Increased participant work skills (* BPS) Incentives are used to buy daily needs (* BPS) EMPLOYMENT: Encouraging employment, including entrepreneurship Changed from previously unemployed as of 35% February 2020 to working when surveyed (*Evaluation Survey) Changed from unemployed to >94% Skilling improvement in both skilling, reskilling, and upskilling (* Evaluation Survey) entrepreneurship (*Evaluation Survey) Nomor Kart мк 0012909009080438 2343458848090909 Nema Tangpe/Leh 18% Source: Coordinating Ministry for Economic Affairs Changed from being unemployed to being an employee/laborer/freelance (*Evaluation Survey) Alamat Kecamatan Kabupaten Bongo AT 20 20#22• • National Economic Recovery Strategy Through Import Substitution Program (35% Reduction) in 2022 AA INDUSTRIAL CONDITIONS Require to deepen Industrial Structure Necessary to be independent on raw materials and production Unsupportive regulations and incentives The P3DN Program is not yet optimal 7 SECTORS FOCUS Food and Beverage Textiles and Clothing Import Reduction STRATEGIC STEPS through Import Substitution in Industries with Large Import Value Encouraging the Deepening of Industrial Structure Increasing Production Utilisation of All Manufacturing Industry Sectors Increase in Investment and Absorption of New Workers 35% IMPORT SUBSTITUTION PROGRAM BY 2020 Source: Ministry of Industry Automotive Chemical Electronic Utilisation 60% (2020) Utilisation Utilisation 75% 85% (2021) (2022) Pharmacy Medical Devices • Absorption of workers affected by layoffs. Increased domestic spending capacity • Increase in the export market 21 221#23Fiscal Incentives Policy to Boost the Economy The government facilitates fiscal incentives to create a conducive investment climate, especially for industry players. Through increased investment, it is hoped that it can strengthen the domestic industrial structure TAX HOLIDAY TAX ALLOWANCE INVESTMENT ALLOWANCE SUPER DEDUCTION TAX • . • The criteria are new investment, taxpayers including pioneer industries, and income received from the main business activities carried out. Pioneer industries are defined as industries that have broad linkages, provide added value and high externalities, introduce new technologies, and have strategic value for the national economy. There are 18 industrial sectors that fall within the scope of pioneer industries Updated: 31 Dec 2020 82 Taxpayers; 14 countries investors Investment plan of IDR 1,356 trillion Realization of IDR 204 Trillion Business locations in 24 provinces Workforce of 112 thousand Source: Coordinating Ministry for Economic Affairs • To encourage investment labor-intensive in industries, a • To increase direct investment activities for certain business fields and/or in certain areas. • The facilities include reduction in net income of 30% of the total investment for six years, accelerated depreciation and amortization, imposition of income tax on dividends paid to foreign tax subjects of 10% or lower based on a tax treaty, and compensation for losses of up • to ten years. The criteria are having a high investment value or for export, a large absorption of labor; or have a high local content. support programs for job creation and absorption Indonesian workers. of • Incentives in the form of facilities to reduce net income by up to 60% for labor-intensive sectors • There are 45 labor- intensive industrial sectors and employ an average of 300 workers in 1 tax year. . Super Deduction Vocational • Engaging industry in vocational activities to provide knowledge and encourage the transfer of knowledge • A maximum reduction of 200% gross income from costs in the context of providing work practice, apprenticeship, and / or learning activities R & D Super Deduction . Increase the role of industry in fostering innovation and the use of the latest technology in the production process • Maximum gross income deduction of 300% over R&D costs carried out in Indonesia 22 22#24Government Support for MSMEs During the Covid-19 Pandemic In the form of relaxation of asset quality assessments, postponement of principal & interest subsidies, low-interest working capital loans guaranteed by Askrindo and Jamkrindo, tax incentives for MSMEs borne by the government, and Productive Presidential Assistance for Micro Enterprises 1 ASSET QUALITY MSMEs CREDIT RESTRUCTURING ASSESSMENT According to POJK 2 WORKING CAPITAL CREDIT POSTPONEMENT OF PRINCIPAL & INTEREST SUBSIDIES 3 KUR Super Mikro: Loan up to IDR 10 million • Interest subsidy will be 19% consist of additional interest subsidy 6% and regular interest subsidy 13%, debtors pays 0% interest from Aug - Dec 2020. KUR MKM (SMEs): 4 Quality No. 11/POJK.03/2020 & 14/POJK.05/2020 Asset LOW INTEREST Placement of IDR30 Trillion Government Funds at Bank Himbara GUARANTEE Arrangement: Loans S IDR 10 billion can be based only on the accuracy of principal interest payments Restructurisation: The credit quality for affected debtors is determined to be current restructuring since The restructuring is carried out without a ceiling limit type of financing Loan up to Rp10 million up to IDR 500 million • Postponement of installments and 6% additional interest subsidy for the period from Apr-Dec 2020 to 0%. Loan > Rp500 million up to IDR 10 billion • • Postponement of installments and interest subsidies from 3% to 3% for the period Apr-Jun 2020 and interest subsidies from 2% to 4% for the period Jul- Sep 2020. UMi, Mekaar, Pegadaian (Pawnshop) • Postponement of principal installments and interest subsidies for 6 months from Apr-Sep 2020 Fintech Loan, Co-op, Farmers, LPDB, LPMUKP, UMKM PEMDA Relaxation is given a 6% interest subsidy for 6 months Based on Coordination Meeting held by Financing Policy Committee for MSME on December 28, 2020, KUR implementation in 2021 are as follows: Source: Coordinating Ministry for Economic Affairs Additional interest subsidy 3% for 6 months, debtors pays 3% interest. Increase the ceiling of KUR in 2021 to IDR 253 trillion. 5 Government support in the form of guarantees by Askrindo and Jamkrindo OTHER SUPPORT Income Tax for MSMEs is borne by Government MSMEs receive a final PPh rate of 0.5% (PP 23/2018) borne by the government (DTP). 6 MICRO BUSINESS PRODUCTIVE PRESIDENT ASSISTANCE Direct assistance to 12 million Micro- Business Actors in the amount of IDR 2.4 million per recipient 23 23#25• • Integration of Various Types of Social Assistance and Financing for Super Micro and MSMEs is Continually Encouraged The Government has began to empower super micro, micro and small businesses that are un-bankable through Productive Presidential Assistance & Pre-Work Card programs, while the BUMN through the partnership and community development program (PKBL) and private parties with CSR. Based on KUR Super Micro scheme, people could have loans with 0% interest until December 31, 2020. Meanwhile, People's Business Credit (KUR) for micro small and medium enterprises (MSME) is given an additional interest subsidy of 6% until 31 Dec 2020. For 2021, MSME is given an additional interest subsidy of 3% for 6 months, so MSME pays 3% interest. A Commercial Financing Patterns Social Assistance F Unbanked B Fully commercial loan Subsidized loan Special scheme of commercial loan Rolling soft loan C CSR D E Productive Presidential Assistance & Pre- employment Card Partnership and Community Development Program (PKBL) & Private CSR Bankable MSMEs Financing Mekaar UMi BWM LPDB* KUR Super Micro People's Business Credit Commercial (KUR) Regular Facilities Social grants Private PKBL & CSR Funds Interest Subsidy from the Government Government Guarantee Market Mechanism Source: Coordinating Ministry for Economic Affairs Business Ability 24 24#26Indonesia's Economic Improvement Trend Continues GDP Growth (%YoY) PMI Markit Indonesia 55 Expansion >50 10 2505 50 45 -5 40 -10 Contraction Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 35 <50 2019 2020 30 27.5 -Total GDP 25 HH Consumption GFCF Current Account Deficit 53.2 Total Investment (DDI+FDI) Rp Trillion CCI & Retail Sales 130 0.0 230 220 210 110 90 200 سا 190 70 -5.0 -10.0 -15.0 -20.0 -25.0 180 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-2 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 170 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 Mar-21 Trade Balance (Billion USD) of GDP (%) 4.00 3.00 40.00 30.00 12000 20.00 1.00 0.29 2.00 13000 10.00 1.00 0.00 0.00 14000 0.00 -10.00 -1.00 -20.00 15000 -1.00 -2.00 -30.00 -2.00 -40.00 16000 -3.00 -3.00 -50.00 -4.00 1 3 5 7 9 11 1 3 5 7 9 11 1 17000 Q1 Q3 Q1 Q3 Q1 Q3 2019 2020 2021 2018 2019 2020 Balance (Billion USD) Export-g (% YoY)-rhs Source: CEIC, BI, BPS, Bloomberg (as of 28 April 2021) Import-g (% YoY)-rhs Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2019 2020 2021 The Indonesian Rupiah and JCI 1/1/2020 5/1/2020 9/1/2020 -IDR/USD 1/1/2021 -JCI-rhs 4000.00 7000 2000.00 6500 0.00 -2000.00 6000 -4000.00 5500 -6000.00 5000 -8000.00 4500 -10000.00 4000 Consumer Confidence Index (CCI) Retail Sales-g (rhs) Net Capital Inflow (Million USD) 3/1/2020 1/1/2020 5/1/2020 7/1/2020 9/1/2020 11/1/2020 Equity Flow (Mtd) I Bond Flow (Mtd) Total 1/1/2021 3/1/2021 0 100 200 300 400#27Section 2 Institutional and Government Effectiveness: Accelerated Reforms Agenda with Institutional Improvement BHINNEKA TUNGGAL IKA#2827 27 Rank 2007-2008 Improving Global Perception ...with recent improvements on governance effectiveness Global Competitiveness Index¹ Ease of Doing Business² 2008-2009 2009-2010 Higher rank is better 2010-2011 2011-2012 20 30 40 50 60 70 80 90 India Indonesia Worldwide Governance Indicators³ 2012-2013 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018 2018* 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2019* 0 20 Higher rank is better (rankings at the time of annual report publication) 40 36 41 60 45 50 80 100 72 73 91 128 120 140 *New Concepts by using the Global Competitiveness index 4.0 which captures the determinants of long- term growth. 160 Philippines Bulgaria Colombia Indonesia -India - Philippines Bulgaria Colombia Corruption Perception Index4 65 L 60 46 Higher score is better 53 55 44 51 42 45 42 38 40 35 38 28 25 Higher rank is better 36 15 34 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 32 Voice and Accountability Government Effectiveness Political Stability/Absence of Violence Regulatory Quality 30 Rule of Law Control of Corruption 2012 2013 2014 2015 2016 2017 2018 2019 2020 Indonesia India Philippines Bulgaria Colombia 1. Source: World Economic Forum - The Global Competitiveness Report 2019; 2. Source: World Bank - Doing Business 2020 Report; 3. Source: World Bank - The Worldwide Governance Indicators 2020 Update; 4. Source: Transparency International - Corruption Perceptions Index 2020 Report 34 40 39 37 44#29Continuous Improvement of Investment Climate ...another leap on Indonesia's Rank on Ease of Doing Business (EODB)* EoDB 2020 Rank Rank EoDB 2019 Change in Rank EoDB 2020 EoDB 2019 Change in Points Points Points Overall 73 73 0 ( 69.6 68.0 1.6 Starting a business 140 134 6 81.2 81.2 0.0 Dealing with Construction Permits 110 112 2 66.8 66.6 0.2 Getting Electricity 33 33 0 87.3 86.4 0.9 Registering Property 106 100 6 60.0 61.7 1.7 Getting Credit 48 44 4 70.0 70.0 0.0 Protecting Minority Investors 37 51 14 70.0 63.3 6.7 Paying Taxes 81 112 31 75.8 68.0 7.8 Trading Across Borders 116 116 0 67.5 67.3 0.2 Enforcing Contracts 139 146 7 49.1 47.2 1.9 Resolving Insolvency 38 36 ⇓2 68.1 67.9 ↑ 0.2 * Higher rank is better, EoDB 2020 was published in October 2019 Government efforts to boost business growth through deregulations and de-bureaucratization have been recognized by the improvement of EODB Structural reforms will continue including in the budget and real sectors Source: World Bank 28 28#30Indonesia Has Been Rated as Investment Grade Country since 2017 BBB+ BBB BBB- Investment Co B6+ Below Investment Crede BB BB- B+ R& JCRA S&P Fitzh Fitch Ratings BBB / Stable March 2021, Rating Affirmed at BBB/Stable "The affirmation of the rating is underpinned by a favorable medium-term growth outlook and a still low, but rising, government debt burden compared with "BBB" category peers". Maddy's S&P Global Ratings BBB Negative April 2021, Rating Affirmed at BBB/Negative "The affirmation reflects Indonesia's solid economic growth prospects and historically judicious policy dynamics. The negative outlook reflects our expectation that Indonesia will face sustained fiscal and external pressures related to the COVID-19 pandemic over the next 12-24months". 2008 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 MOODY'S Baa2 / Stable Feb 2020, Rating Affirmed at Baa2/Stable "The affirmation of the ratings is underpinned by a number of credit strengths including Indonesia's robust and stable growth rates and a low government debt burden, preserved by consistent fiscal discipline and emphasis on macroeconomic stability as well as persistent credit challenges." R&I April 2021, Rating Affirmed at BBB+/Stable JCR BBB+ / Stable "In R&l view, Indonesia's economy that plunged in 2020 will likely return to a pre- coronavirus growth level in one to two years. The government's structural reform efforts are also expected to boost growth potential in the medium to long term. Despite the pressure on the fiscal side caused by policy responses, the government debt ratio remains relatively low. The economic resilience to external shocks is maintained thanks to flexible policy responses by the government and the central bank and ample foreign reserves". December 2020, Rating Affirmed at BBB+/Stable BBB+ / Stable "The ratings mainly reflect the country's solid domestic demand-led economic growth potential, restrained public debt, and resilience to external shocks supported by flexible exchange rate and monetary policies and accumulation of foreign exchange reserves. Additionally, the government has been maintaining the momentum of economic structural reforms even amid the pandemic, as evidenced by the enactment of the "Omnibus Law on Job Creation". 29#31Medium-Term National Development Plan (RPJMN) 2020-2024 President's Vision: "The Establishment of an Advanced Sovereign, Independent and Personality Based on Mutual Cooperation". President's Missions Top 5 Presidential Priorities 1 Improving the Quality of the Indonesian Labour Force 1 HR Development Achieving Productive, Independent 2 and Competitive Economic Structure 3 Attaining Equitable and Prosperous 2 National Development Infrastructure Development Achieving Sustainable 4 Environmental Climate Developing Cultural Progress 5 Reflecting the Nation's Personality 3 Developing a Dignified and Trustworthy 6 Legal System Free from Corruption 4 Protection of All Nations and 7 Provision of Security to All Citizens 00 7 RPJMN Development Agenda Regulation Simplification Simplification of Bureaucracy Transformation Strengthening Economic Resilience to Achieve Superior Economic Growth Developing More Remote Regions to Reduce Economic Gaps and Improve Equality Improvement of Quality and Competitiveness of the Labour Force Engaging in Mental Revolution and Culture Development Strengthening Infrastructure to Support Economic Development and Improve Basic Services Conservation of Environment, Supporting Climate Change, and Enhancing Disaster Resilience Enhancing Political, Legal, Defense and Stability and Transforming Public Services Attaining Good, Effective, and Reliable Governance Economic 5 Achieving Synergy of Governmental 9 Framework with the Regional Government Source: National Development Planning Agency 30#32Economic Transformation is Required to Recover the Economy and Avoid the Middle Income Trap Bill on Job Creation as a strategic and extraordinary national policy to recover and improve the national economy (Complements UU 2/2020) Bill on Job Creation Economic Transformation National Economy Indonesia Maju 2045 Investment, Business License (80 Articles) Land Procurement (19 ✓ Articles) 督 Gov Investment and Strategic National Project (16 Articles) MSMEs & Cooperative (15 Articles) Ease of Doing Business (11 Articles) ☐ Fundamental Problems Hyper Regulation National and sub-national regulations = 43.604 Competitiveness Less conducive business environment Inefficient bureaucracy High cost economy hampering export Employment Low productivity albeit productive age Unemployed and part-time workforce amounting to 45,8 million people (34,3%) (before pandemic) License and Ease of Doing Business Employment (5 Articles) ☐ Licensing approach Economic Zones (4 Articles) Monitoring and Sanctions (3 Articles) Research and Innovation (1 Article) Source: Coordinating Ministry for Economic Affairs Convoluted and overlapped Difficult to start and operate a business MSME & Cooperative Complex licensing Without legal status Minimum protection and facilitation Legal Certainty Criminal sanction for administrative sanction Growth 0000 Equity Top 5 Global Economy Out of middle- income trap Protection Competitiveness GDP of USD 7.4 trillion Poverty Rate 0% Competitive workforce 31 334#33& DATA FACT The Job Creation Omnibus Law Promotes Employment and Facilitates Opening of New Business While Pursuing the Economic Recovery Toko K 50 Labour Market Of the total population aged 203.97 million people, there are 14.28 people affected by Covid-19 1. Unemployment due to covid-19 (2,56 million people) 2. Not labor force due to Covid-19 (0,76 million people) 3. Temporarily not working due to Covid-19 (1,77 million people) 4. Work with shorter hours due to Covid-19 (24,03 million people) MSME BIG 5.550 unit MIDDLE 60.702 unit SMALL 783.132 Unit MICRO 63.5 Juta Unit REGULATION Among the 64.19 million MSES, 64.13 million are Micro & Small Businesses, most of which are in the informal sector, so it needs to be encouraged to transform into formal ones. Complicated licensing issues with abundant central & local regulations (hyper-regulations) that regulate the sector, causing disharmony, overlapping, non- operational and sectoral. JOB CREATION LAW 2. BUSINESS LICENSING 8. ECONOMIC ZONE SUBSTANCE 1. IMPROVING INVESTMENT ECOSYSTEM 7. LAND PROCUREMENT (1)] Encouraging Job Creation and Entrepreneurship through Ease of Doing Business from MSEs and Large Enterprises Source: Coordinating Ministry for Economic Affairs 3. LABOR 4. SUPPORTING MSMES 5. EASE OF DOING BUSINESS 6. RESEARCH & INNOVATION 10. GOVERNMENT ADMINISTRATION 11. IMPOSITION OF SANCTIONS 9. CENTRAL GOVERNMENT INVESTMENT & SPEEDING OF STRATEGIC NATIONAL PROJECT BENEFITS (2) Protecting Worker's Rights through 3 Worker's Protection Benefits for the General Public, including provision of housing and redistribution of land 32#34The Framework of Job Creation Law wwww COMPANY HOUSEHOLD AL New Business Creation New Job Creation GREENFIELD INVESTMENT (111> Business Development Welfare Creation Supply Brownfield PRODUCTION Demand JOB CREATION LAW CONSUMPTION Increased Purchasing Increased Income Power Source: Coordinating Ministry for Economic Affairs 33 33#35Development of Implementing Regulations for the Job Creation Law The government has completed 51 implementing regulations consisting of 47 government regulations and 4 presidential regulations The implementing regulations are grouped into 11 regulatory clusters, namely: 1. Spatial (4) 2. Land and Land Rights (5) 3. Environment (1) 4. Construction and Housing (6) 5. Cooperatives and SMEs (4) 6. 7. Investment (6) Fiscal (3) 8. Employment (4) 9. Economic Zone (2) 10. Government Goods / Services (1) 11. Licensing and Sector Business Activities (15) . Regulations The ministry immediately makes internal implementation standards or guidelines no later than 2 months after the implementing regulations are enacted Public Communication Ministries / Institutions held intensive socialization in the form of electronic media and leaflets Infrastructure and Supporting System . OSS and Supporting System will be ready for operation in July 2021 Readiness of Ministries / Agencies and Local Governments in providing networks, tools, and consultations Human Resources Training for OSS Operators and Supervisors Source: Coordinating Ministry for Economic Affairs 34 ==#3651 Regulations for Job Creation Law (Substance Grouping) Spatial 1. Government Regulation No. 21 of 2021 concerning the Implementation of Spatial Planning 2. Government Regulation No. 43 of 2021 concerning Settlement of Inconsistencies in Spatial Planning, Forest Areas, Permits, and / or Land Rights 3. Government Regulation No. 45 of 2021 concerning the Implementation of Geospatial Information 4. Presidential Regulation No. 11 of 2021 concerning Cooperation between the Central Government and State-Owned Enterprises in Providing Basic Geospatial Information Land and Land Rights 1. Government Regulation No. 18 of 2021 concerning Management Rights, Land Rights, Apartment Units and Land Registration 2. Government Regulation No. 19 of 2021 concerning Implementation of Land Acquisition for Development for Public Interest 3. Government Regulation No. 20 of 2021 concerning Control of Neglected Areas and Lands 4. Government Regulation No. 23 of 2021 concerning Forestry Implementation 5. Government Regulation No. 24 of 2021 concerning Procedures for Imposing Administrative Sanctions and Procedures for Non-Tax State Revenues Derived from Administrative Fines in the Forestry Sector Environment 1. Government Regulation No. 22 Year 2021 concerning Implementation of Environmental Protection and Management Construction and Housing to 1. Government Regulation No. 12 of 2021 concerning Amendments No. Government Regulation 14 of 2016 concerning Implementation of Housing and Settlement Areas 2. Government Regulation No. 13 of 2021 concerning the Implementation of Flats to 3. Government Regulation No. 14 of 2021 concerning Amendments Government Regulation No. 22 of 2020 concerning Implementation Regulations of Law No. 2 of 2017 concerning Construction Services concerning 4. Government Regulation No. 15 of 2021 Implementation Regulations of Law No. 6 of 2017 concerning Architects 5. Government Regulation No. 16 of 2021 concerning Implementation Regulations of Law No. 28 of 2002 concerning Buildings 6. Presidential Regulation No. 9 of 2021 concerning the Agency for the Acceleration of Housing Management Cooperatives and SMEs 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Source: Coordinating Ministry for Economic Affairs 35#3751 Regulations for Job Creation Law (Substance Grouping) Investment 1. Government Regulation No. 42 of 2021 concerning the Ease of National Strategic Projects 2. Government Regulation No. 44 of 2021 concerning Implementation of the Prohibition of Monopolistic Practices and Unfair Business Competition 3. Government Regulation No. 48 of 2021 concerning Third Amendment to Government Regulation No. 31 of 2013 concerning Implementation Regulations of Law No. 6 of 2011 concerning Immigration 4. Presidential Regulation No. 10 of 2021 concerning the Investment Business Field 5. Government Regulation No. 73 of 2020 concerning Investment Management Institutions2. 6. Government Regulation No. 74 of 2020 concerning Authorized Capital for Management Institutions Investation Fiscal 1. Government Regulation No. 9 of 2021 concerning Tax Treatment to Support Ease of Doing Business 2. Government Regulation No. 10 of 2021 concerning Regional Taxes and Regional Levies in the Framework of Supporting Ease of Doing Business and Regional Services 3. Government Regulation No. 49 of 2021 concerning Taxation Treatment of Transactions Involving Investment Management Institutions and / or Entities They Own Employment 1. Government Regulation No. 34 of 2021 concerning the Use of Foreign Workers 2. Government Regulation No. 35 of 2021 concerning Specific Time Work Agreements, Transfer, Working Hours and Breaks, and Termination of Employment 3. Government Regulation No. 36 of 2021 concerning Wages 4. Government Regulation No. 37 of 2021 concerning the Implementation of the Job Loss Guarantee Program Economic Zone 1. Government Regulation No. 40 of 2021 concerning the Implementation of Special Economic Zones 2. Government Regulation No. 41 of 2021 concerning the Implementation of Free Trade Zones and Free Ports Government Goods / Services 1. Presidential Regulation No. 12 of 2021 concerning Amendments to Presidential Regulation No. 16 of 2018 concerning Government Procurement of Goods / Services Source: Coordinating Ministry for Economic Affairs 36#3851 Regulations for Job Creation Law (Substance Grouping) Licensing and Sector Business Activities 1. Government Regulation No. 5 of 2021 concerning Implementation of Risk-Based Business Licensing 2. Government Regulation No. 6 of 2021 concerning the Implementation of Business Licensing in Regions 3. Government Regulation No. 25 of 2021 concerning the Implementation of the Sector of Energy and Mineral Resources 4. Government Regulation No. 26 of 2021 concerning the Implementation of the Agricultural Sector 5. Government Regulation No. 27 of 2021 concerning the Implementation of the Marine and Fisheries Sector 6. Government Regulation No. 28 of 2021 concerning the Implementation of the Industrial Sector 7. Government Regulation No. 29 of 2021 concerning the Implementation of the Trade Sector 8. Government Regulation No. 30 of 2021 concerning Implementation of the Road Traffic and Transportation Sector 9. Government Regulation No. 31 of 2021 concerning the Implementation of the Shipping Sector 10. Government Regulation No. 32 of 2021 concerning the Implementation of the Aviation Sector 11. Government Regulation No. 33 of 2021 concerning the Implementation of the Railway Sector 12. Government Regulation No. 38 of 2021 concerning Accompanying Accounts for Umrah Travel Expenses 13. Government Regulation No. 39 Year 2021 concerning Implementation of the Halal Product Guarantee Sector 14. Government Regulation No. 46 of 2021 concerning Post, Telecommunication and Broadcasting 15. Government Regulation No. 47 of 2021 concerning the Implementation of Hospitalization Source: Coordinating Ministry for Economic Affairs 37 37#39Implementation of Risk Based Licenses Encourage Government Services to be Efficient, Easy, and Certain Licensing Reform The implementation of Job Creation Law reforms business licensing regulations by implementing Risk- based Norms, Standards, Procedures, Criteria Licenses based approach High Risk >>> Risk based approach Government Regulation No. 5/2021 Medium High Risk Purpose: • • A more effective and simpler business license issuance integrated supervision of business activities that is more transparent, structured and accountable Medium Low Risk Business Identification Number + Permit Business Identification Number + Standard Certification (Verification) Business Identification Number + Standard Certification (Self Declare) Low Business Identification Risk Number 38#40Investment Priority List in the Presidential Regulation No.10 of 2021 for the Investment Business Sector The government provides positive sentiment to businesses by regulating more open (positive) and priority business fields Priority Business Field Criteria Presidential Regulation No. 10 of 2021 concerning the Investment Business Field National Programs/Projects Capital Intensive Strategic Labor Intensive High Technology 245 PRIORITY BUSINESS FIELDS Pioneer Industry Export Orientation; and/or given fiscal incentives and and non-fiscal Orientation Development in and Research, Innovation Activities 89 AREAS OF BUSINESS FIELDS OR PARTNERSHIP WITH COOPERATIONS AND MSMEs 46 BUSINESS FIELDS WITH SPECIFIC REQUIREMENTS Fiscal Incentives 1. Tax Incentives: • Tax Allowance • Tax Holiday • Investment Allowance 2. Customs and excise investives (free of import duty on industrial construction machinery materials) and Non-Fiscal Incentives 1. Ease licensing of business 2. Provision supporting infrastructure 3. Guaranteed availability 4. Raw materials of energy 5. Immigration labor 6. etc In principle, the government assures that all business fields are open to investment unless stated as closed by law while continue to protect and empower MSMEs#41Investment Priority List in the Presidential Regulation No.10 of 2021 for the Investment Business Sector The government provides positive sentiment to the business world by establishing policies for regulating business sectors that are more open (positive) and prioritized PRESIDENTIAL REGULATION OF INVESTMENT BUSINESS FIELDS 245 PRIORITY BUSINESS FIELDS given fiscal incentives and and non-fiscal, a.l. Tax Allowance and Tax Holiday 89 AREAS OF BUSINESS FIELDS OR PARTNERSHIP WITH COOPERATIONS AND MSMEs 46 BUSINESS > 1700 FIELDS WITH SPECIFIC REQUIREMENTS BUSINESS FIELDS OPEN FOR INVESTMENT With a positive approach, the Government provides assurance that in principle all business fields are open to investment, unless otherwise stated as covered by law. The investment value for Mandatory PMA is> IDR 10 billions. This openness takes into account the protection and empowerment of MSMEs. The government also provides information on the direction of investment policy in Indonesia by determining business fields that are Government's priorities. Priority Business Field Criteria National Strategic Programs/Projects; Capital Intensive; Labor intensive; High technology; Pioneer Industry; Export Orientation; and/or Orientation in Research, Development and Innovation Activities. Incentives provided Tax Incentives: 。 Tax Holiday; o Tax Allowance; o Investment Allowance Customs and excise incentives (free of import duty on industrial construction machinery and materials) Non-fiscal incentives (ease of business licensing, provision of supporting infrastructure, guaranteed energy availability, raw materials, immigration, labor, etc.) Other incentives according to regulations Source: Coordinating Ministry for Economic Affairs#42Indonesia Investment Authority (INA) as an Alternative Source of Economic Financing • The President has appointed 3 Supervisory Boards from the professional element on 27 Jan 2021. • Initial capital has been allocated IDR 15 T in 2020, in 2021 PMN non-cash IDR 60 T Progress • INA is planned to start operating in the first quarter of 2021 Internasional and Domestic Investor Discussions with more than 50 companies as strategic partners, and several countries have expressed a desire to partner with INA Republic of Indonesia Gov't (through Ministry of Finance) Indonesia Sovereign Wealth Fund (Indonesia Investment Authority (INA)) Main Investors (ex: ADIA, JBIC) Master Fund Manager Management Agreement Target Optimization of Central Government Investment Value Increase Foreign Direct Investment (FDI) Share Co-Investment saham (Minority Ownership) Directly to the company and/ or assets/projects Investment Agreement (LP) Infrastructure Sector Management Fund . Toll roads Airports Seaports Energy and Natural Resources Sector Managed Fund ■ Oil & Gas reserves Source: Coordinating Ministry for Economic Affairs Master Fund/ Managed funds Investment Agreement (LP) Encouraging the improvement of the investment climate Health Sector Managed Fund Tourism Sector Managed Fund Hospitals Pharma- ceuticals • Tourism SEZ Tanamori Toba + Likupang Hotel chain Technology Sector Managed Fund Digital lending Payments Commerce + New Capital City Managed Fund Contractor Utilities Land & building Top SWF in Global with its total assets: ○ Norway Gov USD 1,1 trillion О China Inv. Co.→ USD 1 trillion О Abu Dhabi USD 579 trillion Top SWF in ASEAN with its total assets: GIC Private Limited → USD 453 billion Temasek Holdings → USD 417 billion Khazanah Nasional Berhad → USD 20 billion#43& 00 Investment Facilitation Services During COVID-19 Pandemic 1 2 3 4 5 Companies Operation Support Optimizing facilitation for companies that accelerate the development and operation of business activities through the issuance of letters of support to companies while still observing the COVID-19 protocol Visa Recommendations for Company Leaders Providing Visa recommendations for foreign companies' leader visit to related to their industry exploration /relocation and company operations. Including to obtain an entry permit visit visa during large scale social restriction (PSBB). Visa recommendations for foreign skilled workers Providing Visa recommendations for foreign skilled workers who will enter the country related to their investment realization / implementation Managing Existing Investment Realization Conduct visits to companies (for example visiting Hyundai and Bonded Zone) to spur existing investment in addition to fiscal incentive facilitation Optimization of Business Licensing Services BKPM continues to provide business licensing services amid the COVID-19 Pandemic. The average business license issued during the pandemic both online and offline is 4000- 5000 permits per day. Source: Investment Coordinating Board (BKPM) 42 42#44Investment Realization in Q1-2021 1000 900 800 700 S 600 IDR tn 500 400 300 200 100 0 Q1 2020 Q II 2020 TOTAL 210,7 191,9 Q III 2020 209,0 Q IV 2020 Jan-Dec 2020 Q1 2021 Target 2021* Achievement** 214,7 826,3 219,7 900,0 24,4% FDI DDI 98,0 112,7 97,6 106,1 111,1 412,8 111,7 469,8 23,8% 94,3 102,9 103,6 413,5 108,0 430,2 25,1% DDI: Domestic Direct Investment FDI: Foreign Direct Investment *) The adjustment of investment realization target for 2021 based on the BKPM Regulation No 2 of 2020 on the Strategic Plan of BKPM of 2020 2024 is IDR 858 5 T **) Towards the 2021 investment realization target The value of investment in Quarter | 2021 constitutes the direct investment realization done for three months period (January-March 2021) based on investment realization report (LKPM) from DDI and FDI companies Q-1 2020 у-о-у q-o-q DDI -4.2% 4.2% FDI Investment on Upstream Oil and Gas, Banking, Non Bank Financial Institution, Insurance, and Micro Business are excluded 14.0% 0.6% TOTAL 4.3% 2.3% The investment value is in IDR Trillion and US 1 IDR 14 600 based on The 2021 National Budget The investment realization in Quarter I 2021 IDR 219.7 T, 4.3% increase from Quarter | 2020 (IDR 210.7 T) Source: Investment Coordinating Board (BKPM) 43 33#45Investment Realization in Q1-2021 (excluding the upstream oil and gas sector and financial services) Top 5 Investors (by country) (in USD billion) Singapore 34.0% China 1 13.6% South Korea 0.9 11.1% Hongkong 0.8 10.8% Switzerland 0.5 6.1% Others 24.4% Source: Investment Coordinating Board (BKPM) By Geography By Region in IDR Trillion IDR 20.2T West Java 37.1 (9.2%) IDR 13.6T, (6.2%) IDR 20.7 T (9.4%) DKI Jakarta 23.3 2.6 IDR 52.3T (23.8%) IDR 105.3T (47.9%) IDR 7.6 T (3.5%) East Java 17 Banten 14.8 Central Java 12.3 Others 115.2 By Sector Electricity, Gas, and Water Supply 20.2 Food Industry 21.7 Transportation, Warehouse, and 25.6 Telecommunication 1.9 Metal, Except Machinery and Equipment Industry 27.9 Housing, Industrial Estate, and 29.4 Office Building Others 94.9 44#46Investment Realization in Q1-2021 (excluding the upstream oil and gas sector and financial services) Outside Java IDR 102.4 T (48.6%) FDI Q1 - 2020 Total: IDR 210.7 T Direct Investments IDR tn DDI TOTAL Outside Java IDR 114.4 T Realization (52.1%) y-o-y Java -2.7% Java IDR 108.3 T (51.4%) Outside Java 11.7% TOTAL 4.3% Q1 - 2021 Total IDR 219.7 T Java IDR 105.3 T (47.9%) 219.7 108.0 111.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2013 2020 2014 2015 2016 2017 2018 2019 2021 Source: Investment Coordinating Board (BKPM) 45#47Potential Investment Realization Reaches IDR 708 T IDR 708T Potential Investment Realization IDR 517.6 (73.1%) The potential value facilitated Companies that had been facilitated: Rosneft YTL Power YTL GROUP 211.9T LOTTE CHEMICAL 61.2T 58.1T YTL 38.0T (PT Tanjung Jati Power) PT. INDO RAYA TENAGA VALE 39.2T PT VALE INDONESIA TEk KOBEXINDO we grow together. 14.0T INDONESIA POWER 9.5T Solving stalled investment issues is one strategy to attract investors Klaten, Central Java Dumai, Riau 21.7T HYUNDAI tlb 5.2T 7.7T " 2.7T GCL PT GCL INDO TENAGA PT Multimas Nabati Asahan (PT Tenaga Listrik Bengkulu) 2.0T ANI APT Galempa Sejahtera Bersama Masdar 1.8T A HUBADALA COMPANY PT Sumber Mutiara Indah Perdana (SMIP) 1.8T bp MALUNDO 1.1T 1.0T ◉ GORONTALO LISTRIK PERDANA 2.8T JAMBI INTEGRATED CITY 2.4T PI JAMBI KEMINGKING ECOPARK Indonesian government does not only facilitates large investment issues, but also medium & small investments Source: Investment Coordinating Board (BKPM), data up to Dec 2020 FIRST PACIFIC 14.7T Others 1.4T CJ CHEILJEDANG 2.4T Minahasa Cahaya 1.8T Lestari PERTAMINA GEOTHERMAL ENERGY 6.0T * 2.3T (Project Hululais) 5.4T (PT Halmahera Persada Lygend) 1.4T (PT Sulawesi Cahaya Mineral) 46#48Enhancing Business License Service Standard Presidential Regulation to Accelerate Ease of Doing Business implemented since 2014 Main Policy Policy Goals Improve efficient, streamlined, & integrated business license service standards 2 A 3 Provide business licensing process assurance in terms of the costs and lead times Accelerate the business licensing process 3 ☑M Source: Coordinating Ministry for Economic Affairs 1st Phase Forming a Task Force to identify & overcome the end- to-end licensing barriers Implementing a licensing checklist for Special Economic Zones (KEK), Free Trade Zones (FTZ), Industrial Zones & Tourist Zones Utilizing data sharing Overcome the barriers to doing business in Indonesia 4 6 5 Increase coordination & synergy between central & regional government Implement integrated licensing process (single submission) 2nd Phase Business license regulatory reforms Implementation of the Single Submission system Note: 1st and 2nd Phase are implemented in parallel 47#49Improving Investment Climate ...Bonded Logistic Center launched in 2016 to Improve Indonesia's Competitiveness Bonded Logistic Center (Pusat Logistik Berikat/PLB) is a facility provided by Ministry of Finance as part of the implementation of the 1st Economic Policy Package, launched on March 2016 PLB facility aims to to improve efficiency and reduce the cost of transportation and logistics in Indonesia; support the growth of the domestic industry, including small and To date, 52 Bonded Logistic Center has been launched to support various industries. textile (chemical Food & beverages industry Small and medium industry Oil and gas, and mining industry Personal care/ home care industry Synthetic Auto- motive industry medium industries; increase Heavy Equipment industry Textile (cotton) industry. Aircraft investment; and to make Defence Indonesia to become a logistics hub in Asia Pacific. industry MRO industry industry substances) Source: Coordinating Ministry for Economic Affairs 48#50Improving Investment Climate Online Single Submission (OSS) Has Been Launched in 2018 OSS is a web-based business licensing system intended to cut the red tape involved in obtaining business permits and integrated between the central government and regional administrations Sectors Environment & Forestry Sector Electricity Sector Public Works & Housing Sector Health Sector Industry Sector Marine & Fishery Sector Medicine & Food Sector Transportation Sector Trade Sector Information & Communication Sector Business licenses can be secured in under an hour Other Sector The Advantage of Using OSS 良 Standardized business licenses are available More practical Source: Coordinating Ministry for Economic Affairs Accessible at anytime and anywhere Ellectronically integrated The whole licensing process is monitored by the Task Force 49 49#51Improving Investment Climate ...revision of the Negative Investment List in 2018 Introduction of New Foreign Ownership Regulation for Strategic Sectors Sports Center, Cold storage Before After Restaurants, Bars Pharmaceutical Raw Materials Before Film Processing Lab, Crumb Rubber After Manufacturing Before After Before After 33% 100% 100% 100% 100% 49% 51% 85% Key Reforms in Negative Foreign Investment List Revision of "Partnership" category to refer to partnership with Micro, Small and Medium Enterprises (MSMEs) Grandfather Law: If a particular sector is tightened in future, existing foreign investor does not need to comply with tighter stake Strengthen implementation of negative investment law through active roles from ministries, agencies and regional governments 1 For total project value of IDR10bn and above Source: Investment Coordinating Board (BKPM) Toll Road Operator, Telecommunication Testing Company Before After Distribution, Warehousing Before After Private Museum, Catering, apparel Manufacturing, Exhibitions & Conventions Before After 95% 100% 67% 67% 33% 51% Professional Training, Golf Course Management, Air Transport Support Services, Travel Bureau Telecommunication Provider Before After Consultancy for Construction¹ Before with Integrated Services After Before After 49% 67% 67% 67% 55% 65% 50 50#52Section 3 Economic Factor: Stable Growth Prospects Amid Temporary Moderation BHINNEKA TUNGGAL IKA#53Conducive Environment Underpinning Stable Growth Fundamentals Amid Temporary Moderation Largest Economy in South East Asia Manageable Inflation Rate manufacturing 4th Most Populous country in the World; 64% in productive age Rising Middle Class and Affluent Customers Large and Stable Economy Consistent Budget Reform Reform-Oriented Administration and New Economic Structure High Infrastructure Investments From commodity-based to service sectors via infrastructure development From consumption-led to investment- led growth via a stronger manufacturing sector and more investment initiatives Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions Budget reform as a part of larger economic reform initiative Fuel subsidies significantly reduced and spending redirected to more productive allocation Tax base to be broadened from one reduce dependency on commodities Prudent debt management Three main sources of financing for investment needs: State and regional budget, State Owned Enterprises and PPP Continuing from 2015 policy, infrastructure spending will be higher than fuel subsidy Infrastructure spending focused on basic infrastructure projects Fiscal and non-fiscal incentives to attract infrastructure investment and promote PPP 52 2#54National Economic Growth Improved Strong GDP Growth¹ % 7.0 QoQ - YoY 5.0 3.27 3.31 3.14 4.01 3.19 3.09 3.06 3.0 1.0 0.04 -1.0 (0.16) -3.0 (0.36) (1.73) (0.30) (0.41) (1.81) (1.70) (2.07) -5.0 -7.0 5.05 (0.52) (1.69) (4.19) (0.42) (1.74) (2.41) 2.19) (3.49) (5.32) Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4 2014 2015 2016 2017 2018 2019 2020 Favourable GDP Growth Compared to Peers² % 10.00 8.80 7.40 . • National economic growth maintained recovery momentum in the fourth quarter of 2020. Based on data from BPS-Statistics Indonesia, economic growth in Indonesia recorded a shallower - 2.19% (yoy) contraction in the fourth quarter of 2020, improving from -3.49% (yoy) in the third quarter of 2020. A fourth-quarter improvement was recorded across nearly all demand-side components and economic sectors. Therefore, national economic growth in Indonesia contracted 2.07% in 2020. Looking forward, domestic economic growth, which improved through to the end of 2020, is projected to gradually gain momentum in 2021. Bank Indonesia has oriented its accommodative policy mix towards supporting the national economic recovery, while strengthening synergy with the Government and other relevant authorities. Domestic economic improvements in the fourth quarter of 2020 were supported by stimulus realisation and a positive external sector contribution. Government consumption expanded 1.94% (yoy) in 2020 due to the realisation of government stimuli, dominated by social assistance disbursements, other goods and services expenditure as well as regional transfers and village fund disbursements. Meanwhile, household consumption growth recorded a shallower -3.61% (yoy) contraction in the fourth quarter of 2020 compared with -4.05% (yoy) in the previous period in response to greater public mobility. Annually, household consumption contracted 2.63%. Investment growth also experienced a slightly shallower -6.15% (yoy) contraction in the reporting period compared with -6.48% (yoy) in the previous period, bringing the decline for the year in 2020 to negative 4.95%. On the other hand, net exports enjoyed a positive position as export performance improved in line with economic recovery momentum in several of Indonesia's major export destinations amidst comparatively subdued import performance. Most economic sectors recorded incremental gains in the fourth quarter of 2020. Sectors associated with healthcare as well as work-from-home and school-from-home activities continued to improve and maintained positive growth, including Information and Communication as well as Health Services. In addition, Agriculture and Education also recorded positive growth, while the Manufacturing Industry and Trade, accounting for large economic contributions, improved to experience shallower contractions. 6.10 5.00 0.00 4.00 Growth Prospect Institutions 2021 GDP growth (% YoY) 2021 Budget 5.0 -5.00 Bank Indonesia 4.1-5.1 -10.00 Bulgaria Indonesia Colombia Philippines India IMF (WEO, Apr 2021) 4.3 World Bank (Global Economic Prospects, Jan 2021) 4.4 -15.00 2012 2013 2014 2015 2016 2017 2018 ADB (ADO, Apr 2021) 4.5 2019 2020 2021* 2. 1. Source: Central Bureau of Statistics of Indonesia (BPS), Including non-profit household consumption Source: World Economic Outlook Database - October 2020; * indicates estimated figure ** Consensus Forecast (Apr 2021) 4.4 53 53#55GDP Growth Breakdown GDP Growth Based on Expenditures (%, YoY)¹ 2015 2016 2017 2018 2019 2020 By expenditure HH. Consumption 5.0 Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 5.0 5.0 5.0 4.9 5.0 Q3 5.1 5.0 5.0 5.0 4.9 5.0 4.9 Non profit HH. consumption Government consumption Gross Fixed Cap. Formation (8.1) (8.0) 6.6 - - 2.9 2.6 7.1 8.3 (0.6) 7.1 5.3 3.4 6.4 - - - Exports Imports 3.9 2.7 6.7 6.7 6.7 6.6 8.1 8.5 6.0 6.2 (3.0) (4.0) (0.1) 2.7 (1.9) 3.5 3.8 2.1 2.7 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5 4.8 5.3 7.1 7.3 6.2 7.9 (0.6) (0.3) (1.0) (6.4) (2.1) (3.1) (1.5) (5.9) (1.7) 8.4 2.7 16.5 8.4 8.9 5.8 7.4 8.3 (2.6) (7.1) (6.5) (8.6) (6.2) (5.0) (3.4) (4.1) (2.4) 4.8 0.2 15.4 11.9 8.1 13 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 Q4 Tot Q1 5.0 4.9 5 5.3 6.9 8.1 Q2 Q3 Q4 Tot Q1 5.2 5 5.1 5.1 5.0 8.8 8.7 11 9.1 5.2 6.3 5.8 6.9 4.6 4.8 5.3 8.2 6.7 15 14 6.1 4.6 6.5 -1.5 7.4 12 -6.5 5.0 Q2 Q3 Q4 Tot Q1 Q2 Q3 Q4 Tot 5.2 5.0 5.0 5.0 2.8 -5.5 -4.0 -3.6 -2.6 17.0 15.3 7.4 3.5 10.6 -5.0 -7.8 -2.0 -2.1 -4.3 1.0 0.5 3.3 3.8 -6.9 9.8 1.8 1.9 4.6 4.2 4.1 4.5 1.7 -1.8 0.1 -0.4 -0.9 0.4 12.0 -11.7 -7.2 -7.7 -6.7 -8.3 -7.9 -7.4 -3.6 -18.3 -23.0 -13.5 -14.7 -8.6 -6.5 -6.2 -4.9 5.1 5.1 5.0 5.0 5.0 3.0 -5.3-3.5 -2.2-2.1 GDP 1. Source: Central Bureau of Statistics of Indonesia (BPS), GDP Growth by Sector (%, YoY) ** Including non-profit household consumption 2015 2016 2017 2018 2019 2020 By sectors Tot Q3 Q4 Tot. Agriculture, forestry, and fishery Mining and Quarrying Q1 Q2 Q1 Q2 Q3 3.7 6.5 2.9 1.6 3.8 1.5 3.5 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 Q4 Tot. Q1 Q2 Q3 Q4 3.2 5.5 3.4 7.1 3.3 2.8 2.4 3.9 3.3 Q1 Q2 Q3 Q4 Tot Q1 3.8 4.7 3.6 O Q2 Q3 Q4 Tot Q1 Q2 Q3 3.9 1.8 5.3 3.1 4.2 3.6 0.0 2.2 (1. - " 1.0 0.2 བ 1.4 0.9 2.1 1.8 0.0 0.7 1.1 2.6 2.7 2.2 2.2 2.3 -0.7 2.3 0.9 1.2 0.4 NNN -2.7 -4.3 * NO Tot Q4 2.2 2.6 1.8 -1.2 -2.0 3) Manufacturing Construction Wholesale and Retail Trade, Repair of Car and Motorcycle Transportation and Storage 4.1 4.2 4.6 4.4 6.0 5.4 6.8 7.1 4.3 6.4 4.7 4.6 4.5 3.3 4.3 4.3 3.5 4.9 4.5 4.3 4.6 - F 3.8 1.6 1.4 3.5 2.5 4.3 4.3 3.7 3.9 6.8 5.1 5.0 4.2 5.2 6.0 7.0 7.0 7.2 6.8 7.4 5.7 4.0 4.6 3.5 5.2 4.5 4.5 5 5.2 5.3 4.4 3.9 4.4 5.8 4.2 4.3 ▼ F F 6.3 6.0 7.0 7.5 6.7 7.4 6.5 8.2 7.6 7.4 8.1 8.8 8.9 8.2 8.5 8.5 8.7 5.7 5.5 3157 3.9 3.5 55 4.1 5.6 6.1 5.9 5.7 5.2 4.6 5.4 ㄖ片ㄞˊ 3.7 3.8 2.1 5.6 5.8 5.8 2.9 -6.2 -4.3 -3.1 -2.9 -5.4 -4.5 -5.7 -3.3 4.4 4.2 4.6 1.6 -7.6 -5.0 -3.6 -3.7 5.9 6.7 7.6 6.4 1.3 30.8 -16.7 -13.4 -15.0 Information and communication 9.7 9.3 10.6 9.2 9.7 7.6 9.3 8.9 9.6 8.9 Financial service Other Services* 8.6 2.6 10.3 12.8 8.6 9.3 13.6 9.0 5.1 6.5 4.8 5.5 5.4 6.0 5.6 4.5 4.2 10. 5 8.9 6.0 5.9 6.1 11.1 8.8 8.3 9.6 7.8 5.1 8.1 7.1 7 9.1 9.6 9.2 9.8 9.4 9.8 10.8 10.7 10.9 10.6 3.8 5.5 4.3 P 3.8 4.9 4.2 3.5 4.8 6.0 4.6 5.4 6.2 6.7 6.4 6.2 3.1 3.1 6.2 4.2 7.2 6.8 4.5 6.2 8.5 6.6 7.3 6.4 6.2 6.7 4.6 10.6 1.1 -0.9 2.4 3.2 -6.2 -1.4 -1.7 -1.2 GDP 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0 5.0 5.0 5.1 5.2 5.1 5.1 5.3 5.2 5.2 5.2 5.1 5.1 5.0 5.0 5.0 3.0 -5.3-3.5 -2.2-2.1 Source: Central Bureau of Statistics of Indonesia (BPS) *Other services consist of 10 sectors (according to Standard National 2008) 54#56Economic Performance Improved In Almost All Regions REGIONAL GDP Q4-2020 (% YOY) ACEH (2.99) North Sumatra (2.94) RIAU (1.47) West Sumatra (2.23) JAMBI (0.99) East Kalimantan Riau Islands (4.46) West Kalimantan (2.22) (2.83) GORONTALO (3.56) North Sulawesi (2.23) North Maluku 9.48 Central Kalimantan Babel Islands (1.04) (2.10) West Sulawesi (7.51) Central Sulawesi 4.45 West Papua (5.21) South Sumatra BENGKULU (1.21) (2.39) LAMPUNG (2.26) DKI (2.14) Central West Java Java BANTEN (3.92) (2.39) (3.34) South Kalimantan (2.94) South-East Sulawesi (2.15) MALUKU (3.42) South Sulawesi (0.62) BALI East Java (2.64) (12.21) DIY (0.68) West Nusa Tenggara 03) East Nusa Tenggara (2.27) Source: Central Bureau of Statistics of Indonesia (BPS), calculated Tw IV > Tw II Tw IV < Tw II PAPUA 6.92 55#57Economic Performance in Most Sectors Starting to Improve Most economic sectors recorded incremental gains in the fourth quarter of 2020. Sectors associated with healthcare as well as work- from-home and school-from-home activities continued to improve and maintained positive growth, including Information and Communication as well as Health Services. In addition, Agriculture and Education also recorded positive growth, while the Manufacturing Industry and Trade, accounting for large economic contributions, improved to experience shallower contractions. Indonesia's GDP Share (%) % 100.0 2.63 1.99 2.16 2.49 2.49 3.15 3.57 3.85 4.06 3.24 4.14 4.40 4.61 4.11 3.26 3.51 3.50 4.26 3.64 90.0 17.55 17.64 17.88 18.03 18.20 18.64 18.66 18.47 18.35 18.49 18.52 18.33 19.37 18.68 19.08 18.82 19.10 19.86 19.22 80.0 3.49 3.46 3.72 3.88 3.86 4.03 3.73 3.60 4.19 3.61 4.20 4.15 4.34 3.57 3.50 4.10 4.18 4.24 4.70 4.44 4.32 4.51 4.34 4.57 70.0 3.57 3.53 3.52 3.62 3.63 3.78 3.77 3.95 3.89 3.95 3.96 4.25 4.66 4.56 3.93 4.42 4.04 4.51 4.57 5.02 5.20 5.41 5.38 5.53 5.57 5.54 5.63 5.57 5.17 3.58 4.40 4.47 4.68 13.46 13.61 13.21 13.21 60.0 13.43 13.30 13.19 13.02 13.02 13.19 12.83 12.95 12.98 12.95 13.01 13.20 12.83 12.93 12.85 50.0 9.13 9.09 9.35 9.49 9.86 10.21 10.38 10.38 10.53 10.76 10.37 10.56 10.60 10.75 10.70 10.60 10.71 11.26 10.96 40.0 30.0 22.04 21.76 21.45 21.03 21.08 20.99 19.86 20.52 20.16 19.86 20.07 19.52 19.62 19.70 19.86 19.98 19.88 19.63 19.81 20.0 10.46 11.81 11.61 11.01 9.83 6.28 7.65 7.18 7.58 8.08 7.77 7.39 6.95 6.16 7.26 6.82 6.44 6.98 6.48 10.0 13.93 13.51 13.37 13.36 13.34 13.49 13.48 13.16 12.81 12.65 13.57 13.44 15.45 11.19 12.71 12.84 14.68 11.97 13.70 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019 Q2-2019 Q3-2019 Q4-2019 2019 Q1-2020 Q2-2020 Q3-2020 Q4-2020 2020 Taxes Other Services ■Transportation and Warehousing I Mining and Quarrying Source: Central Bureau of Statistics of Indonesia (BPS), calculated Wholesale and Retail Trade Agriculture, Forestry, and Fishery Financial and Insurance Services Construction Information and Communication Manufacturing 56#58Stronger Fundamentals Facing the Headwinds Inflation Rate (%) Inflation controlled within the target range 1998 2008 12.1 Apr 2021 1.37 (yoy) 1998 1998 82.4 2008 19-Apr-21 Non-Performing Loan/NPL (%) NPL level (gross) is below the maximum threshold of 5% 2008 3.8 Feb 2021 3.21 0 5 10 15 20 25 External Debt (Public & Private) to FX Reserve Ratio Significantly lower than 1998 crisis 30 30 30 35 40 IDR Movement (%) IDR appreciated year-to-date Foreign Reserves (USD bn) Significantly higher than 1998 & 2008, ample to cover 10 months of import and external debt repayment -197 -35 -3.42 (ytd) -300 -200 -100 0 Government Debt/GDP Consistently well-maintained 1998 17.4 2008 Mar 2021 More Liquid Market (%) Overnight interbank money market rate is relatively lower 62 10.5 2.79 1998 2008 Mar 2021 50.2 External Debt/GDP Higher than 2008, but significantly lower than 1998 137.1 8.6x 3.1x 3.04x 100.0% 27.4% 41.64% 116.8% 33.2% 39.4% 2008 Feb 2021 2008 Mar 2021 2008 Q4-2020 1998 1998 1998 57 44#59Outlook of Domestic Economy Remains Robust ...domestic economic growth is predicted to rebound in 2021 2021 Economic Outlook • Bank Indonesia projects economic growth in 2021 at the range 4.1-5.1%. Bank Indonesia projects Inflation in 2021 to remain under control and within the 3.0%±1% target corridor. • Bank Indonesia projects the current account deficit at 1.0-2.0% of GDP in 2021, thereby supporting external sector resilience in Indonesia. ● Bank Indonesia projects credit growth in 2021 will be around 5.0-7.0% LOAN π Rp Economic Growth Inflation CAD (% of GDP) Credit Growth 2018 Realisation 5.17% 3.13% 2.98% 11.75% 2019 5.02% 2.72% 2.71% 6.08% Realisation 2020 -2.07% 1.68% 0.4% -2.4% Realisation 2021 4.1-5.1% 3.0±1% 1.0-2.0% 5.0-7.0% Source Bank Indonesia 58#60Section 4 External Factor: Improved External Resilience BHINNEKA TUNGGAL IKA#61External Sector Remains Resilient Supported by Adequate Reserves and Sound Balance of Payments Balance Of Payment Remains Solid US$bn Current Account Overall Balance Capital and Financial Account Reserve Asset (rhs) 20 15 10 5 0 -5 -10 -15 Q1Q2Q3Q Current Account Continue Recorded Surplus in Q4-2020 2018: 2019: 2013: 2014: 2015: 2016: 2017: 2020: CA Deficit CA Deficit CA Deficit CA Deficit CA Deficit. CA Deficit CA Deficit CA Deficit (US$29.1bn) (US$26.7bn) (US$17.5bn) (US$16.9bn) (US$16.2bn) (US$30.6bn) (US$30.4bn) (US$4.7bn) US$bn 160 US$bn 135.90 13 120 8 Current Account (%GDP) (rhs) Primary Income Secondary Income Services 3 0.80 80 (0.91) -2 (0.16) 40 -7 0 -12 1.0 0.29 0.0 9.95 -1.0 1.43 -2.0 (7.48)-3.0 -4.0 (3.10) -5.0 ww Q102030401020304 Q10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 10 20 30 40 1Q 20304 2013 2014 2015 2016 2017 2018 2019* 2020** Source: Bank Indonesia Trade Balance Surplus Increases 2012 2013 2014 Source: Bank Indonesia 2015 2016 2017 2018 2019* 2020** 2013: 2014: 2015: 2016: 2017: Deficit Deficit Surplus Surplus Surplus (US$4.10bn) (US$2.37bn) US$7.59bn US$8.83bn US$11.83bn 2018: 2019: 2020: 2021: Deficit Deficit Surplus Surplus (US$8.65bn) (US$3.24bn) (US$21.81bn) (US$5.53bn) Official Reserve Assets Increased to Reinforce External Sector Resilience FX Reserves as of March 2021: US$137.1 bn (Equiv. to 9.7 months of imports + servicing of government debt) US$bn US$bn 5.00 FX Reserves (LHS) Month of Import & Debt Service (RHS) Month OG Non-OG Total 130 4.00 120 2.94 3.00 110 9.1 2.00 N 100 1.57 1.00 90 0.00 80 -1.00 70 -1.37 -2.00 60 -3.00 50 1 4 7 1 4 7 1 4 7 1 47 1 4 7 10 10 10 10 2013 2014 2015 2016 2017 2018 2019 2020 Preliminary Figure ** Very Preliminary Figure 2014 2015 2016 2017 2018 10 1 4 7 10 2019 1 4 7 1 10 2020 2021 Source: BPS Source: Bank Indonesia E122110007654321 00#62Exchange Rate In Line with Fundamentals Movement of Rupiah a.o 19 Apr'21 Quarterly Average Monthly Average 15,711 IDR/USD 414893 14,673 15,179 14,53 14,80 14,708 14,381 14,220 14,232 14254 14,113 14339 14120 13,714 14,855 14,201 14605 14134 14,141 14,031 14064 14219 14,105 14,12 14,023 14,006 14,044 25-Dec 14-Jan 3-Feb 23-Feb 15-Mar 4-Apr 24-Apr 14-May 3-Jun 23-Jun 13-Jul ΛΟΝ ΛΟΝ Dec 9-Jan 29-Jan 18-Feb 9-Mar 29-Mar 18-Apr 8-May 28-May 17-Jun 7-Jul 27-Jul 16-Aug 5-Sep 25-Sep 15-Oct 4-Nov 4-Nov 14-Dec Jan 23-Jan 17,000 16,500 16,000 15,500 14547.5 15,000 14157 14,387 14,500 14,555 Feb 4-Mar 24-Mar 13-Apr 14,000 13,500 13,000 In line with Bank Indonesia stabilisation measures, rupiah exchange rates remain relatively stable, despite persistently elevated global financial market uncertainty. As of 19th April 2021, the rupiah depreciated 1.16% on average, or by 0.15% (ptp) on the March 2021 level. Rupiah depreciation is consistent with persistently high global financial market uncertainty that has restrained foreign capital inflows in the form of portfolio investment to domestic financial markets. As of 19th April 2021, therefore, the rupiah recorded 3.42% (ytd) depreciation against the yearend level in 2020, which is comparatively lower than several other emerging markets, however, such as Brazil, Turkey and Thailand. Bank Indonesia continues to strengthen exchange rate stabilisation policy in line with the rupiah's fundamental value and market mechanisms through effective monetary operations and adequate market liquidity. Rupiah Exchange Rate Volatilty BRL -8.42 -6.99 Rupiah Exchange Rate Fared Relatively Well Compared to Peers -7.09-6.98 JPY -4.51 -4.09 IDR -3.42 0.21 2.66 2.13 -2.77 5.75 EUR -2.24 5.10 -2.12 2.96 INR -2.06 1.20 -0.57 3.41 PHP -0.74 2.67 0.22 6.27 ZAR a.o 19-Apr-21 2.74 -10.0 -5.0 00 0.0 5.0 Source: Reuters, Bloomberg (calculated) 30.08 29.9 point-to-point average 22.08 15.4 11.3 17.2 18.8 52.34 a.o 19 Apr 2021 % 60 ■Feb-21 ■Mar-21 50 ■Apr-21 40 21.0 6.1 8.01 8.6 5.5 9.71 11.65 9.17.0 5.96 8.4 7.62 7.90 5.0 1.8 3.6 3.3 2.8 3.4 4.8 4.6 2.19 10.35 10.0 15.0 BRL ZAR TRY IDR KRW THB MYR INR SGD PHP 61 30 20 20 10 10#63Ample Lines of Defense Against External Shocks Ample Reserves FX Reserve Ample level of FX reserves to buffer against external shock FX Reserves as of of March 2021: US$137.1 bn Swap Arrangement Japan Bilateral Regional Global South Korea Australia Singapore China Malaysia ASEAN Swap Arrangement (ASA) Chiang Mai Initiative Multilateralization (CMIM) Agreement IMF Global Financial Safety Net - GSFN Source: Bank Indonesia Renewed a 3 year USD22.76 billion swap line with Japan on October 14th, 2018 The facility is available in USD and JPY • Renewed a 3 year KRW / IDR swap arrangement with the size of up to KRW 10.7 trillion IDR 115 trillion in March 2020 • Renewed a 3 year A$/IDR swap arrangement of up to A$10 billion or IDR 100 trillion in August 2018 • Renewed a one year SGD/IDR swap arrangement with a size up to USD10 billion (equivalent) in November 2020 Renewed a 3 year swap arrangement and increased the size of swap line up to CNY 200 bn / USD 30 billion in November 2018 Established a 3 year RM/IDR swap arrangement with a size up to USD2 billion (equivalent) in September 2019 Entitled to a maximum swap amount of USD600 million under ASA The first MoU on the ASA was signed in 1977 among 5 ASEAN Central Banks with total facility USD100 million Increased in size to U.S.$2 billion in 2005 Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement • Came into effect in 2010 with a pool of US$120 bn and • Doubled to US$240 bn effective July 2014 Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem • Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL) 99 62#64Healthy External Debt Profile External Debt Structure Private External Debt ■Public External Debt 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% The Structure of External Debt is Dominated by Long-Term Debt 100% 90% - Short Term External Debt Long Term External Debt 80% - 50.2 70% 60% 50% 40% 30% 49.8 20% 10% 0% 84.4 15.6 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* Jun 2020* Jul 2020* Aug 2020* Sep 2020* Oct 2020* Nov 2020* Dec 2020* Jan 2021* Feb 2021** 2009 2010 2011 2012 2013 2014 2015 CTOZ 2016 2017 2018 Q1-2019* External Debt Remains Manageable Million USD External Debt to GDP Ratio & Debt to Export Ratio % % 450,000 17.1 400,000 350,000 300,000 115 1.312.0 10.2 250,000 10.1 8.0 o 200,000 150,000 5.4 5.9 6.5 100,000 50,000 External Debt External Debt (rhs) 20.0 240 18.0 16.0 220 31.8 36.1 32.9 o 29.1 O 14.0 200 26.5 27.4 25.0 9.9 10.2 12.0 180 10.0 7.5 160 8.0 5.0 140 3.8 3.4 6.0 3.0 4.0 120 139.5 0.6 2.0 100 121.14.9 113.8 123.1 0 0.0 80 101.0 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* Q1-2020* Q2-2020* Q3-2020* Q4-2020** Source: Bank Indonesia, External Debt Statistics of Indonesia 2009 2010 2011 2012 2013 34.3 34.7 36.0 36.7 36.5 36.1 36.1. 34.5 37.3 38.1 39.4 207.315 215. 30 197.7 15 10 222222250 35 168.476.168.672.468472.0 77.183.177.8 External Debt/ Export Ratio (rhs) External Debt/ GDP Ratio 2018 Q1-2019* Q2-2019* Q3-2019* Q4-2019* Q1-2020* Q2-2020* Q3-2020* Q4-2020** 2014 2015 2016 2017 *Provisional Figures **Very Provisional Figures Q2-2019* Q3-2019* Q4-2019* Jan 2020* Feb 2020* Mar 2020* Apr 2020* May 2020* Jun 2020* Jul 2020* Aug 2020* Sep 2020* Oct 2020* Nov 2020* Dec 2020* Jan 2021* Feb 2021** % 63 83#65Manageable External Debt Profile Short term non-bank corporate debt (non affiliation) represents only 10.5% of total private external debt Public US$212.1bn Long Term 1 US$155.8bn or or 50.2% of Total Ext. Debt 74.5% of Private Ext. Debt External Debt Position Affiliation US$12.6bn Private Bank US$20.0bn or 9.5% of Private Ext. Debt or 6.0% of Private Ext. Debt 49.8% 50.2% US$422.6bn 74.0% US$210.5bn or 49.8% of total Ext. Debt 36.6% 36.2% US$54.7bn or 26.0% of Private Ext. Debt US$34.7bn or 62.9% of Private Ext. Debt 63.8% 63.4% 26.0% Short-Term¹ Private External Debt Position as of February 2021 1 Based on remaining maturity Source: External Debt Statistics of Indonesia, April 2021 Private Non-Bank US$22.1bn or 10.5% of Private Ext. Debt Non Affiliation 64#66Strengthened Private External Debt Risk Management Debt Burden Indicator (External Debt/GDP) Remains Comparable to Peers Rating Encouraging Corporates Compliance on Hedging Ratio & Liquidity Ratio External Debt/GDP (%) Hedging Ratio* Uruguay 86.1 93.9 76.2 24.2 Philippines 24.7 22.2 36.3 Indonesia 35.3 361 48.7 Colombia 53 ■2021F 42.7 2020F 53.6 Bulgaria 56.6 2019 56.3 0 20 40 60 80 100 Source: Moody's Credit View Fundamental Data, July 2020 Regulation on Prudential Principle in Managing External Debt Regulation Key Points Phase 1 Jan 1,2015 Phase 2 Jan 1,2016 Dec 31,2015 Dec 31,2016 Phase 3 Jan 1, 2017 & beyond Object of Regulation Hedging Ratio < 3 months >36 months Liquidity Ratio (< 3 months) Credit Rating Hedging transaction to meet hedge ratio Sanction Source: Bank Indonesia Governs all Foreign Currency Debt 20%* 25%** 20%* 25%** 50% 70% Not applicable Minimum rating of BB- not necessarily be done with a bank in Indonesia Must be done with a bank in Indonesia As of Q IV-2015 Applied 260 corporates (9.9%) 161 corporates (6.1%) ≤ 3 months 2,359 corporates (90.1%) > 3-6 months 2,458 corporates (93.9%) Liquidity Ratio* 308 corporates (11.8%) 2.311 corporates (88.2%) ■Comply Not Comply *Data as of Q3 2020, with total population 2.,619 corporates Source: Bank Indonesia 65#67Solid Policy Coordination In Managing Financial Markets Volatility CMP BSF The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financial System Stability Committee (KSSK) KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation Swap facility arrangements based on international cooperation Enhancing coordination between government institutions and continuous dialogue with market participants Implementing Crisis Management Protocol (CMP) Gov't Securities Crisis Management Protocol (CMP) Indicators: - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; Foreign ownership in government securities Policies to address the crisis at every level : - Repurchase the government securities at secondary market Postpone or stop the issuance State's Budget Bond Stabilization Framework State Owned Enterprises (BUMN)'s Budget Social Security Organizing Agency (BPJS)'s Budget State's Budget First Line of Defense Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related SOES (min. level Aware) BPJS (min. level Aware) Second Line of Defense State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) Implementing Bond Stabilization Framework (BSF) Source: Ministry of Finance 66#68BHINNEKA TUNGGAL IKA Section 5 Fiscal Performance and Flexibility: Strong Commitment in Maintaining Fiscal Credibility#692021 Economic Recovery will be Strengthen Achievement G 2020 Indonesia is taking a big but measured steps to handle the pandemic Overcoming the spread of Covid-19, protecting the purchasing power of poor and vulnerable people, maintaining the sustainability of the business world, including MSMES Supported by synergy between institutions and all elements of the Nation Government, legislative institutions, law enforcement officers, KSSK, private sector, and society Indonesia's economic and fiscal pressures are better than many other countries Indonesia's economic contraction and widening fiscal deficit and debt were relatively moderate compared to many other countries STRENGTHENING PANDEMIC HANDLING & ECONOMIC RECOVERY 2021 Priority policies will Mass vaccination continue Strengthening 3M & 3T • Optimizing PEN program Indonesia is optimistic, but remains vigilant that the pandemic can be controlled and socio- economic activities will continue to recover "We all have to be optimistic that the beginning of 2021 will be a turning point for the pandemic problem." President RI's remarks at the annual meeting of the financial services industry, 15 Jan 68 888#70State Budget is Crucial to Contain the Impact Of COVID-19 State Budget plays critical role as countercyclical instrument in avoiding the deeper economic contraction Indonesia Economic Growth (%, yoy) 2017 2018 2019 5.1 5.2 5.0 Q1 2020 State Budget Continue To Strive in 2021 State Budget 2021 5.0 State Budget 2020 Realization (interim) IDR2,589.9 T 2021 Allocation (as of Feb 22 Growth (%) 2021) IDR2,750.0 T 6.2 2.97 Covid-19 Pandemic National Economic Recovery Program (PEN) IDR579.8 T IDR699.43 T 20.6 Health IDR63.5 T Q4 2020 -2.19 Social Protection IDR 220.4 T IDR176.3 T IDR157.4 T 177.6 -28.6 MSMEs Support & Corooration Financing IDR 173.2 T IDR186.8 T 7.9 Q2 2020 -5.32 Q3 2020 -3.49 Business Incentives Priority Program IDR 56.1 T IDR 66.6 T IDR53.9 T IDR125.1 T -3.9 87.8 Deficit (% to GDP) 6.09% 5.70% State Budget & PEN Through the widening of the 2020 state budget deficit to 6.1% of GDP, the realization of state expenditure of IDR 2,589.9 trillion, including the realization of PEN, IDR 579.8 trillion government role prevent a deeper economic contraction due to the 2020 pandemic. In 2021, state budget and fiscal policy will continue its role as a shrive to support national economic recovery 69 69#71The 2020 Social Protection Program Is Escalated To Mitigate The Negative Impact of Covid-19 Pandemic Ministry of Finance estimation shows that Social Protection is able to maintain the consumption of the poor and vulnerable groups Simulation of Changes in Household Expenditure Due to Covid-19 and Social Protection 15% 10.9% 10% 7.8% 6.8% 5.9% 4.0% 5.1% 5% 2.3% 1.9% 1.5% 0.1% 1.2% -1.4% -1.9% -2.5% 0.7% 3.0% 0% -5.5% -6.2% -6.5% -6.5% -5% -3.6% -10% -6.8% -7.7% -8.2% -7.8% -7.6% -7.8% -8.1% -8.1% -7.6% -15% 10% Poores 2 3 4 5 6 7 8 9 10% Richest 10% ■Changes in spending due to Social Assistance Changes in spending due to Covid-19 Net Changes in Household spending ■ The poor and vulnerable people (the poorest 50%) have the most benefits. The Social Protection (Perlinsos) program reaches up to the affected middle class population (for example, wage assistance, pre- employment cards, and internet quota subsidies) ■ Without the PEN program, poverty is expected to escalate even further by 2020 ■ The middle and rich classes (group of 10% to 6th and above) tend to hold back consumption, due to limited mobility. Third Party Funds (DPK) in banking grew to reach 10.9% Source: BKF calculations, for the realization of various 2020 Perlinsos programs Note: a) simulations are carried out on the growth of nominal household consumption in 2020 using Susenas 2019. b) distribution of the Perlinsos Program is carried out based on beneficiaries in Susenas Realization of PEN & Social Protection PROGRAM PKH 10 mio Beneficiaries Jabodetabek Food Aid 2,2 mio Beneficiaries Non Jabodetabek Cash Social Assistance 9,2 mio Beneficiaries Sembako Card 19,4 mio Benficiaries Wage Assistance 12.4 mio employees Village Fund Cash Direct Assistance 8 mio penerima Non PKH Basic Food Cash Assistance 9 mio Beneficiaries Wage Subsidy Assistance for non-permanent teachers 2,6 mio teachers Pre Employment Card 5,6 mio beneficiaries PKH Participants Rice Aid 10 mio Beneficiaries Internet Quota Subsidy 51 Juta Beneficiaries Electricity Discount 32,1 mio households 70 0#722020 State Budget Supports MSMEs Survivals Through Various Assistance Programs The government spends IDR112.44T to support the sustainability of MSMEs through interest subsidies, credit distribution through fund placement, Micro Business President Assistance (BPUM), Final Income Tax exemption and investment financing through LPDB. 37 million MSMEs received at least one government aid. Debtors who receive interest subsidies and debt restructuring benefit from loosening cash flows and reducing NPL risk. BANK Polo Surveys conducted by LPEM-LD FEBUI, BRI Institute, LIPI and ITB show that MSMEs can survive thanks to government assistance. TAX Most of the beneficiaries used PEN funds for working capital (buying raw materials). Fund Placement IDR66.75 T Total Credit Rp315.51 T For 4.7 million debtors Interest subsidy IDR12.83 T For 19.1 million Debtors Banpres for Micro Business Actors (BPUM) IDR28.8 T Grant IDR 2.4 million / business for 12 million businesses . Credit Guarantee IDR2.09 T Accumulated working capital credit: IDR19.32 T Total working capital credit debtors: 923.67 Thousand Final Income Tax for UMKM IDRO.67 T For 248,275 Tax Payers Lembaga Pengelola Bel KUM Investment Financing LPDB IDR 1.29 T For 63 cooperative partners and 101,011 MSMEs 71#73Tax Incentive Has Supported The Business Resilience Tax incentives has been utilized and has supported 464,316 tax payers The tax payers most affected by pandemic has dominated the incentives utilization Incentive to improve people purchasing power Govt' borne income tax 131,889 Employers Trade Manufacturing 47% 19% H Construction I 7% *apart from MSME incentives (58% of trade sector) Incentives to support business liquidity and continuity Income Tax Exemption on Import 14,941 : Reduction on Tax Installment 66,682 Accelerated Tax Refund 2,529 The Majority of eligible sectors have utilized the incentives I Incentive to support the MSMEs Final Income Tax 248,275 MSMES for MSMEs I Government- Borne Income 90% Reduction of Tax Installment 86% Tax I Income Tax I ■ Accelerated Tax Exemption on 72% 43% Refund Import 22 72#74Vaccines As The Game Changer Accelerated around the world, in a hope to soon end pandemic and strengthen economic recovery Vaccination Progress in Several Countries 0 (million doses, as of 26 Apr) 50 100 150 Indonesia is planning to complete vaccination until March 2022 200 250 First Wave- (1) US (2) China (3) India Second Wave 230.77 224.90 145.09 (4) UK 46.65 Health Workers Public Workers Vulnerable Others 16.9 million Group (5) Brazil 42.62 63.9 (6) Germany 25.45 (7) Turkey 21.56 1.46 million Elderly 21.5 million 77.7 million million (8) France 19.99 (9) Russia 19.40 > 1.04 ~19.2 (10) Indonesia 18.90 900,000 Daily Vaccination in Indonesia (11) Italy 17.88 Billion doses Million doses 800,000 (12) Mexico cumulative 16.41 worldwide (37) Singapore 2.21 per day worldwide 700,000 600,000 Weekly Average (40) Myanmar 1.88 (45) Cambodia 1.54 500,000 2 (51) Philippines 1.37 ~ 172 400,000 267,285 300,000 (54) Malaysia 1.31 Countries already started 200,000 (59) Thailland 1.15 vaccination 60,815 100,000 (100) Vietnam 0.21 (109) Laos 0.14#75Gain Recovery Momentum With Expansive Yet Consolidative Fiscal Policy In 2021 Also continue to address the Covid-19 pandemic issues, while pursuing a sustainable development goals Macroeconomic Assumption Indonesia's economic growth is projected to return to its medium-term growth trajectory, while anticipate the uncertainty in global economic recovery Development Indicator Target The overall fiscal policies are expected to support the achievement of development targets in 2021 Budget Budget Gl Economic Growth (%) 5.0 Unemployment Rate 7.7-9.1 (%) Inflation (%, yoy) 3.0 Poverty Rate (%) 9.2 9.7 Exchange Rate (Rp/US$) 14,600 Gini Ratio (index) 0.377 0.379 b. 10 years Government 7.29 Securities Rate (%) Human Development Index 72.78 72.95 ICP (US$/barrel) 45 Oil Lifting (rbph) 705 Farmer Terms of Trade Fisherman Terms of 102-104 Gas Lifting (rbsmph) 1,007 102-104 Trade 74#762021 Budget Is A Critical Tool To Drive The Economy Amidst Uncertainty Comprehensively designed to support the acceleration of economic recovery and address Covid-19 pandemic 2020 2021 Account (IDR T) Perpres 72/2020 Realization (Unaudited) State Budget Growth* (%) Revenue 1,699.9 1,633.6 1,743.6 6.7 Tax Revenue 1,198.8 1,070.0 1,229.6 11.9 Customs & Excise 213.5 212.8 215 1.0 Non Tax Revenue 409.0 338.5 298.2 -11.9 • Grant 1.3 12.3 0.9 -92.7 STATE REVENUE POLICY • • Supporting national economic recovery by providing tax incentives selectively and prudently calculated Cutting the red tape to accelerate national economic recovery Improving public services to optimize non-tax revenue EXPENDITURE FOCUS Handling COVID-19 and supporting health programs . Expenditure 2,739.2 2,589.9 2,750.0 6.2 Continuing social safety net to lay a solid foundation of inclusive economic recovery • Central Government Expenditure 1,975.2 1,827.4 1,954.5 7.0 • Regional Transfer & Village Funds 763.9 762.5 795.5 4.3 Primary Balance (700.4) (642.2) (633.1) -1.4 Surplus (Deficit) (1,039.2) (956.3) (1,006.4) 5.2 % to GDP (6.3) (6,09) Financing 1,039.2 1,190.9 (5.70) 1,006.4 -15.5 *Based on 2020 realization . Expanding access to capital for MSMEs and cooperatives through interest subsidy Supporting programs activities for impacted sectors (e.g. Tourism) FINANCING STRATEGY Supporting the restructuring of SOES, PSA, Sovereign Wealth Fund (SWF) Increasing access to financing for MSMEs and housing for low-income household Continuing to support higher education,, research and cultural activities 75#77The PEN Program As The Key Instruments For Covid-19 Handling Evidence of the government's commitment to accelerate the economic recovery Health IDR176.30 T 2020 IDR63.1 T 1. The COVID-19 vaccine Projected Allocation for PEN 2021 IDR 699.43 T* (2020 PEN Realization at IDR 579.78 T)* Assistance for PBPU / BP 2. Medical Facilities and Infrastructure 6. Health tax incentives (including VAT 3. Health Care Claim Costs 4. Medical Personnel Incentives and death compensation 5. Reserve BPJS Contribution Priority Programs IDR122.44 T and import duty incentives for vaccine purchases) 7. Transfer to region and Village fund for health sector Social Protection IDR157.41 T 2020 IDR220.39 T 1. PKH 10 million beneficiaries (KPM) 2. Basic Food/SEMBAKO Card 3. Pre-Employment Card 4. Cash Transfer - Village Fund 5. Cash Social Assistance 10 million KPM 6. Internet Subsidy 7. Electricity Discount. 8. Job Loss Guarantee Contribution MSMEs & Corporation Business Incentives Support IDR184.83 T IDR58.46 T The budget for Social Protection and Health Program in 2021 increase by 17.5% in total Crucial programs to maintain public health, stabilize of the purchasing power of the poor and vulnerable, and push community confidence government for property sector Reduction of Tax Installment Corporate income tax tariff reduction VAT not- collected/exempted (Bonded Zone/KITE) 10. Import duty incentives ■ Increased support for business to jump- start the economic activities and maintain the sustainability of strategic sectors ■This support is also directed at stimulating the demands of the people who have been restrained during the pandemic, especially the middle class ■ Sales Tax of Luxurious Goods (PPnBM) for motor vehicle borne by the government reaches at IDR 2.99T and VAT borne by the government for property sector reaches at IDR 5.0T 2020 IDR66.59 T 2020 IDR173.17 T 2020 IDR56.12 T 1. Tourism Supports 1. KUR and non- KUR interest subsidy 1. Government- 2. Food Security/Food Estate 2. Micro business assistance (BPUM) Borne Income Tax 3. ICT Development 3. Loss Limit Guarantee for MSMEs 2. Income Tax Exemption on 7. 4. Loan to Regions & Corporation Import 5. Labor Intensive Program 4. Guarantee services (IJP) of MSMEs 3. VAT Refund 8. 6. Industrial Area and cooperatives 4. Government-Borne 7. Other Priority Programs 5. Electrical Assistance Income Tax for MSMEs 9. 6 200 6. Other PEN Programs 5. PPnBM for motor vehicle 7. Placement of Funds borne by the government 8. PMN to SOEs carrying out assignments 6. VAT borne by the (HK, ITDC, Pelindo III, KIW) 76#78Seven Areas To Be Strengthened Through Reforms In order to thrive together and transform the economy 1 EDUCATION Going digital; Strengthening teacher quality; Simplifying curriculum; ■ Global standard for measurement; ■Link and match; Strenthening public and private roles in education. " 2 HEALTH Strengthening health sector' facilities and human resources; Improving national health security program; ■ Strenthening health security ☐ preparedness; Integrated health system. 3 SOCIAL PROTECTION Improving program effectivity (data accuracy, synergy between programs) ■ Social security system covering all life cycle; Adaptive Social safety net. 4 INFRASTRUCTURE Improving basic infrastructure for human capital development; ■ Improving the quality of infrastructure to support economic transformation and strengthening cometitiveness; 5 BUREAUCRATIC REFORM System improvement: ✓ Going digital for public services; Simplifying process; Improving human capacity: Consistent reward & Punishment; Pension reform 6 BUDGETING REFORM Budget efficiency for basic function of the government; ■ Focus on priority programs (Zero based budgeting); Synergy between central and local governments ■ Result-based budgeting DATA 7 STRENGTHENING Improving accuracy, reliability and data integration 77#79Economic Recovery Policies to Drive Growth Acceleration Fiscal framework incorporated within PEN Program to accelerate economic recovery Regional Fiscal 6 Policies Regions and Village Funds Transfers (TKDD) allocation adjustments and directions of use for vaccination support. Disbursement and implementation of profit sharing funds (DBH) under / over payments. Waste management funding synergy. Taxation & Customs 18 Policies Regarding the delivery of tax exempted clean water. Taxation on transactions done by investment management institutions. Taxation to support ease of doing business. Tax incentives due to the impact of Covid-19 pandemic. Regarding sales tax on luxury goods. Value added tax on delivery of landed houses and flats that are borne by the Government. Implementation of special economic zones. Business capital investment tax. Treatment on export and import value added tax. Government Guarantee Program 2 Policies Regarding the Procedures for Granting Guarantees: National strategic project guarantee. Guarantee for corporate business practitioners with regards to the PEN implementation. Source: Ministry of Finance 78#80The State Budget Is Continue As A Central Role in Promoting Economic Recovery Driving the economic recovery and stimulating overall economic activity STATE BUDGET ACCELERATION AND OPTIMIZATION TO ENCOURAGE ECONOMIC RECOVERY State Expenditure: IDR523 T ✰ 15.6% yoy Central Govt. Expenditure: IDR350 T 26.0% yoy Capital spending, material spending and social spending are increased by 186,2; 81,6; 16,5% (March 21, yoy) (Realization up to March 2021) ADAPTIVE AND EFFECTIVE NATIONAL ECONOMIC RECOVERY PROGRAMS (PEN) Realization: IDR134.07 T 19.2% from its budget (Realization up to March 2021) Including vaccine procurement for more than 56 million doses ready to processed (Mar-21) and new initiatives in Q1'21: Labour intensive program, incentive for vehicle and housing sales, expansion of credit guarantees SUPPORT FROM STATE BUDGET IS NEEDED TO MAXIMIZE THE ECONOMIC RECOVERY MOMENTUM TO BE MORE SOLID Optimizing the role of state budget to gain the momentum of economic recovery: The global economy and trading partners continue to show improvement Vaccination program is on-track and implementation of health protocols The increasing public confidence and production activities Economic Recovery & Higher Growth#81The State Budget Still Become The Only Game In Town The acceleration of budget expenditure to support economic recovery is on track, will be continuously controlled and monitored The state budget is working hard to support economic recovery. Until Q1, State Expenditure and Investment Financing have grown significantly and positively affected to people The increasing needs of spending to Covid-19 handling and economic recovery is funded from financing, while tax and non-tax revenues are continuously being optimized. Budget deficit reached IDR 144.2 T (0.82% to GDP). The budget financing is still on track. Financial market volatility is closely watched and anticipated by a prudent and flexible financing strategy. 2020 2021 Account (IDR T) Realization as of 31 March % of Perpres 72/2020 Growth (%) Budget Realization as of 31 March % of Budget Growth (%) Revenue 376.4 22.1 7.8 1,743.6 378.8 21.7 0.6 Tax Revenue 241.6 20,2 (2.5) 1,229.6 228.1 18.6 (5.6) Customs & Excise 38.3 18.6 23.6 215.0 62.3 29.0 62.7 Non Tax Revenue 96.2 32.7 37.1 298.2 88.1 29.5 (8.4) Grant 0.3 22.0 94.6 0.9 0.3 31.4 (0.6) Expenditure 452.4 16.5 0.1 2,750.0 523,0 19,0 15,6 Central Government Expenditure 277.9 14.1 6,6 1,954.5 350.1 17.9 26.0 Regional Transfer & Village 174.5 22.8 (8.8) 795.5 173.0 21.7 (0.9) Funds Primary Balance (2.2) 0.3 (93.3) (633.1) (65.8) 10.4 2,933.7 Surplus (Deficit) % to GDP (76.0) 7.3 (26.2) (1,006.4) (144.2) 14.3 89.7 (0.49) (5.70) (0.82) Financing 84.5 8.1 (52.5) 1,006.4 323.0 32.1 282.1 SILPA (SIKPA) 8.5 178.8 80 60#822021 Budget Financing 2020 2021 (in IDR tn) Pres. Decree APBN Growth 72/2020 A. State Revenue I. Domestic Revenue 1,699.9 1,743.6 2.6% 1,698.6 1.742.7 2.6% 1. Tax Revenue 1,404.5 1.444.5 2.8% 2. Non-Tax Revenue 294.1 298.2 1.4% II. Grant 1.3 0.9 -30.8% B. State Expenditure 2.739.2 2,750.0 0.4% 1. Central Government Expenditure 1,975.2 1.954.5 -1.0% 1. Line Ministries 836.4 1,032.0 23.4% 2. Non Line Ministries 1,138.9 922.6 -19.0% II. Regional Transfer and Village Fund 763.9 795.5 4.1% 1. Regional Transfer 692.7 723.5 4.4% 2. Village Fund 71.2 72.0 1.1% C. Primary Balance D. Surplus/(Deficit) (700.4) (633.1) -9.6% (1,039.2) (1,006.4) -3.2% % to GDP (6.3) (5.7) E. Financing 1,039.2 1,006.4 -3.2% Source: Ministry of Finance () io Priorities in 2021 Health (IDR169.7 tn) Accelerating health recovery, National Health Insurance (JKN) reforms, and vaccine procurement Education (IDR550.0 tn) Strengthening the quality of education and teacher competences Social Protection (IDR421.7 tn) Supporting social protection reform and comprehensive social protection Infrastructure (IDR413.8 tn) $ Provision of infrastructure for basic services, improving connectivity, and supporting economic recovery, and continuing pending priority programs Food Security (IDR104.2 tn) Increase food production and revitalizing the national food system and developing Food Estate Tourism (IDR15.7 tn) Encouraging the recovery of the tourism sector ICT (IDR29.6 tn) Optimizing the use of ICT to support and improve the quality of public services 81#832021 Financing Needs Financing Needs Budget Deficit 2021 IDR1,006.4 T (5.7% of GDP) + o Investment financing o Lending • Liabilities 。 Other financing • Matured debt Financing Sources Foreign Denominated Debt 15-20% Foreign Loan GROSS GS (Through auction & non- auction) GDS 68-73% Sukuk 27-32% *GS: Government Securities Domestic Debt 80-85% Foreign Denomina- ted Bonds Domestic Domestic Loan GS 2021 Matured T-Bills Issuance Debt to GDP Ratio Source: Ministry of Finance Realization* Projection 2020 39.36% 2021 41.64% *preliminary figure 82#842021 Financing Strategy Opportunistic, Measured, and Prudent Financing Strategies to support counter cyclical policies Debt is used as an instrument to support counter cyclical policy; managed in prudent manner, measurable and opportunistic Debt Policy Overall Funding Strategy 1 Manage debt by maintaining the debt over GDP ratio within the safe limit 1 Non-debt funding source optimization, including SAL utilization To adopt a flexible debt management which is 2 responsive in supporting the countercyclical 2 policy, while prudently manage the cost and risk Targeting Loan Program from Development Partners, for both bilateral and multilaterals, i.e. World Bank, ADB, KfW, JICA, EDFC, and AIIB To achieve an efficient debt cost, by doing market deepening exercises: investor base widening 3 improving the infrastructure in the SBN market 3 debt instrument diversification eg. SDG bond issuance and municipal bond/sukuk issuance 4 To maintain macro stability by managing debt portfolio composition optimally. 4 A well targeted SBN (Government Bond) issuance by optimizing all available sources Targeting domestic/onshore bond issuance (including retail bond) for up to IDR 80 tn Targeting Foreign Currency/Global Bond issuance amount at 12-15% from total SBN funding (subject to market conditions) Private Placement from specific institutions Support from Bank Indonesia as the funding of the last resort / back stop Source: Ministry of Finance 83 83#85Government Securities Indicative Financing Plan for 2021 Auction: Conventional Securities - 24x Islamic Securities - 24x Non Auction - Retail GDS (tradable/ORI & non tradable), Retail Sovereign Sukuk (tradable/sukri & non-tradable) Private Placement - based on request Government Securities Issuance Composition Source: Ministry of Finance GS Rupiah Domestic Auction [80%-85%] [85% -88%] Non Auction International [4% -6%] [12% - 15%] Foreign *GS: Government Securities Denominated GS Foreign denominated GS as complementary (avoid crowding out in domestic market) The target amount can be adjust to the potential of other financing sources and financing needs • • 84 ==#86Synergy Between Central Bank and the Government in Accelerating National Economic Recovery The Enactment of Emergency Law No. 1/2020 (becoming Law No. 2/2020) allows Central Bank to buy GS in the primary market 1st Joint Decree between Minister of Finance and Governor of Bank Indonesia (BI) on April 16, 2020 (SKB I) The role of BI is as backstop buyer in the primary market 2nd Joint Decree between Minister of Finance and Governor of BI on July 7, 2020 amended with Joint Decree on July 20, 2020 (SKB II) Burden Sharing Scheme Realization of Gov't Securities purchased by Bank Indonesia under SKB I IDR 75,855 tn COVID-19 HANDLING ALLOCATION IDR 903,46 T Health 1. Public Goods Covered by Bl with rate based on BI Reverse repo 3M Issuance specifically to BI through private placement 2. Non-Public Goods: MSME ■ Corporation on-MSME 3. Non-Public Goods: Others Covered by Government with rate BI Reverse repo 3M minus 1%, and BI covered the remaining difference with market rate Full Covered by Government amounting market rate Issuance through market mechanism (auction, Green Shoe Option, Private Placement according to the SKB on April 16, 2020) • Public Goods IDR 397.56T Non-Public Goods IDR 505.90T IDR 87.55T Social Protection IDR 203.90T Sectoral K/L, Local Govt IDR 106.11 T Micro small and Medium Enterprises (MSME) IDR 123.46T Corporation Non-MSME IDR 53.57T Others IDR 328.87T SBN purchased by BI (SKB II) for Public Goods IDR397,56T or 100% from target and issuance of SBN for Non Public Goods reach IDR177,03T (100%). Non-Public Goods: Others, refer to all issuance (incl: auction, private placement, retail, and foreign denominated GS. Source: Ministry of Finance 85#87Government Securities Financing Realisation (a.o March 31, 2021) GDS 28.49% Source: Ministry of Finance GS 26.45% Government Securities (GS) Government Debt Securities (GDS) IDR Denominated GDS - Coupon GDS - Conventional T-Bills - Private Placement - Retail Bonds Foreign Denominated Bonds - SEC USD-EUR REG SHELF TAKE-DOWN - Samurai Bond - SEC USD REG SHELF TAKE-DOWN USD Onshore Bonds (Trillion IDR) Realization (ao. Mar 31, 2021) 413.95 313.75 253.77 200.52 20.25 7.00 26.00 59.97 59.97 0.00 0.00 0.00 SUKUK 21.60% Sovereign Sharia Securities (Sukuk) 100.21 Domestic Sovereign Sharia Securitoes 100.21 - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rate Bond/Project Based Sukuk 80.00 - Retail Sukuk 16.71 - Private Placement 3.50 Global Sukuk 0.00 Note: including GSO transaction 86#88Republic of Indonesia - Dual Currency US$3bio and EUR1bio Issuer Issuer Rating Exp. Issue Rating Format Issue Pricing Date Settlement Date Republic of Indonesia Baa2 Moody's (Stable) BBB S&P (Neg) BBB Fitch (Stable) Baa2 Moody's BBB S&P / BBB Fitch SEC Registered Senior unsecured fixed rate notes off US SEC Shelf January 5, 2021 Currency Size US$1.25bio Tenor Long 10-year Maturity March 12, 2031 Coupon (p.a.) Yield 1.850% 1.900% Price 99.538% Listing January 12, 2021 USD US$1.25bio US$0.5bio Long 30-year Long 50-year PB/Others, CB/SWF 540 Bar% Isurance PF, 95% Investor Breakdown by Investor Type CB/SWF PB/Others, 3% 1% Banks, % RIEUR033 Insurance/ PF, 20% RI0351 PB/Others, AM/FM, 75% CB / SWF Banks, 26% RI0331 Euro €1bio AM/FM 63% Insurance PF, 2% Long 12-year March 12, 2051 March 12, 2071 March 12, 2033 3.050% 3.350% 1.100% 3.100% 99.020% 3.400% 98.794% 1.174 99.165% Singapore, Frankfurt Stock Exchange Use of Proceeds The net proceeds are for general purposes of the Republic of Indonesia, including its Covid-19 relief efforts Transaction Highlights • The lowest yields and coupons throughout the issuance of Indonesian Global Bonds for all tenors and currencies • All tranches priced inside of the Republic's existing credit curve with negative new issue premium and at the tightest levels for every one of the tranches • The transaction was well-executed and competitively priced, with final pricing across all tranches pricing 45bps inside of initial price guidance for USD and 40bps inside of initial price guidance for EUR Source: Ministry of Finance US, 20% AM/FM, 58% Banks, 1% PB/Others, 1%%% CD/SWE 6% Insurance PF, 24% RI0371 Investor Breakdown by Geography RIEUR0333 APAC, 9% EMEA, 71% EMEA, 30% US, 27% RI0351 US, 20% EMEA, 22% APAC, 43% EMEA, 31% RI0331 APAC, 58% AM/FM, 63K RI0371 US, 37% APAC, 32% 87#89GS Primary Market Performance 2020 - 2021 Through Auction [IDR Trillion] 400 In 2021, average incoming bid = IDR50.21 tn/auction while average awarded bid = IDR23.14 tn/auction Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) 350 300 5.14 250 6.50 Average Incoming Bid 2020 = IDR54.50T /auction 200 3.01 3.14 150 100 50 1.98 May-20 Jan-20 Feb-20 Source: Ministry of Finance Mar-20 Apr-20 3.91 3.35 Average Awarded Bid 2020 = IDR15.85T /auction 4.24 2.45 2.16 3.85 7.00 6.00 5.00 4.00 3.00 2.95 2.03 2.27 2.23 2.00 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 1.00 88#90Ownership of IDR Tradable Government Securities (a.o March 31,2021) (IDR tn) Description Banks* Dec-17 Dec-18 Dec-19 Dec-20 March 31, 2021 491.61 23.41% 481.33 20.32% 581.37 21.12% 1375.567 35.54% 1,573.13 37.86% Govt Institutions (Bank Indonesia**) 141.83 6.75% 253.47 10.70% 262.49 9.54% 454.3606 11.74% 442.68 10.65% 10.65% Govt Institution 37,86% 51,49% BANK NON-BANK Bank Indonesia (gross) GS used for Monetary Operation Non-Banks Mutual Funds Insurance Company and Pension Fund Foreign Holders Foreign Govt's & Central Banks MUTUAL FUND 3.93% INSURANCE & PENSION FUND FOREIGN 14,08% 22.89% 4,56% Individual Others Total 179.84 8.56% 217.36 9.18% 38.01 1.81% -36.11 -1.52% 1,466.33 69.83% 1,633.65 68.98% 104 4.95% 118.63 5.01% 348.86 16.61% 414.47 17.50% 836.15 39.82% 893.25 37.71% 146.88 6.99% 163.76 6.91% 59.84 2.85% 73.07 3.09% 117.48 5.60% 134.22 5.67% 2,099.77 100% 2,368.45 100% 273.21 9.93% 874.875562 10.72 0.39% 420.514938 1,908.88 69.34% 2,040.83 130.86 4.75% 161.321131 471.67 17.13% 542.817373 1,061.86 38.57% 973.91 194.45 7.06% 178.3111 81.17 2.95% 131.210288 22.60% 959.48 23.09% 10.86% 516.80 12.44% 52.72% 2,139.78 51.49% 4.17% 14.02% 163.10 585.19 14.08% 3.92% 25.16% 951.41 22.89% 4.61% 236.52 5.69% 3.39% 189.33 4.56% 163.32 5.93% 231.572274 250.75 6.03% 2,752.74 100% 3,870.76 100% 4,155.60 100% 5.98% INDIVIDUAL OTHERS 6.03% IDR 1.092,02T on January 24, 2020, foreign holders reach a record high in nominal terms. 69,48% 1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company and Pension Fund. 2) Others such as Securities Company, Corporation, and Foundation. *) Including the Government Securities used in monetary operation with Bank Indonesia. **) net, excluding Government Securities used in monetary operation with Banks. Source: Ministry of Finance Portion of foreign ownership in the mid & long term sector (≥ 5 years). 89#91Triliun Rp Disciplined and Sophisticated Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Prudent Fiscal Deficit IDR Tn Government Debt / GDP (%) Debt to GDP 500 442 446.3 0.0% 407 414.52 362 41.64% 7,000.00 6,000.00 400 45% 39.36% -0.5% 40% 300 861.91 5,000.00 27.46% 28.34% 29.40% 29.81% 30.18% 852.91 35% 200 -1.0% 30% 24.68% 100 764.48 19 4,000.00 810.74 25% 0 746.32 3,000.00 734.85 755.12 2,000.00 1,000.00 1,931.22 677.54 2,410.01 2,780.86 3,248.93 3,612.69 4,014.80 5,221.65 5,583.16 20% -100 -58 -4 -69 (20) (56) 15% -200 10% -300 5% -2.5% -2.5% -2.6%298 (308) -400 14 111111 -1.5% -1.8% (66) (9)(35) -2.0% -2.2% -2.5% (269) 0% (341) (349) -3.0% 2015 2016 2017 2018 2019 2014 2015 2016 2017 2018 Bond Loan Weighted Average Debt Maturity of ~8.6 Years 2019 Debt to GDP 2020 Mar-21 GS Nett Non-Debt Loan Nett Surplus (Deficit) Budget Well Diversified Across Different Currencies 9.75 9.39 9.13 2014 2015 Source: Ministry of Finance 8.68 8.6 8.52 8.5 8.37 % of Yearly Issuance 1% 1% 7% 4% 6% 31% 29% 30% 27% 23% 22% 57% 59% 58% 62% 66% 67% 2016 2017 2016 2017 2018 2018 2019 2019 2020 2020 Mar-21 Mar-21 IDR USD EUR JPY OTHER 90#92Well Balanced Maturity Profile with Strong Resilience Against External Shocks Interest Rate Risks Declining Exchange Rate Risks 25.0 50.0 21.0 20.7 21.0 20.8 43.4 44.6 42.6 41.3 41.0 19.2 19.7 37.9 20.0 17.5 40.0 33.5 16.1 32.9 14.8 14.2 13.7 15.0 12.7 30.0 12.1 10.6 10.6 9.8 10.0 20.0 12.2 12.1 12.1 12.2 13.2 13.7 10.7 11.4 5.0 10.0 0.0 0.0 2014 2015 2016 2017 2018 2019 2020 Mar-21 2014 2015 2016 2017 2018 2019 2020 Mar-21 ■VR Proportion Refixing Proportion FX to GDP Ratio ■FX Proportion Debt Maturity Profile Upcoming Maturities (Next 5 Years) IDR tn 600 39.3 40.4 41.0 39.6 39.6 36.0 IDR Denominated (Triliun Rp) Other Currencies (Triliun Rp) 33.9 34.7 500 156141 95 146 400 132164 8 93 88 57 300 25.0 25.5 24.3 24.7 22.7 22.8 21.4 20.1 200 100 79 88 390400410 354 282276 299289 226214 299 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 30 21 180 9 33 E f f f f f f 95 129 2032 2032 2033 2034 2035 2036 112 2037 2037.co 2038 0 2039 2039 2041 IPOZ Source: Ministry of Finance 2042 000 2043 2012 115 9.9 10.6 8.8 7.7 8.4 8.1 7.8 6.5 2043 N 2044 VVUC 2015 2045 2046 2016 2017 2047 2048 2049-2071 2014 2015 2016 2017 2018 2019 2020 Mar-21 1 Year 3 Year 5 Year#93Holders of Tradable Central Government Securities More Balance Ownership In Terms of Holders and Tenors Holders of Tradable Gov't Domestic Debt Securities Foreign Ownership of Gov't Domestic Debt Securities by Tenor 100% 100% 25.2% 22.9% 30.0% 80% 38.2% 37.5% 39.8% 37.7% 38.6% 36.0% 80% 37.0% 38.6% 34.8% 33.5% 44.7% 60% 40% 37.8% 39.9% 36.8% 42.0% 40.3% 60% 39.2% 39.3% 34.1% 39.0% 37.4% 35.6% 36.8% 39.0% 35.8% 39.8% 40% 37.7% 38.6% 38.2% 37.5% 25.2% 22.9% 20% 35.5% 37.9% 20% 17.8% 17.3% 22.0% 22.1% 22.7% 18.4% 23.9% 22.5% 23.4% 20.3% 21.1% 11.8% 5.3% 5.1% 1.3% 1.9% 6.7% 4.0% 3.4% 0% 3.5% 5.0% 4.3% 0% 2.4% 4.6% 4.9% Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Mar-21 Dec-15 Dec-16 Dec-17 Dec-18 Dec-19 Dec-20 Mar-21 ■0-1 ■Foreign Holders Domestic Non-Banks ■Domestic Banks ■>2-5 >1-2 >5-10 ■>10 % Foreign Ownership of Total Source: Ministry of Finance 92#94Section 6 Commitment to Sustainability and Climate Change Mitigation BHINNEKA TUNGGAL IKA#95Commitment to Sustainability and Climate Change Mitigation Republic of Indonesia's Commitment to Sustainability Including Climate Change Mitigation Commitment to Sustainability Commitment to implement the United Nation's ("UN") Sustainable Development Goals ("SDG") in order to achieve the 2030 development agenda introduced by the UN. Through Presidential Regulation No. 59/2017 relating to the implementation of SDGs in Indonesia, the National Development Planning Agency was instructed to present a roadmap to implement the SDGS Mitigation AND EDDEMIC GROWTH Background Forefront of Environmental Protection Indonesia's Environmental Law was enacted in 2009 based on the concept of sustainable development, prevention, precaution and a "polluter pays" principle. To better address environmental issues, the Ministry of Environment and the Ministry of Forestry were merged to become the Ministry of Environment and Forestry in October 2014 13 Indonesia's Environmental Commitment and Objectives Adopted the National Action Plan for Greenhouse Gas Emission Reduction in 2011. Focuses on reducing greenhouse gas emission through a National Determined Contribution with an unconditional reduction target of 29% by 2030 compared to the 2010 baseline. An additional 12% reduction is conditional on technology transfer, capacity building, results for payment and access to finance. Environmental Fund Management Agency (BPLDH): established in October 2019 with the vision to create a trusted institution to attract national and international donors as well as effectively mobilize public and private fund in order to support protection programmes. Source: Green Sukuk Report 2020, Bank Indonesia, Ministry of Finance Adaptation SUSTAINABLE The President's Nawacita Programme The "Nine Agenda Priorities" of the President's priority actions. Shifting to a low-carbon and climate-resilient development path is an integral part of this mission and is integrated in development policies, strategies and programs DEVELOPMENT GOALS National Action Plan on Climate Change Adaptation: National framework for adaptation initiatives mainstreamed the National Development Plan. into Medium Term Development Plan 2020-2024 (RPJMN): reflects Indonesia's strong commitment to shift to a low carbon development based approach to economic development and a more climate resilient path. Includes key priorities such as renewable energy and energy efficient development, forest conservation and reforestation, waste management, land intensification, food security as well as governance and institutionalization of investment and regulation. Biodiversity Indonesia is an archipelago made up of 17,504 islands with unique ecosystems containing a large number of diverse species. Indonesian Biodiversity Strategy and Action Plan 2015-2020: launched to provide an outline on how biodiversity could be utilized sustainably to improve economic opportunities. and development 94 =#96Indonesia's Existing Green Bond and Sukuk Framework Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects 1 2 3 Use of proceeds Project Evaluation and Selection of Green Bond and Green Sukuk Eligible Green Projects must fall into one of the nine eligible sectors Review and approval process by Ministry of Finance and National Development Planning Agency Management of Proceeds Management- Ministry of Finance The Green Bond and Green Sukuk proceeds will be credited to a designated account of relevant ministries for funding exclusive projects as previously defined. Allocation is managed by Ministry of Finance. Line Ministries The line ministries utilizing the proceeds shall track, monitor and report to Ministry of Finance, on the environmental benefits of the Eligible Green Projects 4 Reporting Ministry of Finance will prepare and publish a Green Bond and Green Sukuk annual report on the list of projects, amounts of proceeds allocated to such projects and estimation of beneficial impacts The Framework has received a second opinion from the Centre for International Climate Research (CICERO) and is awarded medium green shading, which allows the possibility of light, medium and dark green project types. This shade also shows that eligible listed projects are representing the country ongoing efforts towards the long-term vision in carbon emission reduction Source: Indonesia's Green Bond & Green Sukuk Framework 95#97Indonesia's Existing Green Bond and Sukuk Framework (Cont'd) Existing Green Bond and Sukuk Framework under which the Republic of Indonesia can Finance and Refinance Selected Eligible Projects Eligible Sectors Green Shading according to CICERO's Dark Green second-party opinion Renewable Energy The Framework Excluded Use of Proceeds for Resilience to Climate Change for Highly Vulnerable Areas and Sectors/Disaster Risk Reduction Medium to Dark Sustainable Transport Waste and Waste to Energy Management Green Tourism Sustainable Agriculture Light to Medium Light Green Energy efficiency AA Sustainable Management of Natural Resources Green Building New Fossil Fuel-Based Electric Power Large Scale Hydropower Plants > 30 MW Nuclear Assets Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) 96 96#98Indonesia's Green Initiatives: Financing Green Projects Development of Indonesia's Green Projects Financing The Republic of Indonesia has issued three sovereign global Green Sukuk, consecutively in February 2018, 2019 and June 2020, with the total amount of USD 2.75 Billion 2020 Issuance USD 750 million 34% allocated to Green investors* 2019 Issuance USD 750 million (or IDR 11.25 trillion) 29% allocated to Green investors* Each issuance comprised of: 2018 Issuance USD 1.25 billion (or IDR 16.75 trillion) 29% allocated to Green investors* Indonesia has continued to develop the Green market through the introduction of the first Retail Green Sukuk in the world (Savings Retail Sukuk, ST006) in November 2019. The ST006 is an investment instrument based on Sharia principles issued and sold to individual Indonesian citizens in the domestic market with an online platform. Allocation and impact of the Retail Green Sukuk is not included in the Green Sukuk Issuance Allocation and Impact Report issued in February 2020 2019 Issuance Allocation by Sector 2018 Issuance 51% refinancing existing projects and 49% financing new projects Allocation by Sector Renewable energy Resilience to Climate Change for Highly Vulnerable Arcas and Sectors/Disaster Risk Reduction Frergy efficiency Waste and Waste to Energy Management Managed by 3 Ministries: 148元 777805006 82% 22718.713 27 20088318 1262073 30217,186 11% 39.482,770 102.5.1947 42,59520 73.187388 17 96 0% 6% 7% Sustainable Transport 69% Mineary of Transportation Minicity if nergy and Mucral Resources Ministry of Putile: Warks and Housing 116. 2019 Issuance imagation adaptation Allocation by Activity 11% 83% 00 2018 Issuance mbcation daptation Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC. Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project *These statistics are based on the HSBC's in house assessment of investor ESG/SRI appetite and sophistication, which is developed from Market Intelligence and our own understanding from client conversations. A green classification is assigned to investors taking into account whether they have Green/SRI fund and/or strategy, whether they are signatories of a variety of SRI initiatives and with awareness to their broader activities/public announcements in the SRI market. Classifications evolve over time 17% 97#99Indonesia's Green Initiatives: Projected Environmental Benefits Environmental Benefits Arising from Indonesia's Green Sukuk Issuance CO 3,218,014.41 tonnes CO2e emissions reduced, towards a low carbon future Breakdown by Sector + 60 cara 1,319,620.41 355,394 1,319,620.41 1,543,000 SUSTAINABLE DEVELOPMENT GOALS 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE 11 AFFORDABLE AND CLEAN ENERGY DECENT WORK AND ECONOMIC GROWTH SUSTAINABLE CITIES AND COMMUNITIES 13 CLIMATE ACTION D 691.4 km of railway constructed, linking the nation 7,429 kWh of additional power generation capacity 2,056,200 of households benefitting from improved waste management Source: Green Sukuk Issuance Allocation and Impact Report (February 2020) 98#100Tangible Results from Indonesia's Green Sukuk Initiatives Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Target Impact / Emissions Reduction (2017) Renewable Energy Resilience to Climate Change Across the country Across the country Waste and Waste to Energy Management Across the country USD4.31 mil USD39.62 mil 134,872.41 tonnes of CO2e USD96.57 mil USD10.83 mil USD63.13 mil In order to achieve 48,000,000 tonnes target set in RAN-GRK Project Examples Financed Refinanced Planning, Development and Supervision of New, Renewable Energy and Energy Conservation Infrastructure (Refinancing and Financing) Construction of new and renewable energy infrastructure, with a focus on areas outside current electricity coverage. The project aims to improve the electrification ratio in off-grid areas across the country. Power generation is sourced from solar, mini hydro, and micro hydro power plants*. Locations spread across 19 provinces in 2017 (Refinancing) and the 2019 development of such infrastructure are spread across all provinces (Financing) • Construction of Flood Control Facilities (Financing) of Construction retention ponds/polders, flood canals, dikes, checkdam, and river maintenance and normalization. It aims to reduce the risk of flooding due to increased rainfall intensity and land use changes. Locations: West Java, Central Java, Yogyakarta, North Sumatera, West Sumatera, South Sulawesi, Maluku, Bali • Improvement of Municipal Solid Waste Management System (Refinancing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal sites. Locations: All provinces except East Kalimantan Improvement of Municipal Solid Waste Management System (Financing) Improvement of basic waste management infrastructure services through the development of city, regional and special area-scale of final disposal site. Locations spread across 11 provinces *Micro-hydro is of <100 kW and mini-hydro is of 100 kW-10 MW Note: Information extracted from Green Sukuk Issuance Allocation and Impact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs and the currency exchange rate based on the State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the amount spent on each project 99#101Tangible Results from Indonesia's Green Sukuk Initiatives (Cont'd) Green Projects Refinanced and Financed with Proceeds from Indonesia's Green Sukuk Issuance Proceeds from Indonesia's Green Sukuk Initiative has been Successfully Deployed to a Range of Eligible Green Projects Locations Amount Committed to Finance 2019 Projects Amount Committed to Refinance 2017 Projects Target Impact / Emissions Reduction (2017) Sustainable Transport Jakarta, Sumatera, Java USD288.77 mil USD77.95 mil 1,543,000 tonnes of CO2e Energy Efficiency Across the country USD202.72 mil 355,394 tonnes of CO2e Project Examples Financed / Refinanced in 2019 • Development of Urban Train (Refinancing) Jabodetabek Construction Management Double Railways and • of Track Construction of double-double track of the Jabodetabek urban railway network. • Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Construction and Management of Railways Infrastructure and Supporting Facilities Sumatera (Refinancing Financing) in and Construction of the Trans Sumatera Railway from Aceh to Lampung province. The Trans Sumatera Railway causes a mode shift from road transport to rail Infrastructure and Supporting Facilities (Refinancing Financing) and The construction of the double track railway project in the Trans Java railway's northern section, upgrading the single-track railway. Locations: Jabodetabek (Jakarta, Bogor, Depok, Tangerang, Bekasi) Installation of Navigation Facilities (Refinancing) Construction, rehabilitation and replacement of marine navigation aids and the installation of solar cells to power marine navigation aids. The shift towards solar powered marine navigation aids reduces the use of fossil-fuel sources of power. Locations: spread across 21 provinces in 2017 • Improvement of Land Transportation Traffic Management System (Refinancing) Installation of road traffic equipment such as traffic signs, area traffic control systems (ATCS) and navigation aids for river and take crossings (SBNP) with energy-saving sensors. • Locations: Jakarta, West Java, Central Java, Yogyakarta, East Java Construction, Rehabilitation and Maintenance of Airport Infra- structures (Refinancing) The installation of solar-powered street lights and solar power plants. It improves the energy efficiency of airports and ensure electricity is sourced from renewable sources Locations: spread across 30 provinces in 2017 Note: Information extracted from Green Sukukottidogisticpact Report (February 2020), and subject to change and assurance from PwC Projects were financed in Indonesian Rupiahs than baseater State Budget Assumption for 2019 budget year of IDR 15,000 per USD was used to re-calculate the spent amount on each project 100#102Section 7 Monetary and Financial Factor: Credible Monetary Policy Track Record and Favourable Financial Sector BHINNEKA TUNGGAL IKA#103Bank Indonesia's Policy Mix Synergy to Build Economic Recovery Optimism 1 1 1 Maintaining accommodative monetary policy stance (lowering policy rate 125bps in 2020, and 25ps in February 2021). Maintaining rupiah exchange rate stabilisation policy in line with the currency's fundamental value and market mechanisms. Strengthening the monetary operations strategy to reinforce the accommodative monetary policy stance. Focusing on the quantity channel by providing liquidity to stimulate economic recovery 1R Monetary Policy $ 2 Macro- prudential Policy B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA 3 1 Strengthening accommodative macroprudential policy to stimulate growth of loans/financing allocated to priority sectors, incl. SMEs, and inclusion of export L/C as a financing component to stimulate bank lending to the corporate sector and export-oriented businesses. Accommodative macroprudential policy stance by: Relaxing the Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing 1 Relaxing down payment automotive loans/financing requirements on Holding the countercyclical buffer (CCB) at 0%, Macroprudential Intermediation Ratio (MIR) in the 84-94% range, Macroprudential Liquidity Buffer (MLB) at 6% with 6% repo flexibility, Relaxing credit card policy Controlling inflation through Inflation Control Team in national and regional level. Supporting the 2020 state budget through SBN purchases in the primary market in line with Act No. 2/2020, while maintaining macroeconomic stability. 1 Supporting national economic recovery program thru Burden Sharing Scheme with the MOF 1 Promoting lower lending rates through close supervision and public communication in coordination with OJK. Strengthening policy coordination with the Government and Financial System Stability Committee to maintain macroeconomic and financial system stability. Coordination with other Authorities 5 4 Financial Market Deepening Payment System Policy Accelerating digital transformation payment system policy and faster implementation of Indonesia Payment System Blueprint 2025 1 Strengthening and expanding electronification: Social program, e-payment for Government Expanding of QRIS (QR Indonesia Standard) acceptance Strengthening money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in the forex market Accelerating infrastructure development, including Electronic Trading Platforms (ETP) as well as a Central Counterparty (CCP) Developing Money Market Development Blueprint 2025 102#104Bank Indonesia Policy Mix: April 2021 B BANK INDONESIA BANK SENTRAL REPUBLIK INDONESIA The BI Board of Governors agreed on 19th and 20th April 2021 to hold the BI 7-Day Reverse Repo Rate at 3.50%, while also maintaining the Deposit Facility (DF) rates at 2.75% and Lending Facility (LF) rates at 4.25%. % Hold the Bl 7-Day Reverse Repo Rate at 3.50% Strengthening the monetary operations strategy to bolster the accommodative monetary policy stance and strengthening Prime Lending Rate (SBDK) transparency in the banking industry, while coordinating with the Government and other relevant authorities to: (i) accelerate monetary policy transmission to lending rates in the banking industry; and (ii) stimulate lending/financing to the corporate sector Source: Bank Indonesia Rp Strengthening rupiah exchange rate policy by maintaining market presence through triple intervention policy to preserve exchange rate stability in line with the currency's fundamental value and market mechanisms. Maintaining accommodative macroprudential policy by holding the countercyclical capital buffer (CCyB) at 0%, the Macroprudential Liquidity Buffer (MPLB) at 6% with repo flexibility at 6%, as Iwell as the Sharia Macroprudential Liquidity Buffer at 4.5% with repo flexibility also at 4.5%. Extending the National Clearing System (SKNBI) pricing policy to accelerate national economic recovery momentum. • • Strengthening QRIS policy to accelerate inclusive and efficient economic and financial digitalisation by: ☐ Raising the QRIS transaction limit from Rp2 million to Rp5 million, effective from 1st May 2021; and ☐ Lowering the Merchant Discount Rate (MDR) for Public Services Agencies (BLU) and Public Service Obligations (PSO) from 0.7% to 0.4%, effective from 1st June 2021. • Safeguarding the security, reliability and uninterrupted availability of payment system and rupiah currency management services during the Ramadan and Eid-ul-Fitr 1442 H festive period. 103#105Loose Liquidity Persist, In Line with Strengthened Synergy Between Monetary and Fiscal Policy PRINCIPLES OF FUNDING AND BURDEN SHARING PRUDENT Maintaining the credibility of Monetary Policy in the effort to Maintain Economic Stability MARKET MECHANISM TRADABLE & MARKETABLE MEASURED LAST RESORT SUN/SBSN tradable maintaining inflation in the target range One-off Policy in 2020 GOVERN Prioritize good governance SUSTAINABLE Bl as the back-stop for Non-public Goods scheme Beginning in 2020, Bank Indonesia has injected liquidity through quantitative easing to the banking industry totalling Rp798.85 trillion (5.18% of GDP), consisting of Rp726.57 trillion in 2020 and Rp72.27 trillion in 2021 (as of 16th April 2021) Synergy between monetary expansion and fiscal stimuli has been strengthened through SBN purchases by Bank Indonesia in the primary market: ✓ After making purchases in the primary market totalling Rp473.42 trillion to fund the 2020 State Budget, Bank Indonesia is continuing to purchase SBN in the primary market in 2021 to help fund the 2021 State Budget through mechanisms pursuant to the Joint Decree issued by the Minister of Finance and Governor of Bank Indonesia on 16th April 2020, which was subsequently extended on 11th December 2020 until 31st December 2021 As of 16th April 2021, Bank Indonesia has purchased SBN worth Rp101.91 trillion in 2021 in the primary market, including Rp28.33 trillion through primary auction and Rp73.58 trillion through greenshoe options (GSO) Source: Bank Indonesia 104#106Further Strengthening of an Accommodative Bank Indonesia's Policy Mix BGM: Lower/Hol dBI 7-day Reverse Repo Rate Stabilization Of The Rupiah Money Market & Foreign Exchange BGM 19-20 FEB, 2 MAR, AND 18-19 MAR 2020 1. Lower BI7DRR by 25 bps in February to 4,75%, and other 25 bps in March to 4,50% 2. Lower a 50bps of daily rupiah reserve requirement (RR) for the banks engaged in export-import financing, and expanding rupiah RR cut for SME 3. Lower Foreign Exchange Reserve Requirement from 8% to 4% 4. Rupiah (vostro) accounts of foreign investors as underlying of DNDF 5. Domestic custodian bank for global investors Quantitative Easing 6. Triple spot, Macro- Prudential Policy Payment System Policy intervention: DNDF, & purchasing SBN in the secondary market 7. Daily FX swap auction and Repo auction of SBN 8. Liquidity through operation injection monetary 9. Relaxation of Macro- prudential Intermediation Ratio 10. QRIS campaign to SME, traditional markets, students and worship places Board of Governor Meeting 11. Lower SKNBI cost Source: Bank Indonesia BGM 13-14 APRIL AND 18-19 MAY 2020 1. Hold the BI 7-Day Reverse Repo Rate at 4.50% for external stability & stimulate growth 2. Strengthening the intensity of triple intervention policy 3. Providing liquidity for the banking industry on restructuring MSME loans and ultra-micro with formal loans 4. Lower the rupiah RR ratios by 200bps for conventional commercial banks and by 50bps for Islamic banks 5. Strengthening Monetary operations and Islamic financial market deepening through FLisBI, PaSBI and SiPA 6. Relaxing the additional demand deposit obligations on the MIR 7. Raised the MLB by 200bps for conventional commercial banks and by 50bps for Islamic banks 8. Increasing the non-cash payment instruments uptake 9. Strengthening policy mix and coordination with the other & Government authorities 10.Accelerating implementation of digital economy & finance BGM 17-18 JUNE AND 15-16 JULY 2020 1. Lower BI7DRR to 4,00%, 25 bps in June and 25 bps in July 2. Maintaining Rupiah exchange rate stabilization policy in line with the currency's fundamental value and market mechanisms 3. Providing reserve requirement remuneration of 1.5% per year for banks meeting daily and average rupiah reserve requirements 4. Strengthening a synergized expansive monetary policy response with accelerated fiscal stimuli from the Government: ✓ firmly to committed funding the APBN 2020 through SBN purchases in the primary market to finance the budgets for healthcare, protections, government ministries and agencies & local government social sectoral ✓ Burden sharing with the Government to accelerate MSME and corporate sector recoveries 5. Expediting payment system digitalization to hasten the digital economy and finance implementation as part of the economic recovery efforts BGM 18-19 AUG, 16-17 SEP AND 12-13 OCT 2020 1. Hold BI7DRR at 4,00% 2. Focusing on the quantity channel by providing liquidity to stimulate economic recovery, including supporting Government in accelerating 2020 state budget realization 3. Maintaining rupiah stabilization policy in line with fundamental value & market mechanisms 4. Strengthening MO strategy in order to accelerate monetary policy transmission 5. Accelerating money market and foreign exchange market deepening through infrastructure development, including ETP & CCP 6. Lowering the minimum limit of DP on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles 7. Extending the 50bps lower on rupiah reserve requirements, as an incentive for banks disbursing loans to SMEs and for export-import activity and to non-SMEs operating in priority sectors as stipulated in the PEN, from 31 Dec' 20 previously until 30 Jun'21; 8. Accelerating development of money market instruments to support corporate and SME financing in line with the national economic recovery program 9. Strengthening synergy with the banking industry, FinTech, Government and relevant authorities to accelerate digitalization, amongst others, by supporting SME digitalization and the Made in Indonesia National Movement (GERNAS BBI), and promoting the use of QRIS for e-commerce 10. Expanding QRIS acceptance to bolster economic recovery and accelerate SME by extending 0% MDR for micro-businesses from 30 Sept 20 previously until 31 Dec'20 11. Strengthening policy implementation to stimulate SMEs through corporatization, increasing capacity, access to finance as well as digitalization in line with Gernas BBI 12. Strengthening the digital economy & finance ecosystem through the use of digital payment instruments & collaboration between the banking industry, FinTech & e- commerce to support PEN 105#107Further Strengthening of an Accommodative Bank Indonesia's Policy Mix BGM 18-19 NOV 2020 BGM 16-17 DEC 2020 BGM 17-18 FEB AND 17-18 MARCH 2021 BGM: AND 20-21 JAN 2021 1. Hold BI7DRR at 3,75% 1. providing economic supporting Lower/Hol dBI 7-day Reverse Repo Rate Stabilization Of The Rupiah 1. BI7DRR lower 25 bps at 3,75% for maintain external stability and inflation is predicted to remain low 2. Focusing on the quantity channel by liquidity to stimulate recovery, including accelerating 2020 state budget realization 3. Maintaining rupiah stabilization policy 2. Maintaining rupiah stabilization policy in line with fundamental value & market mechanisms 2. 3. Strengthening MO strategy in order to accelerate monetary policy 3. 4. Government in 5. Accelerating money market deepening by strengthening JISDOR as a rupiah reference rate against the US dollar Strengthening accommodative macroprudential policy to stimulate growth of loans/financing allocated to priority sectors towards national economic recovery. 4. 6. in line with fundamental value & market mechanisms 7. 4. Strengthening MO strategy to accelerate MP transmission 8. Promoting lending rate transparency in the banking industry Strengthening money market deepening by expanding underlying DNDF to boost liquidity and reinforce JISDOR as a reference for exchange rate setting in forex market Strengthening integrated bank supervision coordination between BI, OJK and LPS to maintain financial system stability 5. 6. Money Market & Foreign Exchange Quantitative Easing Macro- Prudential Policy Payment System Policy Board of Governor Meeting Source: Bank Indonesia 5. Accelerate the deepening of the development of the foreign exchange market and the domestic financial market through the implementation of BPPU 2025 6. Maintain a CCB ratio of 0%, RIM 84- 94%, PLM 6% as well as 6% repo flexibility and LTF / FTV ratio for property loans. 7. Strengthening macroprudential policy to stimulate inclusive financing, in particular for small and medium enterprises (SMEs) 8. Strengthening payment system digitalization in order to build economic recovery momentum through several digital transformation initiatives, including: expanding access to digital financial economy services for SMEs & public, collaboration between banks & fintech; promoting broader acceptance of digital payments through the QRIS 9. Reducing service fees for the BI-RTGS, Extending the period of lower service fees for the SKNBI, & lower payment limit and late payment fees for CC 7. 9. Accelerating digital transformation & synergy to strengthen economic recovery momentum with robust payment system policy and faster implementation of BSPI'25 8. 10. Extending the 0% MDR on QRIS transactions for micro enterprises until 31/3/2021 11. Promoting technology innovation, utilization & collaboration between the banking & FinTech industries through faster implementation of Sandbox 2.0, encompassing, i.g: regulatory sandbox, industrial tests, innovation lab & start-ups 12. Strengthening payment system policy and rupiah currency management to establish a digital economy and finance ecosystem in order to accelerate the economic recovery by: a. Applying an integrated and collaborative strategy to expand QRIS acceptance to 12 million merchants, while developing QRIS features, such as transfers, withdrawals and deposits, in order to boost public QRIS acceptance. b. Implementing payment system regulatory reforms in accordance with Bank Indonesia Regulation (PBI) No. 22/23/PBI/2020 through industry restructuring, license reclassification, ownership, technological innovation, including data and information, as well as strengthening supervision, including cyber risk management. 9. Lower BI7DRR to 3.50% in February and Hold the rate in March Strengthening rupiah exchange rate policy by maintaining market presence through triple intervention policy. Strengthening the MO strategy to reinforce the accommodative monetary policy stance. Relaxing down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles to stimulate credit growth in the automotive sector. And relaxing the LTV/FTV ratio on housing loans/financing to maximum 100% on all residential property for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property to stimulate credit growth in the property sector. Both effective from 1st Mar until 31st Dec 2021. Publishing the "Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" in February. Expanding the use of Bank Indonesia Sukuk (SukBI) for tenors of 1 week to 12 months, effective from 16th April 2021. Strengthening Prime Lending Rate (SBDK) transparency in the banking industry Strengthening MIR/Sharia MIR policy through the inclusion of export L/C as a financing component, while incrementally introducing regulatory disincentives in the form of MIR related reserve requirement, to stimulate bank lending to the corporate sector and export-oriented businesses Accelerating money market deepening through repo transactions between market players and by strengthening transaction infrastructure 10. Facilitating trade and investment promotion for productive sectors and tourism as well as socialising the use of LCS domestically and internationally 11. Supporting the Regional Digitalisation Acceleration and Expansion Teams (TP2DD) to stimulate innovation, accelerate and expand Electronification of Regional Government Transactions (ETP) and integrate the digital economy and finance. 12. Supporting development of an inclusive and efficient digital economy and finance ecosystem, specifically targeting SMEs, to drive the economic recovery, including Gernas BBI and the Indonesia Proud of Travelling Movement (GBWI) by; Extending the QRIS 0% merchant discount rate (MDR) for micro enterprises until 31st December 2021; • Expanding QRIS acceptance to 12 mil merchants I Encouraging collaboration between e-commerce, SMEs and the Government to strengthen the competitiveness of domestic SME products for the domestic and export markets. 106#108Stable Monetary Environment Despite Challenges Well Maintained Inflation Ensured Price Stability 20 15 10 Strengthened Monetary Policy Framework 8.8%) 19 August 2016 The New Monetary CPI (%, yoy) rhs Core (%, yoy) - lhs 7.00 Volatile Food (%, yoy) - lhs2 LF Rate: 7.00 Administered (%, yoy) - lhs BI Rate: 6.50 6.00 5.00 5. H 2.49 4.00 1.21 1.37 3.00 0.88 0 2013 2014 2015 2016 2017 2018 2019 2020 Mar-21 Jan-16 Mar-16 May-16 Jul-16 Q3-2016 Q1-2017 Rupiah Exchange Rate Fared Relatively Well Compared to Peers (ytd) YTD 2021 vs 2020 Credit Growth Profile % yoy 0 BRL -7.09-6.98 -8.42 -6.99 JPY -4.51 -4.09 IDR -3.42 0.21 2.66 2.13 -2.77 5.75 EUR -2.24 5.10 -2.12 2.96 INR -2.06 1.20 -0.57 3.41 PHP -0.74 2.67 0.22 6.27 ZAR a.o 19-Apr-21 2.74 -10.0 -5.0 0.0 5.0 Source: Bank Indonesia. *) Source: Reuters and Bloomberg point-to-point average 0 10.0 10.35 15.0 1357 Operation Framework LF Rate: 4.25 BI 7Day RR Rate: 3.50 DF Rate: 2.75 Q3-2017 Q1-2018 Q3-2018 Q1-2019 Q3-2019 Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Total Growth Investment Loans Working Capital Loans Consumption Loans Jan-21 Mar-21 -4.1 TITIT U -1.1 -5.0 -5.5 2015 2016 2017 2018 2019 2020 07#109Regional Inflation Remains Under Control ...supported by maintained inflation in all regions Inflation remains low on subdued domestic demand and adequate supply, MARCH 2021(%, YOY) SUMATRA 1.60 NATIONAL INFLATION MARCH 2021 1.37% (yay) Inf> 4% 3% Inf≤4% KALIMANTAN 1.13 34 Aceh 1.6 Riau Islands 1.6 North Sumatra 1.4 Bengkulu 1.4 Riau 1.9 Babel Islands 2.1 West Kalimantan 1.0 South Kalimantan 2.0 East Kalimantan 0.7 Central Kalimantan 1.0 North Kalimantan 1.1 SULAWESI 2.03 105 1.10 1.59 1:20 West Sumatra 1.8 Lampung 1.8 South Sumatra 1.1 Jambi 2.7 2% <Inf≤3% 6.1 1.73 1.57 14 Banten 1.4 1.2 DKI Jakarta 1.1 West Java 1.4 رية 1.01 05 Bali 0.8 West Nusa Tenggara 1.6 East Nusa Tenggara 0.8 Inf≤ 2% Central Java 1.5 East Java 1.3 Source: BPS, calculated JAVA 1.28 DI Yogyakarta 1.4 BALI-NUSA TENGGARA 1.01 Source: Central Bureau of Statistics of Indonesia (BPS), calculated 120 1.12 0.62 U.23 MALUKU-PAPUA 1.46 1.46 Gorontalo 2.0 North Sulawesi 1.7 Central Sulawesi 2.3 West Sulawesi 3.3 South Sulawesi 2.0 South-East Sulawesi 1.9 Maluku 0,1 North Maluku 1.4 Papua 2.5 West Papua 1.7 108#1104 Strategies to Achieve the Inflation Target 2018-2019 Target Achieving inflation at 3,5%±1% Maintaining core inflation Maintaining volatile food stability at 4-5% Controlling administered price inflation 2020-2021 Target Achieving inflation at 3,0%±1% Maintaining core inflation Maintaining volatile food inflation less than 4% Controlling administered price inflation 1. Price Affordability 2. Supply Availability Stabilizing the price Managing demand side Strengthening production, Government food reserves and food export-import management 4 Strategies 3. Well Managed Distribution 4. Effective Communication Strengthening institution Encouraging trade cooperation between regions Improving trade infrastructure Improving data quality Strengthening central-regional coordination Source: Bank Indonesia 109#111Principles of Average Reserve Requirement Ratios Improvement . • Considerations for the Average Reserve Requirement Ratios Improvement Improvement in average reserve requirement is a follow up to the monetary policy operational framework reform implemented by Bank Indonesia since 2016. Monetary policy operational framework reform started in August 2016 as BI7DRR replaced BI Rate as policy rate. This was then strengthened in 1st July 2017, by the implementation of the average reserve requirement in rupiah for conventional commercial banks at 1.5% out of the total 6.5% of GDP requirement in Rupiah. The reformulation is also backed by various efforts in financial market deepening. reserve The current improvement aims to elevate flexibility in banking liquidity management, enhance banking intermediation function, and support efforts in financial market deepening. This multiple targets will in turn improve the effectiveness of monetary policy transmission in maintaining economic stability. * Substance a. Additional rupiah average reserve requirement for conventional commercial banks b. Annulment of demand deposit renumeration c. Implementation of foreign exchange average reserve requirement for conventional commercial banks d. Implementation of average reserve requirement for Islamic banks Old New Effective Date Fixed RR: 5% Fixed RR: 4.5% Average RR: 1.5% RR: 6.5% Average RR: 2% RR: 6.5% 16th July 2018 2.5% (from 1.5% RR) 0% Fixed RR: 8% Average RR: 0% RR: 8% Fixed RR: 6% 16th July 2018 Average RR: 2% RR: 8%* 1st October 2018 Fixed RR: 5% Average RR: 0% RR: 5% Fixed RR: 3% 1st Average RR: 2% RR: 5%* October 2018 Complemented by harmonisation feature to align with the average reserve requirement in rupiah feature for conventional commercial banks (e.g. Calculation period, lag period, and Maintenance period of 2 weeks) Source: Bank Indonesia 110#112Relaxing Reserve Requirement Ratios Lower reserve requirements, effective 1st May 2020 Regulation 1 2 3 4 200bps for conventional commercial banks INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 50bps for Islamic banks and Islamic business units INELIGIBLE for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.5%, with a daily ratio of 0.5% and average ratio of 3% 200bps for conventional commercial banks eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% 50bps for Islamic banks and Islamic business units eligible for looser daily reserve requirements as per macroprudential policy to support export-import and MSME financing, effective from 1st April 2020, to 3.0%, with a daily ratio of 0% and average ratio of 3% Source: Bank Indonesia 111#113Principles of Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 1 Considerations for Macroprudential Instruments Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) 2 3 4 Striving to stimulate the bank intermediation function and liquidity management, Bank Indonesia issued Bank Indonesia Regulation (PBI) No. 20/4/PBI/2018 and Board of Governors Regulation (PADG) No. 20/11/PADG/2018 concerning the Macroprudential Intermediation Ratio (MIR) and Macroprudential Liquidity Buffer (MLB) for Conventional Commercial Banks, Sharia Banks and Sharia Business Units. The regulation is effective for conventional commercial banks from 16th July 2018 and for sharia banks from 1st October 2018. The policy is expected to stimulate the bank intermediation function to the real sector congruent with sectoral capacity and the economic growth target in compliance with prudential principles, while also overcoming the issue of liquidity procyclicality. This macroprudential policy instrument is countercyclical and can be adjusted in line with prevailing economic and financial dynamics. Source: Bank Indonesia 112#114Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) 1 MIR Accounting Formula Credit Owned Bond Deposit Issued Bond 2 Rate and Parameters Ceiling 94% • Floor 84% 3 Scope of credit/financing . and deposits to calculate MIR MIR Sharia . MIR Sharia (Sharia Banks and Sharia Business Units) Financing + Owned Sharia Bond Deposit Issued Sharia Bond Ceiling 94% • Floor 84% • Minimum • 14% Capital Adequacy Requirement • Minimum Capital Adequacy Requirement 14% Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 Credit: rupiah and foreign currency Deposits in rupiah and a foreign currency: • (i) demand deposits, (ii) savings deposits; and (iii) term deposits, excluding interbank funds Monthly Commercial Bank Reports Corporate bonds and/or corporate sukuk • For Sharia business units, the Minimum Capital Adequacy Requirement is the same as that of the parent conventional commercial bank • Upper disincentive parameter 0.2 • Lower disincentive parameter 0.1 • Financing: rupiah and foreign currency Deposits in rupiah and a foreign currency: (i) wadiah savings; and (ii) unrestricted investment funds, excluding interbank funds Monthly Sharia Bank Reports Corporate bonds and/or corporate sukuk • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering 4 Source of Data 5 Criteria for securities held • • Equivalent to investment grade rating affirmed by a rating agency • Administrated by an authorised securities institution *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 113#115Principles of Macroprudential Intermediation Ratio (MIR)* Regulation MIR (Conventional Commercial Bank) MIR Sharia (Sharia Banks and Sharia Business Units) 6 Percentage of the securities held 7 Criteria for securities issued 100% (MTN) medium-term notes (MTN), floating rate notes • sharia-compliant medium-term notes (FRN) and/or bonds other than subordinated and/or sukuk other than subordinated sukuk bonds • Issued by a nonbank corporation and by a resident • Offered to the public through a public offering • Equivalent to investment grade rating affirmed by a rating agency 8 88 Securities Reporting 9 Scope of deposits to meet DD MIR /DD MIR Sharia 10 Relaxation of DD MIR/Sharia DD MIR • Administrated by an authorised securities institution Offline delivery mechanism (email) • Average daily total deposits in rupiah at all branch offices in Indonesia . Including rupiah liabilities to a resident and non-resident third-party nonbank, consisting of: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • Average daily total deposits in rupiah at all branch offices and sharia business units in Indonesia Including rupiah liabilities to a resident and non- resident third-party nonbank, consisting of: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities • Bank Indonesia may relax the provisions of the DD MIR/Sharia DD MIR based on credit/financing disbursement and fund accumulation • The provisions may be relaxed based on a request from a conventional commercial bank, Sharia bank or Sharia business unit or a recommendation from the Financial Services Authority (OJK) • Conventional commercial banks, Sharia banks or Sharia business units that receive the relaxed policy are exempt from sanctions *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 114#116Adjustment of Macroprudential Intermediation Ratio (MIR)/Sharia Macroprudential Intermediation Ratio (Sharia MIR)* Bank Indonesia strengthens accommodative macroprudential policy through an adjustment to the Macroprudential Intermediation Ratio by including the loan/financing received by banks as a component of funding in MIR/sharia MIR. Policy Backgrounds • • • • In response to global and domestic economic developments, BI is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. BI relaxed MIR/sharia MIR policy in March 2019, which stimulated bank lending. Nevertheless, the macroprudential intermediation ratio (MIR) is again approaching the upper bound, thus necessitating efforts to increase bank lending capacity. Considering the potential of bank funding sources that are not included in the MIR ratio, for example the expanding share of loans/financing received by banks, Bl decides to adjust MIR/sharia MIR policy in order to optimize loans/financing received for bank lending. This policy to stimulate credit growth will comply with prudential principles. Therefore, Bl is only encouraging banks with low non-performing loans and adequate capital resilience to expand credit/financing. *This adjustment will be effective from December 2nd, 2019 Source: Bank Indonesia Main Regulatory Points Including loan received by conventional commercial banks and financing received by Islamic banks and Islamic business units as a source of bank funding in the calculation of MIR/sharia MIR. The criteria for loans/financing received by banks that are eligible to be included in MIR/sharia MIR calculation are as follows: a. Loans/financing received in Rupiah and foreign currency; b. Loans/financing received in the form of bilateral loans and/or syndicated loans for conventional commercial banks, Islamic banks and Islamic business units; c. Loans/financing excludes interbank loans/financing. d. Loans/financing received with a maturity of no less than 1 year; and e. Loans/financing received based on a loan agreement. Based on points a and b, the adjusted MIR/sharia MIR formula is as follows: Credit + Owned Bond Deposit + Issued Bond + Loan/Financing Received Lower disincentive parameter MIR/sharia MIR RR= Lower Disincentives Parameter X (Lower Bound MIR/Sharia MIR Target - Bank's MIR/Sharia MIR) x Deposit NPL ≥ 5% CAR KPMM 14% < 5% 14% KPMM ≤ 19% KPMM 19% Lower Disincentives Parameter 0.00 0.00 0.10 0.15 Upper disincentive parameter MIR/sharia MIR RR= - of 0.2 x (Bank's MIR/sharia MIR Upper Bound of MIR/Sharia MIR Target - ) x Deposit *This disincentive applies for banks with CAR below 14%. The reference rate used to calculate penalties for banks that do not meet MIR/sharia MIR policy will be adjusted from the Jakarta Interbank Offered Rate (JIBOR) to the Indonesia Overnight Index Average (IndONIA). 115#117Strengthened MIR and Sharia MIR to accelerate economic recovery To accelerate the economic recovery through stimulating bank lending to the corporate sector and export-oriented businesses, BI has decided to strengthen Macroprudential Intermediation Ratio (MIR/Sharia MIR)) policy through the inclusion of export L/C as a financing component, while incrementally introducing regulatory disincentives in the form of MIR related reserve requirement Expanding the scope of securities in the formula to calculate MIR through the inclusion of a new component, namely export L/C, while maintaining the MIR/Sharia MIR at 84-94% a. Incremental reintroduction of the MIR related reserve requirement (RR) disincentive for banks with an MIR below 75% from 1st May 2021, below 80% from 1st September 2021 and below 84% from 1st January 2022: i. 0.15 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement (KPMM) above 19% ii. 0.10 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement above 14% and up to 19% iii. 0.00 for banks with a gross NPL/NPF ratio below 5% and Minimum Capital Adequacy Requirement below or equal to 14% iv. 0.00 for banks with a gross NPL/NPF ratio above or equal to 5% c. The upper disincentive parameter is set at 0.00 for banks with a Minimum Capital Adequacy Requirement below or equal to 14% and banks with a Minimum Capital Adequacy Requirement above 14%. Current Regulation New Regulation Current Regulation New Regulation Regulation MIR (CCB) Sheria MIR (SCB and SBU) Regulation MIR (CCB) Sharia MIR (SCB and SBU) and/or corporate sukuk; in the form of corporate bonds In the form of corporate 1.Issued by nonbank corporation and residents. Criteria of 2 Offered to the public through a Securities sukuk; In the form of corporate bonds and/or corporate sukuk; In the form of corporate sukuk; Lower Lower NPL/NPF KPMM Disincentive Parameter NPL/NPF KPMM Disincentive Parameter Criteria of Securities public offering. held held 3.Rated by a rating agency no lower than investment grade. 4.Administrated by an institution 1. Issued by nonbank corporation and residents 2. Offered to the public through a public offering. >19% 0.00 >19% 0.15 14%<KPMM< 14%<KPMM< authorised to provide securities settlement and custodial 3. Rated by a rating agency no lower than investment grade. 4. Administrated by an institution authorised to provide securities settlement and custodial services. <5% 0.00 <5% 0.10 19% 19% ≤14% 0.00 <14% 0.00 services. ≥5% 0.00 ≥5% 0.00 # In the form of export L/C, Applicable to banks with an MIR/Sharia MIRbelow 75% from 1stMay 2021, below 80% from 1stSeptember 2021 and below 84% from 1stJanuary 2022 116#118Principles of Macroprudential Liquidity Buffer (MLB) Regulation 1 Rate 2 Components 3 Calculation Formula 4 Flexibility 5 Sources of Data on Deposits MLB (Conventional Commercial Bank) MLB Sharia (Sharia Banks) 4% of rupiah deposits (including Sharia Business Units 4% of rupiah deposits deposits) • Securities denominated in rupiah held by a conventional commercial bank that may be used for monetary operations (including SBI/SDBI/SBN); and • Sharia-complaint securities denominated in rupiah held by an Sharia business unit that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Sharia-complaint securities denominated in rupiah held by an Sharia bank that may be used for sharia-compliant monetary operations (including SBIS/SBSN) Percentage of rupiah securities held by a conventional Percentage of sharia-compliant rupiah securities commercial bank to rupiah deposits held by an Sharia bank to rupiah deposits Under certain conditions, the securities used to meet the sharia MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits Under certain conditions, the securities used to meet the MLB may be used for repo transactions to Bank Indonesia for open market operations, totalling no more than 2% of rupiah deposits • Monthly Commercial Bank Reports • Rupiah deposits to calculate MLB are the average daily total deposits at all branches in Indonesia • Rupiah deposits include: (i) demand deposits, (ii) savings deposits; (iii) term deposits, and (iv) other liabilities • • Monthly Sharia Bank Reports Rupiah deposits to calculate sharia MLB are the average daily total deposits at all branches in Indonesia Rupiah deposits include: (i) wadiah savings; (ii) unrestricted investment funds, and (iii) other liabilities 117#119Macroprudential Liquidity Buffer (MLB) Policy and Credit card policy Policy to increase the Macroprudential Liquidity Buffer (MPLB), effective 1st May 2020. Regulation Before After 1 Increase in the Macroprudential Liquidity Buffer (MLB) for conventional commercial banks 4% of rupiah deposits 6% of rupiah deposits 2 Increase in the Macroprudential Liquidity Buffer (MLB) for Islamic banks and Islamic business units 4% of rupiah deposits 4.5% of rupiah deposits Regulation Credit card policy, effective 1st May 2020. 1 Lower upper limit on credit card interest 2 Temporary reduction of minimum payment requirements 3 Temporary reduction of late payment penalties 4 Supporting credit card issuer policy to extend the due date for customers Before 2.25% per month 10% 3% or maximum of IDR150,000 After 2% per month 5% 1% or maximum of IDR100,000 Issuer discretion Effective Period 1st May 2020 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 1st May 2020 - 31st December 2020 118#120Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* The LTV/FTV relaxation is conducted while taking into account aspects of prudential and consumer protection* 1. Increasing opportunities of first time buyers to fulfill their housing needs through housing loan, specifically by adjusting the LTV ratio for property loan and the FTV ratio for property financing for the 1st facility, 2nd facility, etc., making the largest LTV ratio for property credit and FTV ratio for property financing as shown in the table below. PROPERTY LOAN & PROPERTY FINANCING BASED ON MURABAHAH & ISTISHNA DEEDS 2. 3. Relaxing the amount of loan/financing facility through indent mechanism to a maximum of 5 facilities without taking account of the orders Adjusting the arrangement of stages and amount of property loan/financing disbursement of indent property: Current Regulation Conditions PROPERTY FINANCING BASED ON MMQ & IMBT DEEDS Current Regulation Current Regulation Relaxation PROPERTY TYPE PROPERTY TYPE Property Loan & Property Loan Property Financing Relaxation Property Financing (m²) Financing & Financing (m²) I II Ill etc 1 Il etc etc etc HOUSE Type>70m² HOUSE 85% 80% 75% 80% Type 22-70m? 85% 80% 85% Type>70m Type 22-70m² 90% 85% 80% 85% 90% 85% 90% Type <=21m² Type <=21m² APARTMENT APARTMENT Туре >70м² 85% 80% 75% 30% Type>70m² 90% 85% 80% 85% Type 22-70mm? 90% 85% 80% 85% Type 22-70m² 90% 85% 30% 85% Type <=21m² 85% 80% 85% Type <=21m² 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% SHOP/OFFICE HOUSE 85% 80% 85% Stage and Disbursement Rate House/Office House/Shop Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 80% of ceiling Max. Cumulative disbursement up to 90% of celling Max. Cumulative disbursement up to 100% of celling Apartment Max. Cumulative disbursement up to 40% of ceiling Max. Cumulative disbursement up to 70% of ceiling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Footing finished Roof toop finished Letter of acceptance signing Letter of acceptance accompanied with deeds of purchase and mortgage deeds/authorization for the assignment of a mortgage Relaxation 66 "The LTV rate depends on each bank's risk management Stage and Disbursement Rate House/Office House/Shop House Max. Cumulative disbursement up to 30% of ceiling Max. Cumulative disbursement up to 50% of celling Max. Cumulative disbursement up to 90% of ceiling Max. Cumulative disbursement up to 100% of celling *As part of further relaxation on macroprudential policy, an adjustment will be applied starting from December 2nd, 2019 Source: Bank Indonesia Conditions After loan deeds Footing finished Roof toop finished Letter of acceptance accompanied with deeds of purchase and covernote 119#121Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios* 1. 2. 3. Prudential aspects of Relaxing the Loan-to-value (LTV) and Financing-to-Value (FTV) Ratios The requirements of the LTV ratio for property credit and FTV ratio for property financing are as follows: i. The net ratio of NPL to total credit or NPF to total financing must not exceed 5%; and ii. The gross ratio of property NPL to total property credit or property NPF to total financing must not exceed 5%. Banks must make sure that there is no loan transfer to another borrower at the same bank or different bank for tenors of less than 1 year. The requirements are valid for banks that will disburse pre-order property loan/financing. Banks are required to comply with prudential principles when disbursing loans. 4. Gradual loan liquidation is only allowed for developers that comply with bank's risk management policy (e.g. the business feasibility of the developer). 5. Banks are required to ensure that transactions to disburse loans (including down payment) and gradual liquidation must be processed through the debtor and developer/seller's bank account. LTV / FTV Exemptions Central government or local government loan / financing programs are exempt from this regulation. Source: Bank Indonesia 120#122Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* (Effective December 2nd, 2019) Bank Indonesia adjusts macroprudential policy in the property and automotive sectors by: (i) relaxing the LTV ratio for property loans and the FTV ratio for property financing; (ii) providing additional incentive on LTV ratio for green property loans and FTV ratio for green property financing; (iii) relaxing down payments on automotive loans/financing; (iv) providing additional incentive on down payments on green automotive loans. • Policy Backgrounds In response to global and domestic economic developments, Bl is maintaining an accommodative policy mix to maintain the economic growth while also maintaining macroeconomic and financial system stability. This effort will be targeted to several potential sectors. Considering the ongoing needs to stimulate the property and automotive sectors which have a huge backward and forward linkages to other sectors in the economy, BI decides to relax LTV/FTV policy for property loans/financing and down payments on automotive loans in compliance with prudential principles. Additional incentives are also given to support sustainable development through green financing in order to reduce potential disruptions to financial system stability stemming from environmental degradation. As a prudential mitigation, those relaxations will be given to borrower with strong repayment capacity and low credit/financing risk. Main Regulatory Points 1. Adjustment of LTV Ratio for Property Loans and FTV Ratio for Property Financing. a. Bl decides to relax the LTV ratio for property loans and FTV ratio for property financing by 5% from current ratio as follows: Landed House Type >70 Type >21-70 Type $21 Apartment Type >70 Type >21-70 Type $21 Office House Landed House Type >70 Type >21-70 Type ≤21 Table 1. Current LTV/FTV Ratio Meets NPL/NPF Criteria Property Loan & Property Financing based on Akad Murabahah & Akad 1 Istishna Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad Property Financing based on akad MMQ & akad IMBT Property Financing based on akad MMa & akad IMBT Istishna 22 1 22 1 2 23 1 80% 85% 80% 85% 85% 85% 2 23 8596 80% 70% 60% 85% 75% 65% 90% 80% 70% 80% 70% 85% 80% 70% 60% 85% 75% 65% 85% 90% 80% 70% 90% 80% 70% 85% 80% 70% 80% 70% 85% 80% 70% 80% 70% Table 2. Adjusted LTV/FTV Ratio Property Loan & Property Property Financing Meets NPL/NPF Criteria Does Not Meet NPL/NPF Criteria Property Financing Property Financing Financing based on Akad Murabahah & Akad based on Akad based on akad MMQ & akad IMBT based on akad MMO Murabahah & Akad & akad IMBT Istishna Istishna 22 1 22 1 2 23 2 23 90% 85% 75% 65% 90% 80% 70% 95% 85% 75% 85% 75% 85% 90% T Apartment • Bl will regularly evaluate this policy at least once a year. Type >70 85% 19096 85% 75% 65% 90% 80% 70% Type 21-70 90% 90% 95% 85% 75% 95% 85% 75% Type 321 90% 90% 85% 75% 85% 75% Office House 90% 90% 85% 75% 85% 75% Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 121#123Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* (Effective December 2nd, 2019) Main Regulatory Points 2. Additional incentive on the LTV ratio for green property loans and FTV ratio for green property financing. a. The Green Property criteria standards/certificates refers to the or issued by a nationally internationally recognized environmental institution. b. Green property that is granted for the incentive has to meet the following standards: i. For residential areas/buildings in certified green belt areas, each unit in the residential area/building is considered to meet the criteria. ii. In case that the residential area/building is not a certified green belt area, an evaluation will be conducted on each unit as follows: İ. For buildings 2500m², the bank may conduct a self-assessment using the tools/applications provided by a recognized institution. ■ For buildings > 2500m², the assessment must be conducted by a recognized institution; ■ For new buildings constructed in an area by one developer or group of developers, the assessment must be conducted by a recognized institution and the certificate must be submitted by the developer Additional incentive for green property on LTV ratio for property loans and FTV ratio for property financing is 5% from the LTV/FTV ratio presented in Table 2 as follows: Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 Landed House Type >70 Type 21-70 Type 521 Apartment Type>70 Type>21-70 Type s21 Office House Table 3. LTV/FTV Ratio for Green Property Meets NPL/NPF Criteria Property Loan & Property Property Financing Financing based on Akad Murabahah & Akad Does Not Meet NPL/NPF Criteria Property Financing based on Akad Murabahah & Akad Property Financing based on akad MMQ & akad IMBT Istishna 1 based on akad MMQ & akad IMBT 22 1 22 1 90% 95% Istishna 23 1 2 23 95% 90% 80% 70% 90%. 95% 80% 85%6 75% 90% 80% 90%. 95% 90% 80%. 70% 959 85% 75% 95% 95% 90% 80% 90% 80% 95% 95% 90% 80% 90% R0% 95% 95% 00% 80% 90% 80% of Down Payments 3. Adjustment Loans/Financing on Automotive a. Down Payments on Automotive Loans/Financing is adjusted as follows: i. Relaxation on the down payments of automotive loans automotive financing 5%-10% from current regulations; or ii. The relaxation should consider the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; iii. The adjustment of down payments of automotive loans/financing in points a and b is as follows: Table 4. Current Down Payment on Automotive Loan or Financing Current Down Payment Table 5. Adjusted Down Payment on Automotive Loan or Financing Adjusted Down Payment Meets MPUMPF Does Not Meet Criteria Meets NPL NPF Criteria Does Not Meet NPL NPF Criteria 2 Whookd 20% 35% 2-Wheeled 15% 20% 3-Wheeled or more (nonproductive) 3-Wheeled or more productive 25% 30 3-Wheeled or more (non productive) 15% 25% 10% 3-Wheeled or more productive 10% 15% 122#124Adjustment of LTV Ratio for Property Loans, FTV Ratio for Property Financing, and Down Payments on Automotive Loans/Financing* (Effective December 2nd, 2019) Main Regulatory Points 4. Adjustment of Down Payments on Green Automotive Loans/Financing a. The green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. b. The down payments on green automotive loans or green automotive financing is adjusted as follows: i. Additional incentive of 5% on green vehicles from the down payment presented in Table 5; ii. The down payment incentives considers the gross NPL/NPF ratios and gross NPL/NPF ratios on automotive loans/financing; ¡¡¡. The down payment regulation for green automotive loans or green automotive financing in points a and b is as follows: Table 6. Down Payment on Green Automotive Loan or Financing 2-Wheeled Down Payment on Green Automotive Loan or Financing Does Not Meet NPL/NPF Masts NPL/NPF Criteria 10% Criteria 15% 10% 5% 20% 10% 3-Wheeled or more (non productive) 3-Wheeled or more (productive) Note: Adjustments of the LTV ratio for property loans, FTV ratio for property financing and down payments on automotive loans or financing will be effective from December 2nd, 2019 Source: Bank Indonesia *This adjustment will be effective from December 2nd, 2019 123#125Adjustment of Minimum Down Payments on Green Automotive Loans/Financing (Effective 1st October 2020) Bank Indonesia adjusts macroprudential policy in automotive sectors by: (Lowering the minimum limit of down payment on green automotive loans/financing from 5-10% to 0%, in compliance with prudential principles. Main Regulatory Points 1. Adjustment of Minimum Down Payments on Green Automotive Loans/FinancingThe green vehicles criteria refers to the Presidential Regulation No. 55 of 2019 concerning Battery Electric Vehicles. Type of Green Motor Vehicle Current regulation New Regulation *) (PBI No. 21/13/PBI/2019) *) Two-wheel 10% 0% Three-wheel or more (non- 10% 0% commercial) Three-wheel or more 5% 0% (commercial) 1. Applicable to banks with a non-performing loans (NPL) ratio below 5% 2. Effective 1st October 2020 Requirements: 1. Gross NPL ratio on total credit <5%; and 2. Net NPL ratio on automotive loan <5% Source: Bank Indonesia 124#126Adjustment of LTV/FTV Requirements on Automotive loans/financing (effective from 1st March 2021 until 31st December 2021) Bank Indonesia relaxes down payment requirements on automotive loans/financing to minimum 0% for all new motor vehicles to stimulate credit growth in the automotive sector, while maintaining prudential principles and risk management Policy Objectives and Background a. b. C. d. e. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. Considering the need to stimulate recovery, particularly in the automotive sector, and considering the sector has strong backward and forward linkages in the economy. The policy is implemented as part of the policy mix with fiscal stimuli issued by the Government, including a reduction to the luxury goods sales tax (PPnBM). The amendment also takes into consideration the contained credit/financing risk in the automotive sector. Looser downpayment requirements on automotive loans must comply with prudential principles and risk management. Changes to Down payment Requirements on Automotive Loans/Financing Current Regulation Downpayment Requirements. on Non-Green Vehicles New Regulation Source: Bank Indonesia Dombayment Require ment on Green Vehicles Downpayment Regulerent on Non-Green Vehicles Downpayment Requirement on Green Vehicles NPL Requirements Mer NFL Requirements Not Met** NFL Requirements der-- NFL Requirements Not Met** Vehicle Type NFL Requirements Met NPL Requirement Not Met NPL Requirements Met- NFL Requirements Not Met Two Wheels 15% 20% 0% 15% Two Wheels 0% 10% 09 0% Two Wheels 15% 25% 0% 20% Two Wheels 0% 10% .0% 0% or More (Non- of (Non- More Commercial) Commercial) Two Wheels 1096 15% 0% 103% or More Two Wheels of 0% 5% 0% 0% More (Commercial) (Commercial) *) previous regulation, PBI No. 21/13/PBI/2019 Requirements as follows. 1. Gross NPL/NPF ratio <5%; and 2. Net NPL/NPF ratio <5% Notes: Green vehicles include battery electric vehicles (BEVS) as stipulated in prevailing laws and regulations on accelerating the battery electric vehicle program for road transportation. 125#127Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2021) Bank Indonesia relaxes he Loan/Financing-to-Value (LTV/FTV) ratio on housing loans/financing to maximum 100% on all residential property (landed houses, apartments and shop houses/office houses) for banks meeting specific NPL/NPF criteria, and repealing regulations on the gradual liquidation of partially prepaid property to stimulate credit growth in the property sector, while maintaining prudential principles and risk management, Policy Objectives and Background a. In response to the latest global and domestic developments, Bank Indonesia is maintaining an accommodative policy mix in line with efforts to stimulate economic recovery and maintain financial system stability. b. C. d. Considering the need to stimulate recovery, particularly in the property sector, and considering the sector has strong backward and forward economic linkages. The amendment also takes into consideration the contained credit/financing risk in the property sector. The LTV ratio is set at an upper limit of 100% for banks meeting the NPL/NPF requirements and regulations concerning the liquidation of partially prepaid property (inden) are being relaxed, which must comply with prudential principles and risk management. a. Changes to LTV/FTV Ratio on Non-Green Property Loans/Financing Current Regulation NPL/NPF Criteria Met Property Loans Financing NPL/NPF Criteria Not Met* Property Loans/Financing Property Financing based on MMO and IMBT Contracts New Regulation NPL/NPF Criteria Met Property Loans/Financing NPL/NPF Criteria Not Met* Property Loans/Financing based on Murabahah and Istishna Contracts Property Financing based on MMO and IMBT Source: Bank Indonesia Facility based on Murabahah and Istishna Contracts 1 22 Property Financing based on MMQ and IMBT Contracts 1 22 based on Murabahah and Istishna Contracts 12 23 1 2 a Facility 1 based on Murabahah and Istishna Contracts 27 Property Financing based on MMO and IMBI Contracts Contracts 1 22 1 2 23 1 2 23 Landse House Type >70 Type>21-70. Type 321 Apartment Type>70 Type>21-70 85% 90% 90% 95% 85% 75% 65% 90% 80% 70% |85% 75%| 85% 75% - - - - Landee House Type >70 Type >21-70 Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 95% 95% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% 100 100 % % 95% 95% 85% 90% 90% 90% 85% 75% 65% 90% 80% 70% 95% 85% 75% 95% 85% 75% Apartment Type >70 Type 521 90% 90% 85% 75% 85% 75% Type >21-70 100% 100% Shop House/Office 90% 90% 85% 75% 85% 75% Type ≤21 100% 100% 100% 100% 100% 100% 100% 100% 95% 95% House Notes: Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100 100 % % 100% 95% 90% 90% 95% 90% 90% 95% 95% 1. denotes LTV ratio policy at bank discretion 2. Based on PB No. 21/13/PBL 2019. NPLANPF Criteria 1. Gross NPL/NPF ratio <5%; and 2. Not NPLAPF ratio on property cans/financing <5% 126#128Adjustment of LTV/FTV ratio on Housing loans/financing (effective from 1st March 2021 until 31st December 2021) Facility based on Murabalah and Istishna Contracts 1 27 based on Murabahah and Istishna Contracts 1 22 1 2 23 1 2 23 Facility b. Changes to LTV/FTV Ratio on Green Property Loans/Financing Ketentuan Saat Ini NPL/NPF Criteria Met Property Loans/Financing Property Financing based on MMO and IMBT Contracts NPL/NPF Criteria Not Met Property Loans/Financing Property Financing based on MMO and IMBT Contracts Ketentuan Baru NPL/NPF Criteria Met Property Loans/Financing based on Murabahah and Istishna Contracts 1 Property Financing based on MMQ and IMBT Contracts 22 1 NPL/NPF Criteria Not Met* Property Loans/Financing PP Bdsr 22 2 based on Murabahah and Istishna Contracts 1 23 Akad MMQ & Akad IMBT 1 2 23 Landoc House Type >70 Type >21-70 90% 95% 95% 90% 80% 70% 95% 85% 75% 90% 80% 90% 80% Landed House Type >70 100% 100% 100% Type>21-70 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 95% 95% 95% 95% 95% 95% Type ≤21 Apartment Type ≤21 100% 100% 100% 100% 100% 95% 95% 100% 95% 95% Type >70 90% 95% 90% 80% 70% 95% 85% 75% Type >70 100% 100% 100% Type >21-70 95% 95% Type $21 95% 95% 90% 80% 90% 80% |90% 80% Type >21-70 100% 100% 90% 80% Type ≤21 100% 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% 100% 95% 95% 95% 95% 95% 95% 100% 100% 95% 95% 100% 95% 95% Shop House Office 95% 95% 90% 80% 90% 80% House Shop House Office House 100% 100% 100% 100% 95% 90% 90% 95% 90% 90% Notes 1. denotes LTV ratio policy at bank discretion *NPLNPF Criteria 2. Based on PB No. 21/13/PBU2019 3. Criteria for a green building a Property area <2,500m², assessed by Bank Indonesia using tools from an approved green building appraisal institution and/or certified directly by an approved green building appraisal institution b. Property area > 2500m², certified by an approved green building appra sal institution. 1. Gross NPL/NPF ratio < 5%, and 2. Net NPL/NPF ratio on property loans/financing <5% c. Changes to Indent Regulations Source: Bank Indonesia New Regulation Repeals regulations concerning the gradual maximum liquidation of indent and the cumulative liquidation of property loans or property financing. 2. Banks are required to maintain prudential principles and risk management when liquidating property loans/financing on indent. Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation Maximum cumulative liquidation Current Regulation up to 30% of ceiling upon completion of loan contract 1. up to 50% upon completion of foundations up to 90% of ceiling upon completion of roof up to 100% of ceiling upon signing of BAST, accompanied by AJB and a cover note. 127#129Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry Bank Indonesia published the “Assessment of Policy Rate Transmission to Prime Lending Rates in the Banking Industry" to accelerate monetary policy transmission and expand the dissemination of information to corporate and individual consumers in order to enhance governance, market discipline and competition in the credit market. Key Takeaways Prime lending rate response to lower policy rate (BI7DRR) still rigid. Greater prime lending rate rigidity at state-owned banks compared with other bank groups. Prime lending rate rigidity found across all credit segments, excluding micro loans. Notwithstanding, the lending rate response to a lower policy rate and loose liquidity conditions in the banking industry remains rigid. This is reflected by significant rigidity in the Prime Lending Rate (PLR)2 in response to the lower policy rate • The prime lending rate is used as the basis for determining the interest rate to be charged by the bank to the customer yet does not include the risk premium. Therefore, the interest rate charged by the bank to the borrower is not necessarily the same as the prime lending rate. PLR rigidity is a facet of nearly all credit segments, affecting consumer loans, corporate loans and retail loans. The rigid banking industry response, as reflected by smaller increments of prime lending rate reductions, has been observable in non-housing consumer loans (67bps) as well as housing loans (57bps) since June 2019 1 Assessment period until December 2020 based on data availability. 2 The prime lending rate is the base rate published by banks in accordance with OJK Regulation (POJK) No. 37/POJK.03/2019, dated 19th Dec 2019, concerning Bank Report Transparency and Publication. Source: Bank Indonesia • • Prime Lending Rate and Deposit Rate Response to BI7DRR 1 Bank Indonesia has maintained an accommodative monetary and macroprudential policy stance in order to stimulate economic growth. Prior to the Covid-19 pandemic, from June 2019 until Feb 2020, BI lowered the BI7DRR policy rate five times by a total of 125bps from 6.00% to 4.75%. From March 2020, Bank Indonesia lowered the policy rate another four times (100bps) to a level of 3.75% in November 2020. In terms of liquidity, accommodative monetary and macroprudential policy significantly boosted liquidity in the banking industry in order to maintain financial system stability and the bank intermediation function. Graph 1. 12 BIZDRR Monthly Deposit Rate SBDK - Prime Lending Rate (SBDK) R 6 4 2 % Graph 2. 12 " " 10 Prime Lending Rate (SBDK) based of banking group Regional Govt Banks (BPD) State Owned Banks (BUMN) National Private Commercial Banks (BUSN) Foreign Branch Banks (KCBA) Prime Lending Rate (SBDK) based of credit segment Mortgage (KPR) Graph 3. 1A 15 14 15 Non Mortgage (non KPR) 70 • Corporation Micro Retail *** 11,27 +10,11 1 4.27 1,7% RA 2012 2025 Sprid (BOK BITDERI Spread (B80K Sp) ******* SEDX Deposit bulum -817098 2017 20 2014 WORD BION HINN BCH 1651 1044 * * * 2017 DRAHSI 2018 Korum KPR 2019 KaNKPR K 2020 Mine 3.BD 6.17 11.15 $300 著 8 00#130Improving the Effectiveness of Monetary Policy Transmission Bank Indonesia has instituted a Reformulation of Monetary Policy Operations Framework which consists of 3 pillars B Reformulation of Monetary Policy Operational Framework Implementation of BI 7 Day Reverse Repo Rate Enhancement of monetary policy signal Implementation of Money Market Deepening Program Enhancement of instruments and transactions Implementation of Reserve Requirement (RR) Averaging Enhancement of banking liquidity management Blueprint for Money Market Development (BPPU) 2025 launched on Dec 14th, 2020 to build a reliable and efficient ecosystem for money market development in Indonesia Initiative I Promoting Digitalization and Strengthen Financial Market Infrastructures (Trading venue, central counterparty, BI-SSSS, BI-RTGS, trade repository) Initiative II Strengthening Effectiveness of Monetary Policy Transmission (Repo, IndONIA and JIBOR, Overnight Index Swap, DNDF, LCS) Initiative III Developing Economic Financing Sources and Risk Management (long-term hedging, sustainability and green financing, investor retail, asset securitization) Blueprint is accessible here: https://www.bi.go.id/en/publikasi/kajian/Pages/Blueprint-Pengembangan-Pasar-Uang-2025.aspx Source: Bank Indonesia 129#131Principles of Domestic Non Deliverable Forward (DNDF) Transaction 1. 2. 3. Purposes To support the effort of stabilizing the Rupiah exchange rate through the additional of alternative hedging instruments To support the development and deepening of the domestic financial market To increase the confidence of exporters, importers, and investors in conducting economic and investment activities through the flexibility of hedging transactions against Rupiah currency risk General Provisions ✰ Domestic Non-Deliverable Forward Transaction (DNDF Transaction) Plain vanilla derivative transaction of foreign exchange against rupiah in the form of forward transaction with fixing mechanism in the domestic market ✰ Forward Transactions Forward Transactions are sell/purchase foreign currencies against rupiah whereas the delivery of funds shall be performed in more than 2 days after the transaction date Fixing Mechanism Transaction settlement mechanism without full movement of funds by calculating the difference between rate on the transaction date and reference rate in JISDOR on a specified future time agreed in the contract (fixing date) Other Definitions The definition of derivative transaction of foreign exchange against rupiah, Forward Transaction, Spot Transaction, Customers, Foreign Party is referring to Bank Indonesia regulations regarding foreign exchange transaction against rupiah Source: Bank Indonesia 130#132Principles of Domestic Non Deliverable Forward (DNDF) Transaction Bank can perform DNDF Transactions as follows: Transaction between: III Bank Customer III Can only be performed to hedge rupiah exchange rate risk. 1. Must have Underlying Transactions: X Including all following activities : a. b. C. Trade of goods and services Investments, loans, capital, and other investements. Banks credit or financing in foreign currencies (specifically for transactions between bank and customers) Excluding following activities: a. b. C. d. e. f. g. Bank Indonesia certificates; Placement of funds with bank; Unwithdrawn credit facilities; Documents of foreign currencies sales againts rupiah; Money transfer by fund transfer companies Intercompany loan Money changer activities. Bank Foreign Party III III 2. Nominal of DNDF Transactions ≤ Nominal of Underlying Transactions 3. Tenor of DNDF Transactions ≤ Tenor of Underlying Transactions Bank - Bank Source: Bank Indonesia 131#133Principles of Domestic Non Deliverable Forward (DNDF) Transaction Source: Bank Indonesia Transaction Settlement • Use Fixing mechanism Reference rate: JISDOR for USD/IDR and BI FX Transaction MidRate for non-USD/IDR Settlement currency : IDR Roll over and early termination are not allowed Roll over and early termination for DNDF is prohibited However, unwind can be done by opening the reverse DNDF transactions Cover Hedging Bank may conduct DNDF Transactions with Bank Overseas for cover hedging purpose. Underlying Transactions: DNDF Transaction between Bank and Customer/Foreign Purpose: Hedging Customer/ Foreign Party Overseas Bank Hedging Cover Hedging Bank Notes: Customer A conduct DNDF transactions with Bank B, and so Bank B can conduct DNDF transactions with overseas Bank for the purpose of cover hedge. 132#134Amendment on DNDF Regulation *to provide more flexibility in DNDF transaction *to increase liquidity and efficiency in domestic foreign exchange market BI Regulation No. 20/10/PBI/2018 Article 3 AMENDMENT BI Regulation No. 21/7/PBI/2019 Article 3 1. DNDF transactions must have Underlying Article 6 2. Not Regulated; Article 11 1. Sell FX/IDR through DNDF up to $ 5 mio can be done without underlying documents Article 6 2. DNDF can be terminated (unwind); Article 11 3. Underlying documents must be final (firm) with additional supporting documents 4. Not Regulated; Article 11 *Effective on May 17th, 2019; English version of the regulation is available in Bl website. Source: Bank Indonesia 3. Underlying documents for buy FX/IDR for DNDF is : Final (firm commitment) + Supporting documents 4. Underlying documents for sell FX/IDR for DNDF above threshold $ 5 mio can be: . • Final (firm commitment) + Supporting documents Projection (anticipatory basis) + Supporting documents Article 11 5. In using estimate underlying transaction documents in the form of cash flow projection, Bank must evaluate the appropriateness through: a. Supplementary documents; b. Historical data within at least 1 year before; and c. Track record of the Customer or Foreign Party. 133#135• Strengthening Jakarta Interbank Spot Dollar Rate (JISDOR) To accelerate money market deepening The strengthening of JISDOR to increase domestic foreign exchange market credibility and support exchange rate stability. This measures is in line with the benchmark reform initiatives taking place on global financial markets, to establish a reference rate that represents daily exchange rates based on transactions supported by best practice methodologies. ✓ Effective starting April 5, 2021 JISDOR is obtained by calculating the weighted average based on transaction volume of the Rupiah exchange rate against USD on the spot market within the specified time window Specification Before Implementation After Implementation Information Currency Pair USD/IDR Not changed Data type Actual USD/IDR spot transactions traded in interbank market Not changed Data Reporting Media SISMONTAVAR Publisher Administrator Bank Indonesia Observation Range 08.00-09.45 08.00-16.00 Not changed Not changed Changed Jakarta Time JISDOR Publication Time Calculation Method 10.00 WIB Weighted average rate of USD/IDR spot transactions traded in interbank market Jakarta Time * 16.15 WIB * Changed Not changed Publication Media Bank Indonesia Website Not changed * Adjustment of the operational time for the domestic FX Market operating hours during The COVID-19 Pandemic: Monitoring Period JISDOR ranges: 09.00-15.00, JISDOR published at 15.15 Jakarta Time. JISDOR is available on every working days on https://www.bi.go.id/en/statistik/indikator/Default.aspx Source: Bank Indonesia 134#136Overnight Index Swaps (OIS) & Interest Rate Swaps (IRS) As hedging instruments against Rupiah interest rate changes IRS market development OIS market development We're Here 3 IRS is a contract between two parties to periodically exchange rupiah interest rate flows during the contract period or at the completion of the contract based on certain notional amount. IRS pricing is based on JIBOR. OIS is an interest rate swap agreement based on a daily overnight reference rate (IndoNIA) IndoNIA & JIBOR Strengthening reference rate based on real transactions Source: Bank Indonesia OIS transaction with IndoNIA as benchmark rate Alignment between JIBOR and OIS interest Improvement of IRS transaction liquidity rate Encourage price transparency in the rupiah money market * Strengthen monetary policy transmission Provide alternative hedging instruments against rupiah interest rate changes Support securities market deepening in Indonesia 135#137OIS and IRS Transactions: General Provisions Market Players. Banks, bank clients, both individual and non-bank institutions, and also foreign parties. Transaction Needs Analysis. A bank performing an IRS or OIS transaction with a customer and/or foreign party on behalf of the customer and/or foreign party is required to have an analysis on the need of rupiah interest rate derivative transactions. Calculation Base ACT/360 Market Conventions Interest Payment based on Netting OIS Quotation rates based on 2 decimals Market Conventions. When performing IRS and OIS transactions, the respective bank is bound by market conventions agreed upon by market players through industry association including the Indonesian Foreign Exchange Market Committee. Settlement. Settlement can be performed as a netting payment and every transaction has to be settled in Rupiah. Close-out netting can be applied under predetermined conditions. IndONIA Index with 5 decimals Compound Floating Rates (CFR) based on 5 decimals Notional of Net interest payment in IDR with 0 decimals Settlement Date = 1 business days after Maturity Date (MD) Quotation : 1W, 2W, 1M, 2M, 3M, 4M, 5M, 6M At the 1st phase, OIS settlement will only be done at the end of the OIS tenor (MD+1bd). Source: Bank Indonesia 136#138Enhancement of Monetary Operations Framework 3 2 STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory enhancement. ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA REDUCED SEGMENTATION AND IMPROVE THE CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to counterparties 4 MOVING FROM AXED RATE TENDER (FRT) TO VARIABLE RATE TENDER (VRT) PROGRESS IN PROGRESS PROGRESS • • PREVIOUS JIBOR Can be traded among contributor banks for 10 minutes. • Up to the amount of IDR10 billion. Up to 1-month tenor. CURRENT JIBOR (as per June 1st, 2016) Can be traded among contributor banks for 20 minutes. Up to a total of IDR20 billion. • Up to 3-month tenor. Source: Bank Indonesia 137#139IDR Tn 160 140 120 100 80 60 40 20 0 2016 Source: Financial Service Authority (OJK) 2017 IDR Tn 6,000 5,000 4,000 3,000 2,000 1,000 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Mai-20 Bank Loans Financial Intermediation Affected Economic Activities Recovery of financial services intermediation remains a challenge as credit demand has not fully recovered due to limitations on daily activities. Nevertheless, optimism linked to Covid-19 vaccine rollout and Government's continuous stimulus and reform bring hopes of recovery in 2021... Credit growth contracts by -2.15% in February 2021. However, it is New financing distribution are still restrained and contracted by expected to improve as the economy continues to recover. -19.80% in February 2021. Apr-20 May-20 Jun-20 Jul-20 Aug-20 Aug-20 Sep-20 Sep-20 Oct-20 YoY Growth (rhs) YOY IDR Tn 16% 500 5419 12% 400 8% 300 4% 200 0% 100 -2.15% -4% 0 Nov-20 Dec-20 Jan-21 Feb-21 Capital raising through securities issuance reached IDR 39.04 Tn in 2021 (YTD). IPO level are still expected to be back to its pre-pandemic level. ■IPO Rights Issue Corporate Bond & Sukuk Both life insurance and general insurance premium continue to grow positively by 23.2% and 0.7% respectively in February 2021 yoy. 50 Life Insurance Premium Growth General & Reinsurance Premium Growth 12.04 -10 24.87 2.13 -30 2018 2019 2020 2021* Jan-19 Feb-19 Mar-19 Apr-19 10 10 May-19 Jun-19 6T-unc Jul-19 Aug-19 Sep-19 61-das 30 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 Jun-20 Jul-20 Sep-20 Oct-20 May-20 Aug-20 Nov-20 Nov-20 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 138 Aug-19 61-8 Sep-19 Oct-19 0.7 Nov-19 Dec-19 23.2 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Financing Growth (rhs) 10% YOY 5% 362.8 0% -5% -10% -15% Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 -19.80% -20%#140Jan-19 Feb-19 Mar-19 Apr-19 May-19 2 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 4 26 24 22 20 18 16 14 12 10 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Banking sector profitability remains stable in February 2021. % 6 Net Interest Margin Return on Assets Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Feb-21 4 4.47 3 2 1.98 1 0 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 T Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Oct-20 ■CAR Resilient Financial Institutions Tier 1 Domestic financial institutions remain sound and stable, supported by strong capitals and leverage amidst hurdles due to the pandemic... CAR of the banking sector remained high and stable at 24.60%, with Tier-1 capital at 22.8% as of February 2021.*) RBC of the insurance industry remained high and well above the minimum threshold (120%) with Life Insurance RBC at 537% and General Insurance RBC at 352% as of February 2021. Nov-20 24.6 900 22.8 800 700 600 500 400 300 200 0 Jan-19 Feb-19 Mar-19 100 threshold Insurance RBC (Lhs)=120% Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Gearing ratio of multi-finance companies remains steady, far below the threshold in February 2021. % Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 139 2.04 Apr-20 May-20 Jun-20 Life Insurance (Lhs) General Insurance (rhs) 400 352 350 300 250 537 200 threshold Insurance RBC (rhs)=120% 150 100 50 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 0#1412 1 0 3 % 5 4 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 ៩8 ន ឬ ន ឬ 8 8 9 180 160 140 120 100 Jan-19+ Feb-19- NPL Net threshold LA/ NCD= 50% Manageable Credit Risks with Adequate Liquidity Liquid Assets to Non-Core Deposits Liquid Assets to Deposits (rhs) Nov-19 Dec-19- Jan-20- Feb-20 Mar-20 Apr-20 May-20 Jun-20 Financial Institutions are equipped with ample liquidity, while credit risk is still manageable.. The ratios of liquid assets to deposit and non-core deposits remained well above the threshold following banks' cautious appetite for lending. *) Investment adequacy ratios in the insurance industry, both life and general insurance were maintained above the threshold and remained steady in February 2021. *) % Life Insurance General Insurance NPL Gross threshold LA to Deposit (rhs) = 10% Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 240 28 157.43 200 34.04 30 160 20 20 120 10 10 80 40 0 0 Banking NPL ratios are kept low and constantly remained below the threshold, at 3.21% gross and 1.04% net as of February 2021. *) NPF of multi-finance companies are well-managed far below the threshold and steadily declining at 3.9% as of February 2021. *) % May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 5 3.21 4 3 2 1.04 9 60 Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 0 1 O Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Jan-19 Feb-19- Mar-19- Apr-19 Oct-19 Nov-19 Dec-19 Jan-20 May-19 Jun-19 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-19- Aug-19- Sep-19 Oct-19 Nov-19 Dec-19 threshold Investment Adequacy Ratio= 100% Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 140 Jun-20 Jul-20 Aug-20 3.9 Dec-20 Jan-21 Feb-21 107.0 204.2#142IDR Tn 1,500 1,200 900 600 300 0 T % 5 4 3 2 1 Manageable Market Risks Amidst global pressure, the risk profile of domestic financial institutions remains manageable... Net open position in the banking sector still maintained far below the threshold of 20% in February 2021. *) The net asset value (NAV) of Equity Mutual Funds continue its recovery path following investors' optimistic views on JCI. Insurance IDR Tn 700 009 500 400 1.62 300 200 NAV Equity Mutual Funds 0 Jan-19 Feb-19 Mar-19 Apr-19 May-... Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-... Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Insurance & pension fund investment value was steadily increasing with insurance investment reaching IDR 1256.98 Tn and pension fund investment at IDR 306.17 Tn in February 2021. *) 100 Jan-19 Mar-19 May-19- Jul-19- Sep-19 Nov-19 Jan-20 Mar-20 May-20 Jul-20 Sep-20- Nov-20 Jan-21 Mar-21 Multi-finance companies' exposure to foreign and domestic debt remains steady. *) Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 GI-das Oct-19 Nov-19 IDR Tn Pension Funds (rhs) IDR Tn 250 400 200 350 1256.98 150 300 100 306.17 250 58 50 200 0 Domestic Debt Foreign Debt Source: Financial Service Authority (OJK) *) provisional figures due to the relaxation on financial institutions' report to OJK because of Covid-19 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 JCI (rhs) 7,000 6,000 5,000 4,000 3,000 As of 9 April, 2021 2,000 1,000 89.21 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 141 131.35#143IDR Tn 100 50 0 -50 -100 -150 Jan-19 Feb-19 Mar-19 Apr-19 SIN VIE US S KOR WORLD JPN THAI HKN INDO BRAZ MAL CHIN TURK PHIL9.03% Domestic Capital Market Performance Amid Global Challenges The progress of Covid-19 vaccines rollout and prospect of faster economic recovery have kept a positive tone in the global capital market... Global indices recorded mixed improvement and performances. Indonesia is one of the countries that reached pre-pandemic level performance. Stock Index Performance as of 16 Apr 21 (compared to 31 Dec'20) JCI performance has been stable and returned to its pre-pandemic level despite slight decrease in April. Comp Bond Index -4.64% 12.59% 340 12.22% 11.74% 320 11.32% 9.08% 300 8.16% 280 6.87% 6.38% 260 1.79% 1.76% 240 -1.16% -1.34% 220 (% YTD) 200 Oct-19 ■Gov't Debt Securities ■ Equity -10% -8% -6% -4% -2% 0% 2% 4% 6% 8% 10% 12% 14% Non-resident portfolios of gov't bonds and equity have recorded a total of 4 Tn net buy in April 2021. Gov't bond yields remain competitive followed by stable rupiah as risk premium is maintained. May-19 Jun-19 Jul-19 Aug-19 Sep-19 Oct-19 Nov-19 Source: Bloomberg and Ministry of Finance As of 9 April, 2021 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Nov-20 Yield (%) 10 5.9 8 -1.9 7 6 5 Dec-20 Jan-21 Feb-21 Mar-21 Apr-21 6 Jan-19 Mar-19 May-19 Jul-19 Sep-19 Nov-19 Comp Stock Index (rhs) 7000 6500 6000 6,070 5500 5000 4500 4000 3500 3000 Jan-20 Apr-20 Jul-20 Oct-20 Jan-21 Apr-21 5-yr Yield 20-yr Yield IDR (rhs) Jan-20 Mar-20 May-20 Jul-20 Sep-20 Nov-20 Jan-21 10-yr Yield Mar-21 18,000 14,000 10,000 6,000 2,000 142#144Stimuli to Support Indonesia's Financial Industry OJK and other government institutions have worked intensively to minimize the impact of COVID-19 on the economy 1 Maintaining business fundamental of the real sector 2 OJK Regulation No. 48/POJK.03/2020 on KANN Bank NBFI "Extension of National Economic Stimulus as A Countercyclical Policy of The Impacts of COVID-19 Outbreak" Amended *OJK Regulation No. 11/POJK.03/2020 Relaxation of credit assessment and credit restructuring to debtors who are affected by COVID-19. - Credit assessment (up to IDR10 billion) is based only on one pillar, the punctuality of debtors to pay their debts and interests. This applies to Commercial and Sharia Banks ▪ This regulation also amended several other conditions, including: " Banks' Management Risk Implementation Credit Restructuring Mechanism Banks' Capital and Liquidity Policy Banks' Reporting Mechanism Valid until March 31st, 2022 OJK Regulation No. 58/POJK.05/2020 on "Extension of Countercyclical Policy as an Impact of COVID-19 for Non-Bank Financial Institution (NBFI)" Amended *OJK Regulation No. 14/POJK.05/2020 Extended deadline of report submission Relaxation of financing assessment Financing Restructuring This regulation also add other conditions and further relaxations including: Communication Mechanism for Insurance through Video Conference Working Capital Facility Relaxation of corporate debt issuance Valid until April 17th, 2022 Source: Financial Service Authority (OJK) companies Supporting National Economic Recovery Continuing Capital Market Stabilitzation - - Prohibition of short-selling, Asymmetric Auto Rejection (current auto rejection limits under 7%), 30-minute Trading Halt for 5% decrease in IHSG, Stock buyback without prior general shareholders meeting. Mortgage Credit/Financing Policy Reducing Risk-Weighted Asset (RWA) for residential property mortgages depending on a Loan to Value (LTV) ratio. Vehicle Credit/Financing Policy Reducing RWA for vehicle loan/financing. Allowing insurance company to set the premium/contribution rate for vehicle insurance lower than the lower threshold as regulated in SEOJK 6/2017. Allowing bank and multifinance companies with certain criteria to provide loan with down payment (DP) 0%. Health Sector Credit Policy Reducing credit RWA from 100% to 50%. Digitizing MSMEs Expanding the ecosystem for MSMEs digitization from upstream to downstream with the UMKMMU and BWM Mobile platforms. Support to Sovereign Wealth Fund (SWF) Provision of funds to SWF is subject to a risk weight of 0% in the calculation of RWA for credit risk. *) OJK Regulations in Response to Government Regulation in Lieu of Law No. 1 Year 2020 to maintain financial stability and economic activities. 143#145Banking Regulations Way Forward in 2021 For 2021, banking research and regulation provisions issued by the OJK will focus on strengthening banking business processes that support trends in industry and technology developments, as well as updating prudential regulations that follows international standards, while still observing the best fit principle. OJK's Draft Regulation for Commercial Bank Business Activities: To support bank competitiveness and innovation, it is necessary to make adjustments to the licensing mechanism and product classification and/or activities that banks can carry out. OJK's Draft Regulation on Commercial Banks: Adjustments to trends in industrial developments and banking business processes, supporting the strengthening of the banking industry and adapting to the latest policies OJK's Draft Regulation Amendments to OJK Regulation No. 19/POJK.03/2014 on Branchless Financial Services in the Context of Financial Inclusion: adjustments to current conditions and developments in banking information technology OJK's Draft Regulation to Provision of Funds for the Development of Human Resource Quality for Commercial Banks: Renewal of Director Decree No.31/310/KEP/DIR in 1999 Source: Financial Service Authority (OJK) OJK's Draft Regulation Amendments to OJK Regulation No. 34/POJK.03/2018 on Reassessment of Main Parties of Financial Services Institutions: The need to accelerate the process of handling Bank problems OJK's Draft Regulation Amendments to OJK Regulation No.13/POJK.03/2017 on the Use of Public Accountant (AP) and Public Accounting Office (KAP) in Financial Service Activities: Adjustments to the latest AP/KAP regulations OJK's Draft Circulation Letter on Guidelines for Calculating RWA for Credit Risk Using the Standard Approach: Adjustment to the Basel III Reforms standard which will take effect from 1 January 2023 OJK's Draft Circulation Letter on Guidelines for Calculating RWA for Market Risk Using a Standardized Approach: Adjustment to the Basel III Reforms standard which will take effect from 1 January 2023 OJK's Draft Circulation Letter on Commercial Bank Business Plan: Adjustment to the needs and development of industry, and in line with the development of the RBB in the OJK's Online Reporting Application (APOLO) which will be effective by the end of 2021 144#146OJK's Role in the National Economic Recovery Program (PEN) The Pandemic raises various risks that affect the financial system, namely default debtors, investor outflows, liquidity risk and capital risk. Credit restructuring relaxation policy by OJK, reducing the volatility of the capital market to assist financial services institutions in mitigating risks and helping businesses to continue their business activities in the midst of a pandemic. Some other OJK's support for the PEN program includes: Providing Interest Subsidy data related regarding banking debtors, finance company, BUMN Credit Distribution Program, which becomes the basis of giving interest subsidy. MSME's Guarantee Coordinating with Ministry of Finance in formulating the framework of implementing policy related to MSME's guarantee and providing information of criteria that can receive the guarantee. Corporate Guarantee Coordinating with Ministry of Finance in formulating the framework of implementing policy related to Banking guarantee and providing information of criteria that can receive the guarantee. Realization of the National Economic Recovery Program Gov't Fund Placement in Coordinating with Ministry of Finance assessing prospective Commercial Bank Partners as well as information & data exchange. OJK is actively monitoring Government fund placement to HIMBARA, Regional Development Bank and Sharia Bank. Various government stimulant such as government funds in these industry may encourage lending to accelerate the growth of the economy. r HIMBARA Regional Development Bank Credit Disbursement *IDR 218.36 T ■ Credit Disbursement *IDR30.12 T Sharia Bank ■ Credit Disbursement *IDR 5.89 T *data as of 31 Dec 2020 OJK's Way Forward Continuing Restructuring extension Restructuring Policy will be given selectively based on bank assessment to avoid moral hazard. Regional Economic Acceleration Accelerating regional economic to further facilitate national government spending. Source: Financial Service Authority (OJK) Financial Industry Optimalization financial Optimizing industry through financing labor-intensive business and / or high-multiplier effect consumption. Acceleration of Digitalization & Integrated Finance Accelerating digitalization and continuing NBFI and capital market reformation to increase competitiveness. Strengthening Integrated Supervision Improving supervision infrastructure technology licensing. and based 145#147OJK's Strategic Policies in The Financial Sector 2021 National Economic Recovery Program Stimulus Policy Extension of the restructuring policy for debtors affected by Covid-19 to 2022. Providing sovereign rating in calculating risk-based capital when buying securities issued by the Investment Management Institution. Recurring credit / financing restructuring during the relaxation period. Temporary prudential policy relaxation, namely: Recurring credit / financing restructuring during the relaxation period and without unnatural / excessive fees. Reduction of credit risk weighting (RWA) for Credit and Property Financing as well as Motor Vehicle Loans and Financing. Adjustment of Legal Lending Limits and Reduction of Credit Risk Weighting (RWA) for the health sector. Simplify and accelerate access to finance for MSMEs by expanding (KUR) Cluster pilot project. Digitalization of integrated community economic activities from upstream to downstream through the development of Bank Wakaf Mikro (BWM), KUR, the securities crowdfunding platform and the MSMEs digital marketplace. Digital Transformation Acceleration in the Financial Services Sector Accelerating digitalization in the financial services industry, including granting licenses for digital banks. Strengthen prudential rules for fintech peer to peer lending Supporting the growth of fintech start-ups by developing a regulatory sandbox Digitalizing Sharia products. Source: Financial Service Authority (OJK)-- I Strengthening Resilience and Competitiveness of the Financial Services Sector Accelerating the consolidation of the financial services industry by gradually implementing a minimum capital policy. Strengthening the implementation of governance, risk management through Investment Limits and Large Fund Provision, Improvement of Capital Regulations, & Status Determination and Supervision Follow-Up (Exit Policy). Financial Services Sector Ecosystem Development Maintaining market integrity and developing the retail and domestic investor base. Supporting financial services institutions to carry out multi-activities business and be digital-based. Accelerating the expansion of financial access and improving public financial literacy through KUR, BWM, Laku Pandai and Student Savings and strengthening consumer protection. Implementing Sustainable Finance through the Roadmap Phase II 2021-2025. Improving the human resource capacity of the financial services sector based on the blueprint for human resource development in the financial services sector 2021-2025. Strengthening OJK's internal capacity Developing integrated supervision of all financial service products Improving governance in internal business processes. Adjusting the market conduct monitoring process related to the product life cycle stages. Strengthening digital-based surveillance. | I I I 4'46#148A Comprehensive Financial Deepening Program ...strategy to tackle challenges in deepening Indonesia's financial markets In Apr-2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority launched a Coordination Forum for Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate "The National Strategy of Financial Market Development" Vision: To Establish Deep, Liquid, Efficient, Inclusive, and Safe Financial Market Mission: Financial Market as Sources of National Development Financing TARGET KEY PERFORMANCE INDICATOR 1 2 STRATEGIC ACTION PLAN 3 ECONOMIC FUNDING & MARKET INFRASTRUCTURE 3 Pilars RISK MANAGEMENT DEVELOPMENT POLICY COORDINATION, HARMONIZATION & EDUCATION 6 Markets Money Market Bond FX Market Market Stock Market Syariah Market Structure Product Market 7 Elements of Financial Fund Market Infrastructure Regulatory Framework Market Ecosystem Instrument Benchmark Rate & Standardization Coordination & Education Source: Bank Indonesia Intermediaries 147#149BI's Roles in Supporting Distribution of Non-Cash Social Assistance (NCSA) Bl supports government's program of shifting social assistance to targeted non cash social assistance disbursement through the electronic payment system. In the future, electronic mechanism disbursement will be also applied to LPG subsidy. NCSA Programs Family Hope Program (Program Keluarga Harapan -PKH) Smart Indonesia Program (Program Indonesia Pintar-PIP) Pilot Project Source: Bank Indonesia KARTY KELARA SE MATERA Gradual Implementation Non Cash Food Assistance (Bantuan Pangan Non Tunai BPNT) I 9876543210 XXYYZZ 12345678 LPG Subsidy 2016-2020 Full Implementation Interconnected & interoperable payment system T T 148#150Progress of NCSA Programs • • Family Hope Program (Program Keluarga Harapan - PKH) The Family Hope Program (PKH) is a program that provides cash to very poor households. IDR1.89 million/year will be granted for each household. PKH will be granted every February, May, August, and November. As of December 2017, PKH has been distributed to 6.0 million households on non- cash basis. • In 2018, PKH has been distributed to 10 million households on non-cash basis. with In 2019, PKH has been distributed to 9.84 million house hold on noncash basis total realization of IDR32.75T. KARTU KELUARGA SEJAHTERA 1281 5678 12345678 AGE RAMANAS • • Non Cash Food Assistance (Bantuan Pangan Non Tunai - BPNT) BPNT is a poverty alleviation and social protection program that is managed by the central government. It provides subsidized rice and eggs to low-income households. IDR110 thousand month will be granted for each household as BPNT that can be used in certain stores which called e-warong. As of December 2017, BPNT was distributed to 1.2 million households in 44 cities. In 2018, BPNT has been distributed to 10.1 million households (65.1% of the target of 15.5 million households target). . In 2019, BPNT has been distributed to 15 million household on non cash basis with total realization of IDR15.44T Source: Bank Indonesia 149#151Section 8 Progressive Infrastructure Development: Strong Commitment on Acceleration of Infrastructure Provision BHINNEKA TUNGGAL IKA#152PIC Institutional Reforms to establish a conducive PPP ecosystem kppip Institutional Reforms for PPP Implementation KPPIP: Coordinating unit in decision- making processes and debottlenecking efforts for infrastructure acceleration WLKPP KANTOR BERSAMA KPBU REPUBLIK INDONESIA Por Gommini PPP Joint Office: Information center for policy coordination and capacity building to encourage the use of PPP schemes IIGF Indonesia Infrastructure Guarantee Fund: Provides guarantee and supports project preparation VSMI Sarana Multi Infrastruktur: Facilitating infrastructure financing, preparing project, and serving advisory PPP Stages Project Development Facility (PDF) Outline Business Case Determination of Funding Scheme Tender document + Transaction preparation PPP Agreement Final Business Case (FBC) Government Contracting Agency (PJPK) Financial Close Legend IIGF PAM Вердитым Kementerian PPM/ Bappenas Business Entity P Happ KANTOR BERSAMA KPBU REPUBLIK INDONESIA KANTOR BERSAMA KPBU REPUBLIK INDONESIA KANTOR BERSAMA KPBU REPUBLIK INDONESIA IIGF kppip PornP Intabuldur Fibr kpsip VSMi Business Entity Lender Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Ministry of National Development Planning Ministry of Finance 151#153Reforms Along the Project's Life Cycle ...to encourage and accelerate infrastructure project using PPP scheme Government of Indonesia Project Development Facility (PDF) Preparation Project development facility assists the Government Contracting Agency (GCA) in PPP project preparation (PDF&TA) Managing entity: KPPIP, PT SMI and PT IIF, Ministry of Finance Viability Funding Gap (VGF) Guarantee Scheme Tax Facilities Availability Payment Land Acquisition A facility which contributes to construction cost in order to increase project financial feasibility Managing entity: Ministry of Finance based on GCA proposal Govt's commitment: Max 49% per project cost Bidding Process Guaranteeing govt. contractual obligations under infra. concession agreements and MoF Reg. No. 130/PMK.08 /2016 re: Govt. guarantee for electricity project acceleration Managing entity: Indonesia Infra. Guarantee Fund (IGF) and MoF Govt's commitment: US$ 450 Mil MoF Reg. No.150/2018 allowed 100% Tax Holiday for 18 Pioneering Industries for 5 - 20 years depending on the investment value. The tax holiday is not only given to the new investments but can also be obtained by the existing taxpayers who want to expand their business. Managing entity: Ministry of Finance A scheme in which concessionaires receive periodic payments from central or regional government if the service standard is fulfilled. The MoF Regulation and MOHA Regulation on Availability Payment have been stipulated. Managing entity: Ministry of Finance Ministry of Home Affairs Construction A facility to support land acquisition for infrastructure projects particularly projects that involve private sector Managing entity: Ministry of Finance; Ministry of Agrarian and Spatial Planningl/BPN, and BLU-LMAN Gov't. commitment: US$ 9.3 bn (2016- 2021)* *USD1 IDR13,500 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 152#154Efforts to Accelerate Infrastructure Provision The establishment of Indonesia Asset Management Agency (LMAN) Government has established State Asset Management Unit (LMAN) as a solution to accelerate the land acquisition through the provision of land acquisition fund Land Acquisition Budgeting Scheme G 1. Unutilized fund can be allocated for the following year Non-project-specific land acquisition fund LMAN at a Glance 1. LMAN was established in December 2015 through the issuance of MoF Reg. 219/2015 concerning State Assets Management 2. In 2016, BLU LMAN was mandated to provide land acquisition fund as a support to Ministry of Public Works due to US$ 1,081 Mio shortage of fund to acquire land for priority toll roads 3. The scope of support is broaden for all National Strategic Projects through the issuance of MoF Reg. 21/2017 (j.o MoF Reg. 209/2019 j.o. MoF Reg. 139/2020) concerning land acquisition financing guideline for PSN 4. In April 2019, LMAN has disbursed up to US$ 4 billion (IDR 54 Trillion) through bridging finance scheme for 93 toll road projects, and planned to start the implementation of direct payment scheme 2. 3. allocation. Unused allocated fund can flexibly be made available for the other project Land acquisition fund for PSN projects is managed under one agency This LMAN initiative provides better flexibility, coordination and management of land acquisition fund provision for National Strategic Projects (PSN) Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 153#155Efforts to Accelerate Infrastructure Provision Limited Concession Scheme as an Alternative of Infrastructure financing Presidential Regulation No 32/2020 about Infrastructure Financing through Limited Concession Scheme Definition Limited Concession Scheme of Infrastructure Asset is the asset concession agreement to improve operations of Government assets (BMN) and/or SOES' assets generate revenue to improve similar project operations and/or finance other infrastructure provision Infrastructure Financing Priority to Revenue generated by the LCS will be used to fund the priority infrastructure projects and/or national strategic infrastructure projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) LCS Principles LCS transfers concession rights from brownfield asset owned by the Government and/or SOEs to private sector to operate, maintain, and develop the assets; As the rewards, Government and/or SOE will receive upfront payment or annuity payment during the concession period Future CAPEX during the concession period will be borne by the concession holder to ease the Government and SOE budget burdens Technical Criteria for the LCS assets The asset has been fully operated for minimum 2 years The asset needs to improve operation efficiency based on international standard Asset's useful life minimum is 10 years For the SOE's asset, the asset must have positive cash flow for minimum 2 years in a row and has been audited at least 3 years in a row For Government asset (BMN), the asset should be on the Ministry Financial report that has been audited based on the Government Accountancy Standard in the previous period 154#156Efforts to Accelerate Infrastructure Provision Land Value Capture (LVC) Scheme ❝ A policy approach that enables communities to recover and reinvest economic value increases and increases in economic productivity that result from public investment and other government actions. (Lincoln Institute of Land Policy) . Open Housing & Settlement Human Settlement Improvement 品 Keep Investing- network Grows LVC Benefit alue Uplift Retain a Portion • Local revenue from tax and levy Better city planning and development • Regional growth Distributed development in urban area Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Tax based LVC Land and Property Tax Betterment Levies and Special Assessment Tax Increment Financing (TIF) Development Based LVC Land Sale and Rent Air Right Sale Joint Development Land Readjustment Better Triple Win LVC Reducing Urban Creating Fiscal Subsidy Mobility Space 155#157Efforts to Accelerate Infrastructure Provision Sovereign Wealth Fund (SWF) • SWF Investment Guide Omnibus Lawmandated the establishment of Sovereign Wealth Fund asGol investmentbody With goal to • Increaseand optimize assetvalue in long term Domesticand International Investor Co-Investor (Minority Shareholder) | Direct landing to company/asset/project Government of Indonesia Cq. Ministry of Finance Indonesia Sovereign Wealth Fund (Lembaga Pengelola Investasi/LPI) Investment Agreement • To support Management Agreement Master Fund/ Master Fund Manager Principal Investor (ex. ADB, JBIC) Investment Agreement Managed fund for Health sector Managed fund for Tourism Managed fund for Technology sustainable development Gol committed to invest IDR 15 Billion as initial capital for SWF/LPI Managed fund for infrastructure • Tollroads Airports Seaports Managed fund for Energy & Natural Resources • Oil & Gas Hospitals reserves Pharma- Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) ceuticals Tourism SEZ • Tanamori • Toba Likupang Hotel chain • Digital lending Payments Commerce Managed fund for New Capital • Contractor • Utilities • Land& building 156#158Fundamental Regulations Initiation to accelerate infrastructure projects delivery 1 2 3 4 5 Government Reg. No. 13/2017 on National Spatial Plan (RTRWN) The issuance of RTRWN can resolve spatial planning mismatch in the implementation of infrastructure projects listed in the annex of Government Reg. No. 13/2017. A number of breakthroughs were developed, and one of them is that the Minister of Agrarian and Spatial can issue a recommendation of spatial utilization; so that the process of obtaining project permission can be done. MoF Reg. No. 60/2017 on Procedures for the Provision of Central Government Guarantee for the Acceleration of the National Strategic Projects Implementation The supporting regulation for Presidential Reg. No. 3/2016 on the Acceleration of the National Strategic Projects Implementation. This regulation regulates the scope and general requirements and procedures to propose and grant guarantees, as well as allocate state budget obligation on government guarantees to all PSN. The guarantee provision is expected to increase the feasibility and trust of investors to participate in the implementation of PSN. Presidential Reg. No. 56/2017 on Social Impact Handling in Land Acquisition Process for PSN This Presidential Reg. allows the Executing Agency to pay land acquisition compensation to the impacted community who does not have official rights over the land required for PSN. This regulation helps to solve the land acquisition problem due to community objection over the land use. Presidential Reg. No. 66/2020 on Land Acquisition Funding for Public Interest in Implementing PSN This Presidential Reg. was issued to accelerate the process of land acquisition funding for PSN as well as replacing the Presidential Reg. No. 102/2016 MoF Reg. No. 21/2017 on Procedures for Land Acquisition for National Strategic Projects (PSN) and Asset Management of Land Acquisition by State Asset Management Agency (j.o. MoF Reg. No. 5/2019, j.o. MoF Reg. No. 209/2019, j.o. MoF Reg. No. 139/2020) The implementing regulation of Presidential Reg. No. 102/2016 on Financing of Land Acquisition for the Development of Public Interest in the Framework of the National Strategic Implementation. This regulation becomes the legal basis for the financing of the procurement of National Strategic and Priority Projects by BLU LMAN Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 157#159National Strategic Projects (PSN) may receive privileges as stipulated in the Presidential Reg. No. 3/2016 j.o. the Presidential Reg. No. 58/2017 j.o. the Presidential Reg. No. 56/2018, j.o Presidential Decree no.109/2020 Project acceleration for private investment Settlement of Legal Issues Accelerate Goods and Service Procurement Land transfer fee waiver 12 01 Electronic permit licensing 11 PSN Facilities 02 10 60 Spatial Planning 10 3 03 04 Land clearing acceleration Problems and 09 Hindrance Completion New Facilities 08 SOE's Assignment 07 06 Projects Monitoring via KPPIP IT System Existing Facilities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 95 05 Local Content Utilization Government Guarantee Provision 158#160Job Creation Law's Positive Development of PSN Government Regulation on Ease of Doing Business for PSN Government Regulation on Land Acquisition for Public Interest Government Regulation on Spatial Adjustment for Forest and Land Right/Permit 呂 Government Regulation on Spatial Planning Government Regulation on Land Bank Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) A 159#161Under Presidential Reg. No.56/2018, PSN list has been revised into 223 Projects and 3 Programs 53 Projects Sumatra US$43.6 B 17 Projects 27 Projects 12 Projects Sulawesi Kalimantan US$23.4 B US$35.7 B Maluku & Papua US$34.5 B 89 Projects 3 Programs National Java US$72.7 B 12 Projects US$100.7 B 13 Projects Bali & Nusa Tenggara US$0.7 B Exchange rate: US$ 1 = IDR 13,500 PSN includes 15 sectors at project level and 3 sectors at program level Project A Road 69 Projects Dams 51 Projects SEZs & IES 29 Projects Railway 16 Projects Energy 11 Projects Ports 10 Projects Clean Water & Sanitation Airports 7 Projects 4 Housing Smelter 6 Projects Technology 4 Projects 3 Projects Fisheries/Farming 1 Projects Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 8 Projects Sea Dike 1 Projects Education 1 Projects Irigation 6 Projects Program Electricity 1 Program Aeroplane Industry 1 Program Economic Equality 1 Program 160#162PSN Profile of 223 Projects and 3 Programs The Estimated Investment Value for 223 Projects + 3 Programs PSN¹ State Budget 10% 5 Sectors with Highest Investment Value Energy 11 Projects US$ 89.8 Bn Private 59% 31% SOES/ RSOES 4 A Electricity 1 Program US$ 76.7 Bn Roads 69 Projects US$ 49.7 Bn Total Investment Value² US$ 307.4 Billion State Budget US$ 31.6 Bn SOES/RSOES US$ 96.6 Bn Private US$ 179.2 Bn Railways 16 Projects US$ 29.2 Bn SEZs and IEs 31 Projects US$ 31 Bn ¹Exclude 7 projects which investment value are still unknown Exchange rate: US$ 1 = IDR 13,500 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 161#163From 2016-2020, there were 92 projects¹ completed with total estimated investment value of IDR 847 tn Completed 2016 20 Projects (IDR 33,3 T) • 7 Airports . 1 Seaports 1 Toll Road • 1 Gas Pipe • 6 Dam • 4 National Border Completed 2017 10 Projects (IDR 61,4 T) Completed 2018 32 Projects (IDR 207,4 T) Completed 2019 30 Projects (IDR 165,3 T) Completed 2020 12 Projects (IDR 135,3 T) • . 2 Toll Road . 1 Access Road 3 National Border 1 Dam 2 Railway . 1 Airports 4 Airports • 4 Dam • 4 Industrial Zone 9 National Road . . 1 Airports • 1 Irrigation • 1 Irrigation • 4 Smelter 6 Industrial Zone • 1 Gas Facility 10 Toll Road 5 SEZ • 1 Fishery Center • 2 Smelter • 4 Dam • 2 Technology ¹In cumulative, including projects that are already taken out in 2016 and 2017 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) • 2 railways 1 seaport • 1 Airport • 1 Train 3 Highway 1 SPAM . 3 Industrial Estate 2 Dam 1 Port 162#164Since January 2020, 12 PSN projects completed with 19 projects operate partially and 99 under construction PSN Progress (January- December 2020) PSN Investment contributor 12 Completed (IDR 124,2 T) State budget 6% 19 SOE Operate Partially (IDR 1.442,2 T) 67 25 % PSN Construction (IDR 1.749,9 T) IDR 4.817,7 Trillion* 69% Transaction (IDR 214,7 T) 99 Preparation (IDR 1.286,8 T) Private *Include 10 programs -> 6 Operate partially, 1 Construction, and 3 Preparation *Exclude Regional Development program, food estate program and Bali Utara airport investment Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 163#165Progress on 37 Priority Projects From the revised National Strategic Projects, the Government has selected a list of 37 Priority Projects to be the focus of infrastructure provision. 24 22 14 23 24 27 23 24 4 22 23 22 22 24 27 4 11 23 37 24 15 2 18 24 23 18 24 30 12 23 24 18 18 18 27 25 18 31 24 18 18 18 18 24 36 1234 1. # New Priority Projects # Existing Priority Projects Balikpapan-Samarinda Toll Road 24 3 13 9 16 33 27 37 1 37 10 13 35 21 20 24 19 32 20 29 26 28 27 6 37 37 24 37 5 24 24 26. 13. LRT of DKI Jakarta 2. Manado-Bitung Toll Road 14. Kuala Tanjung International Hub Seaport 27. 3. Panimbang-Serang Toll Road 15. Bitung International Hub Seaport 4. 15 Segments of Trans - Sumatera Toll 16. Patimban Port 28. Road 17. 56∞ 5. - Probolinggo Banyuwangi Toll Road 18. Inland Waterways Cikarang-Bekasi-Laut (CBL) Palapa Ring Broadband 29. Tuban Oil Refinery RDMP/Revitalization of the Existing Refineries (Balikpapan, Cilacap, Balongan, Dumai, Plaju) Abadi WK Masela Field Unilization Field Has Jambaran-Tiung Biru 30. 6. - Yogyakarta Bawean Toll Road 19. Batang, Central Java Power Plant (CJPP) 31. Indonesian Deepwater Development (IDD) Tangguh LNG Train 3 Development 7. SHIA Express Railway 8. MRT Jakarta South-North Line 20. Central West Java Transmission Line 500 kV 32. 21. Indramayu Coal-fired Power Plant 33. West Semarang Drinking Water Supply System Jakarta Sewerage System 34. 9. Makassar-Parepare Railway 22. 10. Light Rail Transit (LRT) of Jakarta- 23. Depok-Bogor-Bekasi Sumatera 500 kV Transmission (4 Provinces) Mulut Tambang Coal-fired Power Plant (6 Provinces) National Capital Integrated Coastal Development (NCICD) Phase A 35. Jatiluhur Drinking Water Supply 11. LRT of South Sumatera 24. PLTGU (16 Provinces) 36. Lampung Drinking Water Supply 12. East Kalimantan Railway 25. Bontang Oil Refinery 37. Waste to Energy Program in 8 cities Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 164#166Progress on 37 Priority Projects Progress of 37 Priority Projects (as of June 2020) 8% 11% 5% 60% 16% 4 project is completed 6 projects in construction and partial operation phase 22 projects in construction and I will start operating after 2019 3 projects in transaction 2 projects in preparation Recent Milestones A Palapa Ring West package has been fully operasional since April 2018. A Trans Sumatera Toll Road Segment of Pekanbaru-Dumai (131,5Km) has been operated on Sept 26th, 2020. West Semarang Water Supply System: On March 2018, pre-qualification stage has resulted 4 shortlisted bidders Funding Scheme of 37 Priority Projects 8% O 26% 66% Total Investment Value US$ 183.9 Billion US$120.7 billion from Private/ PPP US$47.7 billion from SOE/ Regional SOE US$15.5 billion State/ Regional Budget (including G-to-G loan) Exchange rate: US$ 1 = IDR 13,500 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) ធៈ០ Mass Rapid Transit (MRT) Jakarta South-North Allocation of repayment liability on additional-loan for Phase | and Phase II has been decided in the KPPIP Ministerial meeting - 49% will be borne by Central Government and 51% will be borne Provincial Government of DKI Jakarta. Patimban Port Loan Agreement has been signed on 15 November 017. Note: This data is still going to be verified by The Executive Office of President (KSP) and Indonesia's National Government Internal Auditor (BPKP) 165#167Energy Sector: the Progress of 35.000 MW Program Average economic growth of 6.7% requires 7,000 MW / year or 35,000 MW 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024) Debottlenecking through regulation: 1. Regulation No.1/2015 concerning electricity supply cooperation & joint utilization of the electrical network among license holders. 2. Regulation No.3/2015, concerning Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection & Appointment. Cabinet Meeting Progress of 35,000 MW Launching 35.000 MW by the President in Goa Beach Sanden DIY 17 Dec '14 Jan '15 Cabinet Meeting "There's electricity crisis in Indonesia, requires construction of large capacity plant " Jan '15 35,000 MW Program Distribution Update Electricity Supply Business Plan (RUPTL) 2019-2028) 16 Mar '15 4 May '15 Kalimantan (4,477 MW) Sulawesi (2,570 MW) 1. Op. 904 MW 1. Op. 1,146 MW 2. Cons. 785 MW 2. Cons. 963 MW Maluku-Papua (877 MW) The progress so far: 1. 3. PPA 1,413 MW 3. PPA. 76 MW Op. 437 MW Aug 20 2. Cons. 54 MW 4. Proc. 218 MW 4. Proc. 235 MW Sumatera (9.410 MW) 5. Plan. 158 MW 5. Plan. 150 MW 3. PPA. - 12345 1. Op. 1,302 MW 4. Proc. 160 MW No Phase MW % 5. Plan.-225 MW 2. Cons. 4,248 MW 3. PPA 3,555 MW 4. Proc. 85 MW 5. Plan. 85 MW Jawa, Madura & Bali (18,399 MW) Nusa Tenggara (812 MW) 1. Op. 4,184 MW 2. Cons. 12,730 MW 3. PPA. 1,485 MW 4. Proc. - 5. Plan. - 1. Op. 427 MW 2. Cons. 274 MW 3. PPA. 4. Proc. 5 MW 5. Plan. 106 MW 1234 Operating Construction 8,400 24 19,055 54 Signed Power-Purchase Agreement 6,528 18 Procurement 839 5 Planning 724 2 Source: PLN Note : Progress of 35,000 MW Electricity Program as of August 2020 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 166#168Energy Sector: the Progress of 35.000 MW Program December 2016 November 2017 December 2018 December 2019 August 2020 2% 16 % 28 % 9% 6% 3% 3% 8% 2% 19 % 3% 19 % 5% 18 % 2% 2% 24 % ooooo 30 % 24 % 38 % 44 32 % % 52 % 57 54 % % MW 706 operating phase 10,141 MW in construction phase 8,478 MW signed Power-purchase Agreement 10,560 MW in procurement phase 5,824 MW in planning phase in 998 MW in operating phase 15,676 MW in construction phase 13,782 MW signed Power-purchase Agreement 3,163 MW in procurement phase 2,228 MW in planning phase Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 2,899 MW in operating phase 18,207 MW in construction phase 11,467 MW signed Power-purchase Agreement 1,683 MW in procurement phase 954 MW in planning phase 6,811 MW in operating phase 20,168 MW in construction phase 6,678 MW signed Power-purchase Agreement 829 MW in procurement phase 734 MW in planning phase 8,400 MW in operating phase 19,055 MW in construction phase 6,528 MW signed Power-purchase Agreement 839 MW in procurement phase 724 MW in planning phase 167#169Acceleration of 35.000 MW Program The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects Government Support (outside Guarantee) • Provision of Primary Energy Provision of Renewable Energy Simplicity of Permits and non-Licensing Spatial Planning Land acquisition Resolution on Legal Matters Government Assignment Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content. 1 EPC Powerplant and Transmission PT PLN Provision of Electricity 2A 2B 23 PLN Subsidiary (Joint Venture) SJKU* Ministry of Finance Independent Power Producer Direct Lending PT PLN's divident allocation Company Tax Holiday *)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter Strengthen Equity Strengthen PLN's Balance Sheet Loan from independent lenders Equity Injection by the Government Refinancing Hedging Bond issuance by PT PLN Asset Revaluation Financial Asset Optimization Direct Lending Other types of funding Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 168#170Significant Progress on Infrastructure Projects Roads wwwwcon Trans-Sumatra Toll Road Dams Merah Putih Bridge, Ambon Drinking Water Processing Jatigede Dam (Operational) Umbulan Drinking Water Provision System, East Java Transportation Jakarta MRT Project² Terminal 3 Ultimate Soekarno-Hatta² New Tanjung Priok Port Project² Nop Goliat Dekai, Papua Improving Monitoring System on Infrastructure Projects¹ KPPIP developed an integrated IT System for monitoring of national strategic and priority projects, providing database on projects' latest status which can be effectively utilized for monitoring and decision-making purposes. Database Project information such as map, track, existing study and latest project status. 2 Platform data outlook that is efficient and functional using a user-friendly framework. 12 1 An integrated IT system with monitoring capacity for stakeholders, so that they can have real time data. 3 Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders. Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) Not funded from National Budget 169#171Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth 1 Infrastructure Development is a Key Priority Infrastructure Development in order to: 1. Accelerate growth particularly in rural areas 2. Support industrial development and tourism 3. Reduce unemployment and poverty Infrastructure fundraising needs: $357.9 bn (or equivalent to IDR4,796.2 tn) Broad Objective Core Mandates 1 1 245 National Strategy Projects under National Medium Term Plan for 2015 2019 with an estimated total cost of IDR 4,197 tn (USD 313 bn) 1 37 priority infrastructure projects with an estimated cost of IDR 2,490 tn (USD 180 billion) Additional Mandates 1 - Majority of 37 priority projects are expected to commence commercial operation by 2018 2022 Establishment of PPP Unit Champion project preparation and acceleration of the PPP agenda in Indonesia - Improve quality of project selection under KPPIP OBC criteria Support project preparation through PDF support and highly qualified transaction advisors Act on behalf the Minister of Finance in providing government support and approvals for projects Coordinate all public finance instruments Provide input for PPP Policy program Development and Regulations Implement capacity building for Govt. Contracting Agency (GCAs) One stop shop for PPP promotion & Information Budget Central & regional budget (special allocation fund & rural transfer) • Primarily to support basic infrastructure projects: Food security: Irrigation, dams etc. Maritime: Seaports, shipyards etc. Connectivity: Village roads, public transportation etc. Public Private Partnership Certain infrastructure projects to be funded and operated through a partnership between the Indonesian government and the private sector Projects ready for auction under the PPP Scheme: Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung Railway projects such as an express line into Soekarno-Hatta International Airport Water supply projects such as the West Semarang Project Various government support for PPP: - - Project Development Facility (PDF): Helps Government Contracting Agencies (GCAs) in project preparation and transaction Viability Gap Fund: improves financial viability of PPP projects Government Guarantees: Supports PPP projects' bankability by providing sovereign guarantees Infrastructure Financing Fund: Provided through PT SMI and IIGF Availability Payment (AP): GCA pays private partner based of availability of infrastructure services Note: OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity Source SOE & Private Sector Government to inject capital into SOES: Intended multiplier effect to develop more infrastructure projects • Key focus areas: Infrastructure and maritime development Transportation and connectivity Food security ● Medium term infrastructure developments to focus on: Water Supply Airports Seaports Electricity and power plants Housing Mining Ministry of Finance; Bappenas; KPPIP: "Komite Kebijakan Percepatan Penyediaan Infrastruktur" or National Committee for the Acceleration of Infrastructure Delivery Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP) 170#172Government Guarantee For Basic Infrastructure Development Reflects strong commitment to national development planning Government Guarantee Program Contingent Liabilities from Government Guarantee as of Q4 2020 ** Power (Electricity) - Full credit guarantee for PT PLN's debt payment obligation under FTP 1 10,000MW and 35GW programs*. No. Central Government Guarantee for Infrastructure Programs Guarantee Document Credit Outstanding /Investment Exposure (billion)** Credit Guarantee Business Viability Guarantee (BVG) PPP Guarantee Political Risk Guarantee - Clean Water Guarantee for 70% of PDAM'S debt principal payment obligations. - I Toll road Full credit guarantee for PT Hutama Karya's debt payment obligations for development of Sumatra Toll Roads. Infrastructure Full credit guarantee on SOE'S borrowing from international financial institution & guarantee for PT SMI's local infrastructure financing. 1 Coal Power Plant 10,000MW Fast Track Program (FTP 1) 14 USD 1.18 the 2 Clean Water Supply Program 6 USD 0.01 3 Direct Lending from International Financial Institution to SOES 9 USD 1.86 4 Sumatra Toll Road 10 USD 3.07 5 Renewable energy, Coals & Gas Power Plant 10,000 MW 7 USD 3.92 (FTP 2) 6 Public-Private Partnerships (PPP) 7 USD 5.06 7 Regional infrastructure financing 1 USD 0.22 8 Public Transportation (Light Rail Transit) 1 USD 0.56 9 Electricity Infrastructure Fast Track Program (35 GW) 6 USD 4.59 Total 61 USD 20.47 Public Transportation (Light Rail Transit) Full credit guarantee for PT Kereta Api Indonesia's debt payment obligations for the development of LRT Jabodebek. Power (Electricity) Guarantee for PT PLN's obligations under Power Purchase Agreements with IPPS (off-take and political risk) under FTP-2 10.000MW and 35GW programs* - Infrastructure Guarantee for Government-related entities obligations (line ministries, local governments, SOEs, local SOEs) under PPP contracts/agreements Infrastructure Guarantee against infrastructure risks for National Strategic Projects (Presidential Decree No.58/2017) which are not covered by other type of guarantees *) MOF provides both credit guarantees and BVGs for 35GW program Source: Ministry of Finance 1 From 2008 to Q4-2020 **, the government has issued 91 guarantee documents with total value of USD41.69 billion, there were 30 guarantee documents worth USD4.19 billion have been expired. 1 The Maximum Guarantee Limit for the period 2020-2024 is set at 6% of GDP. Beginning in 2008 the Government has allocated a contingent budget with respect to these guarantees. Any unused budget allocation may be transferred to a guarantee reserve fund. This reserve fund, together with the relevant annual budget allocations, serves as reserves for any claim that arises from these guarantees. **) Currency conversion of IDR14,105.01/USD1 and IDR17,330.13/EUR1 (as of end December 2020) 171#173Government Financial Facilities for PPP Projects Financial Facilities to Attract More Private Participation More Funding Schemes are on the Pipelines Viability Gap Fund (VGF) Project Development Facility (PDF) LCS (Limited Concession Scheme) Government Guarantees (directly by MoF or through IIGF) Availability Payment Schemes Financing from PT. SMI and PT. IIF PINA (Non-Government Budget Infrastructure Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects: Financing) Source: Ministry of Finance Project Financing funded by the private sector through the granting of concessions for an operating asset owned by the Government/SOE (based on the policy of the Government) to the private sector to be operated & managed. • • Scheme Characteristics Asset is owned by public sector Operating asset, not greenfield project Records positive cash flow for the last several years Predicted revenue Project Financing funded by any source of funds other than Government's budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty, pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National Development Planning Ministry/Bappenas. . Scheme Characteristics Asset is owned by private sector Greenfield brownfield / operating projects 172#174New Guarantee Schemes for Non-PPP Projects Guarantee on SOE Direct Lending from International Financial Institutions (IFIs) The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provide guarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects. The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long tenor financing, State finance soundness Guarantee for Regional Infrastructure Financing Provision with 3 main principles: Fiscal sustainability Best practice of fiscal risk management Based on Government Regulation No. 95/2015 and Ministry of Finance Regulation No. 232/2015, Minister of Finance assigns PT SMI (Sarana Multi Infrastruktur) to carry out functions in providing loan to local government, as previously carried out by PIP (Government Investment Center). The Government had issued Ministry of Finance Regulation No 174 of 2016 to provide guarantee to PT SMI on the assignment of regional infrastructure financing provision, by loan to local governments that is transferred from PIP to PT SMI, and new loan channeled by PT SMI to the local government. The objective is to give stimulus to the acceleration of local infrastructure development through the ease of access to infrastructure financing and to boost local economic growth, as well as to provide alternative financing schemes in order to meet local infrastructure development needs and to reduce reliance on state/local budget. 173#175findonesia.travel @indtravel wonderful indonesia indonesiatravel@indtravel www.indonesia.travel Toba Lake, North Sumatera