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Republic of Indonesia

November 2016

Synergy for Progressive Reforms

1

Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs,

Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to

address concerns of investors, especially financial market investors.

As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by

International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among

others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry

of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority.

IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of

banks/financial institutions to Bank Indonesia and other relevant government offices.

Published by Investor Relations Unit – Republic of Indonesia

Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279)

Dalyono (Fiscal Policy Office - Ministry of Finance)

Farid Arif Wibowo (Directorate General of Budget Financing and Risk Management - Ministry of Finance)

E-mail: [email protected]

About Investor Relations Unit of the Republic of Indonesia

2

Overview

1

2

3

4

5

6

Institutional and Governance Effectiveness:

Accelerated Reforms Agenda with

Institutional Improvement

Economic Factor:

Strong and Stable Growth Prospects

Remain Intact

External Factor:

Improved External Resiliency

Fiscal Performance and Flexibility:

More Fiscal Stimulus with

Prudent Fiscal Management

Monetary and Financial Factor:

Credible Monetary Policy Track Record

and Favourable Financial Sector

Progressive Infrastructure Development:

Strong Commitment on Acceleration

of Infrastructure Provision

Accelerated Reforms Agenda with Institutional Improvement

Institutional and Government Effectiveness:1

4

Positive Global Perception

52

25

46

4038

15

25

35

45

55

2010 2011 2012 2013 2014 2015

Voice and Accountability Political Stability/Absence of Violence

Government Effectiveness Regulatory Quality

Rule of Law Control of Corruption

1. Source: World Bank;

2. Source: Transparency International;

3. Source: World Economic Forum

World Governance Indicators1

Ease of Doing Business1

Global Competitiveness Index3

Corruption Perception Index2

Higher rank is better

Higher score is better

36

38*

35

45

20

25

30

35

40

45

50

55

2010 2011 2012 2013 2014 2015

Indonesia India Brazil Philippines Turkey

* Both India and Brazil shared the same score (38) in 2015


41

39

81

57

55

30

45

60

75

90

2009 2010 2011 2012 2013 2014 2015 2016

Indonesia India Brazil Phillipines Turkey


91

130123

99

69

50

70

90

110

130

150

2008 2009 2010 2011 2012 2013 2014 2015 2016

Indonesia India Brazil Philippines Turkey

* Both ‘Rule of Law’ and ‘Regulatory Quality’ shared the same score (40) in 2015

5

Strong Improvement in Ease of Doing Business Rank*

EODB 2017

Rank

EODB 2016

Rank

Change in

Rank

EODB 2017

Points

EODB 2016

Points

Change in

Points

Overall 91 106 15 61.52 58.51 3.01

Starting a business 151 167 16 76.43 67.51 8.92

Dealing with Construction Permit 116 113 3 65.73 65.26 0.47

Getting Electricity 49 61 12 80.92 77.60 3.32

Registering Property 118 123 5 55.72 53.24 2.48

Getting Credit 62 70 8 60.00 55.00 5.00

Protecting Minority Investors 70 69 1 56.67 56.67 0

Paying Taxes 104 115 11 69.25 64.47 4.78

Trading Across Borders 108 113 5 65.87 63.53 2.34

Enforcing Contracts 166 171 5 38.15 35.37 2.78

Resolving Insolvency 76 74 2 46.46 46.48 0.02

- 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

* Higher rank is better, EoDB 2017 is published in October 2016

6

Indonesia Remains the Investment Destination of Choice

3,9

3,9

4,6

5,5

6,2

7,9

11,1

11,5

16,6

23,6

27,5

30,7

38,8

38,8

40,4

0 5 10 15 20 25 30 35 40 45

Turkey

Korea

Singapore

Russia

Malaysia

Myanmar

Brazil

Philippines

USA

Mexico

Vietnam

Thailand

China

Indonesia

India

% of surveyed who consider each country has promising prospects

1. Source: Indonesia Investment Coordinating Board (BKPM);

2. Source: IMF World Economic Outlook, Database October 2016, * actual figures;

3. The Economist – Asia Business Outlook Survey 2016;

4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (27th Annual Survey);

IDR tn

2016E

To

tal In

vestm

en

t / G

DP

(%

)

Indonesia Enjoys Large Investments Relative to Peers within the Region2

JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for

business investment (December 2015)4

The Economist: Indonesia among the top 3 destination for attracting

investors in Asia (January 2016)3

18,9

22,9

23,6

24,8

27,1

28,3

29,0

30,1

32,2

32,7

37,2

48,0

58,2

69,3

0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0

Taiwan

Hong Kong

South Korea

Singapore

Australia

Japan

Thailand

Vietnam

Myanmar

Malaysia

Philippines

Indonesia

China

India

% of surveyed who plan to increase investment in each country

155.3

55.6

99.7

2013 2014 2015 2016

Rising Direct Investments1

17,96

31,6634,65

26,1523,74 24,42

0

5

10

15

20

25

30

35

Brazil India* Indonesia Malaysia Philippines Thailand

0

40

80

120

160

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

FDI DDI TOTAL

7

National Strategic Development Plan (Nawa Cita)

Human Development

Education

Health

Housing

Character

Priority Sector Development

Food Security

Energy & Electrical Security

Maritime & Marine

Tourism & Industry

Water Security, Basic Infrastructure & Connectivity

Equitable Development

Inter- Income Group

Inter-Region:

(1) Rural Area,

(2) Periphery,

(3) Outside Java,

(4) Eastern Area.

Security & Order Politic & Democracy Governance

The 3 Dimensions on Economic Development

Necessary Condition

Legal Certainty & Law Enforcement

8

Improving Investment Climate:Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS)

BKPM

• Arrive at OSS at BKPM directly from the airport

• Consult with Director of Investment Service

• Submit the required documents & data

Requirement for utilizing 3-hour Investment Lisencing Service:

No requirements for investment in infrastructure sector

9 documents obtained

Wait at the lounge while documents are

processed by BKPM, in-house notary,

ministries, & other government institutions

Obtain eight documents & letter of land

availability within three hours to start the

business

• RPTKA / Employment plan

• IMTA / Working permit

• Investment license

• Certificate of incorporation

• NPWP / Tax Registration Number

• TDP / Company Registration

• APIP / Import identification

• NIK / Customs registration

• Letter of land availability

Until November 2016, more than 180 companies have utilized the “3 hours services”

Certainty to start a business

Certainty to Import capital goods

Certainty to work Accurate land information

1. Minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers.

2. Application must be submitted directly by at least one candidate of the proposed company stakeholder

2 documents needed

• ID Card

• And/or Deed of Establishment (Indonesian company) or Article

of Association (Foreign company)

• Containing workflow from raw material production to the

finished products

Investor identitiy as the prospective shareholders

Flowchart of business activities workflow

Source: Investment Coordinating Board (BKPM)

9

Improving Investment Climate:Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS)

Direct Construction (KLIK)

No Requirements• No minimum investments or workers is

required.

• Available for 14 selected industrial parks.

• Construction permits can be obtained in parallel

with construction process.

Investors can directly start their project construction before obtaining construction permits. This service is supported by

both Central and Regional Governments which become the first step to synergize between central and local licensing

Obtain investment licence at OSS

at national or regional level.• Survey a land within selected

industrial parks.

• Acquire the land for your industry.

• Start the construction of your project.

No other permits are required.

• Apply for building construction permit &

environmental permit, in parallel with

construction process.

Priority Investment Service

Source: Investment Coordinating Board (BKPM)

Until November 2016, 79 projects have utilized the “KLIK services”

10

Improving Investment Realization (Q3-2016)

Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period

Rp140.3 T

Rp155.3 T

Rp92.5 T

Rp99.7 T

Rp47.8 T

Rp55.6 T

373,560276,023

10.7% 26.1%

7.8% 16.3%

Q3-2015 Q3-2016

Q3-2015 Q3-2016

Q3-2015 Q3-2016

Q3-2015 Q3-2016

*

* person

Decreasing

11

FDI Realization by Sectors (Q3-2016)

Mining

Chemical and

Pharmaceutical Industry

Transport Equip and Other

Transport IndustryMetal, Machinery and

Electronic Industry

Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period

US$569.75 mn

US$663.85 mn

US$688.41 mn

US$764.06 mn

US$1,231.41 mn

US$632.24 mn

Food Industry

50.3%

US$694.39 mnFood Crops

24.4%

70.1%

15.8%

30.8%

3.2%

37.7%

Investment Realization

Electricity, Gas

and Water Supply

12

The Economic Policy Packages

“To improve national industry competitiveness, export and investment to generate significant economic growth”

Phase III (7 Oct ’15)Financial services facilitation, export financing and elimination of business unnecessary burden

Phase IV (15 Oct ’15)Social safety net and betterment of people welfare

Phase V (22 Oct ’15)Improving industry and investment climate through tax incentives and deregulation on sharia banking

Harmonizing Regulations Simplifying Bureaucratic Process Ensuring Law Enforceability

Phase VI (6 Nov ’15)Stimulating economic activities in border areas and facilitating strategic commodities availability

Phase I (9 Sept ’15)Improving national industry competitiveness

Phase II (29 Sept ’15)Easing permit requirement and simplifying export proceeds requirement

Phase VII (7 Dec ’15)Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals

Phase VIII (21 Dec ’15)Resolving land acquisition disputes, intensifying domestic oil

production, stimulating domestic parts and aviation industries

Phase IX (27 Jan ’16)Accelerating electricity generation, stabilizing meat prices and

improving rural –urban logistics sector

Phase X (11 Feb ’16)Revising Negative investment List and improving

protection for SMEs

Phase XI (29 Mar ’16)Stimulating national economy through facilitation to SMEs

and industries

Phase XII (28 Apr’16)Improving Indonesia’s rank on Ease of Doing Business (EODB)

Phase XIII (24 Aug ’16)Low Cost Housing for Low-Income Communities

Phase XIV (10 Nov ’16)Roadmap for E-commerce

13

Boosting the Huge Potential of E-commerce in Indonesia

2,2 2,6

7,5 8,6

12,1

19,6

0

5

10

15

20

25

Indonesia India Japan World South Korea China

27% 29%

38%44%

50%

58%

0%

10%

20%

30%

40%

50%

60%

70%

Indonesia Philippines Vietnam Thailand Malaysia Singapore

- SMEs Loan Schemes

- Crowdfunding

- Grants

- Easing tax payment

- Incentive for local

start-up

- National payment

gateway

- Harmonizing

regulations

- Trainings

- Increasing internet

awareness

- Revitalizing PT.

Pos Indonesia

- Improving rural to

city logistics

Expanding high

fiber cable

network

- Develop cyber

security system

- Awareness on

cyber crime

Develop

E-commerce

Roadmap

Total Active On-line Shopper/Total Population (%)

E-commerce/Total Retail (%)

Online shopper and E-commerce contribution in

Indonesia is still low, despite it’s huge potential

Government’s Support to E-commerce Sector

through 14th Economic Policy Package

Consumer

Protection

Communication

Infrastructure

Logistic

Support

HR Capacity

Improvement

Tax

Relaxation

Funding

Support

Cyber

Security

Operation

Management

Source: Ministry of Finance

14

Thematic Policy Issues on Deregulation

Next Phase of Policy Packages based on Sectoral and Thematic Issues

Six policy issues under Packages I-XIII:

improvement of

industry competitiveness

improvement of

society’spurchasing power

widening of

investment

expansion of

export

efficiency of

logistics sector

improvement of

tourism sector

Education and

Vocational

Training

Logistics Agrarian reform Energy

Industry, Manufacture,

Tourism, Fishery &

Service sector

FoodInvention, Innovation

and Creative Economy

15

Progress of the Economic Policy Packages

204 regulation has been deregulated

As of 21 September 2016, deregulation of 202

regulations are finished (99%), comprising 48

regulations at Presidential level and 154 regulations at

Ministrial/Institutional level

Unfinished regulation, (a) Proposed Presidential

Regulation concerning Gas Buffer Enterprises

(Agregator); and (b) Proposed Presidential Regulation

concerning Acceleration on Housing Construction

Licensing for Low-Income Communities

As of 21 September 2016, from total 26 technical

regulations, 24 regulations are deregulated, which

left 2 regulation in process of deregulation

I–XII

202SET 99%

204TOTAL REGULATIONS

2 ON GOING

DISCUSSION 1%

154

TOTAL 154MINISTRIAL/INSTITUTIONAL LEVEL

100%

47 42SELESAI

PRESIDENTIAL50

TOTAL 48 FINISHED

PRESIDENTIAL LEVEL

96%

I–XIII

FINISHED

TECHNICAL REGULATIONS

16

Early Outputs: Positive Influence on Investment

1Bonded Logistics Center (Pusat Logistik Berikat/ PLB)

Total 28 BLC has been launched, including airplane

maintenance industry and oil6

Export Financing/KURBE

Export of Train Wagon to Bangladesh

2Investment Permit - 3 Hours

Granted for 130 companies with investment value of

Rp. 291 T (as of October 2016) and 77.000 additional

workforce

3

Industrial Zones (IZ)

The Province of Central Java proposed 3 IZ’s: Kendal,

Demak, and Ungaran

Pharmaceutical IZ in Bitung (North Sulawesi) in 2017

5Facilities and Incentives for SEZ

Total value of Rp 33.8 T (as of September 2016)

7EoDB for SMEs

Streamline/Simplify permits and procedures which

shorten lead time and costs in 10 indicators

4

Wage Systems

14 Provinces have set 2016 Minimum Wage System in

accordance to the Government Regulation (GR)

No. 78/2015 (Kepri, Kalbar, NTB, Sumbar, Jambi, NAD,

Kalsel, Banten, Gorontalo, NTT, Jabar, Bali, Sumut, and

Babel).

8Simplification of Fiscal Incentive Process

Used by 18 companies with average processing time

of 13.4 days (previously 2 years)

9SME’s Export Product Aggregator/Consolidator

Launched with maiden export from North Sulawesi

through SOEs’ Synergism Program

10Revision to Negative List (PP No. 44/2016)

Implemented since 24 June 2016 with participation of 527

companies with planned investment of USD 12.926 bn

Strong and Stable Growth Prospects Remain Intact

Economic Factor:2

18

Conducive Environment Underpinning Strong Growth Fundamentals

Largest Economy in

South East Asia

4th Most Populous

country in the

World; 64% in

productive age

Manageable Inflation

Rate

Growing Middle

Income Class

From commodity-based to industrialized-

natural resources-based economy via

infrastructure development

From consumption-led to investment-led

growth via a stronger manufacturing sector

and more investment initiatives

Policies to maintain purchasing power to

stimulate domestic economy in the midst of

weakening macroeconomic conditions

Budget reform as a

part of larger

economic reform

initiative

Tax base to be

broadened from one

reduce dependency

on commodities

Fuel subsidies

significantly

reduced and

spending redirected

to more productive

allocation

Prudent debt

management

Reform-Oriented

Administration

Three main sources of financing for IDR 5 tn

investment needs: State and regional budget,

State Owned Enterprises and PPP

Continuing from 2015 policy, infrastructure

will be higher than fuel subsidy

Fiscal and non-fiscal incentives to attract

infrastructure investment and promote PPP

Infrastructure spending focused on basic

infrastructure projects

Large and Stable

Economy

Consistent Budget

Reform

New Economic

Structure

High Infrastructure

Investments

19

Indonesia’s Strong GDP

Growth ProspectGDP Growth Based on Expenditures1

Strong GDP Growth1

By expenditure2014 2015 2016

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

HH.

consumption5.3 5.1 5.1 5.1 5.0 5.0 5.0 4.9 4.9 5.0 5.0

Non profit HH.

consumption23.2 22.4 5.8 (0.5) (8.1) (8.0) 6.6 8.3 6.4 6.7 6.7

Government

consumption6.1 (1.8) 1.2 0.9 2.9 2.6 7.1 7.3 2.9 6.3 (3.0)

Investment 5.2 4.1 4.5 4.6 4.6 3.9 4.8 6.9 5.6 4.6 4.1

Exports 3.2 1.4 4.8 (4.6) (0.6) 0.0 (0.6) (6.4) (3.9) (2.7) (6.0)

Imports 5.0 0.4 0.3 3.2 (2.2) (7.0) (5.9) (8.1) (4.2) (3.0) (3.9)

GDP 5.1 5.0 5.0 5.0 4.7 4.7 4.7 5.0 4.9 5.2 5.0

%

Institutions 2016 GDP growth (%YoY)

2016 Revised Budget 5.2

Bank Indonesia 4.9 – 5.3

IMF 4.9

World Bank 5.1

ADB 5.0

Consensus Forecast (November 2016) 5.0

-5,0

-3,0

-1,0

1,0

3,0

5,0

7,0

9,0

2011 2012 2013 2014 2015 2016* 2017* 2018*

Brazil India Indonesia Malaysia

Philippines Singapore Thailand

Favourable GDP Growth Compared to Peers2

1. Source: Central Bureau of Statistics of Indonesia (BPS)

2. Source: World Economic Outlook Database - October 2016; * indicates estimated figure

%

0,06

3,833,29

-2,11

-0,23

3,75 3,36

-1,83

-0,35

4,033,20

5,14 4,96 4,97 5,04 4,73 4,66 4,745,04

4,925,18 5,02

-3

-1

1

3

5

7

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

2014 2015 2016

QoQ YoY

20

Strong and Stable GDP Performance

Shifting from Commodity-based Economy to Manufacturing

and Service Sectors

Contributors to GDP Growth by Sector

Spatial GDP Growth

Manufacturing sector showed stable

growth, supported by positive

investment performance and provision of

incentive

Logistic-related sector growth is driven

by the development of infrastructure

projects and the improvement on logistic

efficiency

Agriculture sector slowed due to

unfavorable weather

Mining sector showed positive signal as

the increase of oil and gas production

%GDP growth by sectors

(YoY) (%)

2014 2015 2016

Q1 Q2 Q3 Q4 Yearly Q1 Q2 Q3 Q4 Yearly Q1 Q2 Q3

Agriculture, forestry, and

fishery5.2 4.9 3.6 3.3 4.2 4.0 6.9 3.3 1.6 4.0 1.8 3.4 2.8

Mining (1.0) 1.1 1.2 1.5 0.7 (1.3) (5.2) (5.7) (7.9) (5.1) (0.8) (0.1) 0.1

Industrial processing 4.5 4.8 5.0 4.2 4.6 4.0 4.1 4.5 4.4 4.2 4.6 4.7 4.6

Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 8.2 6.6 7.9 6.2 5.7

Big traders, wholesale,

retail6.1 5.0 5.2 4.5 5.2 4.1 1.7 1.4 2.8 2.5 4.0 4.0 3.7

Transportation and

warehousing7.0 7.6 7.7 7.2 7.4 5.8 5.9 7.3 7.7 6.7 7.9 6.9 8.2

Information and

communication9.8 10.5 9.8 10.3 10.1 10.1 9.7 10.7 9.7 10.1 8.1 9.9 9.2

Financial service and

insurance3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.4 12.5 8.5 9.3 13.6 8.8

Other 5.4 4.7 5.9 6.5 5.7 5.1 6.5 5.0 5.9 5.6 6.0 5.4 4.3

GDP 5.1 5.0 5.0 5.0 5.0 4.7 4.7 4.7 5.0 4.8 4.9 5.2 5.0

Java: 58.4%

Sumatera: 22.0%

Maluku & Papua: 2.5%

Sulawesi: 6.2%

Kalimantan: 7.7%

Bali & Nusa

Tenggara: 3.2%

Spatial GDP Growth Contribution

Sumatera

GDP Growth

Q2 2016: 3.9%

Java

GDP Growth

Q2 2016: 5.6%

Kalimantan

GDP Growth

Q2 2016:2.1% Sulawesi

GDP Growth

Q2 2016:6.7%Maluku & Papua

GDP Growth

Q3 2016: 13.7%

Bali & Nusa

Tenggara

GDP Growth

Q3 2016: 5.0%

Source: BPS

-8

-4

0

4

8

Manufacture Transportation& Warehousing

Agriculture Mining

Q3 2015 Q3 2016

Improved External Resiliency

External Factor:3

22

A Narrower, Structurally-Stronger Current Account Deficit

Improving Current Account DeficitStrong Balance of Payments

Supported by Substantial FX Reserves to Mitigate External ChallengesTrade Balance Surplus Continues

Source: Bank IndonesiaSource: Bank Indonesia

US$bn US$bn

115.7

9.4

5.7

(4.5)

2011: CA SurplusUS$1.7bn

2015: CA Deficit(US$17.8bn)




US$bn

(7.9)

(1.5)

3.9

1.0

(4.5)

Source: Bank Indonesia

FX Reserves as of Oct 2016: US$115.0bn

(Equiv. to 8.4 months of imports + servicing of government debt) MonthUS$bn

FX Reserves (LHS) Month of Import & Debt Service (RHS)

2016**: CA Deficit(US$4.5bn)

Source: BPS

2015:

Surplus

US$7.52bn

2014

Deficit

US$1.89bnUS$bn

Jan-Oct 2016:

Surplus

US$6.92bn

0

20

40

60

80

100

120

140

160

-20

-15

-10

-5

0

5

10

15

20

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* Q1* Q3*

2010 2011 2012 2013 2014 2015* 2016**

Current Account Capital & Financial Account

Overall Balance Reserve Assets (RHS) -15

-10

-5

0

5

10

15

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* Q1* Q3*

2011 2012 2013 2014 2015* 2016**

Goods Services Income Secondary Inc. Current Acc.

-

3

6

9

12

15

-

20

40

60

80

100

120

140

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9

2012 2013 2014 2015 2016

-2,5

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10

2014 2015 2016

Non-OG OG Total

23

Balance of Payments Q3-2016: Summary


Indonesia’s Balance of Payments (BOP) recorded a significant surplus in

the third quarter of 2016, underpinned by a narrower current account deficit

coupled with a growing capital and financial account surplus. The BOP

performance in turn strengthened the official reserve asset position that

mounted to USD115.7 billion, equivalent to 8.5 months of imports and

servicing government foreign debt, which was well above the international

adequacy standard.

Balance of Payments

The current account (CA) deficit narrowed on the back of gains in the

goods and services trade balance. The CA deficit was observed to reduce

from USD5.0 billion (2.2% of GDP) in Q2/2016 to US$4.5 billion (1.8% of

GDP) in Q3/2016. The smaller deficit was bolstered by a larger non-oil and

gas trade surplus and narrowed oil and gas trade deficit. In addition, the

services trade deficit decreased due primarily to an increase surplus in the

travel services account. .

Capital & Financial Account

The capital and financial account surplus continued to expand on positive

sentiment concerning the promising domestic economic outlook as well as the

unwinding of global risks. The capital and financial account surplus reached

USD9.4 billion in the third quarter of 2016, increasing from USD7.6 billion in

the second quarter and USD4.4 billion in the first quarter of 2016.

Current Account

US$bn US$bn

115.7

9.4

5.7

(4.5)

0

50

100

150

-20

-10

0

10

20

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* Q1* Q3*

2010 2011 2012 2013 2014 2015* 2016**

Current Account Capital & Financial AccountOverall Balance Reserve Assets (RHS)

US$bn

(7.9)

(1.5)

3.9

1.0

(4.5)

-15

-10

-5

0

5

10

15

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* Q1* Q3*

2011 2012 2013 2014 2015* 2016**

Goods Services Income Secondary Inc. Current Acc.

-10

-5

0

5

10

15

20

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3* Q1* Q3*

2009 2010 2011 2012 2013 2014 2015* 2016**

Direct Inv. Portfolio Inv. Other Inv. Capital & Financial Acc.

US$bn

(2.3)

5.2

6.5

9.4

24

Balance of Payments Q3-2016: Current Account


Trade Balance: Non-Oil & Gas

The oil and gas trade balance improved in the third quarter of 2016 on a

quarterly and annual basis. The oil and gas trade deficit narrowed to

USD1.3 billion from USD1.4 billion last period and USD2.1 billion in the third

quarter of 2015. Declining oil and gas imports contributed to the

improvement.

Trade Balance: Oil & Gas

• The services trade balance recorded a deficit of USD1.5 billion in the

third quarter of 2016, down from USD2.2 billion last quarter. Fewer

freight payments and increase in net receipts of travel services contributed

to the narrower deficit.

• The primary income account recorded a deficit of USD7.9 billion, up

slightly from the USD7.8 billion posted in the previous quarter, due to

a scheduled increase in interest payments by the Government on its debt

securities.

• Secondary income in Q3/2016 recorded a surplus of US$1.0 billion,

mainly due to a net personal transfer receipts. The net personal

transfer receipts was down slightly to USD1.3 billion in Q3/2016, due to a

moratorium on placing Indonesian migrant workers (TKI) in certain

countries.

Services, Primary Income, Secondary Income

The non-oil and gas trade balance recorded a USD5.3 billion surplus in

the reporting period, up from USD5.2 billion previously, as non-oil and gas

imports contracted more deeply (-5.2%, qtq) than non-oil and gas exports

(-4.2%, qtq). A moderate decrease in exports was supported by rising export

prices, mainly of primary products such as vegetable oil and coal.

-15

-10

-5

0

5

10

15

-50

-25

0

25

50


2009 2010 2011 2012 2013 2014 2015* 2016**

Export Import Non Oil & Gas Trade Balance (RHS)

-4

0

4

-15-10

-505

1015


2009 2010 2011 2012 2013 2014 2015* 2016**

Import Export Oil & Gas Trade Balance (RHS)

-12

-8

-4

0

4


2009 2010 2011 2012 2013 2014 2015* 2016**

Services Primary Income Secondary Income Total

US$bn US$bn

US$bn US$bn

US$bn

(26.3)

31.3

5.0

(4.5)

3.3

(1.3)

(7.9)

(1.5)

1.0

(8.4)

25

Balance of Payments Q3-2016: Financial Account


On the assets side, Indonesia’s financial account in Q3/2016

recorded a net inflows (surplus) of US$3.3 billion, in contrast with a

deficit of US$3.9 billion in Q2/2016. The surplus was among others

related to the domestic private sector residents withdrew their offshore

deposits.

Financial Account: Asset

Positive sentiment concerning the promising domestic economic

outlook bolstered the direct investment surplus. On the liability side,

direct investment recorded a net inflow of USD6.0 billion in the third

quarter of 2016, increasing from USD4.2 billion on net withdrawals of

loans from affiliates abroad, which reversed the previous net debt

payments to affiliates abroad. Meanwhile, capital inflows in the form of

equity were considered moderate but surpassed that recorded one year

earlier.

Financial Account: Liabilities – Direct Investment

-2

0

2

4

6

8

10

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3**

2010 2011 2012 2013 2014 2015* 2016

Debt Instruments Equity & Inv. Fund Shares Total

-15

-12

-9

-6

-3

0

3

6

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3**

2010 2011 2012 2013 2014 2015* 2016

Fin. Derivatives Direct Inv. Portfolio Inv.

Other Inv. Financial Account

3.9

US$bn

US$bn

6.0

26

Balance of Payments Q3-2016: Financial Account


The portfolio investment surplus, while moderating compared to the previous period, was still substantial on account of positive sentiment

concerning the sound implementation of Tax Amnesty Law. The surplus was mainly due to the increase in net non-resident buying on government

debt securities and domestic stocks, although growing concerns over the timing of the expected Federal Funds Rate (FFR) hike prompted non-

resident investors to trim their shareholdings in September 2016. In general, however, non-resident portfolio capital inflows totalled USD4.6 billion in

the reporting period, down from USD7.9 billion, as there were no global bonds issued by the government in the third quarter of 2016.

Financial Account: Liabilities - Portfolio Investment

Other investment liabilities in Q3/2016 recorded a deficit of

US$4.3 billion, widened from the deficit of US$0.4 billion in Q2/2016.

The private sector recorded a deficit of USD3.0 billion, stemmed from an

increase in the net payment of offshore loans and trade credits as well as

a net withdrawal of non-resident deposits held at domestic banks.

Meanwhile, public sector recorded a deficit of USD1.2 billion in the third

quarter of 2016, lower than previous period.

Financial Account: Liabilities - Other Investment

-6

-4

-2

0

2

4

6

8

10

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3**

2010 2011 2012 2013 2014 2015* 2016

Debt Sec, net Equity & Inv. Fund Shares, net Total

-6

-4

-2

0

2

4

6

8

10

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3**

2010 2011 2012 2013 2014 2015* 2016

Private Sector Public Sector Total

-6

-4

-2

0

2

4

6

8

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3**

2010 2011 2012 2013 2014 2015* 2016

Private Sector Public Sector Total

4.6

US$bnUS$bn

4.6

US$bn

(4.2)

27

Exchange Rate In Line with Fundamentals

Stable Movement of Rupiah


YTD 2016* vs 2015


Rupiah Exchange Rate Relatively Well Compared to Peers

IDR/US$

The rupiah appreciated by an average of 0.71% to

a level of Rp13,048 per USD as of October 2016. The

Rupiah appreciation stemmed from positive sentiment

surrounding the solid domestic economic outlook, in

line with maintained macroeconomic stability and the

successful implementation of the Tax Amnesty.

Externally, however, the Rupiah strengthened as

global risks eased on the back of clearer policy

direction from the Federal Reserve concerning the

next FFR hike.

Oct 2016* vs Sep 2016


IDR/USD Monthly Average Quarterly Average

* data as of 31 October 2016

* data as of 31 October 2016-5,66

-3,19

-0,94

0,41

2,38

2,73

2,97

5,65

14,86

24,02

-8,00 -3,00 2,00 7,00 12,00 17,00 22,00 27,00

TRY

PHP

INR

EUR

MYR

KRW

THB

IDR

ZAR

BRL

% * data as of 31 October 2016-3,73

-2,56

-3,29

-3,47

-1,53

-1,17

0,83

-1,34

-0,25

0,04

0,02

2,15

-1,54

-1,59

-3,51

-1,70

-0,88

-0,98

0,49

-1,54

0,03

-1,6

0,71

2,10

-5,00 -4,00 -3,00 -2,00 -1,00 0,00 1,00 2,00 3,00

KRW

EUR

TRY

JPY

CNY

THB

ZAR

MYR

INR

PHP

IDR

BRL

%

Average Point-to-point

28

Lines of Defense Against External Shocks

FX Reserve Ample of level of FX reserves to buffer against external shock

FX Reserves as of October 2016: US$115.0 billion

South Korea Established a 3 year KRW/IDR swap arrangement with the size of up to 10.7 trillion KRW / IDR 115 trillion in March 2014

Australia

Exchange of local currencies between the two central banks of up to A$10 billion or IDR 100 trillion

Effective as of December 15, 2015. The effective period will be three years, and could be extended by mutual consent of both

sides

First Line of Defence

Second Line of Defence

BI’s Existing Bilateral Currency Swap Arrangement (BCSA)

* In addition to the above facilities, Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem as part of IMF’s

Global Financial Safety Net (GSFN) initiative. Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)

Japan US$ 22.76 billion swap line with the Bank of Japan currently in place

The quantum of the swap line was increased from US$12 billion in December 2013

Chiang Mai

Initiative

Multilateralization

(CMIM)

Agreement

Entitled to a maximum swap amount of US$ 22.76 billion 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 billion

Doubled to US$ 240 billion effective July 2014


29

Comprehensive Stabilization Framework Ensures Proactive Risk Management of Financial System

Implementing Crisis

Management Protocol

Implementing Bond

Stabilization Framework

Enhancing coordination

between government

institutions and

continuous dialogue with

market participants

Specific policies in place

in the 2014 budget law to

address crisis

Swap facility

arrangements based on

international cooperation

Chiang Mai Initiative

Multilateralization

Specific articles in the 2014 State Budget Law that provide flexibility for Government to take quick mitigation action if necessary, with Parliament approval that has to be given

within 24 hours

The FKSSK, Consists of Minister of Finance, BI Governor, Head of Indonesian FSA and Head of Indonesian Deposit Insurance Corporation, manages

the Nationwide Crisis Management Protocol (CMP) Framework as guidance and procedures for national crisis prevention and mitigation measures.

The nationwide CMP incorporates the Exchange Rate, Banking, Non-Bank Financial Institution, Capital Market, Government Bonds Market (SBN), and

Fiscal CMPs.

Coordination Meeting is conducted regularly to discuss and assess the current level of Financial System Stability and current issues related to the

financial system

In 2013, FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre-emptive instrument (CMIM) at

technical

In April 2016, the Financial System Crisis Prevention and Mitigation Law (UU PPKSK) has been enacted. The law contains some key features, ie:

Clear division of tasks and responsibilities between the Ministry of Finance, BI, OJK and LPS; Clarity of Systemically Important Banks (SIBs) definition

based on international criteria; Application of the bail-in principle according to international best practices; and Resolution mechanism in which Lender

of Last Resort (LoLR) still provided by central banks to address short-term liquidity difficulties.

Several indicators are monitored daily: yield of benchmark series, exchange rate, Jakarta Composite Index and foreign ownership in government

securities

Crisis Management Protocol

Related State Owned Enterprises (min. Aware Level)

State Budget

SOE Budget

BPJS Budget

Buyback fund at the DG of BFRM and Investment fund at PSA (min Aware Level)

BPJS/Social Security Organizing Agency (min. Aware Level)

Bond Stabilization Framework

1

2

3

4

5

6

Fiscal buffers to prevent crises and mitigate risks

First Line of

Defence

Related State Owned Enterprises (min. level Alert )

State Budget

SOE Budget

BPJS Budget

State General Treasury Account/KUN (min. level Alert)

and Accumulated Cash Surplus/SAL (min. Level Crisis)

BPJS/Social Security Organizing Agency (min. Alert Level)

Second Line of

Defence

30

Strengthened Private External Debt Risk Management

(US$bn)

Source: External Debt Statistics of Indonesia, November 2016

(%)

Source: Moody’s Statistical Handbook, November 2016

Despite Increasing Trend of External Debt… Debt Burden Indicator (External Debt / GDP) Remains Comparable to Peers

Regulation Key Points

Phase 1

Jan 1,2015 –

Dec 31,2015

Phase 2

Jan 1,2016 –

Dec 31,2016

Phase 3

Jan 1, 2017 and

beyond

Object of Regulation Governs all Foreign Currency Debt

Hedging Ratio

< 3 months 20% * 25%**

> 3 – 6 months 20%* 25%**

Liquidity Ratio ( < 3 months) 50% 70%

Credit Rating Not applicable Minimum rating of BB-

Hedging transaction to meet

hedge ratio

not necessarily be done with a bank in

Indonesia

Must be done with

a bank in Indonesia

Sanction As of Q IV-2015 Applied

Prudent External Debt Management

External Debt / GDP (%)

Oct 2014, introduced prudential principles in managing external debt for the

nonbank corporation to mitigate risk emerging from external debt activity.

Corporations holding external debt required to fulfil:

Minimum hedging ratio in order to mitigate currency risk

Minimum forex liquidity ratio to mitigate liquidity risk

Minimum credit rating to mitigate overleverage risk

Regulation update in Dec 2014 including among others: broadening the

coverage of components of FX Assets and Liabilities, extension of credit

rating’s status validity period

(US$bn)

0

50

100

150

200

250

300

350

0

50

100

150

200

250

300

2005 2007 2009 2011 2013 2015* Feb2016*

Apr2016*

Jun2016*

Aug2016*

Public (Govt. & BI) Private Total (RHS)

Total FCY Debt:

US$325.3 bn

Private Sector

FCY Debt: US$163.1 bn

23,3

27,3

34,7

33,0

29,5

50,4

23,4

26,5

33,3

36,0

37,5

55,4

21,4

25,8

36,4

34,7

39,3

55,5

0,0 10,0 20,0 30,0 40,0 50,0 60,0

India

Philippines

Thailand

Indonesia

Brazil

Turkey

2016F 2015 2014

31

Manageable External Debt Profile... short term non-bank corporate debt (non affiliation) represents only 9.2% of total private external debt

Private

Short-Term1

Private

Non-Bank

External Debt

Position

Affiliation

Non Affiliation

US$162.2 Bn

or

49.9%

of Total Ext.

Debt

US$114.1 Bn

or

69.9%

of Private Ext.

Debt

US$19.9 Bn

or

12.2%

of Private

Ext. Deb

US$14.1 Bn

or

8.6%

of Private

Ext. Debt

US$15.0 Bn

or

9.2%

of Private

Ext. Debt

Public Long Term 1 Private Bank

US$29.1bn

or

17.9%

of Private

Ext. Debt

US$325.3bn

US$163.1bn

or

50.1%

of total

Ext. Debt

US$49.0bn

or

30.1%

of Private

Ext. Debt

External Debt Position as of September 20161 Based on remaining maturity

Source: External Debt Statistics of Indonesia, November 2016

More Fiscal Stimulus with Prudent Fiscal Policy

Fiscal Performance and Flexibility:4

33

Budget

• Better targeted subsidy

• Social welfare spending

• Strengthening regional involvement

through intergovernmental transfer

Incentives

• Effort to maintain consumption

growth

• Deregulations to ease business

climate

• Increasing non taxable income

threshold

• Improving the easiness in doing

business

Main Strategy to Spur Economic Growth...integrated policy framework through integrated fiscal, real sector and monetary policy reform

• Prudent monetary policy

• Appropriate macro-prudential policy

• Exchange rate management to reduce volatility

Budget

• Focusing on more sustainable

revenue, esp. taxation

• More realistic revenue target

calculation

• Increasing more productive

spending, inc. infrastructure

• Budget efficiency on non-priority

spending

• More sustainable financing

• Maintaining fiscal rule of 3% deficit to

GDP

Incentives

• Investment friendly policies

• Regulation to stimulate the trade of

high value added domestic products

Growth Friendly

Fiscal Policy

to Achieve

Sustainable

and Equitable

Growth

Accommodative

Monetary Policy

while Ensuring

Macroeconomic

Stability

SHORT –

MEDIUM

Term Policies

By utilizing:

- Credible and realistic budget

- Incentives for strategic

sectors

- Support for stable

consumption

LONG

Term Policies

34

Long Term Strategies to Achieve Sustainable Growth…stimuli to maintain purchasing power

The Virtuous Cycle of Purchasing Power Stimuli

Consumption is still the largest contributor to Indonesia’s GDP

Private consumption has been a key factor driving Indonesia’s

economic growth in recent years

The government has designed stimulus program to maintain and

enhance purchasing power for households

The government has increased non-taxable income level and

adjusted wage policy to ensure that the lowest income bracket

has the greatest support

Funds are targeted at not only to improve basic village

infrastructure but also to create jobs through labor intensive

projects as well as other job creation programs

u

Fuel price and

electricity

adjustment

Predictable

labour

wages

Boosting

housing

development

Elimination of luxury goods

tax for consumer goods

2 months

addition of

rice subsidy

program

Rural

transfer for

productive

spending

Ease of land

certification

and licensing

for street

vendors

Maintaining

Purchasing

Power

Increase non-taxable

income limit

Stabilized

price for

meat

products

35

Long Term Strategies to Achieve Sustainable Growth…stimuli to promote investments

Licensing Incentives Tax Incentives Other IncentivesBusiness and Infrastructure Incentives

Tax incentives

on property

Special

economic

zones

Relaxation of

negative foreign

investment list

Integrated

logistics zones

CPO

fundSupport for

export-oriented

industries

Village-city

logistics

improvement

Acceleration

of power

infrastructure

Income tax relief for

labor intensive

industries

Permit &

licensing

simplfication

One map policyIncentives for

footwear and

apparel industries

Simplification of

import licensing for

drugs and raw food

Accelerating

infrastructure

development

Water

management

and regulation

Tax incentives

for REITSRelaxation of

entry visa

policies

Expansion of coverage

and interest subsidy

for MSME

Dwelling time

optimization

Oil refinery

development

Aviation

sector

incentives

Downstream

industries

Debt To

equity ratio

http://www.freepik.com/free-photos-vectors/cargo


36

‘The Big Bang” Policy on Relaxation of Foreign Investment…promoting competition and growth from investments

Introduction of New Foreign Ownership Regulation for Strategic Sectors

1 For total project value of IDR10bn and above

Before

Cold storage Restaurants, Bars Pharmaceutical Raw Materials

Manufacturing

Sports Center,

Film Processing Lab, Crumb Rubber

49%

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

Key Reforms in Negative Foreign

Investment List

Strengthen implementation of negative investment law through

active roles from ministries, agencies and regional governments

100%49%

100%51%

100% 85% 100%

95%100%

33%67%

51%67%

51%67%

55%67%

65%67%

Distribution, Warehousing Private Museum, Catering, apparel

Manufacturing, Exhibitions &

Conventions

Toll Road Operator,

Telecommunication Testing Company

Consultancy for Construction1Telecommunication Provider

with Integrated Services

Professional Training, Golf Course

Management, Air Transport Support Services,

Travel Bureau

After Before After Before After Before After

Before After Before After Before After

Before After Before After Before After

37

2017 Macroeconomic Assumptions and Budget Posture

Indicator2016 2017

R-budget Outlook Budget

Economic growth

(%, yoy)5.2 5.0 5.1

Inflation

(%, yoy)4.0 3.2 4.0

3-Month T-Bills

(%)5.5 5.4 5.3

Exchange Rate

(Rp/US$)13,500 13,300 13,300

ICP

(US$/barrel)40 40 45

Oil Lifting

(thousand

barrel/day)

820 820 815

Gas Lifting

(thousand barrel

oil equivalent/day)

1,150 1,150 1,150

• Macroeconomic assumption was calculated conservatively, measuring the recent external economic development, domestic potentials, and

how the government policy would impact the economy.

• To achieve the target, government will ensure the consistency in supporting investment growth through policy packages, supportive policies

from other institutions (e.g. regional government), and better budget role as growth stimulus.

• Budget as the instrument to support growth momentum but still keeping its credibility

Source: Ministry of FInance

Description

(IDR tn)

2016 2017 Growth (%)

R-Budget Outlook BudgetTo

R-BudgetTo Outlook

A. REVENUE 1,786.2 1,582.9 1750.3 -2.0% 10.6%

I. Domestic Revenue 1,784.2 1,580.9 1748.9 -2.0% 10.6%

1. Tax Revenue 1,539.2 1,320.2 1498.9 -2.6% 13.5%

2. Non Tax Revenue 245.1 260.7 250 2.0% -4.1%

II. Grant 2.0 2,0 1.4 -30.0% -30.0%

B. GOVERNMENT SPENDING 2,082.9 1,898.6 2080.5 -0.1% 9.6%

I. Central Government 1,306.7 1,195.3 1315.5 0.7% 10.1%

1. Ministerial Spending 767.8 672.0 763.6 -0.5% 13.6%

2. Non Ministerial Spending 538.9 523.3 552 2.4% 5.5%

II. Intergovernmental Transfer 776.3 703.3 764.9 -1.5% 8.8%

1. Regional Transfer 729.3 659.1 704.9 -3.3% 6.9%

2. Rural Transfer 47.0 44.2 60 27.7% 35.7%

C. PRIMARY BALANCE (105.5) (126.4) -109 3.3% -13.8%

D. BUDGET SURPLUS/(DEFICIT) (296.7) (315.7) -330.2 11.3% 4.6%

% deficit to GDP (2.35) (2.50) (2.41) 2.6% -3.6%

E. FINANCING 296.7 315.7 330.2 11.3% 4.6%

I. Debt Financing 371.6 387.8 384.7 3.5% -0.8%

II. Investment Financing (94.0) (91.5) -47.5 -49.5% -48.1%

III. Other Financing 19.3 19.3 -7 -136.6% -136.1%

2017 Macroeconomic Assumption 2017 Budget

38

A More Realistic Tax Revenue Target...tax policies are directed to expand tax base and increase compliance

800

900

1000

1100

1200

1300

1400

1500

1600

2014 2015 2016 2017

Realisasi Target

600

700

800

900

1000

1100

1200

1300

1400

2014 2015 2016 2017

Realisasi Target


19,5%

8,2%

29,9%

3,4%

6,4%

24,1%

-2,6%

13,5%25,9%

38,7%

8,2%

6%

30,4%

9,4%

-3,6%

15%

Realization/

Outlook for 2016

Realization/

Outlook for 2016

Target to target growth

Realization to target growth

Realization to Realization growth

Increase tax base and tax compliance

i.e. through IT and database

improvement

Provide tax incentives to support

competitiveness and investment climate

Improve taxation regulation i.e.

through the amendment of laws

(KUP, VAT, Income Tax, Stamp

Duty Laws)

Excises to control consumption of

certain goods and minimize negative

externality

Optimize international taxation to

enforce transparency

Tax Collection Target (IDR tn) Non Oil and Gas Tax Collection (IDR tn)

2017 Main Tax Policies

39

Tax Amnesty as Policy Breakthrough...expected to be strongly affecting the economy trajectory in both short and long run

Expanding Tax Base through more Reliable,

Integrated and Comprehensive Database

Increasing More Sustainable Tax Collection in

Both Short and Long Term

Tax Policy

Reform

Tax Administration

Reform

• Establishment of Semi Autonomous Revenue

Agency

• More effective and better targeted law

enforcement

• Improvement of IT and communication

system

• Enhancement of data management

• Amendment of General Provision of Taxation

Law

• Amendment of VAT Law

• Amendment of Income Tax Law

• Amendment of Stamp Duty Law

Tax Amnesty as the Milestone of Tax Reform More Reforms are Coming

Accelerating Economic Growth through Asset

Repatriation, via several transmissions:

Increase domestic liquidity Improve the stability of IDR currency

Create lower interest rate Support investment growth

Short Term:

Collection from Amnesty Fee

Long Term :

Better Tax Collection based on

Better Tax Database

40

One of the Most Succesful Tax Amnesty in the World...proving the huge potential on Indonesia tax base

Indiv. Non MSME

Indiv. MSME

Corp. Non MSMECorp. MSME

0,04%

0,12%

0,24%

0,35%

0,62%

0,76%

0,0%

0,1%

0,2%

0,3%

0,4%

0,5%

0,6%

0,7%

0,8%

Austalia Spain Italy India Chile Indonesia

0%2% 2%

4%

8%

23%

0%

5%

10%

15%

20%

25%

Australia India Spain Italy Chile Indonesia

% of GDP Penalty as % of GDP

Source: Ministry of Finance, Deutsche Bank Calculation, as of Sept, 30th 2016 (the end of Tax Amnesty Program’s first period)

7.14

0.03 0.23

7.4186.52

10.33

71.52

268.45.71

0.19

0.71

6.6

Tax Amnesty Revenue Realization, Based On

Tax Payment Slip (US$ bn)Tax Amnesty Revenue Realization, Based on

Tax Declaration Letter (US$ bn)

Realization Of Asset Declaration From Tax

Amnesty (US$ bn)

Repatriation

Onshore DeclarationOffshore Declaration

Tax Arrears Payment

Redemption (TPS)Preliminary Evidence Payment

Declared Assets Revenue From Tax Amnesty

41

Worldwide Declaration and Repatriation

Top 5 Repatriation by Country Origin

Country IDR tn %

Singapore 631,29 67,36

Virgin Islands 71,74 7,66

Cayman Islands 52,53 5,61

Hong Kong 37,89 4,04

Australia 32,10 3,43

Country IDR tn %

Singapore 77,41 57,18

Cayman Islands 16,50 12,19

Hong Kong 13,98 10,33

China 3,56 2,63

Virgin Islands 2,25 1,66

Top 5 Offshore Declaration by Country Origin

Source: Ministry of Finance,

as of Sept, 30th 2016 (the

end of Tax Amnesty

Program’s first period)

42

Commitment to Continue Productive Spending...budget allocation for education, infrastructure, and health significantly increasing

Energy

-64.6%

Education

+27.3%

Infrastructure

+114.3%

Health

+82.9%

The efficiency

ambience is

maintained in 2017

budget, especially for

less priority spending

Preserving the

infrastructure

acceleration

Social welfare

spending to improve

equality and maintain

consumption growth

Better and better

subsidy scheme


43

Budget for Priority Program...20 percent for education and 5 percent for health

Bidikmisi

0

50

100

150

200

250

300

350

400

450

2009 2010 2011 2012 2013 2014 2015 2016 2017APBN

IDR tn

2,7 2,83,0

2,7 2,83,3

3,8

5,0 5,0

0,0

1,0

2,0

3,0

4,0

5,0

6,0

0

50

100

150

200

2009 2010 2011 2012 2013 2014 2015 2016 2017APBN

APBNP % of APBNP

IDR tn %

Basic and complete

immunization for 92% of

0-11 months old infants

Immunization

94.4 million people

Health Insurance

Subsidy (PBI)

Stunting prevention to 29.6%

of children below 2 years old

Stunting Prevention

700 regencies

Community Health

Centre (Puskesmas)

6.7 million people

Family Plan Program (KB)

Budget for Education Program Budget for Health Program

360.5 thousands

college students19.5 million students

Indonesia Smart Card

(KIP)

101,100 teachers

10,200 lecturers

Certification

School

Rehabilitation

41,128 rooms8.5 million students

School Operational

Assistance (BOS)

107 Colleges/Universities

Operational Assistance

for Colleges

44

Infrastructure Budget Continues to Increase

* Budget for infrastructure in the 2017 State Budget increases by Rp40.8 T

than proposed, mainly comes from transfer to regions (DAU & DBH)

8,1 8,38,8

9,8 10,2

8,7

14,215,2

18,6

0

2

4

6

8

10

12

14

16

18

20

0

50

100

150

200

250

300

350

400

450

2009 2010 2011 2012 2013 2014 2015 2016 2017

%IDR tn

Anggaran Infrastruktur

% thd Belanja Negara (RHS)

815 km

Roads

9,399 m

Bridges

550 km

Railways

13 airports

Airports

55 locations

Seaports Terminal

3 locations

As regulated in the Minister of Finance Regulation PMK 48/2016 on Transfer to the Regions and Village Funds management, in 2017

minimum 15% of non-earmarked Revenue Sharing and General Allocation Fund have to be used for infrastructure development (the

level has increased to become 25% in the 2017 State Budget).

Infrastructure budget

% of total state expenditure (RHS)

Infrastructure Budget Allocation* 2017 Target




45

Subsidy Policy in 2017 Aims to be Better Targeted and Improved Mechanism

137,8

94,4

77,3 74,383,4 82,7

65%

53%

48%

35%

47%

52%

0%

10%

20%

30%

40%

50%

60%

70%

0

20

40

60

80

100

120

140

160

2015 2016 2017

Energy Subsidy Non Energy Subsidy

Portion of Ener. Subs Portion of Non Ener. Subs

IDR Tn

Fuel and 3kg LPG subsidies Rp32.3 T:

Close distribution (by name and by address)

Implemented gradually

Recipients are 26 million poor households and 2.3

million micro business

Electricity subsidy Rp45,0 T:

Recipients are 19.1 million customers of R-1/450 VA

and 4.05 million customers of R-1/900 VA

For non poor customers of 900VA, the tariff will be

gradually adjusted by three times every two months.

Food subsidy will be given to 14.3 million

households

Gradual conversion of rice for the poors (Rastra) to

become non-cash/voucher food assistance

program. Pilot project in 44 cities.

Fertilizer and seeds subsidies program are directed

to support the improvement of agriculture

productivity

Provision of 9.55 millions volume of fertilizer

subsidy

Seeds subsidy provision for rice and soybean.

Support MSME through KUR (interest subsidy)

Share of Energy Subsidy Share of Non-Energy Subsidy

Energy Subsidy

Non-Energy Subsidy


46

Increasing the Effectiveness and Efficiency of Transfer to Regions & Village Fund

IDR503.6 tn(General Transfer

Fund)

IDR173.4 tn(Special Transfer

Fund)

IDR7.5 tn(Incentive Fund)

IDR20.3 tn(Special

Autonomy & Daerah Istimewa

Yogyakarta)

IDR60.0 tn(Village Fund)

Minimum 25% (Rp125.9 tn) of General Transfer Fund has tobe used for public service facility development acceleration

Physical Special Transfer Fund allocation is based onregions’ proposal and national priorities, especially forunderdeveloped regions, border areas, and transmigration.

Incentive Fund allocation is increased to reward regions with

good fiscal management and basic public service

performances.

• There are 317 regions being rewarded with incentive fund.

• The lowest incentive is Rp7,5 billion.

• The highest incentive is Rp65,3 billion.

Improving efficiency and effectiveness of Special Autonomy

& DIY Fund.

• Special Autonomy Fund Papua Rp5.6 T.

• Special Autonomy Fund West Papua Rp2.4 T.

• Special Autonomy Fund Aceh Rp8.0 T.

• DTI Papua & West Papua Rp3.5 T.

Gradually increases Village Fund.

• Average allocation for each village Rp800.5 million.

• Lowest village fund allocationRp726.7 million.

• Highest village fund allocation Rp2.8 billion.*The budget for this allocation is higher than the budget for line ministries

2017 Transfer to Regions and Village Funds*

47

Preserving Fiscal Sustainability Through the Compliance with Fiscal Rule and Productive Financing

-2,35 -2,5 -2,41

-3

-10

-9

-8

-7

-6

-5

-4

-3

-2

-1

0

2010 2011 2012 2013 2014 2015 2016 2017

Brazil India Malaysia Indonesia

Constitutional Threshold

Indonesia Financing Plan 20172014 2015 2016 2017

Audited Audited R-Budget Budget

Government securities 255,7 380,9 371,6 384,7

Investment Financing (8,9) (59,7) (94,0) (47,5)

Lending 2,5 1,5 0,5 (6,4)

Liability Guarantee 1,0 - (0,7) (0,9)

Other Financing 0,5 0,3 19,3 0,3

Indonesia’s Fiscal Deficit (% of GDP) Prudent and Cautious Expansive Fiscal Deficit


Managing fiscal deficit below 3%

Indonesia has implemented budget deficit regime for years but

never exceeded the constitutional threshold

Financial inclusion and market deepening

Debt issuance to finance productive activity

Selective external loan (to finance infrastructure and energy

sector)

Loan as an alternative instrument for financing

Active Debt Management and Assets and Liabilities

Management

Government sharia debt securities (SUKUK) as project-based

financing for infrastructure projects, such as double track

railway from Martapura-Baturaja (South Kalimantan),

Purwokerto-Kroya (Central Java) and Madiun-Jombang (East

Java), and other road and bridge financing across the nation

48

Management of Contingent Liabilities

Government Guarantee Program and Portfolios 2008 - Present

• Central Government Guarantees are carefully provided to meet

various item of infrastructure programs

• Until Sept 2016, total guarantee committed are USD16,24 bn

(eq. IDR211,1 tn) for 6th programs, and outstanding/exposure

were USD5,59 bn (eq. IDR72,6 tn)

49

Financing Policy 2016

Description (IDR tn)2016 2016

Budget R-Budget

I. Domestic Financing 272.8 299.3

1. Domestic Banking 5.5 25.4

2. Domestic Non-Banking 267.3 273.9

II. Foreign Banking 0.4 -2.53

1. Foreign Outstanding Loan (Gross) 75.1 72.9

a. Program Loan 36.8 35.8

b. Project-Based Loan 38.3 37.2

2. Standby Loan Agreement (SLA) -5.9 -5.8

3. Foreign Debt Principal Repayment -68.8 -69.7

TOTAL 273.2 296.7

(0,73)

(1,14)

(1,86)

(2,33) (2,25)

(1,90)(2,35)

(3,0)

(2,0)

(1,0)

0,0

(300)

(250)

(200)

(150)

(100)

(50)

0 2010 2011 2012 2013 2014

2016

Budget

2016

R-Budget%IDR tn

Deficit

% to PDB

• Manageable Debt-to-GDP ratio

• Financial inclusion & market deepening

• Debt issuance for productive activity

• Selective external loan (infrastructure and energy sector)

• Loan as an alternative instrument for financing

• Active debt management and Asset Liabilities Management

(ALM)

• Sharpen PMN recipients and purposes

• Provide government guarantee for infrastructure project

• Support accessibility for education and housing for low

income class

Debt Financing

Non Debt Financing

50

Budget Financing Breakdown in 2016

Debt (Gross)

IDR729.03tn

Redemption

IDR315.63tn

Budget Financing

IDR344.39tn

Non-Debt Financing

IDR69.01tn

Breakdown of Budget Financing IDR tn US$ bn

Government Debt (net) 407.79 31.25

Government Securities (net) 407.89 31.25

Issuance 654.42 50.14

Redemption & Cash Management (243.54) (18.66)

Debt Portfolio Management (3.00) (0.23)

Domestic Loans (net) 3.25 0.25

Withdrawal 3.58 0.27

Redemption (0.33) (0.03)

Foreign Loans (net) (3.35) (0.26)

Withdrawal 71.02 5.44

Redemption (74.37) (5.70)

Source: Ministry of Finance. USD/IDR: 13,051 (as of end of October 2016)

51

Government Securities – Financing Plan for 2016

Instruments

Revised Budget

Indicative Target

(IDR bn)

Indicative Target

(US$ mm)

Government Securities (Net) 407,886 31,253

Redemption 215,089 16,481

Cash Management 27,874 2,136

Buyback 3,000 230

Gov’t Securities Conversion 573 44

Government Securities

(Gross)654,422 50,143

Composition

Domestic 78%

Auction 63%

Non-Auction 15%

International Bond 22%

Government Issuance Targets International Bonds

• Issuance of international bonds

as a complement to diversify

investor base in domestic

market and to avoid crowding

out the domestic market

• Provides benchmark for

Indonesia corporate issuances,

consisting of USD, JPY and

EUR denominated bonds

• Target maximum 27% of

issuance via international bonds


Domestic Bonds

Weekly Auction:

Conventional securities 23 x

Islamic securities 23 x

ATM for Government Securities (SBN) by auction

9-11 years

Non-Auction:

Retail bondsSukuk Retail (Q1), SBR1 (Q2), Sukuk

Tabungan2 (Q3), and ORI3 (Q4)

Private Placement Based on request

Front Loading Issuance For Budget Financing

• Pre-funding to optimize cost ahead of potential Fed rate hikes

• Anticipate developments in global environment

• Target: to front load 74% of the annual budget in 1H16

Government Debt Outstanding (as of end of October 2016)

IDR tn US$ bn

Total government debt outstanding 3,440 263.6

Loan 732 56.1

Securities 2,708 207.5 Debt

Securities

72%

Sukuk

28%

US$/IDR: 13,051 (as of end of Oct., 2016)1 SBR: “Savings Bond Ritel” or Retail Savings Bond2 Sukuk Tabungan means Sukuk Savings Bond3 ORI: “Obligasi Negara Ritel” or Indonesian Retail Bond

52

Disciplined and Sophisticated Debt Portfolio Management

Stable Debt to GDP Ratio Over the Years

Weighted Average Debt Maturity of ~9.2 Years (As of Sep. 2016)**

US$ bn

Remarkable Debt Reduction Initiative Over the Past 10 Years

Change in Debt to GDP Ratio (2006 – 2016) (%)

Source: IMF World Economic Outlook Database, October 2016

Well Diversified Across Different Currencies

% of Yearly Issuance

Government Debt / GDP (%)


Source: Ministry of Finance Source: Ministry of Finance

(1)

Years

131 141 136 155 175209

69 64 5854

55

56

23.1% 23.0% 24.9% 24.7%

27.4% 27.7%

0,0

5,0

10,0

15,0

20,0

25,0

30,0

0

50

100

150

200

250

300

2011 2012 2013 2014 2015 2016*

Securities (LHS) Loans (LHS) Govt Debt / GDP (%) (RHS)

* Revised Budget 2016 Figure, ** Using GDP assumption in 2016 R-Budget, ***SDR, AUD, and other

-35,3

-31,9

-29,0

-11,2

2,8

11,0

11,4

18,9

29,9

32,9

34,6

40,8

64,9

70,1

117,0

-60,0 0,0 60,0 120,0 180,0 240,0 300,0

Philippines

Turkey

Indonesia

India

Germany

Poland

Thailand

Brazil

Italy

Colombia

Japan

Malaysia

South Africa

United States

United Kingdom

Chile

Australia

9,32

9,70

9,60

9,73

9,40

9,20

9,0

9,3

9,5

9,8

10,0

2011 2012 2013 2014 2015 Oct-16**

55% 56% 53% 57% 56% 58%

22% 24% 29%29% 31% 29%

17% 14% 12% 9% 8% 8%3% 3% 3% 3% 3% 4%3% 3% 3% 2% 2% 2%

0%

20%

40%

60%

80%

100%

2011 2012 2013 2014 2015 Okt-16

IDR USD JPY EUR Others***

53

Well Balanced Maturity Profile With Strong Resilience Against External Shocks


1 Variable Rate Ratio is defined as ratio between debt instruments with variable rate divided by total debt instruments (variable + fixed rates)2 Refixing Rate ratio is defined as ratio between debt instruments with variable rate + debt instruments with fixed rate maturing in 1 year divided by total debt instruments (variable + fixed rates)

**Using GDP assumption in 2016 R-Budget; **Preliminary figures;

Debt Maturity Profile

% %

Upcoming Maturities (Next 5 Years)

%IDR tn

18,8

16,2 16,014,8

13,712,1

25,9

22,5 23,2

21,0 20,7

17,6

0

5

10

15

20

25

30

2011 2012 2013 2014 2015 Oct-2016*

Variable Rate Ratio¹ Refixing Rate²

10,4 10,2 11,7 10,7 12,2 11,4

45,1 44,446,7

43,4 44,541,7

0

10

20

30

40

50

2011 2012 2013 2014 2015 Oct-2016*

FX Debt to GDP Ratio* FX Debt to Total Debt Ratio

8,2 7,28,6 7,7 8,4

6,7

22,7 21,5 21,820,1 21,4

22,8

34,632,4 33,4 33,9 34,7

36,8

0

10

20

30

40

2011 2012 2013 2014 2015 Oct-2016*

In < 1 year In < 3 year In < 5 year

10

129 1

59

168

100 134

87 93

168

45

126

62

53

100

29

116

46 52

97

5

66

22

22

7 15 26

23

20 2516

91

108

133

108

122

102

101

84

111

85

25

43

19

18

16

15 15

11

28

4

23

28

1

1 1

31

21 27

27

18

0

50

100

150

200

250

300

2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046-2055

IDR-Denominated Other Currencies

Declining Interest Rate Risks Declining Exchange Rate Risks

54

30,80 32,98 32,54 38,13 38,12 38,98 38,28 39,39 38,87 39,16 38,4

32,58 30,49 33,7630,83

37,85 30,48 34,05 32,49 35,02 39,77 37,72

36,63 36,53 33,70 31,0423,95 30,53 27,63 28,12 26,11 21,07 23,88

0

20

40

60

80

100

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Feb-16 May-16 Jul-16 Aug-16 Sep-16 Okt-16

Foreign Holder Domestic Non Banks Domestic Banks

Profile of Total Central Government Debt

Increasing Foreign Ownership of Government Securities at Longer Tenors

(%)

Holders of Government IDR Bonds – Composition October 2016

USD bn 209.41199.48 204.51 194.55 214.88 224.60 229.70 263.60255.14 (%)265.02

2011 2012 2013 2014 Jun-15 Dec-15 Jan-16 Jun-16 Sep-16 Oct-16

Loan Government Securities

%74.1368.82 70.04 75.81 75.73 76.14 77.9965.66 78.41 78.72

25.8734.34 31.18 29.96 24.27 23.8624.19 22.01 21.59 21.2811,87 7,84 5,2 4,65 3,23 3,04 3,28 2,69 3,02 1,85

24,97

19,3218,29 18,96

13,1 13,44 12,45 13,7320,9 20,85

63,16 72,84 76,5 76,39 83,66 83,52 84,27 83,57 76,08 77,31

30,80 32,9832,54

38,13 38,21 38,9438,59

39,1039,16 38,4

0

20

40

60

80

100

Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-16 Mar-16 Jun-16 Sep-16 Oct-16

0-1 1-5 >5 Foreign Ownership to Total

Government Debt Outstanding

55

Ownership of IDR Tradable Central Government Securities

Description

Banks* 375.55 31.04% 350.07 23.95% 361.54 21.95% 420.09 23.88%

Govt Institutions (Bank Indonesia**) 41.63 3.44% 148.91 10.19% 150.13 9.12% 102.44 5.82%

Bank Indonesia (gross) 149.07 9.05% 149.37 8.49%

GS used for Monetary Operation -1.05 -0.06% 46.93 2.67%

Non-Banks 792.78 65.52% 962.86 65.87% 1135.18 68.93% 1236.73 70.30%

Mutual Funds 45.79 3.78% 61.60 4.21% 76.44 4.64% 81.04 4.61%

Insurance Company 150.60 12.45% 171.62 11.74% 214.47 13.02% 234.20 13.31%

Foreign Holders 461.35 38.13% 558.52 38.21% 643.99 39.10% 675.64 38.40%

Foreign Govt's&Central Banks 103.42 8.55% 110.32 7.55% 118.53 7.20% 118.46 6.73%

Pension Fund 43.30 3.58% 49.83 3.41% 64.67 3.93% 83.25 4.73%

Individual 30.41 2.51% 42.53 2.91% 48.90 2.97% 61.67 3.51%

Others 60.51 5.00% 78.50 5.37% 86.72 5.27% 100.93 5.74%

Total 1,209.96 100% 1,461.85 100% 1,646.85 100% 1,759.26 100%

Dec-14 Dec-15 Jun-16 Oct-16

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.

(IDR tn)

56

Government Securities Realization

- Issuance Government Securities Conversion 572,581 572,581

- Matured Government Securities Conversion 572,581 360,814

Nett Issuance Government Securities Conversion 211,767

(IDR mn, as of end of October 2016; budget deficit: 2.7%)

Revised Budget

2016

Widening Budget

Deficit 2.7%

Realization

(a.o. end of Oct.

2016)

% Realization to Budget

2016

Government Securities Net 364,866,887 407,885,860 395,144,832 96.88%

Government Securities Maturing in 2016 and Buyback 246,535,735 246,535,735 234,053,977 94.94%

Issuance Need for 2016 611,402,622 654,421,595 629,198,809 96.15%

Government Debt Securities (GDS) 452,855,157

Domestic GDS 343,816,437

-Coupon GDS 238,320,000

-Conventional T-Bills 49,990,000

-Private Placement* 31,895,977

-Retail Bonds 23,610,460

International Bonds 109,038,720

-USD GMTN 48,643,000

-Euro GMTN 44,975,610

-Samurai Bonds 12,760,910

-Domestic GDS 2,659,200

Government Islamic Debt Securities 176,343,652

Domestic Government Islamic Debt Securities 142,936,152

- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based

Sukuk) 105,801,030

- Retail Sukuk 34,085,122

- Private Placement 3,050,000

Global Sukuk 33,407,500

*Including the issuance of Government Securities Conversion

- Issuance Government Securities Conversion 572,581 572,581

- Matured Government Securities Conversion 572,581 360,814

Nett Issuance Government Securities Conversion - 211,767

*Including the issuance of Government Securities Conversion

Credible Monetary Policy Track Record and Favourable Financial Sector

Monetary and Financial Factor:5

58

Bank Indonesia Policy Mix: 2015 - 2016

18 March 2016

• Cut BI Rate 25 bps to

6.75%

• Cut DF & LF Rate at 4.75%

& 7.25% respectively

18 February 2016


7%

• Cut DF & LF Rate at 5%

& 7.5% resp.

• BI lowered the rupiah

denominated primary

reserve requirement by

1%, from 7.5% to 6.5%,

effective from 16th

March 2016

16 June 2016

• Cut BI Rate 25 bps to 6.5%

• Cut DF & LF Rate at 4.5% & 7.0%

respectively

• Relaxed the loan-to-value ratio (LTV) and

financing-to-value ratio (FTV) on housing

loans/financing

• Relaxed partially prepaid loans/financing

• Raised the floor on the Reserve

Requirement - Loan to Funding Ratio (RR-

LFR) from 78% to 80%, with the ceiling

maintained at 92%. The change was

effective on August 2016.

21 April 2016

• Held BI Rate at 6.75%, and

maintained DF & LF Rate at

4.75% & 7.25% respectively.

• Reformulated policy rate from

BI Rate into the 7 day

(Reverse) Repo Rate to

improve the effectiveness of

monetary policy transmission.

The change was effective on

August 19th 2016

14 January 2016


7.25%

• Cut DF & LF Rate at

5.25% & 7.75% resp.

• BI lowered its monetary

operation rates even

further, ranging from

25bps to 45bps (O/N to

1Y)

19 August 2016

• Held BI 7-day RR

Rate and DF Rate

at 5.25% and 4.5%

• Cut LF Rate to

6.00%.

21 July 2016

• Held BI Rate at 6.5%, & maintained BI

7-day RR Rate, DF & LF Rate at

5.25%, 4.5% & 7.00% respectively.

• BI continued to conduct financial

market deepening by introducing new

investment & hedging products in the

financial market, strengthened

monetary management strategies, &

encouraged the real sector to make

optimal use of repatriation funds to

support the implementation of the

2016 Tax Amnesty Law

17 November 2015

Lowered IDR

Primary RR by

50bps from 8.0% to

7.5%. Effective

since 1 Dec 2015

22 September

2016

• Lowered BI 7-day

RR Rate to 5.0%

• Lowered DF and

LF Rate to 4.25%

and 5.75%

20 October 2016

• Lowered BI 7-day RR

Rate to 4.75%

• Lowered DF and LF Rate

to 4.00% and 5.50%

17 November 2016

Held BI 7-day RR

Rate at 4.75%, DF

Rate at 4.00% and

LF Rate at 5.5 %.

59

Bank Indonesia Policy Mix: November 2016

The BI Board of Governors agreed on 17 November 2016 to hold the BI 7-days Repo Rate at 4.75%,

as well as the Deposit Facility at 4.00% and cut the Lending Facility rates to 5.50%

Holds the BI 7-

day Repo Rate

at 4.75%

Convinces that the

transmission of looser

monetary and

macroprudential

policies will continue

and boost credit as

well as other

financing growth to

support stronger

economic growth

moving forward

Remains vigilant towards global

developments, recovery signs of US

economy and the possibilty of Federal

Funds Rate (FFR) hike, limited growth

in advanced countries including the

European Union (EU), the possibility of

China and India to drive the global

economy, also the continuation of the

international commodity prices

improvement

Continues to coordinate

with the Government with a

focus on safeguarding

supply and distribution,

especially of the basic

necessities, while

managing inflation

expectationsth

Maintains exchange

rate stability in line

with the currency’s

fundamental value by

maintating market

mechanisms.

Believes more muted

growth in the fourth

quarter, in line with

fiscal consolidation,

at around 5% and

projects for the

expanding growth in

the 5.0-5.4% range in

2017.

60

Enhancement of Monetary Operations Framework

Bank Indonesia will enhance themonetary operations framework that issupported by the deepening of thefinancial markets in order to strengthenthe transmission of monetary policy.

BI RATE

• BI Rate reflects monetary policystance as a tool to anchor economicagent’ inflation expectations

• BI Rate is used as a benchmarkinterest rate for transactions infinancial markets and eventually toinfluence general interest rate

• BI Rate effectively affect bankinginterest rate

• Excess liquidity due to massivecapital inflows post 2008 globalfinancial crisis draw down overnightinterbank rates around DF Rate.Meanwhile, the BI rate is currentlyaround 9-12 months OM instrument.

• The shallow financial markets alsoinhibit the transmission of monetarypolicy.

CHALLENGES

ENHANCEMENT

BI rate as reference rate

Challenges: Transmission of

monetary policy is less effective

Enhancement of monetary operations

framework

12 months

(equivalent)7 day

Non-TransactionalTransactional

(Central Bank)

Not optimally

reflected in money

market interest rates

Stronger relationship

to the money market

interest rates

Cost of being

illiquid is lower,

support financial

deepening

BI rate BI 7-day repo rate

OMO term structure

Character

Transmission

Financial Deepening

Cost of being illiquid is too

high, does not support

financial deepening

61

Stable Monetary Environment Despite Challenges


Rupiah Exchange Rate Remains Comparable to Peers

YTD 2016* vs. 2015

Strengthened Monetary Policy Framework

(%)

Credit Growth Supported by Macroprudential Policy

Downward Trend of Inflation Ensured Price Stability

8.0%

4.2%

6.5%

9.1%

YoY

LF Rate: 7.00

LF Rate:

5.50

BI Rate: 6.50

BI 7Day RR Rate:

4.75

DF Rate: 4.50

DF Rate:

4.00

19 August 2016

The New

Monetary

Operation

Framework

* data as of 31 October 2016-5,66

-3,19

-0,94

0,41

2,38

2,73

2,97

5,65

14,86

24,02

-8,00 -3,00 2,00 7,00 12,00 17,00 22,00 27,00

TRY

PHP

INR

EUR

MYR

KRW

THB

IDR

ZAR

BRL

%

3.31

0.17

(%)

3.08

7.54

-1

4

9

14

19

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9

2011 2012 2013 2014 2015 2016

CPI (%, yoy) Core (%, yoy)

Volatile Food (%, yoy) Administered (%, yoy)

0%

5%

10%

15%

20%

25%

30%

35%

40%

1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9

2013 2014 2015 2016

Total Growth Working Capital loansInvestment Loans Consumption Loans

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

7,0

7,5

8,0

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Okt-16 Nov-16

LF Rate BI Rate BI-7Day RR Rate DF Rate

62

Financial Intermediaries Development

The has been an improvement in the growths of bank loan & multifinance financing, in line with the improving growth in H2-2016. Capital

raising from the capital market is relatively stable amidst the fluctuating market. Meanwhile, gross premium in the insurance industry is

continuously expanding.

Source: OJK

The growth of financing distributed by multifinance companies

demonstrates an improvement as well, after contracting in 2015

Gross premium revenue in the domestic insurance industry also

demonstrates a positive development in 2016Capital raising through IPOs, rights issues, and corporate bond

issuance in the capital market is relatively stable

After four consecutive years of declining growth (2012-2015), there is

a slight improvement in banking loan growth in 2016

IDR tn IDR tn

IDR tn IDR mn

63

Financial Institutions Remain Robust and Less Vulnerable

Source: OJK

Banking sector’s capital adequacy ratio (CAR) is maintained high

Risk-based capital (RBC) of the insurance industry also remains

high, well above the minimum threshold

Gearing ratio of multifinance companies is well below the maximum

requirement, providing ample room for future growthProfitability of the banking sector is relatively stable

Financial performance of domestic financial institutions generally remains robust. Capital adequacy is well above the minimum

requirements. Profitability and leverage are maintained at a sufficient level. Further, gearing (debt-to-equity) ratio of multifinance

companies provides ample room for future growth.

%

%

64

Adequate Liquidity, Manageable Credit Risks

Source: OJK

Banks are found to possess adequate liquid assets to anticipate depositors’ withdrawal. Insurance industry also demonstrates an enhanced

level of investment adequacy ratio. The non-performing loan/financing (NPF/NPL) ratio is also maintained below the threshold.

The ratio of liquid assets to deposits in the banking sector is well

maintained at a high level

Non-performing loan (NPL) in the banking sector remains at a low level.

The gross & net NPL ratio are 3.2% & 1.5% respectively

NPF ratio in the multifinance industry is 2.2%, maintained below the

5% threshold

Investment adequacy ratio in the insurance industry is maintained

above 100%

% %

65

Manageable Market Risk Amidst Fluctuations

Source: OJK

Being exposed to fluctuations in the securities market and IDR exchange rate, financial institutions demonstrated resilience in dealing with

such risks. Net open position of the banking sector remains low, while the investment value of domestic institutional investors (mutual funds,

insurers, and pension funds) continues to expand. Multifinance companies’ exposures to the exchange risks have generally been mitigated

through hedging measures.

Net open position in the banking sector is kept far below the

maximum requirement (20%)

Amidst the fluctuating market in recent periods, the investment

value of insurers & pension funds continues to expand

Multifinance companies’ exposures to foreign debt have generally been

mitigated through hedging measures

The movement of mutual funds’ net asset value (NAV) is in line with

the market index, but with much lower volatility

IDR tn

IDR tnIDR tnIDR tn

IDR tn

66

Capital Market Demonstrate Strengthening Trend

Volatility in the domestic capital market tends to ease in 2016. The market indices are back to a strengthening trend, accompanied by

significant nonresident capital inflows. In the government bond market, 2016 also witnessed a remarkable decline in the bond yields.

Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance

Both the stock & bond indices demonstrated a strengthening index in

2016, supported by favorable domestic environment

In line with the stabilizing IDR and improving domestic prospects, the

government bond yield continues to decline

Despite uncertain external factor, favorable domestic environment

attracts nonresident inflow especially in Q3

The IDX Composite Index demonstrated a positive growth and listed

among the best-performing indices (ytd) in the region

Yield (%)IDR tn

67

Macroprudential Policy Mix to Support Growth

Effective from August 29th, 2016, Bank Indonesia relaxed the Loan to Value Ratio (LTV) and Financing to Value Ratio (FTV) on housing

loans at 85-90% for the first mortgage lending facility, 80-85% for the second mortgage lending facility, and 75-80% for the third mortgage

lending facility.

Housing Loans and Financing

Based on Murabahah and Istishna Contracts

Property

type (m2)

Lending/Financing Facility

First Second Third

House

>70 m2 85% 80% 75%

22 - 70 m2 - 85% 80%

<21 m2 - - -

Apartment

>70 m2 85% 80% 75%

22 - 70 m2 90% 85% 80%

<21 m2 - 85% 80%

Home

Shop/Office- 85% 80%

Housing Financing Based on MMQ and IMBT Contracts

Property

type (m2)

Lending/Financing Facility

First Second Third

House

>70 m2 90% 85% 80%

22 - 70 m2 - 90% 85%

<21 m2 - - -

Apartment

>70 m2 90% 85% 80%

22 - 70 m2 90% 85% 80%

<21 m2 - 85% 80%

Home

Shop/Office- 85% 80%

The relaxation is only applicable to banks with nett NPL for total loan below 5% and gross NPL for property loan/financing below 5%.

The rationale is to stimulate domestic demand in order to drive domestic economic growth momentum while maintaining compliance to

prudential principles.

68

A Comprehensive Financial Deepening Program...strategy to tackle challenges in deepening Indonesia’s financial markets


Financial Market Deepening Program

First Priority:

Continuous BasisMarket Development Coordination

Monitoring, match

making, and solution:

• Repo

• Hedging

Money Market

• Bank Indonesia Regulation (PBI) on Money Market

Encourage well-functioning money market (deep and efficient, risk mitigation, and market integrity),

• Bank Indonesia Regulation (PBI) on Negotiable Certificate of Deposit (NCD)

Enriching money market instruments, encourage banks to raise long term funding, and acts as an alternative investment for

investors

• Bank Indonesia Regulation (PBI) on Commercial Paper

Alternative sources of financing for non-bank corporations, as well as an investment outlet for investors

FX Market

• Swap Link Deposit

a combination of foreign currency deposits with FX Swap against the rupiah.

• Dual Currency Deposit

a combination of assets (deposits) and derivatives (FX Options).

• Corporate Bonds

• Government

Bonds

• Other instruments

Supporting Regulations

Market Code of Conduct Certification of DealerStrengthening JIBOR

• More comprehensive code of conduct

• The use of technology and public security

• Obligation on certification for dealers

• Dealers’ training for certification

• Extension of window time

• Increase in IDR nominal

• Lengthening tenor of up to 3 months

Inter-agency Cooperation

Signing of MoU on April 8th, 2016, between MoF, BI, and

OJK on Coordination in the Context of Financial Markets

Development and Deepening to Support National

Development Financing

The Signing of this MoU is driven by the need for:

• Sufficient development financing,

• Financial markets deepening, and

• Good coordination among related institutions

69

Stronger Fundamentals Facing the Headwinds

-197

-35

5,62

1998

2008

Sep 16

82,4

12,1

6,8

1998

2008

Sep-15

30,0

3,8

2,8

1998

2008

Agu-15

17,4

50,2

1998

2008

Sep-15

Inflation Rate (%) IDR Movement (%)

Non-Performing Loan/NPL (%)

Government Debt/GDP

Foreign Reserves (USD bn)

100.0%

1998

27.4%

200817.9%

Q3-2016

8.6x

1998

3.1x

2008 2.8x

Q3-2016

116.8%

199833.2%

200835.8%

Q3-2016

More Liquid Market (%)

External Debt (Public &

Private) to FX Reserve RatioExternal Debt/GDP

Inflation controlled within the target range Strengthening IDR with appreciation in 2016

NPL level is below the maximum threshold of 5%

Continue to decline and allocated to

productive sectors

Significantly higher than 1998 & 2008, ample to cover

8.4 months of import and external debt repayment

Significantly lower than 1998 crisisSlightly higher than 2008, but

significantly lower than 1998

Oct 16 115.0Oct 16 3.31 (yoy)

Sep 16 3.1

62

10,55,7

1998 2008 Jul-15

Overnight interbank money market rate

is relatively lower

Oct 16

4.55

5,65 (ytd)Oct 16

70

Outlook of Domestic Economy Improves...domestic economic growth is predicted to be higher in 2016

2016 Economic Outlook

Economic growth expected to increase, supported by fiscal stimulus linked specifically to accelerated infrastructure project

development. Private investment is expected to increase as a result of government policy packages and measurable

monetary easing

Inflation projected at the midpoint of the 4±1% inflation target, with the current account deficit is projected below

2% of GDP

Credit is projected to grow 7-9% in line with looser monetary and macroprudential policy mix as well as acceleration of

fiscal stimulus

2015

2016

4.79%

Economic Growth

4.9-5.3%

Inflation

3.35%

4.0±1%

CAD (% GDP)

2.06%

<2%

Credit Growth

10.45%

7-9%

Strong Commitment on Acceleration of Infrastructure Provision

Progressive Infrastructure Development:6

72

The Government has Enacted Various Reforms to Accelerate Infrastructure Provision

• Investing in Indonesian

infrastructure has been

regarded as risky

• Uncertain returns on

investment

• Did not have any fiscal

mechanisms to support the

infrastructure investment

Lack of leadership to implement

the changes needed

Indonesia regulatory corpus has

been characterized by some

ambiguities and conflicting

regulations

Fiscal Reforms Institutional Reforms Regulatory Reforms

Indonesia now has fiscal

supports:

• Viability Gap Fund (VGF)

• Availability Payment

• Land revolving fund

• Risk-sharing scheme

Revised regulations on:

• PPP, Availability Payment

• Direct Lending

• Land Acquisition

• Other deleregulations as

listed in the Economic Policy

Packages

Institutional strengthening covers

establishment and empowerment

of:

• KPPIP

• Empowerment of PT SMI &

IIGF

• PPP

Supported by improving awareness of Indonesia infrastructure issues, convergent

reforms are bulding a better business environment for tomorrow’s investment

Be

fore

Aft

er

Source: KPPIP

73

Reforms Along the Project’s Life Cycle...to encourage and accelerate infrastructure project using PPP scheme

Government of Indonesia

Project

Development

Facility (PDF)

Viability

Funding

Gap (VGF)

Guarantee

FundTax Facilities

Availability

PaymentLand Acquisition

Preparation Bidding Process Construction

Project

development facility

contributing to

assist GCA on PPP

project preparation

(PDF&TA)

Managing entity:

KPPIP, PT SMI PT

IIF, and Ministry of

Finance

A facility with

contribution to

construction

cost to increase

project financial

viability

Managing

Entitiy:

Ministry of

Finance based

on GCA

proposal

Govt.

Commitment:

49% max. Per

project cost

Guaranteeing

Govt. contractual

obligations

under

infrastructure

concession

agreements and

Mof Regulation

No 130/PMK.

08/2016 re: Govt

guarantee for

electricity project

acceleration

Managing entity:

IIGF and MoF

Govt’s

comitment:

US$ 450 mn

MoF Reg. No.

159/PMK. 010/2015

re: tax holiday for

pioneer sector, such

as base metal, oil

refinery, basic

petrochemical,

machinery,

renewable energy, &

telco equipment

industries. Sector

will be further

expanded

Managing entitiy:

Ministry of Finance

A scheme in which

concessionaires

receive sum of

money periodically

from government

after the completion

of an asset. Ministry

of Finance

Regulation on

Availability Payment

has been ratified

Managing entity:

Ministry of Finance

A facility to support

land acquisition for


particularly projects

that involve private

sector

Managing enitiy:

Ministry of Finance,

Ministry of Agrarian

and Land Spatial/BPN

and BLU-LMAN

Govt commitment:

US$ 12 mn (2016)

Source: KPPIP

74

Efforts to Accelerate Infrastructure Provision

Improvement on PPP Regulation

By taking into account the growth of PPP project potential, the Government of Indonesia has revised the Presidential Regulation No. 67 of 2005

on PPP and its amendments by issuing the new Presidential Regulation No. 38 of 2015 on PPP on 20 March 2015.

This new Presidential Regulation addresses the constraints which contributes to delays in PPP implementation, such as: PPP for the social

infrastructure; a low quality of pre-feasibility studies; gaps of quality in assets that were partly constructed by the Government; unattractive

investment return scheme; and weak Ministries/Institutions commitment for PPP projects.

The Ministry of National Development Planning has issued the Ministerial Regulation No. 4 of 2015 on the implementation Procedures for a

Public-Private Partnership in Infrastructure Provision. This Ministerial Regulation is a derivative regulation to supplement the Presidential

Regulation No. 38 of 2015 on PPP.

Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)

75

Efforts to Accelerate Infrastructure Provision (continued)

Regulation improvement to accelerate land procurement process

The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land

acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete

the land acquisition process.

For its implementation, the Law No. 2 of 2012 was supported by the Presidential

Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public

Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The

Amendment to the Regulation allows a Business Entity to allocate funding for a land

acquisition which can be reimbursed by the Government following the completion of land

acquisition process. With this Regulation, the land acquisition process is expected not to

be delayed by the unallocated budget or the delay on the budget disbursement.

Land Procurement Process as Stipulated in Law No. 2 of 2012

Source: KPPIP

Law No. 2/2012 was successfully applied in:

1. Palembang – Indralaya section of the Trans

Sumatera Toll Road Project

2. Java North Line Double Track Rail Project

76

Significant Progress on Key Infrastructure Projects

Roads Dams Housing

Trans-Sumatra Highway Merah Putih Bridge, Ambon Jatigede Dam (Operational) Raja Ampat Housing Project, Papua

Transportation

Jakarta MRT Project2 Terminal 3 Ultimate Soekarno-Hatta2 New Tanjung Priok Port Project2

Komodo Airport, NTT Matahora Airport, Southeast Sulawesi Tual Airport, Maluku Juwata Airport, Tarakan

1 Source: KPPIP

2 Not funded from National Budget

Progress of National Strategic Project (as of August 2016)1

38%37%

11% 6%

8%25 projects is being reassessed

14 projects is completed*

83 projects is under construction

17 projects is during transaction

86 projects is in preparation

*Gempol-Pandaan Toll Road, Sentani Airport,

Juwata Airport, Matahora Airport, Labuan Bajo

Airport, SHIA Terminal 3, Kalibaru Port,

Belawan-Sei Mangkei Gas Pipe, Rajul Dam,

Jatigede Dam, Bajulmati Dam, Nipah Dam and

Titab Dam

77

30 Priority Projects Within the Pipeline

Source: KPPIP

1. Balikpapan-Samarinda Toll Road

2. Manado-Bitung Toll Road

3. Panimbang-Serang Toll Road

4. Trans-Sumatera Toll Road (8 Sections)

5. SHIA Express Railway

6. MRT Jakarta South-North Line

7. Makassar-Parepare Railway

8. Kuala Tanjung International Port Hub

9. Bitung International Port Hub

10. Karangkates IV & V (2x250MW)

Hydro-Electric Plant

11. Kesamben (37MW) Hydro-Electric Plant

12. Lodoyo (10MW) Hydro-Electric Plant

13. Inland Waterways Cikarang-Bekasi-Laut (CBL)

14. Light Rail Transit (LRT) South Sumatera

15. Integrated LRT Jakarta-Depok-Bogor-Bekasi

16. National Capital Integrated Coastal Development

(NCICD) Phase A

17. Jakarta Sewerage System

18. West Semarang Water Supply

19. High Voltage Direct Current (HVDC)

20. Sumatera 500 kV Transmission Line

21. Central-West Java 500 kV Transmission Line

22. Batang, Central Java Powerplant

23. Indramayu Powerplant

24. Mine to Mouth Powerplant Sumatera Selatan 8-10

25. Bontang Refinery

26. Revitalization of the Existing Refineries

(Balikpapan, Cilacap, Balongan, Dumai, Plaju)

27. New Port Development in West Java (North Part)

28. Tuban Refinery

29. Palapa Ring Broadband

30. East Kalimantan Railway

Construction

Transaction

Preparation

Reassessed

8

5

9

18

1713

23

25

26

27

28

30

16

10

1

3

2

4

6

7

4

44

44

44

15

14

20

2122

29

29

29

29 29

29

29

29

2929

11

12

19

24

78

Energy Sector: the Progress of 35.000 MW Program

No Phase MW %

1 Planning 7,640 20.83

2 Procurement 10,844 29.56

3 Power-purchase Agreement 9,790 26.69

4 Construction 8,215 22.39

5 Commercial Operation Date 195 0.53

17 Dec ‘14

Cabinet Meeting

“There’s electricity crisis in

Indonesia, requires construction

of large capacity plant "

Jan ‘15

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)

Jan ‘15

Debottlenecking through regulation:

1. Regulation No.1/2015 concerning electricity

supply cooperation and 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 and Appointment.

16 Mar ‘15 4 May ‘15

Sept ‘16

Cabinet Meeting

Progress of

35,000 MW

Launching 35.000 MW

by the President in

Goa Beach Sanden DIY

The progress so far:

Source: KPPIP

Sulawesi

PLN: 2,000 MW

Private: 1,470 MW

Transmission: 5,275 ckt.km

Substation: 4,390 MVA

Maluku

PLN: 260 MW

Private: 12 MW

Transmission: 653 ckt.km

Substation: 620 MVA

Papua

PLN : 220 MW

Private: 0 MW

Transmission: 364 ckt.km

Substation: 460 MVA

Kalimantan

PLN: 900 MW

Private: 1,735 MW



Nusa Tenggara

PLN: 670 MW

Private: 0 MW



Sumatera

PLN: 1,100 MW

Private: 8,990 MW



Jawa & Bali

PLN: 5,000 MW

Private: 13,697 MW



35,000 MW Program Distribution

Source: PLN

79

Infrastructure Financing

79

Source: Bappenas

129.75

SOE Private

208.72 78.98

Financing

Needs

Gov’t

Budget

Financing

Gap

355.27 146.55

(billion USD)*

41,25%

58,75%

22,23%

36,52%

100%

Infrastructure Financing Need 2015-2019 General criteria for financing schemes

• Government Budget is used for basic infrastructure projects, mainly

for projects that are economically feasible but financially not.

• SOE scheme is used for projects managed under SOEs (electricity,

toll roads, oil, etc.) to leverage public funding channeled through

capital injections (PMN) and empower SOEs

• PPP scheme in mainly targeted for projects that are both

economically and financially feasible.

The government can provide financial facilites to support PPP & SOE

schemes

*) USD1=IDR13500 (APBNP 2016)

PPP scheme and facilities provided to PPP Projects

• The government may appoint certain SOEs to assign specific


• To support the infrastructure provision through the SOEs, the

government provide a number of financial facilities, such as:

• Capital Injection (PMN)

• Lending

• Credit Guarantees

• Guarantees for SOE Direct Lending

• Business Viability Guarantees

Financial Facilities Provided to Infrastructure SOEs

80

Financing the Acceleration of Infrastructure Development

• Acceleration of public infrastructure development is partly translated into programs to increase private participation and SOEs involvement

in the development of public infrastructure.

• Ministry of Finance provide a number of financial facilities to attract more private participation as well as to increase the capacity of SOEs

in developing public infrastructure.

Guarantees Amount of Guarantees (IDR mn) Outstanding Exposures (IDR mn) Number of Guarantees

Fast Track Project 1 87,871.54 50,821.29 36

PDAM 328.30 181.32 11

PPP 42,176.00 6,608.98 1

FTP 2 66,982.93 16,538.24 10

SOE Direct Lending 14,498.00 1,581.60 2

Sumatra Toll Roads 1,721.34 - 2

Total 213,578.10 75,731.42 62

Financial Facilities for PPP Projects Financial Facilities for Non-PPP Projects

• Project Development Facility (PDF)

• Viability Gap Fund (VGF)

• Government Guarantees (provided directly by MoF or

through IIIGF)

• Availability Payment scheme

• Government guarantees to SOEs’ loans from IFIs for

the Development Infrastructure Projects

• Government guarantees to SOEs’ loans for the

development of Sumatra Toll Roads

• Business Viability Guarantee Letter for PT. PLN power

projects

• Credit guarantees for Regional Water Companies

So far, the government has provided a number of guarantees to PPP and non-PPP projects as well as developed close monitoring to maintain

the fiscal sustainability. The issued guarantees are currently as follows:

81

Progress on PPP-Schemed Infrastructure Projects

With a new PPP unit already established in the Ministry of Finance and some financial facilities are already in place,

PPP projects started to show some real progresses.

There are 3 projects already

reached financial close in 2016 and

one more to come in November

2016. Another project will reach

financial close in March 2017

Other projects are on the

final stage of progress (PPP

and guarantee contracts

have been signed).

Some significant numbers

are on the final RFP while

others are still on the

preliminary stage.

82

Progress of SOE Projects: Facility for Non-PPP Projects

The government issued government guarantees to loans of PT. Hutama Karya in the development of Sumatra Toll Road,

which comprise as follow:

Progress of projects benefiting from guarantees on SOE direct lending:

Projects benefiting from guarantees on SOE loans:

Other guarantees that have been provided to SOE projects:

No. Project Name Project Cost

(USD)

Lender SOE Status

1 Sumatera Power Transmission and Distribusion 600 mn ADB PT. PLN Guarantee is effective

2 Sumatera Power Distribution 500 mn World Bank Pt. PLN Guarantee is issued but still inneffctive

3 The Enhancement of Electricity Grid 330 mn IDB PT. PLN Proposal has been submitted

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