REPUBLIK INDONESIA

Investment Opportunities in Indonesia

Minister of National Development Planning /Head of National Development Planning Agency

Tokyo, November 30, 2017

Prof. Bambang Brodjonegoro, Ph.D.

2

Indonesia Macroeconomic and Policy OutlookHow is the economy doing?

3

Indonesia is a huge potential market in Asia

Largest economy in the world15th

5th Largest emerging market with thebest middle class potential

4th Most Populous country in the world

±5% Private consumptiongrows steadily

Indonesia is projected tobe the largest economy inthe world by 2050

4th

High & stable economic growth

Indonesian Economic Growth (%)

3,374

3,605

2015 2016

GDP per capita (US$)

Source: BPS *Outlook

Progressive infrastructure development

Source: World in 2050, PWC

Source: BPS, Team Analysis

Why should you invest in Indonesia?

5.04.9

5.05.2

2014 2015 2016 2017*

5.04.9

5.05.2

4

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3Top Destination for attracting investors in Asia (The Economist)3Top Japanese investment

destination(JBIC Ratings)

72Rank Jumped from rank 106 in

2016 to rank 91 in 2017 for Ease of Doing Business(EoDB, World Bank - 2018)

BBB- /Positive

Baa3 /Positive BBB- /Stable

BBB- /Positive

BBB- /Positive

Abundantnatural resources

of investment realization in Indonesia are FDI capital65%

∞

most populous country on earth261 million population

Indonesia’s Investment Grade from Rating AgenciesPromising investment destination

Indonesia’s Investment Grade from Rating AgenciesPromising investment destination

4th

55

FDI Realization in Indonesia by countryexcl. upstream oil, gas, and financial sectors

Source: The Investment Coordinating Board of The Republic of Indonesia (BKPM)

# 1

# 2

Total FDI Realizationin 2012 – Q3 2017 (USD million)

# 4

# 3

Total 140 Countries: 163,836.5

TOP 5 Investmentin Q1-Q3 2017

6,119.1

3,999.6

2737,4

1,536.71,336.5

Singapore Japan China United States

South Korea

6

Japan investment outlook

JapanOutward investment in the world 2012 – Q3 2017

Investment RealizationBased on Capital Expenditure*

Source: The Investment Coordinating Board Republic of Indonesia (BKPM)

(excl. upstream oil & gas, and financial sectors )

# 1 – 20%

# 2 – 9%

# 3 – 9%

Japaninvestment realization by sectorsin Indonesia 2012 – Q3 2017(excl. oil & gas, and financial sectors – USD million)

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00

2012 2013 2014 2015 2016 Q3 2017

Transportation Industry Metal, Machinery & Electronic Industry

Electricity, Gas & Water Real Estate

Chemical & Pharmaceutical

Source : FDI Market/Financial Times, 2017

7

7

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2018 Economic Growth and Development TargetInvestment will be the main driver of Indonesia’s economic growth

ECONOMIC GROWTH:

[5.4 %]

HH Consumption : 5.1 %

NPISH Consumption : 5.8 %

Gov. Consumption : 3.8 %

Investment (GFCF) : 6.3 %

Export : 5.1 %

Import : 4.5 %

Expenditure Side

Manufacture* : 4.9 %

Construction* : 6.9 %

Trade* : 5.7 %

ICT* : 11.0 %

Financial Service* : 9.4 %

Agriculture* : 3.7 %

Production Side

Transportation : 8.3 %

Mining : 1.0 %

Electricity & Gas : 5.7 %

Poverty Rate:

9.5 – 10.0%Unemployment Rate:

5.0 – 5.3%

Gini Ratio:

0.38

HDI:

71.5

Inflation: 3.5 %

USD/IDR: 13,400

3 priority sectors that will be enhanced

by its role in growth and employmentrate are:

Tourism

Agriculture Manufacture

*the greatest contribution to growth

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Indonesia Infrastructure Development and Financing FrameworkGrowing private sector involvement in infrastructure development

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Why invest in infrastructure and why now? Closing the infrastructure gap and providing a stronger foundation for economic growth in the future

Source: The World Bank (2015) & McKinsey (2013)

Indonesia infrastructure stock is below average global standard and tends to decline

Strong commitment in policy and implementation level by President Jokowi administration

Some breakthroughs

Umbulan drinking water facilityplanned during Dutch colonial era

Jakarta Mass Rapid Transitplanned 30 years ago

many more …

Multiplier effect from infrastructure development Additional economic growth Boosting activities in various

sectors

Lowering competitiveness and economic growth

Why now?

The nature of infrastructure development

Takes time - yearsfrom planning, construction and operation

Future value of moneyincreased capex when the project is delayed

Benefit for future generationsthe impact are in the medium and long-term (IMF)

Real results

+ 8

+5 Global Competitivenessfrom 41st to 36th

Infrastructure Global Competitivenessfrom 60th to 52nd

Source: Global Competitiveness Report 2017-2018, WEF

38 %

70 %32 %

49 %

Infrastructure stock gap/GDP

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Building an Infrastructure Investment EcosystemClosing the infrastructure gap to achieve economic growth

IntegratedApproach

Financialinnovation

(hybrid financing)Strong

coordinationat policy and

implementationlevel

Private sector engagement(domestic &

overseas)

Mobilizing long-term funds

(pension funds & insurance

companies)

Improving project

readiness & pipeline

Indonesia is committed to close its infrastructure gap

We believe that infrastructure is an engine for economic growth

We work hard to innovate and set up infrastructure investment ecosystem to attract more domestic investors & foreign investors

We continue to improve and implement to strengthen the ecosystem, deepen the capital markets, support transactions, and manage investment risks

Stakeholder facilitation &

advocacy towards

financial close

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11

11

Fulfillment of Basic Needs

100% drinking

water access

100% sanitation

access

Basic needs infrastructure for improving

citizen’s health and well-being

Livable housing

access

Irrigation for

agriculture security

Infrastructureto Support Leading Sectors

Industrial area

connectivity

Tourism area

development

Infrastructure for connecting

leading sector areas

Urban Infrastructure

Modern transport

development

Develop sustainable

urban transport

Development

towards smart cities

Urban infrastructure development

towards modern and smart cities

Infrastructure Development Strategy 2015 - 2019

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SOEs :

USD 79.8 bn

Government Budget:

USD 148.2 bn

Calculation based on infrastructure investment (required) to be a middle income country by 2025.Sources: BAPPENAS- JICA, 2014: Background Study for RPJMN 2015-2019, Analyst team of Ministry of National Development Planning (BAPPENAS)RPJMN: National Medium-Term Development Planning 12

USD 359.2 bn

Total value of investment requiredfor infrastructure in 2015 – 2019

41.3% 22.2% Private Participation:

USD 131.1 bn

36.5%

Investment value sources:

Financing Infrastructure Development 2015 – 2019Increasing the significant role of SOEs & the private sector through PINA & PPP schemes

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Investment which is economically and financially viable but seen as less attractive or risky hence Government intervention is needed.

Investment which is economically viable but less financially viable hence needs additional Government support.

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PUBLIC INVESTMENT: PROVISION OF PUBLIC FACILITIES

Social security;Education security;Health security.

Investment that does not cause direct investment return to the object.

Source of fund : Government funding(APBN & APBD)

Social Investment1

Internal Rate of Return (IRR)low high

Special Commercial Investment2

Public Private Partnership3 General CommercialInvestment4

Drinking water facility; Mass public transportation.

Source of fund :Government funding & commercial funding

Toll roads;Ports.

Source of fund :Commercial funding promoted by the Government

Investment which is more attractive hence the Government’s role in regulating and promoting is minimized.

Electricity; Airports; Gas pipe.

Source of fund : Commercial funding

Financing Infrastruture Development 2015 – 2019Increasing the significant role of SOEs & the private sector through PINA & PPP schemes

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Project Stage

PRIVATEPARTICIPATION

TRANSACTION -OPERATIONAL

PLANNING -PREPARATION

Project Advisor(Preliminary Studies, Feasibility Studies)

Strategic Consultant

Operatorship

Securities

Guarantor

Legal Status

GREENFIELD

Development/Transaction Consultant

Investor (Debt & Equity)

Contractor

Securities

Guarantor

Supplier

Surveyor

Project Initiator (Unsolicited PPP Project Scheme)

Debt Financier

Emerging Opportunities & Trends For Private Participation…PRIVATE INVESTMENT OPPORTUNITIES within a wide range of project phases…

BROWNFIELD

Development/Transaction Consultant

Securities

Guarantor

Investor (Debt & Equity)

Supplier

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Non-Government Budget Equity Financing Pembiayaan Investasi Non Anggaran Pemerintah (PINA)

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INVESTOR

PINA

Investment appetite

Investment focus areas

Equity participation

Loan

Project pipeline

Project readiness

Project structure

Investment instrument options

InvesteeInvestor

Facilitation Function Pipelining Function Ecosystem Function

Non-Government Budget Equity Financing (PINA)PINA plays a significant role in accelerating project’s financial close

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How PINA facilitates investors in Equity Financing

Direct Equity Financing

Direct equity participation in an infrastructure company (investment platform)

Equity investment

Investor purchases equity instruments issued by infrastructure company (investment platform) such as discretionary funds, perpetuity notes, and callable preferred stocks or other near-equity related instruments

deepening capital markets

1818Source: BAPPENAS-PINA Center for Private Investment Analysis18

Non-Government Budget Equity Financing (PINA)Project category (parameter)

Greenfield Brownfield Operational

Feasibility Studies

Concession Agreement

Permits & Licenses

Land Acquisition

Construction Progress

Operating Project

< Under 75% Range 75% - 100% 100%

< Under 25% Range 25% - 100% 100%

< Under 50% Range 50% - 100% 100%

Range 0 – 10 Years More than 10 Years

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19Source: BAPPENAS-PINA Center for Private Investment Analysis

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NEW PROJECT

GREENFIELD BROWNFIELD OPERATIONAL

PINA PROJECT

INVESTOR

EQUITY

BANKS AND FINANCIAL

INSTITUTIONS

LOAN

PINA PROJECT

INVESTOR

EQUITY

BANKS AND FINANCIAL

INSTITUTIONS

LOAN

PINA PROJECT

INVESTOR

EQUITY

BANKS AND FINANCIAL

INSTITUTIONS

LOAN

NEW PROJECT

NEW INVESTOR(Domestic and Foreign Investor)

NEW INVESTOR(Domestic and Foreign Investor)

Recycle EQUITY Securitization/DivestmentLimited Concession Scheme

PROJECT CONDITION

INVESTMENT FINANCING

SCHEME

BOND

Non-Government Budget Equity Financing (PINA)Potential investment recycle at each stage

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Non-Government Budget Equity Financing (PINA)Success stories

Central Package of PALAPA Ring Fiber Optic Project IDR174 billion(USD 13.0mn)

(shareholderloan)

Waskita TollRoad-15 Toll Roads IDR3.5 trillion(USD265.0 mn)

(equityparticipation)

IDR932.0billion(USD 69.7mn)(discretionary fund -equity)

PT Bandara Internasional Jawa Barat (BIJB)-KertajatiInternasional Airport

2

2

Financially closed

Targeted to becompletedby end2017

1

IDR1.81trillion(USD 134mn)(equityparticipation)

PT NusantaraInfrastructure TbkInvestmentpartnershipwithstrategic

internationalpartner

PT Waskita Toll Road (phase 2) The development of Trans-Java and Non Trans Java toll road Project value: USD 10,000 mnTarget Collected Funds : Equity participation max 20 % in WTR based on agreed valuation

Project value: USD 227 mnTarget Collected Funds : USD 75.0 mn (equity)

PT PP Energi The development of Coal-FiredPower Plant in Meulaboh, Aceh

1 2

21

1

3

2

4

Power Plants– PT PJB (6 Projects) (IDR 49.3 tn/ USD 3,600 mn)

BIJB (Development Stage 2 & Aerocity – 2 Projects)(IDR 30 tn/ USD 2,200 mn)

North Sumatera Toll Road – PT Hutama Marga Waskita(IDR 13.4 tn/ USD 1,010 mn)

Gas-fired Diesel Power Plants – PT Indonesia Power(IDR 2 tn/ USD 152.6 mn)

5

7

6

4

5 3 7

2

22

1

6

PINA Next Projects Pipeline13 projects with total value of USD 10.1 bn

Integrated Tourism Area Development, Flores Island –Flores Prosperindo, Ltd.(IDR 13.5 tn/USD 1,000 mn)

R-80 Airplane – PT RAI(IDR 21.6 tn/ USD 1,600 mn )

Kulon Progo DIY Airport – PT Angkasa Pura 1 & PT PP(IDR 6.7 tn/ USD 495 mn)

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ChinaThe private sector is interested to invest in power generation, seaports, toll roads, industrial parks and integrated tourism areas.

Domestic investors that have proven to invest are :

SingaporeThe private sector is interested to invest in toll roads and seaports .

AustraliaThe pension funds and private sector have strong interest to invest in airports, toll roads, power generation and integrated tourismcareas.

JapanThe Financial & Strategic investors havestrong interest to invest in power generation, seaports, toll roads and airports.

Republic of KoreaPrivate sector & pension funds areinterested to invest in power generation, toll roads and airports.

CanadaThe pension funds and privatesector are interested to invest in power plants and toll roads.

± USD 100 billion

Total potential funds

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Improving the investor’s appetite to invest in IndonesiaPINA conducts roadshows and socialization forum with various domestic and foreign investors

SOE in infrastructure finance

Civil servants pension fund

Armed forces pension fund

Long-term funds from Australia, Canada, South Korea & China show strong interest to invest in Indonesia infrastructure projects

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Regulation Advocacy

Coordinate with OJK, Indonesian Financial Services Authority, to relax the regulations & issue new investment instrument(s);

Coordinate with IAI, Indonesian Accounting Association for aligning of financial recording rules.

Socialization & Coordination

Continues to hold PINAsocialization forum with various stakeholders (PINA Day);

Coordinate with various related associations that have potential of becoming investees or investors.

Improvement of Governance & Regulation

Develop strategic plan and good governance guidelines of PINA;

Conducting related research and studies to strengthen the functions and roles of PINA in investment funding schemes.

PINA encourages a better investment climate in IndonesiaPINA advocates several new rules and regulations that improves investment appetite

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Contact us

PINA Center for Private InvestmentMinistry of National Development Planning / BAPPENAS

Jalan Taman Suropati 2, MentengJakarta Pusat, Indonesia 10310

Tel: +62-21-3903916Email : info@pina.bappenas.go.id

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Public Private Partnership (PPP)(Kerjasama Pemerintah dengan Badan Usaha/KPBU)

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There are 19 sectors covered for PPP in Indonesia

CONNECTIVITYRoad Toll Roads Toll Bridges Roads

URBAN FACILITY SOCIAL FACILITIES

Transportation Seaports Airports Railways Road transportation

Electricity Power plants Transmission

Energy conservation Street lighting

Telecommunication

& Informatics Fiber optics E-government Satellite

Water supply

Waste management

system

Water resources &

irrigation

Localized waste

water management

Centralized waste

water management

Public housing

Urban facility Traditional market

Tourism

Education facilities

Sports, art & culture

facilities

Health

Zone

Penintentiary

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Successful PPP Schemes in IndonesiaThere are 6 implemented schemes used as benchmarks for future PPP projects

PPP projects based on structure development PPP projects based on project preparation

GovernmentGuarantee

Coal-Fired Power Plant Central Java 2x1000 MW (USD 4,200.0 million)

Tariff & Viability Gap Fund (VGF)

Umbulan Drinking-Water Facility (USD 152.0 million)

Bangun Cipta Kontraktor

Availability Payment (AP) for Investment Return

Palapa Ring Optic-Fiber Network(USD 561.5 million)

Government In-Kind (Construction Support)

Solo – Kertosono Toll Road (USD 578.8 million) Cisumdawu Toll Road (USD 622.2 million) Balikpapan – Samarinda Toll Road (USD 738.5 million) Manado – Bitung Toll Road (USD 379.3 million)

Total: USD 2,318.8 million

Success Fee Scheme

Coal-Fired Power Plant Central Java 2x1000 MW (USD 4,200.0 million)

Unsolicited PPP Project

Jakarta – Cikampek II Elevated Toll Road(USD 120.2 million)

PT Ranggi Sugiron Perkasa

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PPP Stages in IndonesiaSolicited and Unsolicited Schemes

Project

IdentificationPreliminary

Study

Outline Business

Case (OBC)

Final Business

Case (FBC)Pre

Qualification

Request for

ProposalBid Award

PPP

Agreement

Signing

Financial

Close

PLANNING PREPARATION TRANSACTION

Project proponent submits

a proposal and pre-FS

document to GCA

• Pre-FS document evaluation to

get pre-FS approval

• GCA gives the rights to project

proponent to prepare FS

Business Entity

submits FSFS evaluation

Tender

Preparation

PPP

Agreement

Signing

.

Issuing

approval letter

Financial

Close

Go

vern

men

t as

th

e p

roje

ct in

nit

iato

r(S

OLI

CIT

ED)

Pri

vate

as

the

pro

ject

inn

itia

tor

(UN

SOLI

CIT

ED)

12 projects

include 2 unsolicitedtoll road projects:• Krian – Legundi –

Bunder – Manyar(USD 0.9 billion)

• Jakarta – CikampekElevated II(USD 0.1 billion)

USD 8.8 billion

Construction

Jatiluhur Water Supply(USD 123.7 million)

GCA: Government Contracting Agency

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PP

PTA

RG

ET2016 - 2017A. PROJECT VALUE

B. PROJECT SUMMARY

6 4

PP

PP

IPEL

INE

10 Quick Win Projects 2018 (total project value: USD 3.6 billion)

1. Serang Panimbang Toll Road2. Jakarta – Cikampek South Toll Road3. Probowangi Toll Road4. Nambo Regional Waste Management5. Bandar Lampung Water Supply6. Jatiluhur Water Supply

7. Suramadu Toll Bridge8. West Semarang Water Supply9. Pekanbaru Regional Water Supply10. Sidoarjo General Hospital

Transaction untilPPP Agreement Signing

Financial Close USD 0.6 billion USD 3.5 billion

Transaction until PPP Agreement Signing

Preparation

USD 3.5 billion USD 0.1 billion

USD 6.8 billion +5 Under Calculation Projects

USD 6.7 billion + 12 Under Calculation Projects

Construction USD 8.8 billion USD 0.6 billion

2018

Construction 12 1

Financial Close 1 6

Preparation 27 30

PUBLIC PRIVATE PARTNERSHIPS (PPP/KPBU)

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Contact us: Capital Place, 8th floorJalan Jenderal Gatot Subroto 18Jakarta Selatan 12710 , Indonesia

Phone: +62 21 27081111www.pppoffice-indonesia.or.id

PPP OFFICE

GOVERNMENT OF INDONESIA

KANTOR BERSAMA KPBU REPUBLIK INDONESIA

3030

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