indonesia -kkr insights 130627

7/30/2019 Indonesia -KKR Insights 130627

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2/28

2 KKR InsIGhTs: Global macro Trends

Indonesia: TransitioningPotential Into RealityIn a world increasingly starved for growth, we believeIndonesia has several substantial macro tailwinds thatwill continue to drive its GDP higher and potentially

with lower than average volatility. However, recenteconomic growth has come at a significant cost, andin our view, the country now needs to address thenotable increases in both its fiscal and current accountdeficits. If the country can successfully address thesechallenges, then we think Indonesia could representone of the more compelling opportunities in the globalcapital markets over the next five to seven years.

KKR global MacRo & asset

allocatIon teaM

henRy h. McVey

Head of Global Macro &

Asset Allocation

+1 (212) 519.1628y.vy@kk.

DaVID R. McnellIs

+1 (212) 519.1629vi.i@kk.

FRances b. lIM

+1 (212) 519.1630f.i@kk.

Rebecca J. RaMsey

+1 (212) 519.1631.y@kk.

MaIn oFFIce

Kg Kvi rt & c. l.P.9 Wt 57t sttsit 4200nw Yk, nw Yk 10019+ 1 (212) 750-8300

coMPany locatIons

Usa nw Yk, s Fi, Wigt,d.c., m Pk, ht eURoPel, Pi asIa hg Kg, bijig,sigp, di, Tky, mi, s

aUstRalIa syy

2013 Kg Kvi rt & c. l.P.a rigt rv.

Unity in Diversity

MPU tantUlaR

hIndu PrIesT (14Th cenTurY)


3/28

KKR InsIGhTs: Global macro Trends

W I fit wt t Ii i 1995, I tkk t bkit lwg i

t st wit y t i fi t gt

i t ift. T ti y, it i f t igigt f y

itti tv. my xt tip t Ii w i 2001, I

pt t i f y ti i bi wit y wif kig

fig t tif t ikig p i t

ty ift.

s igt igi, w I t w i t ty

gt ity, Jkt, fw wk k, t tk g tt

w 100% wk-t, t t iig, tffi w w tiy k t y pvi i. s, I g t

ii tt Ii ti tt, wi i

tk f 14t ty p, i uity i divity. Iptty,

tg, Ii t f ffig i t iit t jt g-

gpy; it ppi t t ty i kp f igi,

ti, t i ivity.

nt, ti tip t w qit I ft t ty

wit tig f wy Ii i ig

iptt ipi i t ti i f t v stt

ai gi i t g y. I, ig t it ity

f pp ivity f , Ii w t

i tjty tt i p t tp-10 yy 2030. Pttiy iptt t ivt i tt Ii

y t ti gt y 2050, tiig

y ci Ii.

bt t fy t wt i gig i Ii, -

ti i tt fk t gt t f Jkt, t ti pi-

t i pw (.g., Jkt t f 20%+ f GdP

gwt1), p ti i iti ik sy m. Wy?

b w iv it giv ivt t ppiti f t

, t ft gwig yi pt f t -

ty y. mv, y viitig xitig pt, ti

tt i t iti, ivt gi tt -

tig f w v ipvt i tgy, ti,

iftt tiy t ipvt i t

ty GdP p pit.

hwv, i i t y t igifi-

t t. aft t f t iipi -

ig -t tt, Ii i w f t fw ai

gig kt (em) ti wit t fi t -

t fiit, wit Ii ig t y t j em ty wit

ti ititi. a ky pit f ti i t ty

f iy pg. a t, t gvt w p 3.7% f

totalGdP f ii t pt iigy v vt-

ig 2

. I viw, ti typ f piy i xty tigt y g t t igifit y ifti

.

by vpig f ii, t ty i iitig

it iit gvt i wy f t iftt, t-

ti iititiv tt t ty pty t

1 dt t m 6, 2013. s: b Pt sttitik.

2 dt t my 31, 2013. s: dpt Kg, bi Pt sttitik,ImFWeo, hv ayti.

ffi it g-t ptti. Ti viwpit i t t -

t, w iv, ity w tt igi pi

ft t , tyig t g-t ptivity

ptti gwt.

Giv t tti -t, I tgt it igt

k t ti f y ipi f y t tip

Ty fw:

Favorable Demographics Will Likely Drive Further Increases in GD

per Capita sii t Ii, Tky bzi, Ii i ft gpi it ti, wit 50% f it pp

ti t g f 30 (Exhibit 17). 2012 GdP p pit w j

$3,596, 3/5 t v f ci y 1/3 t v f bzi (Exh

22). T g w i tt t gp i w wig Ii

GdP p pit (i usd) p t gwt

f 18% tw 2005 20113, w k f ft 40%

gggt i f 2012 t 2017. Giv tg tiwi

Ii i pjt t t ft iggt

i t w y 2030 v jt 18t ty (Exhibit 10). Witi t

kt, w t ty, tptti, i

ti/tiig tttiv kt.

High Corporate Sector Profitability in Fast Growing Region of theWorldIi pi igy pfit, kig g

t t tiv i ai. I ft, t qity f t I

ix f piy t pi i 21.5% v 16.5%

f Ti 13.5% f myi4. I viw, tg pfiti

pt t y xti t i ftiv f t

pitiv tiwi tt Ii jy y ig pt f t

ft-gwig stt ai gi. ay, 70% f Ii

xpt w ty witi ai, wi i igifit t oecd i

pjtig i i t gi t i y

tggig 515% t 3.2 ii y 2030 v 525 ii i 2009

Despite Strong Growth, Credit Penetration and Government Lever

age Are Still at Attractive Levels ev wit 20% caGr v t

pt fiv y, ti it t t pivt t i Ii

w jt 33% f GdP v 55% f Ii 130% f ci i

2012 (Exhibit 13). Ti w ti i iptt it

tt not tifiiy p fw, ,

t gi t it gwt i ti qit ig. mwi

g gvt vg ptg f GdP f t jt 24

i 2012 f 95% i 2000 (Exhibit 14), ggtig tt t gv

t py p , ptiy i

vi iftt. ov, Ii t ttiti

v ipiv w t git t kp f

ty tg 6% iz GdP gwt t (Exhibit 8).

Wt ty ggt t t t i ttt ty vg ptivity i qit tg ik

t i . a t, v t t fiv y ptivity

4.4%, p t 1.6% i ty ik bzi.5

However, There Are Definite Signs of Economic Slippage I 2012

3 Ibid.2.

4 dt t my 31, 2013. s: mscI, Ftt.

5 dt t d 31, 2012. s: bi Pt sttitik, Itittbii Ggfi ettti, hv ayti, KKr Gmaa t


4/28


Ii 2.7% t t fiit, wi it fi fiit

gtiv 2.1% v ty g iit f 3.0%6. I

2013, t i ig t fiit v y gtt

gig. Twi fiit i ft gwig i,

, ty ft pt iit jtt pi,

iig y wk / ifti wi. Giv tt

t F y w fiy witwig x iqiity, Ii

y f t k jtt t it fiit piy t ti

w it t f pit i w t ti t i. extig

t i i t ty g f iy pg, wi w

tt 3.7% f GdP. T pt ti i pptiv, t ty fit t f iy pg i t q i t t

ptg f GdP t wt t gvt w

p pi t ti pg combined7. W

tiy kwg tt t gvt i w i t p

f igig i pig f ii, t ftty it

pp tt t i wi it tw t pg

tt kp it i t t v.

Hard Place to Do Business aig t t W bk e f

dig bi Ix f 2012, Ii i k 128 t f 185

i, igty tt t bzi Ii t iffit

t ci. Iptty, ti kig f ft ft it w

tt fig wig i t kti ppti t y 2018. W pt

f i xtiv t t gwig pw f it

ipt ptig t, gi ptig fxiiity i p-

ti. Fiy, itty t i t p,

pti i gig i i Ii tt fig

ivt t i fy.

Need to Translate Recent Commodity Economy Into a New Ser-

vices-based EconomyI viw, t ty v ft

t pitiz t igifit pptity t vg it t

ity ivi it t f t y, iig

vi iftt. at t t, Ii jt 39%

f it ity i vi v 56% i Ii 68% i bzi

(Exhibit 16). T ik f iig ti pptity i igifit

t y ti 35% f tt pyt t t gi-

t; v, 74% f t i i xpt i 2011 w iv

y pi, t v (Exhibit 46). rt t t ft ti

viw 1Q13 GdP f t 6.0% y/y f 6.8% i 4Q2010, iv

gy y i i t pi f , i, p i

8. a wit ci w iftig it gwt piiti tw

pit-itiv gwt, t i y igt ik tt

Ii y v y i it wiw f pptity.

s wt i tt i Ii? sipy tt, i w

w it i iigy t fi gwt, w tik tt sttai, Ii i pti, pt f t pig

g-t ivtt titi. uik y f t g

ig pfi em ti, Ii -

y, it t i w, it i i i y

it t ig pfi gig kt ik ci,

Ii, bzi. a wit ptivity, Ii GdP

6 Ibid.2.

7 Ibid.2.

8 dt t my 6, 2013. s: bg.

gwt i igt t tiv t i.

exhIbIt 1

Indonesian Equities Have Re-rated Since 2004

May-1315.3

Avg, 11.2

+1

-1

4

6

8

10

12

14

16

18

01 02 03 04 05 06 07 08 09 10 11 12 13

Indonesia: Forward Price-to-Earnings

dt t my 31, 2013. s: Ftt agggt.

exhIbIt 2

But Indonesian Equities are No Longer Cheap

May-133.9

Avg, 2.8

+1

-1

0.0

1.0

2.0

3.0

4.0

5.0

6.0

91 93 95 97 99 01 03 05 07 09 11 13

Indonesia: Trailing Price-to-Book

dt t my 31, 2013. s: mscI, Ftt.

I t -t tg, t v wy p-

ti kptii i qi. Pi vti w i

y it t ti w igifit wg gwt i gi-

ig t p gi. a wit u.s. itt t iig, t

ptiti f pit i w gig p, it i iky t p

gig kt i itt t i t ft. Fi

w tik GdP gwt i Ii i iky t ippit i t

t, iv gy y w ity pi wk xp

gwt.


5/28


exhIbIt 3

Given the Countrys Imbalances, the Indonesian Rupiahis Now Beginning to Depreciate

8500

8700

8900

9100

9300

9500

9700

9900

10100

10300

10500Jan-11 May-11 Sep-11 Jan-12 May-12 Sep-12 Jan-13 May-13

Indonesian Rupiah Spot Exchange Rate

(USDIDR)

Weaker Rupiah

dt t J 18, 2013. s: bg.

exhIbIt 4

Its Sovereign Bonds Are Now Too Under Pressure

-50

-25

0

25

50

75

100

125

150

175

Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13

YTD Change in 10-Year Govt Yields (bp)

U.S. Indonesia China

Korea Malaysia Singapore

Thailand

dt t J 20, 2013. s: bg.

o t pivt i, t ty i v px. F

vtg pit, p i iky qi, t t i

gi t t p tt t i if fftig t ivtt ii i-

t t gi. a, giv tt t t f pit

i w w tiv t ity, pivt qity fi ig

t jt ti pit ; ty g pt wit

tg pti piiti ity xpti. eqy

iptt, pivt qity ivt y t wk wit

t iti i wi ty ivt t vigt t

t tw iig gvt itvti, tii

i qity.

exhIbIt 5

Large Subsidies and Weak Tax Collection Have WideneIndonesias Imbalances

0

5

10

15

20

25

-3

-2

-1

0

1

2

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

Indonesia: Fiscal Balance % of GDP (Left)

Indonesia: Government Revenue % GDP (Right)

Indonesia: Government Expenditure % GDP (Right)

dt t J 19, 2013. s: dpt Kg, bi Ptsttitik, ImF Weo, hv ayti.

exhIbIt 6

Indonesia Has Rigid Employment Policies

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

U.S.

Russia

Brazil

India

China

Greece

Indonesia

Mexico

Turkey

OECD Employment Protection Index, 2008

(Scale 0-6, a higher score indicates more restrictions)

dt t d 31, 2008. s: oecd. T fi t tt tgy t t t oecd pyt pttiiit, www..g/pyt/ptti.

GDP: Consistently Strong

I w f iig i itiity, t p

pttiy iptty t ti f Ii

gwt t i t pit f ititi. I 2012, f xp,

t ty iti 6.2% gwt t, pit t ft tt

pt w ty gtiv f t fit ti i igt y (Exh

8).


6/28


a v t t 12 y, t ty g t wt

vtiity yiity f GdP i t j i w fw.

o t tiity t f t i t i

Exhibits 7 and 8 w.

exhIbIt 7

Relatively Low Volatility or High Single Digit GDP Growth

Laos

China

CambodiaKorea

Indonesia

Brazil

Singapore

Turkey

EuropeanUnion

0

1

2

3

4

5

6

0 2 4 6 8 10

StdevofRealGDP2000to2012(%)

Average Real GDP 2013 to 2018 (%)

Real GDP vs. Volatility

dt t api 16, 2013. s: ImF tit, KKr G m &at ati ti.

exhIbIt 8

Despite the Net Export Drag, Real GDP Was 6.2% in2012

-4

-2

0

2

4

6

8

00 01 02 03 04 05 06 07 08 09 10 11 12

Indonesia: Real GDP Y/y (%)

Statistical Discrepancy Net Exports

Gross Fixed Capital Formation Government

Private Consumption Real GDP

Net exports a drag to growth

for the first time in eight years

Fiscal stimulus and

strong credit

growth off set weak

external conditions

dt t my 6, 2013. s: bi Pt sttitik, hv ayti.

a jor reo for Ioei cce i tht the ecooy i ot

too epeet o oe ector or proct. I prticlr, the Ioei

ecooy h it ow virt oetic coptio ecooy. by

coprio, y eergig rket we viit re either overly relit

o low-e export /or high fixe ivetet. If there i hort-

coig i GdP copoitio, we wol rge tht it i the gover-

et low peig rtio. a oe c ee i Exhibit 9, Ioei

goveret cotritio to GdP ttilly lg tht of it peer.

exhIbIt 9

Indonesia Has a Relatively Balanced Economy...

60

21 20

-1

57

20

28

-6

56

9

34

1

35

14

48

3

Consumption Government Investment Net Exports

GDP Composition (2012)

Brazil India Indonesia China

PPP=pig pw pity. dt t J 4, 2013. s:Ititt bii Ggfi ettti, Ii ct sttitiogizti, bi Pt sttitik, ci nti b fsttiti.

exhIbIt 10

And By 2030 Should House the Worlds Fourth LargesConsumption Market

ToP 10 CoUnTRIeS: MIDDle ClASS ConSUMPTIon

(TRIllIonS of 2005 PPP DollARS)

2009 2020 2030

1 u.s. 4.4 chIna 4.5 IndIa 12.

2 JaPan 1.8 u.s. 4.3 chIna 10.

3 GermanY 1.2 IndIa 3.7 u.s. 4.0

4 France 0.9 JaPan 2.2 IndonesIa 2.5

5 u.K. 0.9 GermanY 1.4 JaPan 2.3

6 russIa 0.9 russIa 1.2 russIa 1.4

7 chIna 0.9 France 1.1 GermanY 1.3

8 ITalY 0.7 IndonesIa 1.0 meXIco 1.2

9 meXIco 0.7 meXIco 1.0 braZIl 1.2

10 braZIl 0.6 u.K. 1.0 France 1.1

World 21.3 World 35.0 World 55.

PPP = pig pw pity. dt t Jy 2010. s:bkig Ititti, oecd dvpt ct Wkig Pp n.28deV/doc (2010).


7/28


exhIbIt 11

Productivity in Indonesia Is Relatively High

-14

-12

-10

-8

-6

-4

-2

02

46

8

10

12

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

Indonesia: Real GDP Y/y (%)

Labor Force Productivity Real GDP

President

Susilo

Bambang

Yudhoyono

2004-current

1998 Habibie

1999 Wahid

2001 Megawati

President

Suharto

1968-1998

(1) r GdP f 2012. s: bi Pt sttitik, hv ayti.(2) Ppti tit f my 11, 2011. s: uit nti

W Ppti Ppt, hv ayti.

exhIbIt 12

Growth in Smaller Cities Will Outpace Jakarta

5.9

5.9

5.3

5.9

6.4

6.7

5.8

Indonesia

Rural

Other cities


8/28


exhIbIt 14

As Is Government Leverage

23

24

34

36

42

44

5255

67

68

107

111

238

China

Indonesia

Korea

Turkey

Philippines

Mexico

VietnamMalaysia

India

Brazil

U.S.

Singapore

Japan

2012 Gross Government Debt % GDP

dt t api 16, 2013. s: ImF Weo, hv ayti.

o tip ft wit t itit ipi tt t i

j pptity t k t ty iig git

t ptiv. a Exhibits 15 and 16 itt, gitpyt t f f 35% f tt pyt, t jt

t 15% f tt GdP. Iptty, t gvt i tt-

ig t it pt, pig viy f ipv fig tiq,

iig ftiiz ipvt pitit ig.

ri i ti t ty tp p, t giv gig ,

t ty i ti t ipt t 2012. T ty i

w t w gt p f p i, it i

g t i pti.

T i igifit pptity f GdP gwt i t -

ty vi t. a Exhibit 16 w, Ii vi

t i ti tivy t 39% f GdP. by pi, ci,

Ii bzi v vi t tt tw 6 t 29

ptg pit f GdP highert Ii. a ky i

tt it ptti i tivy w, wit w it pt-

ti t GdP p pit, t ty ti ig

gt f t vi kt ti i ti ify tiv t

y t gig kt ti.

exhIbIt 15

The Agriculture Sector Is Still Relatively Large

17

25

32

35

35

51

52

Brazil (2009)

Turkey (2011)

Philippines (2012)

China (2011)

Indonesia (2012)

India (2010)

Vietnam (2009)

Agriculture % Total Employment

dt t d 2009-2012. s: W bk, hv ayti

exhIbIt 16

While the Services Sector Is Relatively Small

14

47

39

10

45 45

17

26

56

5

26

68

Agriculture & Livestock Manufacturing,Construction & Mining

Services

2012 GDP by Industry (%)

Indonesia

China

India

Brazil

Indonesia servicessector is still

relatively small

dt t api 15, 2013. s: bi Pt sttitik, Ii ctsttiti ogizti, ci nti b f sttiti, ImF, hvayti.

s wi t i wk t i t f f

gvt pig t t giz t pivt t

i ptip wit t gvt t iftt

ft, w iv t Ii GdP gwt ty i t iky t

ff t igifit ww i GdP tt w -

ig i Ii, ci bzi. T , xpt gwt ik titi itti t i iky t ippit i t

-t, t wg iig, pig i gwig, GdP p

pit i tikig ig. eqy iptt, t ty y

g it t k it pt t g

y t t it gwt ft. a t, w tik tt t

g-t tk f t ty k it tttiv titi

f gig kt-it gwt pit.


9/28


Consumption: Demographic Tailwinds Are Favorable

Some people want it to happen, some wish it would happen, others

make it happen. bkt t mi J

W it t pti, wi i y t gt pt f

t Ii y t 56%, t i qti tt Ii

i i t mi J k it pp tgy. I, Ex-

hibit 17w, Ii t y yg ppti t

gwig , wit g pti ptti. Iptty, ti

t i iky t gi t , w w Exhibit18, Ii wkig ppti i t iky t pk ti 2036.

a ik ty ik ci, wi t g v

t p, Ii ptty g tw vig

pti.

exhIbIt 17

A Young and Growing Population, Fourth Largest in theWorld

Cambodia

Spain

Russia

Australia

U.S.

China

TurkeyMexico

Hong

Kong

VietnamBrazil

Indonesia

India

Philippines

Japan

Germany

Singapore

-20

-10

0

10

20

30

40

50

20 30 40 50 60 70

TotalPopulationGrowth2030vs

2010(%)

Percent of Population Under Age 30 (%)

Young and

growing

population

dt t spt 26, 2012. s: uit nti WPpti Ppt, hv ayti.

exhIbIt 18

The Demographic Dividend Crests in 2036

2036

2016

2052

2032

80

100

120

140

160

180

2000

2004

2008

2012

2016

2020

2024

2028

2032

2036

2040

2044

2048

2052

2056

2060

Working Age Population Indexed: 2000 = 100

Indonesia China India Brazil

Indonesias workingage population willonly peak in 2036

dt t spt 26, 2012. s: uit nti WPpti Ppt, hv ayti.

I gggt, Ii i i xpt t gw t 95-

ii pp, 35-45% f t tt ppti y 2030 v ii, 18% f t tt ppti ty (Exhibit 20). a if

t ti pti t k t t 2050, Ii wi v

t ti gt i ppti i t w, i y

ci Ii (Exhibit 21).

exhIbIt 19

The Current Middle Class Is Only About 45 Million

0

200

150

100

50

Pakistan

Egypt

Colombia

Philippines

Peru

Malaysia

Thailand

SaudiArabia

Indonesia

Argentina

Poland

Russia

Turkey

Mexico

Brazil

India

China

2011: Size of Middle Class Population

(millions)

Chinas middle class is

estimated at 300-400 million

s: hsbc pt c i 2050 t ot 2012.

Twin decits are rare in astgrowing EM economies, and

as such, they oten portend animminent adjustment period.


10/28


exhIbIt 20

But it Is Growing Rapidly

45

95-125

245

280

2012 2030

Indonesia: Population (millions)

Middle Class Population Total Population

Middle classis 18% total

population

Middle class is35-45% total

population

s: ati y aii Pg Ii t ot 8, 2012qtig dpty Fi miit m sig.

exhIbIt 21

By 2050, Indonesia Will Have the Third Largest MiddleClass Among Emerging Markets

0100

200

300

400

500

600

700

800

Poland

Argentina

Malaysia

SaudiArabia

Peru

Turkey

Colombia

Pakistan

Thailand

Mexico

Russia

Philippines

Egypt

Brazil

Indonesia

China

India

2050: Size of Middle Class Population

(millions)

Third largest middle

income population among

emerging markets

s: hsbc pt c i 2050 t ot 2012.

exhIbIt 22

GDP per Capita Should Grow by 40%, or 7.4% AnnuallyOver the Next Five Years

1998, 517

20123,596

20175,136

0

1,000

2,000

3,000

4,000

5,000

6,000

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

2015

2018

Indonesia: GDP per Capita (US$)

Indonesia

Estimate

14.9% CAGR

7.4% CAGR

dt t api 16, 2013. s: bi Pt sttitik, ImF, hvayti.

Giv it tg gpi pfi iftig i iv-, w xpt t t tw iig GdP p pit t it

tg t v t xt fiv t v y. at t

izti i y 51-52% f t tt ppti (Exhibi

23). W iv ti iy ti t i

i y 70-80 p, ig 57% pt v t xt fiv t

v y. s ik t t-p i izti tt

ftig i Ii t ig tt ftig

ci, t Ii ty i y t tyig t , i

ig tiy iftig GdP p pit vi izti fft i

f it iti.

exhIbIt 23

Urbanization Moving in Sync with China

51.5

51.8

31.7

85

0

1020

30

40

50

60

70

80

90

1960

1964

1968

1972

1976

1980

1984

1988

1992

1996

2000

2004

2008

2012

2016

2020

Urban Population % of Total

Indonesia

China

India

Brazil

dt t m 18, 2013. s: W bk, hv ayti.

The long-term outlook or the

country makes it a highlyattractive destination or emerging

market-oriented growth capital.


11/28


exhIbIt 24

Given Current Urbanization Trends in Indonesia, GDPper Capita Can Still Move Higher

3,596

1,543

6,076

11,478

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1970

1974

1978

1982

1986

1990

1994

1998

2002

2006

2010

2014

2018

GDP per Capita (US$)

Indonesia India China Brazil

dt t api 16, 2013. s: W bk, bi Pt sttitik, Iict sttiti ogizti, ci nti b f sttiti,F Ititt, b ct bi, ImF, hv ayti.

ov, w k , viw i tt gpi

t, iig t iz i i t ty i

tg 2030, iky t k Ii f t t p-

ig gwt ti i t g y. Iptty,

t ty t t y t f xt f

t f. rt, it jt t f tw g, t f

wi w tik iv. Fit, it xt iig

t i g vi, iig iftt, ti,

t. s, t ty t w it -

gpi f t p iv it y wy f titi

git iti tw vi v-

xpt.

Industry: Focus on Middle Class Beneciaries

a pt f tip t Ii, w pt ti tkig wit ig

xtiv i gvt ffii t wi t

w fit f t gig g w ig i t

ty gpi pfi. T , kw xty

w ig f t ty i wi xty py t

v t xt , t w iv tt k -

pti ft ig iti pi t ft

wi t iky t t t pf. nt piigy,

y f t iti w viw fvy i t pt

f t y. Iptty, ti viwpit i itt wit pp t t ig gig i, tg w

i w vy ty piti, i i

t wi t py ttti.

T ti , w p ti i ti ti igigtig -t-

t tt w tik y fit ti i-t t,

iig ti tiig, t, ti, ig/

fii vi. P t, wv, tt w t

Ii iftt pptity i vig ivtt

ti, giv tt it i g g f gvt ivv-

t.

Education and Training o f t gt ii f viitig

gig kt ik Ii t y i tt, pit it

ig f gwt, t i ti tg f ki

i y t f t y. at t t, t py

t i Ii i jt 5.9%, w f 8.5% fiv y g.9

hwv, ft tkig wit ig xtiv vity

t i Jkt, w tgy f tt t pyt t

tt wt w tik i g gwig i: t iit

f y i t fi wk wit t qi t xpti t pt i iigy ptitiv y.

i ptitiv w t iv ft g-t

gwt, tg viw i tt Ii t iity

ivt ggivy i ig-v ti v

ti ity tiig iititiv.

o w tt Ii f tip i i t

f ig ti. a w w i Exhibit 25, ti pi

i Ii i ti w w y f it gig kt p

p pit i. Py iptt tg, t i t

y 7% f t pt pt-y ti (Exhibit 26

exhIbIt 25

Public Spending on Education Is Just 3% o GDP

2.73.0

3.3 3.3

5.35.6 5.8

6.6

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

Public Spending on Education % GDP

Government

spending on

education is just

3.0% of GDP

unesco ttiti t d 31, 2010, xpt ci p oecd2008 tit. s: unesco, oecd.

9 dt t m 31, 2013. s: bi Pt sttitik.


12/28


exhIbIt 26

and Higher Education Is Lacking

38

23

1614

97

0

5

10

15

20

25

30

35

40

U.S. France Chile Mexico Brazil Indonesia

% Adults Completing Post Secondary Education

s: JPmg eti i bzi pt t Fy24, 2011;unesco G eti digt 2010.

o ttiv tt iig f fft Ii

ig i t ti ki t t uit stt ep fig ti. hwv, ti pp y t

w t ty wi wit t 50 ii i

Ii w g t ipv ti tig i t g

wkf. If t i gig t, w tik tt it i ik

t t ft tt tt giig t gi v-

ti pg (Exhibit 27). Iptty, w viw t t tw

gt ptiipti i ig ti vti tiig

, t yi, tt i iky t j pptity

f pivt pit, wi p t xpit ti pt f

ti gwt, iig fiiti, piig, ti t-

gy.

exhIbIt 27

O Late, More Students Have Enrolled in VocationalTraining

18

20

22

24

26

28

30

32

34

36

38

1,100,000

1,200,000

1,300,000

1,400,000

1,500,000

1,600,000

1,700,000

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07

Shareofvocationalstudentstot

otal

s e c o n d a r y s t u d e n t s ( % )

Numberofvocationalstuden

ts

Vocational School Enrolment 1992 - 2007

Number of Vocational Students (Left)Share of Vocational Students to Total Secondary Students (Right)

dt t d 31, 2009. s: nw sy,

2009 ( s).

Healthcare Witt qti, ft t t tip t I

i, w tik tt t gw tiy ft

t GdP p pit v t xt 5-10 y. Ky t tikig

i tt GdP p pit i Ii i itiy t v w

w typiy pivt t pti tt t g tk

f w gvt- fiiti. b t i

gti f piig qity f vi, t ppt-

ity f qity pivt pi t i y fwig v

ti i igifit. mv, itiz t t f

wkf tg i izti, t pig,

ptiy wit pvi, fit ty. W

tip tt fig t t pvi

y gi t t ty v t xt t t fiv y

wi p t ipv t v f pig t

vi tgt t ty.

agit ti kp, w xpt t ptg f

GdP t i igfy v ti t. Ti ttt i

y t tt i, giv tt Ii t g t w

t f y ptg f GdP t t. I,

Exhibit 28 w, t pig ptg f GdP i

t 1%, wi p fvy wit bzi Tky

v Ii.

The greatest wildcard

surrounding the question othe countrys growth trajectory

is whether the currentadministrationand its successor

government in 2014has the near-term courage to make the rightlong-term decisions that addresssome o the countrys structural

shortcomings.


13/28


exhIbIt 28

Health Care Spending Should Rise

0.9 1.21.4

2.7 2.9 3.0 3.1

4.1 4.1

5.0

7.4

8.2

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2011: Public Health Care Spending % GDP

dt f 2011. s: W bk, hv ayti.

exhIbIt 29

As We Now Expect the Inormal Economy To Begin toShrink More Quickly

32.6

42.3

62.1

68.2

70.1

72.5

78.4

83.6

86.4

China

Thailand

Sri Lanka

Vietnam

Philippines

Indonesia

Pakistan

India

Nepal

Informal Employment as a Share of Non-

Agricultural Employment, Most Recent Year (%)

s: Itti l ogizti (Ilo): sttiti pt pyt i t if y (Gv, J 2012); ntittiti ffi, ttp://t.i.g/if_y_e.t

exhIbIt 30

Healthcare Facilities and Services Are Defcient

6 917 23

30 3038

103

137

2 720 18 24

2818 20 21

Indonesia

India

Mexico

Brazil

U.S.

U.K.

China

Korea

Japan

Hospital Beds (per 10,000 People)

Physicians (per 10,000 People)

Just 6 beds and 2

physicians per

10,000 people

dt t api 17, 2013. ltt vi t p ptiv ty p t W bk. s: W bk, hv ayti.

exhIbIt 31

Indonesias Healthcare Spending Is Among the Lowest Emerging Markets

1.2 1.42.3

4.4 3.1 4.06.9

4.1

8.2 8.3

1.1 2.8

2.3

1.6 3.32.9

1.64.9

1.6

9.1

2.4

4.2 4.6

6.1 6.46.9

8.59.0

9.8

17.4

Indonesia

India

China

Turkey

Mexico

Korea

Japan

Brazil

U.K.

U.S.

Public & Private Expenditure

on Health Care % GDP

Public Private

dt i 2009 tt vi y. s: ogizti fei c-pti dvpt (oecd), Ftk 2011:ei, evit si sttiti - Isbn 978-92-64-111509 - oecd 2011.

lkig , viw i tt wt t,

gwig ptg f t ppti wi igt twpivt ii pit. Ti t i pyig t iy i

t t gig kt w viit, , w xpt

t ii t i Ii i t ig y. Ip

tty tg, t Ii gvt ift tw f

tiz tt i 2001 iky tt t pivt

t y ifti i t p t i

t em ti. spty, w xpt v t

v t i, wi t pptity f

py i t t ppy iti, iig ttig

pvttiv pti.


14/28


Retail/Restaurants/QSR I ty, tivig fit

pi tt t, f t y g t p-

p. bt i Exhibit 32, t v ti kt i

Ii i gy tt. a if w Ii gy

tiig pxy f v tiig, i Exhibit 33

tt it i qit it. a t I ft, Ii v-

i t, ypkt t ptt t y

pt 2-4% f tt ti . I t vpig

kt, y pi, pi 10% f tt ti

10.

exhIbIt 32

The Indonesian Market Is Still Young and Far FromSaturated

0

10

20

30

40

50

60

70

Mexico

Malaysia

China

Brazil

Turkey

Vietnam

Indonesia

Kuwait

India

The 2011 Global Retail Development Index: Market

Saturation

(0=saturated, 100=not saturated)

s: T 2011 a.T. Ky G rti dvpt Ix, ttp://www.tky.

10 s: JPmg Indonesia Retailers: Organizing the shelf, filling theshopping baskett m 10, 2013, eit.

exhIbIt 33

Services as a Percentage o GDP Are Still Small as theBasic Retail Segment Is Far From Fully Developed

1425

4253

71 7684 88

8675

5847

29 2416 12

Indonesia

Philippines

Thailand

Malaysia

Singapore

SouthKorea

U.S.

U.K.

Breakdown in Grocery Retailing

Modern Traditional

s: JPmg Ii rti: ogizig t f, fiig tppig kt t m 10, 2013, eit.

agit ti kp, w tik pivt qity ty p

gt wy t ti t. spifiy, viw

tt Qsr (qik vi tt), ki k-

f pt ittig pivt qity ivtt ppt

ti, ptiy w t gti ift i pivt

py wip ity wit gt t w

g t it gt ppti f ti iti.

Housing and Financial Services a f fii vi

yt, I wy viw t kig t t if f y

y. T g w f Ii wi w fi

viit i tt t k i gt p. mv, wi

t i tt- pt t pt f t kig t, it

p i pi t wt w i y f t g gi

i. ov, it w, gi tg

gwt i vi.

lkig t t ti, it ptti i tt i Ii i j

32% f GdP, f wi tgg ptti i jt 5% f GdP (E

hibit 34). spty, tt i ptti i tiv

w y g t i Ii. m y g pi

witt ptg f GdP, ptti i y 1.7% v,

p wit t w vg f 6.6% i 2011 (Exhibit 35).

Importantly, Indonesia has been

able to grow its economy withoutthe use o leverage rom either the

government or private sector.


15/28


exhIbIt 34

Credit Penetration Is Low

5 10 5 4 20 732 38 32 42

16

6384

2732 45 47 35 55

69 67 8074 111

73

111

Indones

ia

Mex

ico

Tur

key

India

Po

lan

d

Braz

il

Korea

Germany

Ma

lays

ia

France

China

Swe

den

U.S.

Credit to Private Sector % GDP

Mortgages % GDP Other Credit % GDP

dt t 2012 tt vi. s: rptiv tittiti gi.

exhIbIt 35

As Is Insurance Penetration

2.8%

1.1%

3.8%

0.6%

Global Indonesia Global Indonesia

FY11 Insurance Penetration in Indonesia

Life Insurance Pentration Non-Life Insurance Pentration

*I ptti fi g i pi witt ptg f GdP. s: W I i 2011, swi r sig.

exhIbIt 36

Interest Rates Are Now At 6.00% rom 12.75% in 2005

Dec-0512.75

6.00

Oct-0514.68

Feb-124.25

5.25

B3

B2

B1

Ba3

Ba2

Moody'sUpgrade to

Baa3

2

4

6

8

10

12

14

16

05 06 07 08 09 10 11 12 13

Bank Indonesia Policy Rate (%)

Jakarta Interbank Rate (JIBOR) 3-Month (%)

dt t J 13, 2013. s: bk Ii, bg, hvayti.

exhIbIt 37

Fueling Credit Growth, Which Remains Strong at 23%

Aug-069.2

Oct-0838.5

Nov-095.5

Jan-1323.1

0

5

10

15

20

25

30

35

40

04 05 06 07 08 09 10 11 12 13

Indonesia: Credit Growth Y/y (%)

dt t Jy 31, 2013. s: bk Ii, hv ayti.


16/28


exhIbIt 38

The Loan Loss Ratio Appears to Be Structurally MuchBetter Since the Asian Financial Crisis

34.431.9

24.0

6.84.5

7.4 6.14.0 3.2 3.3 2.5 2.1 2.1

2012 Indonesia: Bank Nonperfoming Loans to Total

Gross Loans (%)

dt t api 17, 2013. s: W bk, hv ayti.

hwv, vti wit i xtiv i t fii

vi ity t iv tt it gwt i w fiy

ptig g f , wg gw

izti gi t ft t. citt wit tiviw, w tt ig i ti pt f t

kt tt i ttig t gw iy. F xp, w I w i

sy, I viit g ity vpt f y 60-70

t f ig it wit pig i-

ti, y f wi w ii t t wt-ty

wig. n t, t ity I viit w t xp-

ti t t ( w w pty f ty t t fi ti

viwpit), t it tiy pvi wit wiw wy I

tik ig tgg-t tivity -

igf pt f t y.

If t i i, it i tt t kig yt -t-pit

ti i vig p t qiky (Exhibit 39). o p xtiv

wit w w pk iv tt k f gvt pig

ivtt w pt f t p. Ky t i tikig i tt

pit tt titiy igt fw tg t kig yt vi

pit t p fi ptiv g-t ivt-

t w ty ig it tw p-

ti-it pg, iig ii. W t t wit

ti gi, ptiy t ty pit-t-GdP ti i w

t wt i t ai (Exhibit 40).

exhIbIt 39

Loan-to-Deposit Ratio Has Risen to 84% From 54% Overthe Past 10 Years

Jan-0353.8

Jan-0760.6

Jan-1072.1

Jan-1383.9

50

55

60

65

70

75

80

85

90

03 04 05 06 07 08 09 10 11 12 13

Indonesia: Loan-to-Deposit Ratio (%)

dt t m 6, 2013. s: bk Ii, hv ayti.

exhIbIt 40

Indonesia Suers From Too Few Deposits, Not Too ManLoans

36

168

145

63

89

0

20

40

60

80

100

120

140

160

180

04 05 06 07 08 09 10 11 12 13

Deposits as a % of GDP

Indonesia China Singapore

India Brazil

No growth in deposits as a % of GDP

dt t Jy 31, 2013. s: bk Ii, bi Ptsttitik, Pp bk f ci, ci nti b f sttiti,mty atity f sigp, sigp dptt f sttiti,

rv bk f Ii, Ii ct sttiti ogizti, bct bi, Ititt bii Ggfi ettti, hvayti.

ov, tg w viw t fii vi yt pitivy,

w tik t piy t k, wi xpiv, y

pt v t f ivt kig t ptiipt i t

Ii gwt ty tt w ftig. F pivt iv

t, w tik i, pyt, t fi t i

vi wty f iti.

The recent trend towardsincreased government intervention

is certainly worthy o investorattention.


17/28


The Role o Government in the Economy: More and Less Re-

quired

For every benefit you receive, a tax is levied. rp W e

Giv tt t ty t ty t iti 50 ii

w i- tw w 2030, t y

igifit pptiti f t gvt t p tt

Ii GdP-p-pit ty iti it t t.

by t f iy i tt w v y fgg, t

gvt t t iz f it tx v. I, w w i Exhibit 41, Ii tx v

t 15-17% f GdP fiity pp w v t -

ti. Pt t wy ( ty t wt rp W e

ggt), it pp tt Ii i ty f t fw

ti w f vy fit iv, tx i ty not

iy vi.

s wt pp? W iv tt t gvt

t t xp it f igi py, tt it

f i pg iftt. a wy t pi

ti witt ivy iig tx i t xp t tx

f qifi iivi. a i Exhibit 42, t if

t f t y i Ii i tiz, wi t tty iity t ppy pt tx v.

exhIbIt 41

Revenue Collection as a Percent o GDP is ExtremelyLow

Indonesia

Spain

TurkeyBrazil

China

Norway

U.S.Japan

Germany

Singapore

Saudi Arabia

Revenue =Expenses

Line

IndiaVietnam

10

15

20

25

30

35

40

45

50

55

60

10 20 30 40 50 60

GovernmentExpenditure%

GDP

Government Revenue % GDP

Government

revenues are

extremely low

dt t api 16, 2013. s: ImF Weo tit f 2013.

exhIbIt 42

Due to the Large Inormal Sector

Indonesia

Vietnam

Brazil

Philippines

India

Thailand

Turkey

10

15

20

25

30

35

40

45

20 30 40 50 60 70 80 90

GovernmentRevenue%G

DP

Informal Jobs % Total Employment (%)

dt t api 16, 2013. s: sttiti pt pyti t if y y Itti l ogizti (Ilo)dptt f sttiti t J 2012, ttp://t.i.g/

if_y_e.t, ImF Weo tit f 2013.

Ittigy, t vy i , pitii g-

t wit w w pk iit tt t t fi pii

iig tx tiz ii, w ti

t t t g-t t f t ty. hwv, wit tg

y, w pyt, fiit i t t

t i g tyt f ti t wy t i

pt ig pi f i tif. a, giv tt t gv

t y w t v t 3% fi fiit, y pp

f tt ti i t itti tt wi qiky pi t f t

o xpi wv, ggt ti pp t

t i i iky wt. Ky t tikig i wt w

ig f i t Ii bzi. sii t Ii, t

t ti v ii gpi kp. uft

ty, p i i v ft t ti wi

w t xpt gwt t ig t xpt ifti. T

j i, w iv, i tt i t it t gvt

v-tit i gwt vi t-t f ii

-ff i pig ft t 2008 Gt ri. s

fii? lt y i ft, bzi gw jt 0.9% y v y v

pk f 6.1% i 2007, wi Ii gw 6.2% v pk

6.5% i 201111. Iptty, t t v ti it 201

wit t ti ippitig y gi i 1Q13.

s w w g f ? o viw i tt, I

vp, f t wi t y

g if y tt t iipt. a, GdP

p pit ti t i, t t f tx v

gw ty. hwv, t t t tw

i gvt itvti i tiy wty f iv-

t ttti. I pti, wi gvt ppt f i

11 dt t my 29, 2013. s: Ititt bii Ggfi ettti, ct sttiti offi, Ii, hv ayti.


18/28


iptt i y vpig ty, t i gwig ik tt t

gvt y vtp it i, ivig p t ty

t f pit ivig t t fig it ivtt tt i

y t f y f it gwt iititiv.

Exports and Imports: Period o Transition

F t y vtg pit, Ii tg t i-

. T ty i i i ky t , iig ,

pp, i, g, p i . a t, tw-ti f t tt

xpt f ity t , wi t tw-ti f ipt f -ity t it (Exhibits

43 and 44).

at ky iigt w ig tip i tt titi

fi iigy viwig Ii t y titi

f pt t f ti stt ai i.

Ti ttgi pitiig i igifit, i viw, i iky t

ft t fig it ivtt it iptt

ik ftig.

exhIbIt 43

Two-Thirds o Indonesias Exports Are CommodityRelated

53

62 63 63 6264

6763

47

38 37 37 38

36 3337

20

25

30

3540

45

50

55

60

65

70

2005 2006 2007 2008 2009 2010 2011 2012

Indonesia: Export Composition (% Total)

Commodity Related Products Other

dt t my 01, 2013. s: bk Ii, hv ayti.

exhIbIt 44

While One Third o Indonesias Imports Are CommodRelated

34 3335

3329

32

3633

66 67 6567

7168

6467

20

30

40

50

60

70

2005 2006 2007 2008 2009 2010 2011 2012

Indonesia: Import Composition (% Total)

Commodity Related Other

dt t my 27, 2013. s: bk Ii, hv ayti.

hwv, gwt i t xpt y i Ii tit ig ity pi, t ptivity gi i

t t. aig t wk y y g F li

f 74% f t tt xpt i i 2011 f pi,

v (Exhibit 46). Ti tt i igifit ity xpt

pt 60-70% f tt xpt v (Exhibit 43). o

f ti t tt 2012 i ty t tt f

ti. by pi, t 60% f t ty ipt

-ity t, wit iy tpt qipt

tig f y f f tt tt (Exhibit 44).

Demographic trends, including

the sizeable increase in thecountrys middle class through

2030, are likely to make Indonesione o the most compelling

consumer growth stories in theglobal economy.


19/28


exhIbIt 45

Indonesias Exports Have Been Commodity Dependent

-20%

-15%

-10%

-5%

0%

5%

10%

15%

Korea

Taiwan

HongKong

Singapore

India

China

Philippines

Thailand

Indonesia

Malaysia

2012 Commodity Trade Balance (% of GDP)

Food & live animals Beverages & tobacco

Crude materials Mineral fuels & lubricants

Animal, veg oils & fats All Commodities

dt t my 9, 2013. s: mg sty r, ceIc dt.

exhIbIt 46

But Export Growth Has Primarily Been From PriceAppreciation

-40

-30

-20

-10

0

10

20

30

40

50

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Indonesia: Exports Growth Y/y (%)

Volume Impact Price Impact Exports Value Y/y

In 2012, volumes

rose 3.6% but pricesfell 4.7%

In 2011, 74% due to

price appreciation

dt t my 30, 2013. s: bk Ii, ImF, hv ayti.

I pii, Ii t v ft gyett

vg it t i iti t ft tt t

t pt f it y. nw, wit ci wig

p i pi vig f y 20% , y pt f it xp

y w fig t pi. I ft, i 2012 xpt w

ty gtiv. Tt t w (Exhibit 46).

T g w i tt t ig tt t itti i tig

pitiv, w ty v fi tt t gv

pivt t wkig tgt t i t i

t ftig xpt t. Ittigy, w fit ig t ci viit tt ft w itt

ig pt f ti v-i ig tf t Jv f

st ci. Ti t i ptiy t wit fig -

pti i t f tptti qipt iy

a t, t t f 2012, ti gt t f 15% f Fd

(Exhibit 48). Itti ivt v y tk t f ti

t, fig it ivtt i t t

lkig , w tik t xpt-t ftig ty

i Ii i ti, tg tikig i tt t ty

v t ivify it xpt y. If it , t

it wi f t fw gig kt ti wit t y

- y t tt pt tivy i g t kt i f t ftt gwig gi

i t w.

exhIbIt 47

Foreign Direct Investment Remains Strong

Jun-01-3.1

Mar-062.9

Mar-12.1

-4

-3

-2

-1

0

1

2

3

83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13

Indonesia: Trailing 12 Months Foreign Direct

Investment % of GDP

dt t 1Q2013. s: bk Ii, bi Pt sttitik, hvayti.


20/28


exhIbIt 48

Particularly In Manuacturing

44 63 34 35 25 32 36 42 46

0%

10%

20%

30%

40%

50%60%

70%

80%

90%

100%

04 05 06 07 08 09 10 11 12

Indonesia: 2012 Foreign Direct Investment

Breakdown (%Total)

Other

FinancialIntermediation

Wholesale & Retail

Transportation, Storage,Communication

Mining & Quarrying

Manufacturing

dt t m 31, 2013. s: bk Ii.

Savings and Investment: More Inrastructure Needed

a iptt pi f y pzz w viw w ig

ty-v i t tiip tw vig

ivtt. If ty t v g, it y t ff

t p g t ivtt qi t iv g-t,

ti gwt. Iptty, i t gig kt, t ky

t ivtt i y t iftt pt f t ivtt

p. Tg it i w gig, ti i w Ii

iy pt. I ft, iftt pig

tkig t y 3-4% f GdP 12. I t y pi t t ai

Fii cii, Ii w pig 7%, p t

t t 6-8% i Ii y 10% i ci, ig t t

Pi Wk miity (Exhibit 49).

bt t t p t kw Ii

k i iftt. a qik tip i f t Jkt ipt,

wi i y fi wit g f tffi v

p iti, i f t iftt g

t ty f. Ti i t w w. Wt i pi ,

wv, w w tip xtiv wit w w pk t

f ppig wt t ti i Jkt, it w ti t p-

vi t t y t gvt.

12 dt t my 11, 2011. s: mg sty r, IiIftt: a us$250 opptity t my 11, 2011 y dyi T. =mg sty r tit; f = mg sty r ft.

exhIbIt 49

Inrastructure Spending Lagging Even India...

0%

2%

4%

6%

8%

10%

12%

2005 2006 2007 2008 2009 2010 2011 2012

India China Indonesia

Infrastructure spend (% of GDP)

dt t d 31, 2012. s: ceIc dt mg styr.

exhIbIt 50

But Estimates Are For It to Increase From Here

US$B

2008e

2009e

2010f

2011f

2012f

2013f

2014f

2015f

20

20

CA

elecTrIc-ITY

5.7 6.7 8.9 11.2 13.7 16.6 20.1 24.222

Telecom 7.3 5.9 7.7 8.6 9.4 10.4 11.5 12.8 10

roads 4.6 6.2 8.2 9.7 11.4 13.3 15.6 18.2 17

raIlWaYs 0.1 0.1 0.3 0.7 1.3 1.9 2.7 3.7 65

aIrPorTs 0.5 0.6 0.9 1.3 1.7 2.2 2.9 3.6 32

seaPorTs 0.4 0.7 1.0 1.4 1.9 2.4 3.0 3.8 30

WaTer 0.4 0.7 1.0 1.3 1.6 1.9 2.3 2.8 22

ToTAl 19.0 21.0 27.9 34.1 40.9 48.9 58.2 69.1 19

AS A %

GDP3.7 3.9 4.0 4.3 4.7 5.1 5.5 5.9

dt t my 11, 2011. s: mg sty r, IiIftt: a us$250 opptity t my 11, 2011 y dyiT. = mg sty r tit; f = mg styr ft.


21/28


exhIbIt 51

China Leads the World in Both Rate o Savings andInvestment % o GDP

50

3032

1614

47

35 36

1917

0

10

20

30

40

50

60

China India Indonesia Brazil U.S.

2013 Estimated Gross National Savings % of GDP

2013 Estimated Investment % of GDP

High gross national savings

should support investment

dt t api 16, 2013. s: ImF Weo tit f t y 2013.

exhIbIt 52

But Investment per Capita Still Lags Behind Brazil andChina

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

$8,000

India Indonesia China Brazil U.S.

2013 Estimated Investment Per Capita US$

1980

1990

2000

2013

2000-2013

CAGR

17%

2000-2013

CAGR 1%

2000-2013

CAGR

10%

2000-2013

CAGR

13%

2000-2013CAGR

19%

dt t api 16, 2013. s: ImF Weo tit f t y 2013.

aig t ptiiti pt y t g ivtt k

mg sty, t ty wi p $250 ii v t fiv-y pi ig i 201513. If t, t iftt

pig w i t 6% f GdP, p f 4% i 2010, wit

tiity tig f v 50% f t tt i-

t i (Exhibit 50). Tt i t g w.

13 Ibid.12.

T w i ttt tt iftt p

w i . T gvt i-t p,

wi f 70% f t $150 ii ti t ivt

i iftt f 2010-2014 t f t pivt t

t pp. T Pi Wk miity kwg tt

Pivt Ptip P (PPP) t wk, it i w g-

givy kig g t ipv t itti, iig

gvt fig gt i itiv f t piv

t.

Ittigy, t k f iftt ivtt i t ik tit w vig t k f xt pit. a Exhibits

53 and 54 w, Ii ty t. Wt pp

tg, i tt t f t pivt t pit wt it ig

t iig ivtt it i iftt -

vi qi t t t f t ty ig i

. a, w ti i, gvt v

igt tiv t y i, t gvt titi

iftt pig iit.

T iti qik wt iig. spif

y, Ii w y t dt f 1826 t 1949

ity tt, dt-pi ti jy

iftt i-t t t v y ti ikt uit Kig. s, ii t bzi, Ii

vi ti tt itiy pvt it f kig w

ig -ty ( v i) ivtt. Ti, w

ti v, xti tw t gvt pivt

t ippitig, t tt xt

tiz gvt tt tt it

t gt tig .

exhIbIt 53

A High Savings Rate Is Needed to Support Investment

Investment running

ahead of savings

Indonesia

Mexico

Turkey

Brazil

China

India

U.S.

Japan

Germany

Singapore

Saudi Arabia

Savings =Investment

Line

10

15

20

25

30

35

40

45

50

0 10 20 30 40 50 60

2

013EstimatedInvestment%G

DP

2013 Estimated Gross National Savings % GDP

etit f 2013. dt t api 16, 2013. s: ImF Weo api2012.


22/28


exhIbIt 54

But Foreign Direct Investment Is Needed Too

0

50

100

150

200

250300

350

400

450

500

Jan-07

May-07

Sep-07

Jan-08

May-08

Sep-08

Jan-09

May-09

Sep-09

Jan-10

May-10

Sep-10

Jan-11

May-11

Sep-11

Jan-12

May-12

Sep-12

Jan-13

Indonesia Malaysia

Philippines Singapore

Thailand Vietnam

Myanmar Cambodia

LTM Inward Direct Investment US$: Indexed 1Q07=100

dt t 1Q2013 tt vi. s: bk Ii, myidptt f sttiti, bk ng myi, ct bk f tPiippi, sigp dptt f sttiti, mty atity

f sigp, bk f Ti, ai dvpt bk, Gsttiti offi f Vit, Itti mty F, hvayti.

lkig , vti wit t t gvt

pivt t t iv tt w t tt

i t f i iftt xti. I t wk, t

gvt vpig it ttgy f wkig wit

t pivt t, ii i Jkt wit vity

f iftt fk t iv tt xptti v

w t pppit v. mv, w

i pivt t itt i tig pit tw

ippig, , t pw. T iititiv wi tiy t

pp vigt, t w iv tt xptti w

iti, t tgt , t gvt

f gy i w igt.

Capital Markets, Currency and Infation Outlook: A Potential

Near-Term Achilles Heel?

a ivt itt i Ii gw, it pit kt

v vp iy. I pti, w w i Exhibit

55, it kt pitizti ptg f GdP i w

p wit t vg f it ai p. Ti -tig

k , giv t ty tg gwt, ig pfitiity

pwf gpi. hwv, w iv tt t qityty i f f v (Exhibit 56), ptiyif t gvt

ig i it fiit.

exhIbIt 55

Indonesian Market Cap Percentage o GDP Has SlowlyConverged With Asian Average

55

3/31/2060%

0%

20%

40%

60%

80%

100%

120%

2003 2005 2007 2009 2011 2013

Indonesia Total East Asia*

Market Cap % of GDP

dt t m 31, 2013. *GdP-wigt vg f ci, s. K,Ii, Tiw, Ti, myi, Piippi, Vit, sigp. s: bg, ImF, hv ayti.

exhIbIt 56

Indonesia Market Cap Percentage of GDP Is Above Chiand Vietnam, But Far Below Many Other Asian Peers

MARKeT CAP, % of GDP (3/31/13)

1 sInGaPore 224%

2 TaIWan 173%

3 malaYsIa 149%

4 ThaIland 119%

5 Korea 95%

6 PhIlIPPInes 95%

7 InDoneSIA 55%

8 chIna 37%

9 VIeTnam 30%

dt t m 31, 2013. s: bg, ImF, hv ayti.

o t fix i i, t ty i pit. I

i viy fig ivt t v it fi fiit (Ex-

hibit 57). uti ty, ti p w t y i.

hwv, tigtig y i ik t uit stt

ep, t Ii f i wi. e

tig t i i tt Ii y $100 ii

i v14. a w w i Exhibit 58, it xt fig t

tiv t it v i t y K i t ai k

14 dt t m 31, 2013. s: ImF, hv ayti.


23/28


exhIbIt 57

There is High Foreign Ownership o Indonesian Bonds...

0

5

10

15

20

25

30

35

40

03 04 05 06 07 08 09 10 11 12 13 14

Foreign Ownership of Government Debt Securities (% Total)

Indonesia Malaysia Thailand

dt f api 30, 2013. s: Ii ditt G f dtmgt. bk ng myi, bk f Ti, hv ayti.

exhIbIt 58

and the Short-term External Debt Load Is High

8

11

14

25

26

31

31

34

42

Philippines

Brazil

China

Thailand

India

Malaysia

Mexico

Indonesia

Korea

2011 Short Term External Debt / FX Reserves (%)

dt t m 19, 2013. s: W bk, hv ayti.

I or view, the Ioei cpitl rket fce everl ie throgh

which ivetor hol work. Firt, thogh they hve correcte oe-

wht i recet week, oth et pre eqity trig ltiple

i Ioei re qite rich reltive to oth hitory their peer grop.

so, everythig ee to cotie to go right for it to perit i i-

tiig ch prei vltio. seco, Ioei i likely goig to

feel oe otle ipct fro the cotry rectio i it fel -

iy over tie, we elieve tht ltitely it i fel price icree

tht y ce ifltio to rie. accorig to the ivetet kmorg stley, every 10% rie i retil fel price wol 80 p

to helie ifltio, with 22-44% icree ig 290 p, rigig

helie ifltio to i-8% territory15. not rpriigly, rectio i

the fel iy y lo ct like tighteig, etig coptio o

the rgi. Thir, iteret rte re ovig i lie with the u.s.

o the verge of cig tighteig cycle.

15 rti pi f gi i t ik f rp4,500/it trp6,500/it rp5,500/it, ptivy. Ti pt i f44% 22%. s: mg sty Indonesia Economics: Retail Fuel PriceHike What If? y dyi T t my 23, 2013.

lkig , w tik t ty pig ti, it -

iy/ifti i, t tpig f Qtittiv eig i

t u.s. iky t i t vtiity f it pit kt,

w w t pi t t ty tgg itt

t f iig pit / w p it

y. hity w ti ti gi tt pit fw

it t gig kt v qit qiky, ptiy

t ti w t uit stt gi t i t. ay, i

y J, xp, t ty i t t i

t ti titi t w k f ivt

t t t gvt pt.

exhIbIt 59

The Financial Markets in Indonesia Have Room to Grow

0

50

100

150

200

250

Vietnam

Indonesia

China

Thailand

Malaysia

Singapore

2012 Corporate Debt % GDP

2012 Gross Government Debt % GDP

2011 Market Cap % GDP

s: W bk, ai dvpt bk aiboi ttp://ii..g.

lg-t tg, w i ptiiti f tw iptt -

. Fit, w tik tt t iz f t v Ii pit

kt ti igifit ptti f ppiti. a w

i Exhibit 59, t i ti t f ig f Ii t

gw it kt pitizti ptg f GdP, giv

tt GdP gwt i iky t i tg v t ig fiv

t v y, i viw, t i t ptti t t

wy (i.., iig ptg f GdP i iig GdP vi

s, Ii iqi pit kt ty ftiv

t y, wi ifftit it f y f t g em

kt. I t f ty ik bzi, y pi, g

tt- pi it t ix, wi ft t wt k f f gig t. I ft

tt i Exhibit 60, Ii i ty vwigt

tk. I ci, y pi, tk

t t pt f t pit ix. a i t fii

, w iv Ii ty w- k tt

vy wy y gvt if.


24/28


exhIbIt 60

Compared to Global Peers, the Indonesian Market Is Heavily Overweight Financials and Consumer Discretionary, anUnderweight IT, Energy and Industrials

dt f m 31, 2013. s: mscI, Ftt.

Summary

F t y vtg pit, Ii g iig

g i pw. Iptty, i w iigy tv

f gwt, Ii tti tiwi tt wi

ti t iv it GdP ig pttiy wit w t

vg vtiity. agit ti kp, iti ik ti,

t/w, tptti/giti xpt

t gw igfy v g GdP f t xt fiv t 10 y

pt ittig g-t ivtt pptiti f

t pi pivt ivt.

hwv, t xt t y y t y t pt t,

t i iig ik tt Ii itp, ii t wt w

v ty i t gig kt ik ci, Ii

bzi. I y it, it i p ii-kig t t gv-

t v ft t y fv wit ti pivt t if-

tt y w i gwt ig tjti.

I pti, if t ty ti t wit tg gwtig twi fiit ttgy, t w iv t y wi

t jt ww, wi p t y ig

ifti kp. a giv tt t u.s. y t ig

it pwf f Qtittiv eig, t i w gt ipi

ik i t t fig y kt t t

f t pt v y.

Ii tt GdP-p-pit, wi i -

ty $3,600, ti t i t t tti t

w t ftig (Exhibit 22). T wv, it

iity t k t y ivtt i if-

tt ti tt kp ptivity v wg gwt

I iti, it t wk v t fftivy titi

t y it ig v- iti vi i t

f y f git t pt f t if

y. If it t tig, t ti ty p-

t f t pig pptiti i t g pit

kt v t xt fiv t v y.

% InDex WeIGhT InDoneSIA % oveR/(UnDeR) WeIGhT

MSCI InDoneSIA MSCI eM MSCI AC WoRlD vS. MSCI eM vS. MSCI AC WoRlD

consumer dIscreTIonarY 16.6% 7.7% 11.0% 8.9% 5.6%

consumer sTaPles 12.1% 9.4% 10.9% 2.7% 1.1%

enerGY 4.9% 11.6% 9.9% -6.8% -5.0%

FInancIals 34.8% 27.9% 21.5% 6.9% 13.3%

healThcare 2.5% 1.4% 10.2% 1.1% -7.7%

IndusTrIals 3.8% 6.3% 10.3% -2.5% -6.5%

InFo Tech 0.0% 14.1% 11.9% -14.1% -11.9%

maTerIals 7.7% 10.4% 6.5% -2.6% 1.3%

TelecommunIcaTIon serVIces 11.9% 7.5% 4.3% 4.3% 7.5%

uTIlITIes 5.8% 3.6% 3.6% 2.2% 2.2%


25/28



26/28



27/28


Important Inormation

T viw xp i ti piti t p- viw f hy mVy f Kg Kvi rt& c. l.P. (tgt wit it ffiit, KKr) t iy ft t viw f KKr itf. Tit i t t tt . Ti t t pt vtijgt wit pt t y fii itt, i-, ity t tt y i f- i t pt f ffiiviw f KKr. Ti t i t it t, t, t pifiy t y ivtt ttgy pt tt KKr ff. It i ig pvi y

t pvi fwk t it i t ipttif ivt w yi ivt wviw t tpi i i.

T viw xp ft t t viw f m.mVy f t t f it m. mVy KKr tk t vi y f y g it viw xp i. I iti, t viwxp t iy ft t pii fy ivtt pfi t KKr, y t ft i t ttgi pt tt KKr ff,iig ttgi pt t wi m. mVypvi ivtt vi f f KKr. It t tt m. mVy wi k ivttti i t ft tt itt witt viw xp i, y f ttiq t f yi i i i

gig it t. KKr it ffiit yv piti (g t) gg i ititti tt t itt wit t if-ti viw xp i ti t.

Ti piti pp y f if-ti pp. T ifti ti ii y t f t t iit, y p y qt kt vt f t. ct gp pvi i fittiv pp y. T ifti i ti -t vp ity / tif iv t i; wv, itKKr m. mVy gt t y, qy pt f ifti. ntig tii titt ivtt, g, tx t vi i it t i i kig ivtt t ii.

T tt ivtt ttgywi f. hiti kt t ti iit f t ft kt vi ft pf f y pti ivttwi y iff tiy, t ip . Tgt ti ti i jt t g. T i tt t tgtti wi iv, t ti y igifity ifft t tt w . Tipiti t viw t ptti iitti f ff t y y iti t pt y ivtt ttgy.

T ifti i ti piti y ti pj-ti t fwkig ttt g-ig ft vt, tgt, ft xpttigig t ttgi i i, i y

t f t t iit. T i tt vt tgt wi iv, y igifity ifft f tt w . Tifti i ti t, iig ttt

ig fii kt t, i kt iti, wi wi ftt y p y qt kt vt f t. Pf f it ii i t tt t i wit ivi ivt. Tii t i y xp, f g g t iivtt.

T ivtt ttgy t i y it f ivt pig tipifi ivtt jtiv fii ittiP t tt g i t t f xg f y y fft t v, pi i f

ivtt vy.

nit KKr m. mVy y ty t, tk t pt fw kig ttt. nptti wty, xp ipi, i giv y f f KKr, m. mVy y tp t t y pt fif t ifti ti i ti piti piiity iiity i pt f y ifti. by ptig ti t, t ipikwg it tig pt f tfgig ttt.

T mscI ifti i ti t i txiv ppty f mscI I. (mscI). mscI kxp ipi wti ptti v iiity wtv wit pt t

mscI t ti i. T mscI t y tft itit i f t i y iti fii pt. Ti pi t ppv, viw p y mscI.


28/28

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