INDONESIA’S ECONOMIC UPDATES:

NEW INVESTMENT OPPORTUNITIES

FOR JAPANESE BUSINESS PEOPLE

Ambassador Heri Akhmadi

Pandemic and World Economy

2

2020 STARTED WITH OPTIMISM, SUDDENLY COVID-19 CHANGED THE GAME

WEO January:3.3%

WEO April : -3.0%

WEO June: -4.9%

WEO October: -4.4%

WEO Jan: -3.5%

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

IMF WEO Global

Growth Projection2020

BREXIT TRANSITION31 January2020

US-CHINA TRADE DEAL

PHASE I15 January 2020

THE WHO

ANNOUNCE PANDEMIC11 March 2020

OIL PRICE PLUNGED

TO NEGATIVEF24 April2020

ANNOUNCE EFFICACY(>90%)17 November2020

RECTRICTIVE MOBILITY

WENT VIRALApril2020

RELAXING RESTRICTIVE

MOBILITY MEASURESJuly2020

LIMITED USAGE OF VACCINE (e.g.

by RUSSIA & CHINA)October2020

BIDEN-HARRIS

ADMINISTRATION7 November2020

US PRESIDENTIAL ELECTION3 November2020

2021: EAST ASIA & PACIFIC

GDP GROWTH OPTIMISTIC

OUTLOOK 7.4%, AS

CONSUMPTION GROW 9.5%January2021

BRITAIN AS FIRST COUNTRY

DELIVER VACCINATION,

FOLLOWED BY >30

COUNTRIESDecember2020

PFIZER & MODERNA

Started with new optimism, as:Started with new optimism, as:1. US-China trade war cool down;2. Brexit signals transition; and3. lowest Indonesia’s fiscal deficit ever of

1.76%GDP (IDR307.2 trillion).

Yet at Feb-March, Covid-19 affects confidence & change global trajectories toward recession

98.1108.7 13

1.2

133.6

118.7

118.6

59.5 73.3

72.2

52.6 61.

7

66.5

72.3 89.3

89.9

30.5

38.5

41.

8

57.2

67.6

66.0

37.0 48.9

52.5

130.0

131.

2

132.4

41.

1

50.4

56.4

43.4

46.6

47.1

GER

CHN

IND

INA MAS

PHP

SGP

THA

VIE

2021f

US FRA

Source: BPS, Ministry of Finance, Bloomberg,IMF

COVID-19 PANDEMIC PUSHED MANY COUNTRIES TO IMPLEMENT EXTRAORDINARY MEASURESCountercyclical policies to address economic slowdown

Eco

no

mic

Gro

wth

(%,yo

y)

Covid-19 negatively economic

pandemicaffect

performancesin manycountries.

Countries need to spendstimulus to

the pandemic,massive handle even in lower revenuegeneration.

Consequently, fiscal deficitand the debt areincreasing.

to otherCompare countries, economic

Indonesia’s contraction,

deficit, and debt to GDPratio are relativelymoderate.

Pre

limin

ary

Outt

urn

&Fi

scal D

efici

t

Pro

ject

ion (

%G

DP

)

Fisc

al D

eb

tPro

ject

ion

(% t

oG

DP

)

-4.9 -3

.1

1.4

-4.3

-7.0

-2.3 -0

.7

3.9

-0.1

-15.6 -1

0.8 -8

.2

-10.8-8

.6 -6.5 -3

.2

-11.

9

-11.

8

-13.1 -10.9

-6.1

-5.7 -2

.9

-6.5 -4

.7

-8.1

-7.3

1.2

-5.2

-4.9 -2

.9

-4.0

-4.0

GER

CHN

IND

INA* MAS

THA

VIE*

Rata-rata 2015 -2019

2020f 2021fAverage 2015 –

2019 PHP SGPUS* FRA

*) preliminary realization

2019 2020f

2.9 2.3-1.0 -2.1 -

3.2-3.5

-4.1 -4.7

-5.0

-5.6

-5.8

-6.2

-6.8

-8.3

-8.4

-8.8

-9.5

-9.9

-30.0

-20.0

-10.0

0.0

10.0

Q1 Q2

Q3

Q4

2020

Vietnam

China

SouthKorea

Indonesia

RussiaSaudiArabia

Japan

Germany Malaysia Singapore Thailand EU Mexico

France

Italy Philippines UKUSA

Possible scenarios of Global Growth“Global economy is expected to recover slowly, but prospect for global growth is still uncertain”

The World Bank

The trend of decreasing Covid-19

cases and vaccinations provides

optimism and hope for economic

recovery.

However, needs to remain

vigilant of the potential for a re-

escalation of Covid-19 due to the

widespread of new coronavirusvariants

Indonesia’s Economic Recovery

14,518

5.656

M-

20 A-

20

M-

20 J- 20

J- 20

A-

20 S-

20

O-

20

N-

20 D-

20 J-21

F-21

Indonesia’s Covid-19 DailyCases

(as of 20 March 2021)

• Since January, Indonesia has implemented PPKM (Social Mobility Restiction) as an outbreak controlmeasure.

• Indonesia's active casesfell from 176 thousand (5 Feb) to 129 thousand.

• The government will continue to strengthen 3T protocols, encourage 3M, and acceleratevaccinations.

INDONESIA CONTINUES DOWNWARD TREND IN DAILY COVID-19 CASESIn line with tightening restrictions since the end of the year

6

Cumulative Cases

1.46million

TotalDeaths

39.5 thousand

2.7%

Recovery

1.29million

88.4%

Active Cases

129.8 thousand

8.,9%

mber: worldometers.info, KemenkesRI

5.02

-2.07

5.06 5.05 5.01 4.96

2.97

-3.49

-2.19

Q1 Q2

Q3

Q4

Q1

-5.32

Q2Q3

Q4

AnnuallyQuarterly

Indonesia GDP Growth (%,YoY)

2019 2020

Household Consumption (57.7%)*

GovernmentConsumption

(9.3%)

Investment (31.7%)

Export (17.2%)

Import (16.0%)

Q1 Q2 Q3 Q4

* (%) Contribution to Nominal GDP2020

Source: Statistics Indonesia

ECONOMIC GROWTH CONTINUES THE RECOVERY PHASEDespite the hardship, Indonesia’s economy has shown a modest recovery

The government plays a role as the center of

recovery, being the only component that grows

positively. Other expenditure components indicate

the direction of improvement

The direction of this recovery will accelerated in2021

through the state budget that remains as

countercyclical instrument, an effective vaccination

program, and a strengthened National Economic

Recovery (PEN) program

3.8

-6.9

9.8

1.81.9

Q1 Q2

Q3

Q4

2.8

-5.5

-4.0-3.6

-2.6

1.7

-8.6

-6.5 -6.2

-4.9

Q1 Q2

Q3

Q4

0.4

-12.0 -11.7

-7.2-7.7

Q1 Q2

Q3

Q4

-3.6

-18.3

-23.0

-13.5-14.7

Q1 Q2

Q3

Q4

POSITIVELY MODERATEGROWTH

POSITIVELY MODERATEGROWTH

10.6

1.1

-0.9

2.43.3

Q1 Q2

Q3

Q4

THE RECOVERY TREND IS ALSO SHOWED

FROM THE PRODUCTION SIDE

9.810.9 10.7 10.9

10.6

3

5

7

9

11

13

15

17

Q1 Q2

Q3

Q4

10.4

15.316.5

11.6

Q1

3.7

Q2 Q3 Q4

5.9

1.2

2.41.4

2.6

Q1 Q2 Q3Q4

Communication & Information (4.5%)

HealthServices (1.3%)

EducationServices(3.6%)

Real Estate(2.9%)

Financial & Insurance Services (4.5%

)

2.1

-6.2

-4.3-3.1

-2.9

4

2

0

-2

-4

-6

-8Q1 Q2 Q3

Q4

Manufacturing (19.9%)*

1.3

-30.8

-16.7-13.4

-15.0

Q1 Q2

Q3

Q4

Transportation& Warehouse(4.5%)

0.4

-2.7

-4.3

-1.2-2.0

Q1 Q2

Q3

Q4

Mining (6.4%)

1.9

-22.0

-11.8-8.9

-10.2

-35

-25

-15

-5

5

Q1 Q2

Q3

Q4

Accommodation & food Beverages

(2.6%) 2.9

-5.4-4.5

-5.7

-3.3

Q1Q

2

Q3

Q4

Construction (10.7%)

Quarterly

2.2 2.6

1.8

-1

3

1

5

7

9

11

Q1 Q2 Q3Q4

Agriculture(13.7%)*

1.6

-7.6

-5.1

-3.6

-3.7

Q1 Q2

Annually

Q3

Q4

Trade (12.9%)

3.8

2.3 2.01.3

2.3

Q1 Q2 Q3Q4

* (%) Contribution to Nominal GDP2020Source: Statistics Indonesia(processed)

HIGHGROWTH

DEEP NEGATIVEGROWTH

INDONESIAN SOVEREIGN CREDIT RATING HAS BEEN STABLE DURING THE PANDEMICJCR Ratings has affirmed Indonesia’s Sovereign Credit Rating at BBB with a stable outlook

• The JCR ratings mainly reflect the country's solid domesticdemand-led economic growth potential, restrained public debt,and resilience to external shocks supported by flexible exchangerate and monetary policies and accumulation of foreignexchange reserves.

• The ratings are constrained by its relatively high dependence onnatural resources, the revenue base that remains small relativeto the size of the economy, and the domestic financial systemwhich is still in the process of financial deepening.

RatingAgencySovereign

CreditRatingOutlook

Moody’s Baa2 Stable

Fitch BBB Stable

S&P BBB Negative

Japan Credit RatingAgency BBB+ Stable

Rating & Investment BBB+ Stable

March April May June July August September

U.K Italy, Hong Kong, Australia, Brazil India U.S. Indonesia Laos

Rating Mexico, South Africa Outlook revised Outlook revised Outlook revised Rating affirmationwith

Rating

downgraded Rating downgraded to negative to negative to negative stable outlook downgraded

MalaysiaOutlook revised

to negative

During the Pandemic, the rating agencies has downgraded more than 100 sovereign ratings and

revised the outlook for more than 120 sovereign ratings to “negative”Source:Fitch

October

KoreaRating

affirmationwith stable

outlookTurkeyOutlook revised

to negative

November December

SouthAfrica Rating

downgraded

Indonesia Rating affirmation with stableoutlookMalaysia

downgraded

2021 ECONOMIC RECOVERY WILL BESTRENGTHEN

Achievement 2020 2021STRENGTHENING PANDEMIC HANDLING & ECONOMIC RECOVERY

Indonesia is taking a big but measured

steps to handle the pandemic

Overcoming the spread of Covid-19, protectingthepurchasing power of poor and vulnerablepeople,maintaining the sustainability of the businessworld,includingMSMEsSupported by synergy between

institutions and all elements of the Nation

Government, legislative institutions, lawenforcementofficers, KSSK, private sector, andsociety

Indonesia's economic and fiscal pressures

are better than many other countries

Indonesia's economic contraction and wideningfiscaldeficit and debt were relatively moderate comparedtomany othercountries

Priority policieswillcontinue

Indonesia is optimistic, but remains vigilant that the pandemic can be controlled and socio- economic activities will continue torecover

“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

'21).

Mass vaccination

Strengthening 3M & 3T

Optimizing PEN program

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OMNIBUS LAW

ON JOB CREATION:NEW INVESTMENT OPPORTUNITIES

FOR JAPANESE BUSINESS PEOPLE

Game Changer for Indonesia’s Structural Reform

The benefits include:

1

Simplification of Business Permits

•Location and spatial permits•Environmental permits•Building permits (IMB, SLF)•Risk-based approach licensing

02

Investment Requirements

•Closed business fields•Priority business fields•Investment implementation

03

Labor

Minimum wage, outsourcing, foreign workers, severance pay, sweetener, working hours

4

7

10

Protection and Empowerment of MSMEs Criteria, database, collaboration, partnership, incentives and financing, single permits

Ease of Doing Business Immigrations, patent, MSMEs establishment, downstream processing, oil and gas business, and Village-owned Enterprises (BUMDes)

Support for Research and Innovation

•Export development•SOEs and/or private sector support

2

5 6

Government Administration

Authorities, standardization,discretion, electronification

Sanctions

•Elimination of criminal sanctions for administrative errors

8Land Acquisition

•Land procurement•Forestry

9

Central Government Investment and Strategic Project

•Establishment of IndonesiaSWF•Support for national strategi projects, including landand permits

Economic Zones

•Special Economic Zones•Supporting infrastructure•FTZ enclave

11

Simplify the business permits and investmentrequirements

Speed up the land procurement for public needs

Developing Special Economic Zones

Better employment policies including foreign worker requirements, termination, and minimum wages

Support SME businesses and simplify SME legalization process

New tax policies on dividend and foreign workers

1 3Omnibus Law streamlines, simplifies, and aligns multiple regulations toprogressively improve Indonesia’s investment ecosystem and job creation

OMNIBUS LAW:LAYING THE GROUND FOR INVESTMENT PUSH

Omnibus

Law on Job

CreationLaw No 11/2020

Investment Growth and licensingleniency

Ease, Protection and Empowerment of

Micro, SMEs

Employment Research and Innovation

Ease of doingBusiness

Land Procurement

Economic ZoneGovernment

Administration

Central Government Investment &

National StrategicProject

Penalty

Derived regulation, consisting of 45 Government Regulations (PP) and 4 Presidential Regulations (Perpres) has been ratified

Promoting job creation

Easing the opening of

new job fields

Helping to eradicate

corruption

Streamlining regulation

Omnibus Law on the Job Creation

Indonesia Investment Authority (INA)Your Trusted Investment Partner

INDONESIA INVESTMENT AUTHORITY (INA)Stipulated under the Law on Job Creation for the purpose of long terminvestment

Administer theassets

Carry out fund placement in the form of

financial instrument

Carry out asset

Management Activity

Engage incooperation

with another party including a trustfund

Lend or borrowDetermine a prospective investment

partner

Supervisory Board

Board of Director

managing investment,including plan, organize,supervise, control as well asevaluate investment

ORGANIZATION

INA also play an active role in improving the Indonesian investment climate with itsauthorities:

Capital Maximization Mission

Development Mission

increase investment and strengthen the long-term value of assets in

order to support sustainabledevelopment

OBJECTIVES

co-investment directly on asset/project level and limited partnership on

master fund

Master FundThematic

Fund

FUND STRUCTURES

Indonesia’s Investment Authority (INA)INA provides flexibility for investors to direct their investments either in funds or

direct to assets with professional managers and clear governance

Nusantara Investment Authority

(NIA)

Government of Indonesia

Equity Co – Investment

(Minority Ownership)directly to thematic funds, portfolio companies and/or asset level

Overseas and domestic

Investor (s)Fund

Anchor Investor(s)

International and domestic funds

Infrastructure

Toll Roads Airports Seaports

Other Sector

Potential sectors, e.g.,:

• Healthcare;

• Tourism;

• Tech, etc

Initial capital injection of

±USD 5 Bn

17

JBIC already commits to invest US$4 billion in the Master Fund of INA

19

More details on Omnibus Law and

Indonesia’s Investment Authority

www.dashboard.kbritokyo.jp

TERIMA KASIH –ありがとうございます

20