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1
About Investor Relations Unit of the Republic of Indonesia
Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of
Economic Affairs, Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian
economic policy and to address concerns of investors, especially financial market investors.
As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by
International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies,
among others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, 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 (International Department - Bank Indonesia, Phone: +6221 2981 8279)
Adrianto (Fiscal Policy Office - Ministry of Finance, Phone: +6221 345 0012 )
Farid Arif Wibowo (Directorate General of Budget Financing and Risk Management - Ministry of Finance, Phone: +6221 351 0714)
E-mail: [email protected]
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 Resilience
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
Institutional and Government Effectiveness:Accelerated Reforms Agenda with Institutional Improvement
Section 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 ViolenceGovernment Effectiveness Regulatory QualityRule of Law Control of Corruption
1. Source: World Bank – Doing Business 2017 Report;2. Source: Transparency International – Corruption Perceptions Index 2016 Report;3. Source: World Economic Forum –The Global Competitiveness Report 2016 – 20174. Source: World Bank
World Governance Indicators1
Ease of Doing Business1
Global Competitiveness Index3
Corruption Perception Index2
Higher rank is better
Higher score is better
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
37
40
35
41
20
25
30
35
40
45
50
2012 2013 2014 2015 2016
Indonesia India Brazil Philippines Turkey
* Both India and Brazil shared the same score (40) in 2016
Higher rank is better
Higher rank is better
5
Indonesia Remains the Investment Destination of Choice
1. Source: The Economist – Asia Business Outlook Survey 2017 2. Source: IMF World Economic Outlook, Database October 2016
3. Source: United Nations Conference on Trade and Development (UNCTAD) – World Investment Report 20164. Source: JBIC – Outlook for Japanese Foreign Direct Investment (28th Annual Survey)
2016E Total Inve
stment / G
DP (%)
Indonesia Enjoys Large Investments Relative to Peers within the Region2
JBIC: Amongst ASEAN countries, Indonesia is one of preferred place for business investment (December 2016)4
The Economist: Indonesia among the top 3 destination for attracting investors in Asia (January 2017)1
2.5
3.1
3.5
4.8
6.8
7.2
10.1
10.6
19.3
25.9
29.4
32.7
35.8
42.047.6
0 5 10 15 20 25 30 35 40 45 50
Turkey
Korea
Russia
Singapore
Malaysia
Brazil
Myanmar
Philippines
USA
Mexico
Thailand
Vietnam
Indonesia
China
India
% of surveyed who consider each country has promising prospects
18
18.9
21.3
24.8
25.3
26.3
27.7
28.4
33.3
39.4
46.2
53.7
55.7
71.6
0 10 20 30 40 50 60 70 80
Taiwan
Singapore
Japan
Hong Kong
South Korea
Australia
Malaysia
Myanmar
Thailand
Phillipines
Vietnam
Indonesia
India
China
UNCTAD: Indonesia among the top 10 investment destination country (January 2017)3
4
4
5
5
5
5
8
11
11
13
13
15
19
21
47
0 10 20 30 40 50
Myanmar
Vietnam
Malaysia
Philippines
France
Australia
Indonesia
Brazil
Mexico
Germany
Japan
United Kingdom
India
China
United States
17.96
31.66
34.65
26.1523.74 24.42
0
5
10
15
20
25
30
35
40
Brazil India Indonesia Malaysia Philippines Thailand
6
BBB- / Positive
Baa3 / Positive
BB+ / Positive
Feb 2017, Baa3, Outlook Revised to Positive
“We changed the outlook on Indonesia's sovereign rating to positive from stable to reflect emerging signs of a reduction in structural constraints, including its level of external vulnerability and the strength of its institutions.“
June 2016, BB+ , Positive Rating Affirmed
“The ratings on Indonesia balance the country's low per capita income plus middling fiscal and external indicators, against improved policy and institutional settings, credible monetary policy, and buoyant economic growth.”
Des 2016, BBB-, Outlook Revised to Positive
“Key drivers of the Positive Outlook are the build-up of a track record of macroeconomic stability in the past few years, and a strong structural reform drive since September 2015.”
BBB- / Positive
March 2017, BBB-, Outlook Revised to Positive
“JCR has changed the rating outlook from Stable to Positive, based on the recent improvement on the investment climate promoted by a series of Economic Policy Packages & the containment of private external debt brought by Bank Indonesia’s prudential regulations on external borrowing.”
BBB- / Stable
April 2016, BBB-, Stable Rating Affirmed
“Indonesia's economy has been stable despite uncertainty lingering over external demand.... Fiscal deficits are kept low, and fiscal soundness is maintained. In light of these factors, R&I has affirmed the Foreign Currency Issuer Rating at BBB- with a Stable Rating Outlook.”
Moody's
S & P
Fitch
Investment Grade
JCRA
R & I
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
BBB-
BB+
BB
B+
BB-
Strong Confidence on Indonesia as Reflected in Improvement of Rating Outlook
Below Investment Grade
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
The Economic Policy Packages
“To improve national industry competitiveness, export and investment to generate significant economic growth”
Phase III (7 Oct ’15)Boosting investment, spurring exports, and maintaining people‘s purchasing power
Phase IV (15 Oct ’15)Simplifying wage formula and expanding loans for small business
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
industriesPhase 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
Source: Coordinating Ministry for Economic Affairs
9
Thematic Policy Issues on Deregulation
Next Phase of Policy Packages based on Sectoral and Thematic Issues
Six policy issues under Packages I-XIV:
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
sectorFood
Invention, Innovation and Creative Economy
Source: Coordinating Ministry for Economic Affairs
10
Progress of the Economic Policy Packages
Initially, there are 215 regulations which need to be deregulated
As of February 6nd, 2017, deregulation of 203 regulationsare finished (99%), comprising 49 regulations atPresidential level and 154 regulations atMinistrial/Institutional level
Unfinished regulations: Proposed Policy on E-commerceRoadmap
I–XII
203SET 99%
11REVOKEDREGULATIONS
1ON GOINGDISCUSSION 1%
154TOTAL 154
MINISTRIAL/INSTITUTIONAL LEVEL
100%
47 42SELESAI
PRESIDENTIAL50TOTAL 49 FINISHED
PRESIDENTIAL LEVEL
99%
I–XIV
FINISHED
I–XII215TOTAL INITIALREGULATIONS I–XIV
I–XII204TOTALREGULATIONS I–XIV
Based on the further assessment, 11 regulations has been revoked from deregulation process
Total regulation subject to be deregulated: 204 regulations
Source: Coordinating Ministry for Economic Affairs
11
Improving Investment Climate…implement 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
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) orArticle of Association (Foreign company)
• Containing workflow from raw material production to thefinished products
Investor identitiy as the prospective shareholders
Flowchart of business activities workflow
Source: Investment Coordinating Board (BKPM)
Until December 2016, more than 250 companies have utilized the “3 hours services”
12
Improving Investment Climate…implement 3-hour investment licensing service for Energy and Mineral Resources Sector
Director arrives at central OSS, then submit required documents*
Waiting in priority lounge, while the documents processed
1 2 3
Applicant receive the requested licensing products
Note *: ESDM3J service is given if the company has fulfilled the checklist of administrative & technical requirements as regulated on MEMR Ministrial Decree No.15 of 2016
9 Types of licensing issued by ESDM3J service
No. Type of Licensing Duration for reguler service (work days)
1 Temporary Business License for Electricity
20
2 Temporary Business License for Oil/Fuel/LPG storage
32
3 Temporary Business License for Storage of Processed Products/CNG
32/40
4 Temporary Business License for LNG Storage
32
5 Temporary Business License for Oil Refinery
32
6 Temporary Business License for Processing Oil Residue Industry
32
7 Temporary Business License for Natural Gas Processing
32
8 Temporary Business License for General Trade of Oil/Fuel
40
9 Temporary Business License for General Trade of Processed Product
40
Source: Investment Coordinating Board (BKPM)
13
Improving Investment Climate…implement Direct Construction Permit to attract investment in Industrial Estates
Direct Construction (KLIK)
No Requirements• No minimum investments or workers is
required. • Available for 32 selected industrial estates.• Construction permits can be obtained in
parallel with construction process.
Investors can directly start their project construction beforeobtaining construction permits. This service is supported byboth Central and Regional Governments which become thefirst step to synergize between central and local licensing
Obtain investment licence at OSS at national or regional level.
• Survey a land within selected industrial estates.
• 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 December 2016, 82 projects have utilized the “KLIK services”
14
Improving Investment Climate…Direct Construction Permit is expanded to 32 Industrial Estates (IE) throughout Indonesia
Source: Investment Coordinating Board (BKPM)
1
Banten(3 IE; 3,150 ha)
1. Modern Cikande Industrial Estate/MCIE (1,800 ha)
2. Wilmar Integrated Industrial Park/WIIP (800 ha)
3. Krakatau Industrial Estate Cilegon/KIEC (570 ha)
West Java (5 IE; 1.151 ha)
1. Bekasi Fajar Industrial Estate/BFIE (300 ha)
2. Delta Silicon 8 (158 ha)3. Karawang Internasional
Industrial City/KIIC (293 ha)
4. Suryacipta City of Industry/SCI (300 ha)
5. GT Tech Park @ Karawang (100 ha)
Central Java (3 IE; 840 ha)
1. Kendal Industrial Park/KIP (700 ha)
2. Bukit Semarang Baru/BSB (40 ha)
3. Wijayakusuma Industrial Estate/KIW (100 ha)
East Java (1 IE; 1,761 ha)
KI Java Integrated Industrialand Port Estate/JIIPE(1,761 ha)
North Sumatera (1 IE; 100 ha)
Medan Industrial Estate/KIM(100 ha)
South Sulawesi (1 IE; 3,000 ha)
Bantaeng Industrial Park/BIP(3,000 ha)
KLIK 1st Stage (14 IE)
KLIK 2nd Stage (18 IE)
1
2 3 45
63
56
7
1
2
3
4
5
6
East Java(2 IE; 341 ha)
1. IE Maspion (151 ha)2. IE Tuban (190 ha)
East Kalimantan(1 KI;133.8 ha)
IE Kariangau (133.8 ha)
Riau Island(5 IE; 556 ha)
1. Batamindo Industrial Park (61.4 ha)
2. Bintang Industrial Park II (20 ha)
3. Kabil Integrated Industrial Estate(142.5 ha)
4. Bintan Inti Industrial Estate (229.6 ha)
5. West Point Maritim Industrial Park (102.5 ha)
West Java(6 IE; 1,814.1 ha)
1. Artha Industrial Hill(315.1 ha)
2. Greenland International Industrial Center(GIIC)/Deltamas (400 ha)
3. Jababeka Tahap III(45 ha)
4. Kota Bukit Indah Ind. City (510 ha)
5. Indotaisei Kota Bukit Indah (300 ha)
6. Marunda Center (300 ha)
Central Java(1 IE; 285.7 ha)
IE Demak (285.7 ha)
2
1
Riau(1 IE; 198.9 ha)
IE Dumai (198.9 ha)
2
4
DKI Jakarta(2 IE; 129 ha)
1. Kawasan Berikat Nusantara/KBN (118.6 ha)
2. Jakarta Industrial Estate Pulagadung/JIEP (10.4 ha)
3
6
4
7
5
15
(Pusat Logistik Berikat/PLB) is afacility provided by Ministry ofFinance as part of theimplementation of the2nd Economic Policy Package.
PLB facility aims to improveefficiency and reduce the cost oftransportation and logistics inIndonesia; support the growth ofthe domestic industry, includingsmall and mediumindustries; increaseinvestment; and to makeIndonesia to become a logisticshub in Asia Pacific.
To date, 30 Bonded Logistic Center has beenlaunched to support various industries.
Improving Investment Climate…Bonded Logistic Center to Improve Indonesia’s Competitiveness
Oil and gas, and mining industry
Food & beverages industry
Auto-motive industry
Personal care/
home care industry
Textile (cotton) industry.
Small and medium industry
Synthetictextile
(chemical substances) industry.
Bonded Logistic Center
16
Improving Investment Climate …revising the Negative Investment List
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
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%
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
33%
49%
Introduction of New Foreign Ownership Regulation for Strategic Sectors
Source: Investment Coordinating Board (BKPM)
17
Improving Investment Climate Improving Indonesia’s Rank on Ease of Doing Business (EODB)*
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 was published in October 2016
18
Other Progress on Economic Policy Packages
14 Provinces have set 2016 Minimum Wage System in accordance to the Government Regulation (GR) No. 78/2015 (Kepulauan Riau, Kalimantan Barat, Nusa Tenggara Barat, Sumatera Barat, Jambi, Aceh, Kalimantan Selatan, Banten, Gorontalo, Nusa Tenggara Timur, Jawa Barat, Bali, Sumatera Utara, and Bangka Belitung)
Fair, Simplified & Projectable Wage System
1
• Total value of facilities and incentives for SEZsamounted Rp 33.8 tn (as of September 2016)
• 18 companies benefitted from the simplificationof fiscal incentive process with averageprocessing time of 13.4 days (previously 2 years)
Development of Spesial Economic Zone (SZEs)
2
State-owned train manufacturer PT Industri KeretaApi (INKA) in Madiun, East Java, has begun its firstpassenger train exports by shipping 15 train wagon toBangladesh.
Export-Oriented Business Credit (KURBE)
3
North Sulawesi has sucessfully exported coconutproduct through SOEs’ joint program
Deregulation on Logistics Sector4
19
Improving Investment Realization (Q4-2016)
Source: Investment Coordinating Board (BKPM), compared to Q4-2015 period
Rp145.4 T
Rp159.4 T
Rp99.2 TRp101.3 T
Rp46.2 T
Rp58.1T
434,463
9.6% 15.6%
2.1% 25.8%
Q4-2015Q4-2016
Q4-2015 Q4-2016
Q4-2015Q4-2016
Q4-2015 Q4-2016
*
* person
375,982
IDR tn159.4
2013 2014 2015
Rising Direct Investments1
0
20
40
60
80
100
120
140
160
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
FDI DDI TOTAL
2016
Mining
Chemical & Pharmaceutical Industry
Rubber & Plastic IndustryMetal, Machinery &
Electronic Industry
US$745.9 mn
US$862.5 mn
US$259.3 mn
US$1,074.3 mn
US$1,075.3 mn
US$494.1 mnFood Industry
37.2%
US$48.5 mnConstruction
45.2%
11.4%
18.1%
90.4%
55.9%
38.1%
Investment Realization
Electricity, Gas & Water Supply
Paper & Printing Industry
US$225.8 mn
20.0%
Source: Investment Coordinating Board (BKPM), compared to Q4-2015 period
58.1
101.3
20
Investment Achievement in 2016: Summary
Source: Investment Coordinating Board (BKPM)
Investment Growth Workforce Absorption
Regional Investment
Sectoral Contribution (IDR tn)
Investment in New Projects
Investment Source (USD mn)
* 2016 investment target was IDR 594.8 tn
Sulawesi, Maluku & Papua recorded the highest
investment growth in 2016
2016*
612.8IDR tn
Java
11%
Kalimantan
26%
Bali & Nusa Tenggara
16%
Sumatera
39%
Sulawesi
56%Maluku & Papua
58%
Investment in outside Java reached
46.4%from total investment
in 2016
8
1.5
2.2
2.7
5.4
9.2
0 2 4 6 8 10
Others
Netherland
Hong Kong
China
Japan
Singapore
0 20 40 60 80 100
2015
2016
Primary Manufacture Infrastructure & Services
95
89
236
355.8
214.4
188
2015
545.4IDR tn 12.4%
Increased
1.4 mnof domestic workers
75.5%New projects
24.5%Expansion projects
22
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 manufacturing and service sectors via infrastructure
development
From consumption-led to investment-led growth via a stronger manufacturing sector
and more investment initiatives
Policies to maintain purchasing power to stimulate domestic economy in the midst of weakening macroeconomic conditions
Budget reform as a part of larger
economic reform initiative
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 investment needs: State and regional
budget, State Owned Enterprises and PPP
Continuing from 2015 policy, infrastructurewill 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
23
Indonesia’s Strong GDP
Growth ProspectGDP Growth Based on Expenditures (%, YoY)1
Strong GDP Growth1
By expenditure2014 2015 2016
Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot.
HH. consumption 5.2 5.2 5.1 5.1 5.1 5.0 5.0 5.0 4.9 5.0 5.0 5.1 5.0 5.0 5.0
Non profit HH. consumption
23.2 22.4 5.8 (0.5) 12.2 (8.1) (8.0) 6.6 8.3 (0.6) 6.4 6.7 6.6 6.7 6.6
Government consumption
6.1 (1.8) 1.2 0.9 1.2 2.9 2.6 7.1 7.1 5.3 3.4 6.2 (2.9) (4.0) (0.1)
Gross Fixed Cap. Formation
5.4 4.0 4.4 4.1 4.4 4.6 4.0 4.9 6.4 5.0 4.7 4.2 4.2 4.8 4.5
Exports 3.1 1.5 4.9 (4.4) 1.1 (0.7) (0.3) (0.9) (6.4) (2.1) (3.3) (2.2) (5.6) 4.2 (1.7)
Imports 5.1 0.4 0.2 3.0 2.1 (2.6) (7.4) (6.6) (8.7) (6.4) (5.1) (3.2) (3.7) 2.8 (2.3)
GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0
%
Institutions2017 GDP growth
(%YoY)
2017 Budget 5.1
Bank Indonesia 5.0-5.4
IMF 5.1
World Bank 5.3
ADB 5.1
Consensus Forecast (March 2017) 5.2
-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
%
0.04
3.83 3.27
(2.07)
(0.17)
3.75 3.30
(1.70)
(0.40)
4.01
3.13
(1.77)
5.12 4.94 4.93 5.05 4.82 4.74 4.77 5.17 4.92 5.18 5.01 4.94
-3.0
-1.0
1.0
3.0
5.0
7.0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2014 2015 2016
QoQ YoY
24
Strong and Stable GDP Performance
Contributors to GDP Growth by Sector (%, YoY)
Spatial GDP Growth
By sectors2014 2015 2016
Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot. Q1 Q2 Q3 Q4 Tot.
Agriculture, forestry, and fishery
5.2 4.9 3.6 3.3 4.2 3.8 6.5 2.9 1.6 3.8 1.5 3.4 3.0 5.3 3.3
Mining (1.2) 0.7 0.7 1.5 0.4 0.6 (3.6) (4.4) (6.0) (3.4) 1.2 1.2 0.3 1.6 1.1
Industrial processing 4.5 4.9 5.0 4.2 4.6 4.1 4.2 4.6 4.4 4.3 4.7 4.6 4.5 3.4 4.3
Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 7.1 6.4 6.8 5.1 5.0 4.2 5.2
Big traders, wholesale,retail
6.1 5.1 5.2 4.4 5.2 3.8 1.6 1.4 3.7 2.6 4.1 4.1 3.6 3.9 3.9
Transportation and warehousing
7.0 7.6 7.7 7.2 7.4 5.8 5.9 7.3 7.7 6.7 7.9 6.9 8.3 7.9 7.7
Information and communication
9.9 10.7 9.8 10.1 10.1 9.7 9.3 10.6 9.2 9.7 7.6 9.3 9.0 9.6 8.9
Financial service and insurance
3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.4 12.8 8.6 9.3 13.6 9.0 4.2 8.9
Other Services 8.4 9.5 9.5 8.4 8.9 8.0 8.1 8.1 8.2 8.1 7.9 7.9 7.7 7.7 7.8
GDP 5.1 4.9 4.9 5.0 5.0 4.8 4.7 4.8 5.2 4.9 4.9 5.2 5.0 4.9 5.0
Java: 58.5%
Sumatera: 22.0%
Maluku & Papua: 2.5%
Sulawesi: 6.0%
Kalimantan: 7.9%
Bali & Nusa Tenggara: 3.1%
Spatial GDP Growth Contribution
SumateraGDP GrowthQ4 2016: 4.5%
JavaGDP GrowthQ4 2016: 5.5%
KalimantanGDP GrowthQ4 2016:2.2% Sulawesi
GDP GrowthQ4 2016:6.8%
Maluku & PapuaGDP GrowthQ4 2016: 14.7%
Bali & Nusa TenggaraGDP GrowthQ4 2016: 4.9%
• After experiencing negative growth in2015, mining sector could growpositively. Mainly, due to theimprovement in commodity prices.
• Java, as a major growth contributor,maintained its high growth, while otherregions improved
• Government tries to promote more valueadded, as well as labor intensivesectors, to achieve higher growth, byproviding various incentives, includinginvestment relaxation, fiscal incentives,and easiness in doing business.
26
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
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
2012 2013 2014 2015 2016 2017
Non-OG OG Total
-12
-8
-4
0
4
8
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3*
2012 2013 2014 2015 2016**
Goods Service Income Secondary Inc. Current Account
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 2015:CA Deficit(US$17.5bn)
2012:CA Deficit(US$24.4bn)
2013:CA Deficit(US$29.1bn)
2014:CA Deficit(US$27.5bn)
US$bn
(6.3)
(1.6)
5.1
0.9
(1.8)
Source: Bank Indonesia
FX Reserves as of Feb 2017: US$119.9bn (Equiv. to 8.5 months of imports + servicing of government debt)
MonthUS$bn
2016**:CA Deficit(US$16.3bn)
116.4
6.64.5
(1.8)
Source: BPS
US$bn
* Preliminary Figure ** Very Preliminary Figure
2.55
1.32
(1.23)
-
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 11 1
2012 2013 2014 2015 2016 2017
FX Reserves (LHS) Month of Import & Debt Service (RHS)
0
40
80
120
160
-20
-10
0
10
20
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1* Q3*
2012 2013 2014 2015 2016**
Thousa
nds
Current Account Capital & Financial AccountOverall Balance Reserve Assets (RHS)
2015:Surplus
US$7.59bn
2012:Deficit
(US$1.79bn)
2013:Deficit
(US$4.10bn)
2014:Deficit
(US$2.37bn)
2016: Surplus
US$8.83bn
27
Exchange Rate In Line with Fundamentals
Stable Movement of Rupiah
The rupiah continued to appreciate in February 2017 inline with maintained macroeconomic stability and despite abackdrop of growing global uncertainty. On average, therupiah appreciated by 0.17% (mtm) to Rp13,338/USD inthe reporting period, supported by forex sales by exportercorporations along with improving exports, and a net inflowof foreign capital to purchase tradeable governmentsecurities (SBN) along with positive investor perceptiontowards the domestic economy.
Source: Bank Indonesia
IDR/US$
data as of 28 February 2017
IDR/USD
Monthly Average
Quarterly Average
Rupiah Exchange Rate Fared Relatively Well Compared to Peers
Source: Bank Indonesia Source: Bank Indonesia
YTD 2017* vs 2016 Feb vs Jan 2017
* data as of 28 February 20172.50
3.21
2.8
1.59
2.83
1.29
0.31
0.17
1.66
0.33
-0.49
0.04
3.49
2.75
2.64
1.76
1.23
0.9
0.25
0.12
0.03
-0.27
-0.89
-2.10
-3.00 -2.00 -1.00 0.00 1.00 2.00 3.00 4.00
TRYKRWZARINRBRLTHBCNYIDRJPY
MYRPHPEUR
Point to Point Average
* data as of 28 February 20176.68
4.66
5.49
2.73
1.85
1.02
1.03
0.75
-1.33
-2.56
-0.21
10.52
9.72
0.12
-0.58
-0.34
-6.83
-4.09
-4.74
-18.51
-20.00 -15.00 -10.00 -5.00 0.00 5.00 10.00 15.00
KRW
BRL
ZAR
THB
INR
IDR
MYR
EUR
PHP
TRY
Average Point to Point
28
Ample Lines of Defense Against External Shocks
Ample level of FX reserves to buffer against external shock
FX Reserves as of February 2017: US$119.9 bn
South Korea Renewed a 3 year KRW/IDR swap arrangement with the size of up to 10.7 tn KRW/IDR115 tn in March 2017
Australia Established a 3 year A$/IDR swap arrangement with the size of up to A$10 bn or IDR100 tn in Dec’ 2015
Chiang Mai Initiative
Multilateralization (CMIM)
Agreement
Entitled to a maximum swap amount of US$ 22.76 bn under the ASEAN+3 (Japan, China, and Korea) FX reserves pool created under the agreement
Came into effect in 2010 with a pool of US$120 bn
Doubled to US$240 bn effective July 2014
Japan US$22.76 billion swap line with Japan currently in place
The quantum of the swap line was increased from US$12 bn in December 2013
IMF Global Financial Safety Net - GSFN
Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem
Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)
Bilateral
Regional
Global
FX Reserve
Ample Reserves
Swap Arrangement
29
Measures to Manage External Volatility
Pre-emptive Measures
Implementing Crisis Management Protocol (CMP)
Implementing Bond Stabilization Framework (BSF)
Enhancing coordination between government institutions and continuous dialogue with market participants
Specific policies in place to address crises enacted in 2017 budget law
Swap facility arrangements based on international cooperation
Crisis Management Protocol
Indicators to determine crisis level of Government Securities Market condition (normal, aware, alert, crisis)
Several market indicators that are monitored daily:
- Yield of benchmark series;- Exchange rate;- Jakarta Composite Index;- Foreign ownership in government securities
Policies to address the crisis at every level :
‐ Repurchase the government securities at secondary market
‐ Postpone or stop the issuance
First Line of Defense
State’s Budget
Buyback fund at DG of Budget Financing and Risk Management
Investment fund at Public Service Agency (BLU) (min. level Aware)
State Owned Enterprises’s Budget
Related BUMNs (min. level Aware)
Social Security Organizing Agency (BPJS)’s Budget
BPJS (min. level Aware)
Second Line of Defense
State’s Budget
State General Treasury Account (Rekening KUN) (min. level Alert)
Accumulated cash surplus (SAL) (min. Level Crisis)
State Owned Enterprises’s Budget
Related BUMNs (min. level Alert)
Social Security Organizing Agency (BPJS)’s Budget
BPJS (min. level Alert)
Bond Stabilization Framework
Source: Ministry of FInance
30
0
50
100
150
200
250
300
350
0
50
100
150
200
250
300
2005 2007 2009 2011 2013 2015* Feb
2016*
Apr
2016*
Jun
2016*
Aug
2016*
Oct
2016*
Dec
2016*
Public (Govt. & BI) Private Total (RHS)
Strengthened Private External Debt Risk Management
(US$bn)
Source: External Debt Statistics of Indonesia, March 2017 Source: Moody’s Statistical Handbook, November 2016
Regulation Key PointsPhase 1
Jan 1,2015 –Dec 31,2015
Phase 2Jan 1,2016 –Dec 31,2016
Phase 3Jan 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
External Debt / GDP (%)(US$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
Debt Burden Indicator (External Debt / GDP) Remains Comparable to PeersDespite Increasing Trend of External Debt
Encouraging Corporates Compliance
Total Ext. Debt: US$320bn
Private Sector Ext. Debt:US$159bn
(%)
2,371161
Q3-2016 (∑n = 2,532)
Comply Not Comply
(6.4%)(93.6%)
2,243289
Q3-2016 (∑n = 2,532)
Comply Not Comply
(88.6%) (11.4%)
> 3 – 6 months< 3 months
31
Manageable External Debt Profile...short term non-bank corporate debt (non affiliation) represents only 9.1% of total private external debt
Private
Short-Term1
Private Non-Bank
External DebtPosition
Affiliation
Non Affiliation
US$161.2 Bnor
50.3%of Total Ext.
Debt
US$112.8 Bnor
70.9%of Private Ext.
Debt
US$20.9 Bnor
13.2%of Private Ext. Deb
US$10.9bnor
6.8%of Private Ext. Debt
US$14.4 Bnor
9.1%of Private Ext. Debt
Public Long Term 1 Private Bank
US$25.3bnor
15.9%of Private Ext. Debt
US$159bnor
49.7%of total Ext. Debt
US$46.3bnor
29.1%of Private Ext. Debt
External Debt Position as of January 20171 Based on remaining maturity
Source: External Debt Statistics of Indonesia, March 2017
US$320.3 bn
33
Integrated Reform to Provide Higher Quality of Economic Growth...synergy between authorities to drive economy navigating the challenges
• Productive and realistic budget• Credible budget execution
• Policy to maintain consumption and improve investment climate
• Economic policy packages
• Inflation management • Monetary policy to support
economic stability• Accommodative macro-
prudential policies
Fiscal
Real SectorMonetary & Financial Sector
Synergy in reform to boost the more sustainable
and inclusive growth
Source: Ministry of FInance
34
Long Term Strategies to Achieve Sustainable Growth…stimuli to maintain purchasing power
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 labourwages
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
The Virtuous Cycle of Purchasing Power Stimuli
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
Integratedlogistics zones
CPOfund
Support forexport-oriented
industries
Village-citylogistics
improvement
Accelerationof power
infrastructure
Income tax relief for labor intensive industries
Permit & licensing
simplfication
One map policy
Incentives forfootwear and
apparel industries
Simplification ofimport licensing fordrugs and raw food
Acceleratinginfrastructuredevelopment
Water management
and regulation
Tax incentives for REITS
Relaxation of entry visa policies
Expansion of coverage and
interest subsidy for MSME
Dwelling timeoptimization
Oil refinerydevelopment
Aviationsector
incentives
Downstreamindustries
Debt Toequity ratio
36
Building a Credible and Realistic Budget…providing more certainty to all stakeholders
1: Unaudited Source: Ministry of FInance
INDICATOR2016 2017
Realization1 APBN
Economic growth (%, yoy) 5.0 5.1
Inflation (%, yoy) 3.0 4.0
3-Month Treasury Bill (SPN) (%) 5.7 5.3
Exchange Rate (Rp/US$) 13,305 13,300
ICP (US$/barrel) 40 45
Oil Production (thousand barrel/day) 829 815
Gas Production (thousand barrel oil equivalent/day) 1,184 1,150
• Credible and realistic budget with 2016 outlook numberused as a base for formulating the 2017 State Budget
• Tax revenue grew 3.5%, between 2015 and 2016, whichincludes the contribution of IDR 109.5 trillion from taxamnesty
• Improved efficiency in government expenditure
• Discipline in managing budget deficit
Description (IDR Trillion)
2016 2017
RevisedBudget
Outlook Realization1% realization to revised budget
% realization to outlook
State budget% growth to realization
A. Revenues and grants 1,786.2 1,582.9 1,555.2 87.1% 98.3% 1,750.3 12.5%
I. Domestic revenue 1,784.2 1,580.9 1,547.0 86.7% 97.9% 1,748.9 13.1%
1. Tax revenue 1,539.2 1,320.2 1,284.9 83.5% 97.3% 1,498.9 16.7%
2. Non tax revenue 245.1 260.7 262.0 106.9% 100.5% 250.0 -4.6%
II. Grants 2.0 2.0 8.2 410.0% 410.0% 1.4 -82.9%
B. Expenditure 2,082.9 1,898.6 1,860.7 89.3% 98.0% 2,080.5 11.8%
I. Total Central government expenditure 1,306.7 1,195.3 1,150.2 88.0% 96.2% 1,315.5 14.4%
1. Ministerial spending 767.8 672.0 680.8 88.7% 101.3% 763.6 12.2%
2. Non ministerial spending 538.9 523.3 469.4 87.1% 89.7% 552.0 17.6%
II. Transfer to region and village Fund 776.3 703.3 710.4 91.5% 101.0% 764.9 7.7%
1. Regional transfer 729.3 659.1 663.7 91.0% 100.7% 704.9 6.2%
2. Village fund 47.0 44.2 46.7 99.4% 105.7% 60.0 28.5%
C. Primary balance -105.5 -126.4 -122.7 116.3% 97.1% -109.0 -11.2%
D. Surplus (deficit) -296.7 -315.7 -305.4 102.9% 96.7% -330.2 8.1%
% of GDP -2.35% -2.50% -2.46% 104.7% 98.4% -2.41% -2.0%
E. Financing 296.7 315.7 330.6 111.4% 104.7% 330.2 -0.1%
37
A More Realistic 2017 Tax Revenue Target…taxation policies are directed at expanding the tax base and increase compliance
Source: Ministry of FInance
897.7
1,011.2
1,069
90.8
233.5 249.9
1,271.7
600
700
800
900
1000
1100
1200
1300
1400
2014 2015 2016 2017
Realization Outlook
1,146.9
1,240.4
1,284.9
99.2
248.9
255.6
1,498.9
800
900
1000
1100
1200
1300
1400
1500
1600
2014 2015 2016 2017
Realization Outlook
19.5%
8.2%
29.9%
3.4%
3.6%
24.1%
(2.6%)
16.7%25.9%
38.7%
8.2%
6.0%
30.4%
5.7%
(3.6%)
19.0%
Target to target growthRealization to target growth Realization to Realization growth
IDR tnIDR tn
Increasing the tax base and compliance
i.e. through IT and database improvement
Providing tax incentives to support competitiveness and investment climate
Improving tax regulation i.e. through the amendment of
laws
Using excises to control consumption of certain goods and minimize negative externality
Optimizing international tax arrangement to enforce transparency
2017 Main Taxation Policies
Non-Oil and Gas Tax CollectionTax Collection Target (All sources including Oil & Gas)
38
Indonesian Tax Amnesty: A Success Story
Tax amnesty result1 Declaration & repatriation (Country of Origin)
Compliance rate in submitting annual tax report
Source: Ministry of Finance
Country
Offshore Declaration
IDRtn %
Singapore 750.98 69.21
Virgin Islands 78.00 7.19
Cayman Islands 56.43 5.20
Hong Kong 52.19 4.81
Australia 40.18 3.70
Country
Repatriation
IDRtn %
Singapore 83.61 64.77
Cayman Islands 16.51 12.79
Hong Kong 16.18 12.53
China 3.64 2.82
Virgin Islands 2.55 1.98
Source: Ministry of Finance
RevenueIDR 109.5tn~0.9% of
GDP
Asset declared
IDR 4,296.3tn~34.6% of
GDP
Note: Figures in IDR trillion1 Data as of 31 December 2016. End of Tax Amnesty Period II
3,143.1
1,012.6
140.5
Onshore Declaration
Offshore Declaration
Repatriation
103.2
0.75.5
Redemption Money
Preliminary Evidence Payment
Tax Arrears Payment
56.2%
59.2%
60.4%
62.3%
52%
54%
56%
58%
60%
62%
64%
0
5
10
15
20
25
30
35
2013 2014 2015 2016
Registered Taxpayers
Registered Taxpayers – Tax Report Required
Submitted Tax Report
Compliance Rate = Submitted Tax Report/Registered Taxpayers-Tax Report Required
Source: Ministry of Finance
• Total assets declared in the tax amnesty program as of December 31, 2016 amounted to an equivalent of 34.6% of 2016 GDP
• Tax reform results positive impact to the broadening the tax base, as well as restoring trust between taxpayers and tax authority
• Referring to research from an independent body, Indonesia’s tax amnesty is the most successful tax program in the world (based on revenue and declared assets)
39
More Comprehensive Tax Reform...expected to positively impact the trajectory of the economy in both the short and long term
Tax Amnesty as the Milestone of Tax Reform
Optimizing the tax amnesty momentum
(last period – until March 2017– and post program benefits)
1. Intensive communication for the last period up to March 2017
2. Encouraging SMEs participation by allowing them apply the program collectively
3. Optimizing new database from tax amnesty participants
4. Improving law enforcement (through audit and investigation)
658.7
619.9
723.3
873.9
980.5
1077.3
1146.9
1240.4
1283.6
1495.9
13.3%
11.1%
11.2%
11.8%
11.9% 11.9%11.4%
10.7% 10.3% 11.0%
0%
2%
4%
6%
8%
10%
12%
14%
0
200
400
600
800
1000
1200
1400
1600
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Human Resources
To Improve Tax Ratio in 2017
Tax (IDR tn) Tax Ratio to PDB (RHS)
BusinessProcess
• Improvement of the humanresources and organizationcapacity and capability
• The establishment on taxreform task force team
• Discipline on Plan-Do-Check-Action to monitor collection
• Stronger law enforcement• Authorization to gather 3rd
party data (banking)• Implementation of
Automatic Exchange of Information
• Simplification of tax registration
Regulation
• General Provision and Administration of Taxation Law
• VAT Law• Income Tax Law• Stamp Duty Law
IT Support
• Improvement of IT and communication system
• Improvement on public data access for individual data management
• Enhancement of data management
40
Revenue and Expenditure Profile by Region…effective expenditure policy as a tool to promote equality across Indonesia
SUMATERA
Revenue 141.1
a. Tax 66.9
b. Custom & Excise 6.8
c. Non Tax Revenue 70.4
Expenditure 232.3
a. Transfer to Region 176.1
b. Ministerial Spending
56.2
Nett (88.2)
JAVA
Revenue 1.143.2
a. Tax 884.9
b. Custom & Excise 161.6
c. Non Tax Revenue 96.6
Expenditure 302.8
a. Transfer to Region 201.8
b. Ministerial Spending
101
Nett 840.4
BALI & NUSRA
Revenue 15.5
a. Tax 11.7
b. Custom & Excise 1.5
c. Non Tax Revenue 2.3
Expenditure 56.4
a. Transfer to Region 39.5
b. Ministerial Spending 17.0
Nett (40.9)
KALIMANTAN
Revenue 86.0
a. Tax 32.0
b. Custom & Excise 1.1
c. Non Tax Revenue 52.9
Expenditure 93.9
a. Transfer to Region 73.7
b. Ministerial Spending
20.3
Nett (7.9)
SULAWESI
Revenue 19.7
a. Tax 16.6
b. Custom & Excise 0.6
c. Non Tax Revenue 2.5
Expenditure 104.5
a. Transfer to Region 73.3
b. Ministerial Spending 31.2
Nett (84.8)
PAPUA & MALUKU
Revenue 18.4
a. Tax 10.7
b. Custom & Excise 1.7
c. Non Tax Revenue 6.0
Expenditure 89.6
a. Transfer to Region 71.7
b. Ministerial Spending 17.9
Nett (71.3)
Notes:1. Average data 2014 - 20162. Revenue amount collected from certain region for central government budget3. Expenditure amount spent for certain region from central government budget4. Figure in IDR trillion
Source: Ministry of Finance
41
Commitment to Continue Strengthening Productive Spending...reallocating budget to productive activities, including infrastructure, health, education, and non-energy subsidy
Source: Ministry of Finance
416.1
104.0
77.3
387.3
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
2011 2012 2013 2014 2015 2016 2017
Education Health Energy Subsidy Infrastructure
CONTINUING THE REFORM
INITIAL REFORM
% to total budget allo
cation for su
bsidy
• Focus on productive spending to support growth momentumand improve basic services
• Preserving infrastructure acceleration and social welfarespending to improve equality, and maintain consumptiongrowth
• Targeted energy subsidy in the form of 3 Kg LPG subsidiesand electricity subsidy and increased non energy subsidyallocation
• Continue the improvement of intergovernmental transfer,esp. village fund, to spur growth through regions
Budget Re-allocation Budget allocation for subsidy
48.3%
51.7%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2012 2013 2014 2015 2016 2017 Budget
Energy Non Energy
IDR tn
42
Education and health spending well delivered in 2016…investment to improve the quality of human capital in the long term
Education Expenditure Health Expenditure
2015: 95.5% of budget 2016: 89.0% of budget
2015: 89.6% of budget 2016: 88.6% of budget
Immunization for 0 – 11 months old infantRealization: 4,006,979 infantsTarget 4,001,210 infants
University scholarship for poor student (Bidikmisi)
Realization: 331.9 thousand college students
Target: 306 thousand college students
Health Insurance Subsidy (PBI)Realization: 91.9 million peopleTarget 92.4 million people
School Operational Assistance (BOS)
Realization: 8.0 million students
Target: 8.2 million students
Vaccine availability in Community Health Centre (Puskesmas)
Realization: 81.5%
Target 92.5%
School Rehabilitation
Realization: 30,300 rooms
Target: 27,200 rooms
Malaria EradicationRealization: 247 citiesTarget 245 cities
Indonesia Smart Card (KIP)Realization: 19.4 million students
Target: 19.5 million students Accredited Regional Hospital
Realization: 201 hospitalsTarget n/a
Source: Ministry of Finance
0
50
100
150
200
250
300
350
400
450
Budget Realization Budget Realization
IDR
tn
Ministerial Spending Non Ministerial Spending Regional Transfer Financing
0
20
40
60
80
100
120
Budget Realization Budget Realization
IDR
tn
Ministerial Spending Non Ministerial Spending Regional Transfer Financing
408.5390.2
416.6
370.5
74.867.0
104.1
92.3
43
Better Targeting of Subsidy Policy in 2017...more budget allocated to non energy subsidy and priority programs to improve basic services
BidikmisiScholarship
0
50
100
150
200
250
300
350
400
450
2009 2010 2011 2012 2013 2014 2015 2016 2017
APBN
IDR tn
416.1
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 2017
APBN
APBNP % of APBNP
IDR tn %
Basic & 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 thousandscollege students
19.5 million students
Indonesia Smart Card (KIP)
101,100 teachers10,200 lecturers
Certification
School Rehabilitation
41,128 rooms8.5 million students
School Operational Assistance (BOS)
107 Colleges/Universities
Operational Assistancefor Colleges
44
Budget Allocation Between Central & Local Government Improves…promoting better quality of budget spending from local government
65.85%
22.67%
0.98%
2.65%
7.85%
Gradually increases Village
Fund, with average allocation for each village is IDR800.5 mn.
Village Fund (IDR60.0 tn)
Improving efficiency and effectiveness of Special Autonomy & Special Region of Yogyakarta Fund.(Papua IDR5.6 tn; West Papua IDR2.4 tn; Aceh IDR8.0 tn; DTI Papua & West Papua IDR3.5 tn)
Special Autonomy & Special Region Yogyakarta (IDR20.3 tn)
Incentive Fund (IDR7.5 tn)
Minimum 25% (IDR125.9 tn) of General Transfer
Fund has to be used for public service facility
development acceleration
General Transfer Fund (IDR503.6 tn)
Physical Special Transfer Fund allocation is based on regions’ proposal and national priorities
Special Transfer Fund (IDR173.4 tn)
Incentive Fund allocation is increased (317 regions being rewarded, The lowest incentive is Rp7,5 billion, The highest incentive is Rp65,3 billion)
• Implementation of policy to allocate spending to regions
• 2017 budget has higher allocation of Transfer to Region / Village Fund compared to the Ministerial Spending
• Minimum 25% of general transfer fund has to be used for public service infrastructure
2017 Transfer to Regions and Village Funds Transfer to Regions/Village Funds & Ministerial Spending
IDRtn 2013 2014 2015 20162017 Budget
Transfer to Region 513.3 573.7 602.4 663.7 704.9
Village Fund - - 20.8 46.7 60.0
Total Intergovernmental Transfer
513.3 573.7 623.1 710.4 764.9
Ministerial Spending 582.9 577.2 732.1 680.8 763.6
45
Policy of Infrastructure Spending and Transfer to Regions…developing the nation through targeted spending
In 2017, minimum 25% of general transfer fund has to be used for public service infrastructure
Kalimantan
2016 : 2,889.92017 : 3,641.6
2016 : 597.92017 : 634.5
2016 : 2,694.42017 : 4,117.1
2016 : 606.22017 : 1,042.6
2016 : 3,749.12017 : 3.686.3
2016 : 1,680.22017 : 1,941.7
Sumatera
2016 : 3,895.42017 : 3,545.7
2016 : 1,044.82017 : 1,320.4
2016 : 3,229.42017 : 3,257.8
2016 : 461,12017 : 1,147.5
2016 : 661.32017 : 1,207.3
2016 : 101.1 2017 : 308.2
Java
76
86
114.2
145.5
168.5
154.1
256.1
317.1
387.3
8.1 8.3 8.89.8 10.2
8.7
14.215.2
18.6
0
5
10
15
20
0
100
200
300
400
500
2009 2010 2011 2012 2013 2014 2015 2016 2017
%IDR tnAnggaran Infrastruktur
% thd Belanja Negara (RHS)
Infrastructure budget
% of total state expenditure (RHS)Maluku & Papua
Sulawesi
Bali & Nusa Tenggara
Infrastructure Budget Allocation 2017 Infrastructure Budget Allocation (IDR billion) and
2016 realization
2017 Construction Target
Roads815 km
Bridges9,399 m
Railways550 km
Airports13 airports
Seaports55 locations
Terminal3 location
2016 Construction Realization
Road (km)Target: 2,139Realization: 2,529
AirportsTarget: 15 (2019)Realization: 3
Bridges (km)Target: 16Realization: 10.6
RailwaysTarget: 142Achievement: 33*
* Land issues are in progress
DamTarget: 37Achievement: 37
Irrigation (km)Target: 4,889Achievement: 1,025
46
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)
47
Financing Policy 2017: General Objective & Policy
To conduct active debt
portfolio
To manage debt-to-GDP ratio
To optimize
the use
of
external
and
domestic
loans T
o
optim
ize
curre
ncy
mix o
f issu
ance
General Policy
To support market development
To enhance public accountability as part of transparent Government debt management
To meet financing needs at optimum cost and tolerable
risk
Source: Ministry of Finance
48
Budget Financing Breakdown in 2017
Breakdown of Budget Financing IDR tn US$ bn
Government Debt (net) 384.69 28.36
Government Securities (net) 399.99 29.49
Issuance 684.84 50.49
Redemption & Cash Management
(281.84) (20.78)
Debt Portfolio Management (3.00) (0.22)
Domestic Loans (net) 1.49 0.11
Withdrawal 2.50 0.19
Redemption (1.01) (0.07)
Foreign Loans (net) (16.79) (1.24)
Withdrawal 48.29 3.56
Redemption (65.08) (4.80)
Source: Ministry of Finance
Debt (Gross)
IDR735.6tn
(eq. USD 55.1bn)
Redemption
IDR350.9tn
(eq. USD 26.3bn)
Budget Financing
IDR330.2tn
(eq. USD 24.7bn)
Non-Debt Financing
IDR54.5tn
(eq. USD 4.1bn)
49
Government Securities: Indicative Financing Plan for 2017…prudent and sustainable fiscal management
Government Issuance Targets International Bonds
• Issuance of international bonds as a complement to avoid crowding out the domestic market consists of USD, YEN or EURO global bonds;
• International bond issuance can be maximized up to 25% from gross target, depends on financing need
Source: Ministry of Finance
Domestic Bonds
Weekly Auction:
Conventional securities 24 x
Islamic securities 24 x
Non-Auction:
Retail bonds
Private Placement Based on request
Front Loading Issuance For Budget Financing
• Pre-funding to optimize cost ahead of potential Fed rate
hike
• Anticipate developments in global environment
• Government Securities target for 1st semester 2017 is
59.3% from gross issuance target
• Government Securities target in Rupiah for 1st semester
2017 is 45.7% from gross issuancce target
Debt Securities
71%
Sukuk29%
ATM for Government Securities (SBN): 7-9 years.
Instruments
Budget
Indicative target (IDRbn)
Indicative target (USDbn)*
Government securities (net)
399,993 29.98
Government securities (gross)
684,835* 51.33
Composition
Local currency 80%
Foreign currency 20%
* USSD/IDR: 13,343 as of 31 Jan 2017** Gross financing is not included auction for cash management purposes amounted IDR 119 trillion 3 month and 6 month T-bills)
50
Disciplined and Sophisticated Debt Portfolio Management
Stable Debt to GDP Ratio Over the Years
Weighted Average Debt Maturity of ~9.0 Years (As of Feb. 2017)**
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 Source: Ministry of Finance
(1)
Years
* Based on 2016 realization, ** 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
131 141 136 155 175203
69 64 5854
55
5523.1 23.0
24.9 24.727.4 27.9
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)
9.79.6
9.7
9.4
9.0 9.0
8.0
8.3
8.5
8.8
9.0
9.3
9.5
9.8
10.0
2012 2013 2014 2015 2016 Feb-17
56% 53% 57% 56% 58% 58%
24% 29% 29% 31% 30% 30%
14% 12% 9% 8% 7% 7%3% 3% 3% 3% 4% 4%3% 3% 2% 2% 1% 1%
0%
20%
40%
60%
80%
100%
2012 2013 2014 2015 2016 Feb-17
Others*** EUR JPY USD IDR
51
Well Balanced Maturity Profile With Strong Resilience Against External Shocks
136 1
84
180
100 136
95
95
168
45
126
85
53
100
29
120
53
52
97
5
71
22
22
7 15 26
23
20 25
0
87
109
134
111
124
114
103
87
114
87
44
45
20
19
17
16
16
11
29
5
23 28
1
1
1 31
21 28
28
39
0
50
100
150
200
250
300
2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043 2045
IDR-Denominated Other Currencies
Declining Interest Rate Risks
Debt Maturity Profile
%
Declining Exchange Rate Risks
%
Upcoming Maturities (Next 5 Years)
%IDR tn
Source: Ministry of Finance
16.2 16.014.8
13.712.3 11.6
22.5 23.2
21.0 20.7
17.8
19.8
0
5
10
15
20
25
2012 2013 2014 2015 2016* Feb-17
Variable Rate Ratio¹ Refixing Rate²
10.2 11.7 10.7 12.2 11.7 10.9
44.446.7
43.4 44.541.8 41.7
0
10
20
30
40
50
2012 2013 2014 2015 2016* Feb-17
FX Debt to GDP Ratio** FX Debt to Total Debt Ratio
7.28.6 7.7 8.4
6.69.2
21.5 21.820.1 21.4
23.0 23.4
32.4 33.4 33.9 34.736.5 36.9
0.0
10.0
20.0
30.0
40.0
2012 2013 2014 2015 2016* Feb-17
In < 1 year In < 3 year In < 5 year
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)*Preliminary Figures **Using GDP assumption in 2017 Budget.
52
Profile of Total Central Government Debt
Foreign Ownership of Government Securities at Longer Tenors
Holders of Government IDR Bonds – Composition February 2017
Government Debt Outstanding
30.80 32.98 32.54 38.13 38.12 38.48 39.10 39.16 37.5 37.85 37.47
32.58 30.49 33.7630.83
37.85 32.8938.94 39.77 39.9 34.89 34.5
36.63 36.53 33.70 31.04 23.95 28.63 21.95 21.07 22.5 27.27 28.03
0
20
40
60
80
100
2011 2012 2013 2014 2015 Mar-16 Jun-16 Sep-16 Dec-16 Jan-17 Feb-17
Foreign Holder Domestic Non Banks Domestic Banks
34.34 31.18 29.96 25.87 23.84 21.14 20.67 20.63
65.66 68.82 70.04 74.13 76.16 78.86 79.33 79.37
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 Jan-17 Feb-17
Loan Government Securities
209.41199.48 204.51 194.55 229,4 258,03 265.98USD bn 268.91
Source: Ministry of Finance
11.87 7.84 5.2 4.65 3.23 2.69 3.5 3.4 5.2
24.9719.32
18.29 18.9613.1 13.73
23.1 19.8 19.1
63.16 72.84 76.5 76.39 83.6683.57 73.4 76.8
76.7
30.8032.98 32.54
38.13 38.21 39.10 37.55 37.8 37.5
0
20
40
60
80
100
2011 2012 2013 2014 2015 Jun-16 Dec-16 Jan-17 Feb-17
0-1 1-5 >5 Foreign Ownership to Total
(%)
(%)
53
Ownership of IDR Tradable Central Government Securities
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)
Description Dec-14 Dec-15 Jun-16 Dec-16 Feb-17
Banks* 375.55 31.04% 350.07 23.95% 361.54 21.95% 399.46 22.53% 517.52 28.03%
Govt Institutions (Bank Indonesia**)
41.63 3.44% 148.91 10.19% 150.13 9.12% 134.25 7.57% 49.26 2.67%
Bank Indonesia (gross) 149.07 9.05% 157.88 8.90% 168.42 9.12%
GS used for Monetary Operation
-1.05 -0.06% 23.63 1.33% 119.16 6.45%
Non-Banks 792.78 65.52% 962.86 65.87% 1135.18 68.93% 1239.57 69.90% 1279.58 69.30%
Mutual Funds 45.79 3.78% 61.60 4.21% 76.44 4.64% 85.66 4.83% 89.43 4.84%
Insurance Company 150.60 12.45% 171.62 11.74% 214.47 13.02% 238.24 13.43% 245.00 13.27%
Foreign Holders 461.35 38.13% 558.52 38.21% 643.99 39.10% 665.81 37.55% 691.89 37.47%
Foreign Govt's & Central Banks
103.42 8.55% 110.32 7.55% 118.53 7.20% 120.84 6.81% 122.48 6.63%
Pension Fund 43.30 3.58% 49.83 3.41% 64.67 3.93% 87.28 4.92% 87.68 4.75%
Individual 30.41 2.51% 42.53 2.91% 48.90 2.97% 57.75 3.26% 57.42 3.11%
Others 60.51 5.00% 78.50 5.37% 86.72 5.27% 104.84 5.91% 108.15 5.86%
Total 1,209.96 100% 1,461.85 100% 1,646.85 100% 1,773.28 100% 1,846.36 100%
54
Government Securities Realization
(IDR mn)
*Adjusted with issuance related to cash management realization
Budget 2017Budget Realization
(a.o. February 28, 2017)% Realization to Budget 2017
Government Securities Net 399,992,586 134,869,334 33.72%
Government Securities Maturing in 2017 and Buyback 284,842,264 30,928,623 10.86%
Issuance Need for 2017* 684,834,850 165,797,957 24.21%
Government Debt Securities (GDS) 139,327,500
Domestic GDS 92,130,000
-Coupon GDS 36,680,000
-Conventional T-Bills 55,450,000
-Private Placement -
-Retail Bonds -
International Bonds 47,197,500
-USD GMTN 47,197,500
-Euro GMTN -
-Samurai Bonds -
-Domestic USD Bonds -
Government Islamic Debt Securities 26,470,457
Domestic Government Islamic Debt Securities 26,470,457
- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based Sukuk) 26,470,457
- Retail Sukuk -
- Private Placement -
Global Sukuk -
55
Positive Response of Government Securities Issuance in 2016
Global Conventional Bond Global Sukuk Euro-Denominated Bonds Samurai Bonds
Tenure 10 yr 30 yr 5 yr 10yr 5 yr 12 yr 3 yr 5 yr
Pricing Date December 8th, 2015 March 29th, 2016 June 14th, 2016 June 21st, 2016
Nominal US$ 2.25 bn US$ 1.25 bn US$0.75 bn US$1.75 bn EUR 1.5 bn EUR 1.5 bn JPY62 bn JPY38 bn
Coupon Rate 4.75% 5.95% 3.40% 4.55% 2.625% 3.750% 0.83% 1.16%
Yield 4.80% 6.00% 3.40% 4.55% 2.772% 3.906% 0.83% 1.16%
Incoming Bid US$8.1 bn US$8.6 bn EUR 8.4 bn JPY100 bn
• The average incoming bids in 2016 was
IDR18.81tn/auction, higher than 2015
(IDR14.05tn/auction);
• The average awarded bids in 2016 was
IDR9.44tn/auction, higher than 2015
(IDR6.75tn/auction);
• Bid to cover ratio of government securities issuance
in 2016 was 1.99 times (2015 was 2.08 times).
IDR bn
Increasing Incoming Bids in 2016’s Government Securities Issuance
Incoming Bid 2016 Bid to Cover Ratio 2016 (RHS)Awarded Bid 2016
Monetary and Financial Factor:Credible Monetary Policy Track Record and Favourable Financial Sector
Section 5
57
Bank Indonesia Policy Mix: 2016-2017
19 May 2016Held BI Rate at 6.75%, and
maintained DF & LF Rate at 4.75% & 7.25% respectively
16 March 2017Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at
5.5 %
19 January 2017Held BI 7-day RR Rate at 4.75%, DF Rate at
4.00% and LF Rate at 5.5 %
17 November 2016
Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at 5.5 %
22 September2016
• Lowered BI 7-day RR Rate to 5.0%
• Lowered DF and LF Rate to 4.25% and 5.75%
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, strengthenedmonetary management strategies, & encouraged the real sector to make optimal use of repatriation funds to support the implementation of the 2016 Tax Amnesty Law
16 February 2017Held BI 7-day RR Rate at 4.75%, DF Rate at 4.00% and LF Rate at
5.5 %
15 December 2016
Held BI 7-day RR Rate at
4.75%, DF Rate at 4.00% and LF Rate at 5.5 %.
20 October 2016• Lowered BI 7-
day RR Rate to 4.75%
• Lowered DFand LF Rate to 4.00% and 5.50%
19 August 2016• Held BI 7-day RR Rate and DF Rate at 5.25%and 4.5%
• Cut LF Rate to 6.00%.
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
58
Bank Indonesia Policy Mix: March 2017
Holds the BI 7-day Repo Rate at4.75%.
Projects credit growth in the 10-12% range and deposit growth at around 9-11% in 2017 in line with
increased economic activity
and a looser monetary and macroprudentialpolicy stance.
Remains vigilant towards global risks, such as the increase of inflation in
advanced economies that can trigger monetary tightening, as well as further FFR hikes, the
Brexit issue, geopolitical risks in several European countries due to growing populist sentiment and
debt settlement in Greece.
Continues to strengthen policy coordination with
the Government to control inflation in response to several
risks, including further adjustments to
administered prices (AP) as the Government continues to reform
energy subsidies as well as inflationary pressures
on volatile foods.
Continues to implement the stabilisation
measures necessary to ensure the rupiah remains consistent with the currency’s fundamental value, while maintaining
market mechanisms.
Projects economic growth in 2017 at 5.0-5.4% (yoy), on the
back of strong private consumption, increase
in government consumption, and the improvement of export
performance.
The BI Board of Governors agreed on 16 March 2017 to hold the BI 7-days Repo Rate at 4.75%, as well as the Deposit Facility at 4.00% and Lending Facility at 5.50%
59
Enhancement of Monetary Operations Framework...positive results thus far
Source: LHBU, HARTIS, Bloomberg
Domestic Money Market Yield Curve (Dec. 30th, 2015) Domestic Money Market Yield Curve (May 26th, 2016)
Monetary operation term structure is being referred by money market rates…Domestic money market yield curve tend to converge
Domestic Money Market Yield Curve (Dec. 28th, 2016) Domestic Money Market Yield Curve (Jan. 13rd, 2017)
OM: Monetary Operation PUAB: Interbank Money Market
60
Enhancement of Monetary Operations Framework...positive results thus far
...JIBOR has been strengthened as a market reference
STRENGTHENED THE ROLE OF JIBOR AS REFERENCE RATE by regulatory
enhancement.
1
ACCELERATED MARKET REPO TRANSACTIONS by promoting GMRA
2REDUCED SEGMENTATION AND IMPROVE THE
CAPACITY OF MARKET TRANSACTIONS by encouraging banks to open more access to
counterparties
3
• Can be traded among contributor banks for 10 minutes.
• Up to the amount of Rp10 billion.
• Up to 1-month tenor.
PREVIOUS JIBOR
• Can be traded among banks contributor for 20 minutes.
• Up to a total of Rp20 billion.
• Up to 3-month tenor.
CURRENT JIBOR
as per June 1, 2016
61
Stable Monetary Environment Despite Challenges
Rupiah Exchange Rate Remains Comparable to Peers
YTD 2017* vs. 2016
Downward Trend of Inflation Ensured Price Stability
(%)
Strengthened Monetary Policy Framework
Source: Bank Indonesia
Credit Growth Supported by Macroprudential Policy
4.46
3.413.83
4.76
(%)
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 MonetaryOperation Framework
-2
3
8
13
18
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 11 1
2011 2012 2013 2014 2015 2016 2017
CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)
Average Point-to-point
* data as of 28 February 20176.68
4.66
5.49
2.73
1.85
1.02
1.03
0.75
-1.33
-2.56
-0.21
10.52
9.72
0.12
-0.58
-0.34
-6.83
-4.09
-4.74
-18.51
-22.00 -17.00 -12.00 -7.00 -2.00 3.00 8.00
KRW
BRL
ZAR
THB
INR
IDR
MYR
EUR
PHP
TRY
3.0
3.5
4.0
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17
LF Rate BI Rate BI-7Day RR Rate DF Rate
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 11 1
2013 2014 2015 2016 2017
Total Growth
Working Capital loans
Investment Loans
Consumption Loans
9.1%
7.1%
8.3%
9.6%
62
6 Measures to Control Inflation
On January 25th, 2017, the Government and Bank Indonesia agreed six strategic measures to control inflation in 2017 within the targetcorridor of 4±1% (as well as in 2018 at 3.5±1%), while also setting the inflation targets for 2019-2021 at 3.5±1%, 3±1% and 3±1%respectively.
Those measure is needed to address several onerous domestic and external challenges that demand vigilance and early mitigation. Theexternal challenges mainly stem from rising international commodity prices, while the domestic challenges stem from ongoing energyreforms through adjustments of electricity tariffs for 900VA subscribers as well as fuel prices as the global oil prices continues to rise.Nevertheless, the current aforementioned reforms require support to ensure equitable distribution and to create more healthy fiscalspace.
Maintain volatile food (VF) inflation at 4-5% by:1 2 3
4 5 6
Strengthening infrastructure for food
logistics in local areas, particularly warehousing for
storage
Developing a commodity flow data system, specifically for food commodity
Utilising fiscal instruments and
incentives to extend the local government’s role in price stability
Dampen the second-round effect of Administered Price adjustments
Introduce Administered Price Sequencing
Establishing the National Inflation Control Team
Strengthen central and local government coordination
Through Eighth National TPID Coordination Meeting in July 2017
Strengthen the Bank Indonesia policy mix to maintain macroeconomic stability
Through Presidential Decree to strengthen the National Inflation Task Force (TPI) and Regional Inflation Task Forces (TPID)
Strengthening interregional cooperation
Encouraging diverse food consumption in the
community, especially of fresh chillies and alliums,
by fostering product innovation in the
processed foods industry
Accelerating connectivity infrastructure development
Improving planting patterns
Example: Controlling transportation fares
Including the planned conversion of several direct subsidies to cash transfers (fertilizer, rice for the poor and 3kg LPG)
3kg
63
Financial Intermediaries Development
After slightly moderating in 2016, the growth of banking loans improved in early 2017, and is expected to further expand by 9-12%this year. In the domestic capital markets, capital raising by corporations (particularly right issues and corporate bond issuance)spiked significantly.
Source: Financial Service Authority (OJK)
The growth of financing distributed by multifinance companies in January 2017 was still in an increasing trend…
Gross premium revenue in the domestic insurance industry also demonstrated a continuous growth…
Capital raising through rights issues & corporate bond issuance in the capital market continued to increase in the first two months of 2017…
The growth of banking loans was 8.28% (yoy) in January 2017, increasing from that of the previous year…
IDR
tn
IDR
tn
IDR
mn
IDR
tn
64
Financial Institutions Remain Robust and Less Vulnerable
Banking sector’s capital adequacy ratio (CAR) was maintained at a high level. As of Jan-17, CAR & Tier 1 Capital was 23.21% & 21.37% respectively
Risk-based capital (RBC) of the insurance industry also remains high, well above the minimum threshold (120%)
Gearing ratio of multifinance companies was 3.02 times (well below the maximum requirement of 10 times), 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 minimumrequirements. Profitability and leverage are maintained at a sufficient level. Further, gearing (debt-to-equity) ratio of multifinancecompanies provides ample room for future growth.
%
Source: Financial Service Authority (OJK)
65
Adequate Liquidity, Manageable Credit Risks
Banks are found to possess adequate liquid assets to anticipate depositors’ withdrawal. Insurance industry also demonstrates anenhanced level of investment adequacy ratio. The non-performing loan/financing (NPL/NPF) ratio is also maintained below the threshold.
The ratio of liquid assets to deposits in the banking sector was well maintained at a high level.
NPL in the banking sector maintained below the 5% threshold at the end of 2016. Gross & net NPL ratios in Jan-17 were 3.09% & 1.35% respectively
NPF ratio in the multifinance industry is also maintained below the 5% threshold
Investment adequacy ratio in the insurance industry is maintained above 100%
Source: Financial Service Authority (OJK)
66
Manageable Market Risk Amidst Fluctuations
Being exposed to market fluctuations, financial institutions demonstrated resiliency in dealing with such risks. Net open position ofthe banking sector remains low, while the investment value of domestic institutional investors (mutual funds, insurers, and pensionfunds) continues to increase.
Net open position in the banking sector was kept far below the maximum limit (20%)
The investment value of insurers & pension funds remained in an increasing trend
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 that of market index, but with much lower volatility
%
Source: Financial Service Authority (OJK)
IDR tn
IDR tnIDR tn IDR tn
67
Capital Market Demonstrate Strengthening Trend
The domestic capital markets continued to demonstrate a strengthening trend, amidst uncertainties in the global economy andfinancial markets. This strengthening trend was accompanied by significant nonresident inflows in the government debt market.
Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance
Both the stock & bond indices are relatively stable in early 2017, supported by the improving domestic economic prospect
Outflow pressure in the equity market tended to ease, while the government debt market still attracted nonresident inflow
The IDX Stock Composite Index demonstrated a positive growth in early 2017
In line with the stabilizing IDR and improving domestic prospects, the government bond yields continued to decline
68
Maintaining Financial System Stability…maintaining resilience in confronting possible shocks and enhancing financial system stability
Strengthening financial sector supervision
Assessment on the soundness of financial institutions Liquidity coverage ratio for banks Regulations on risk management for financial
institutions Minimum capital requirement for banks Enhancement of GCG for financial institutions and
publicly-listed companies
Strengthening & structuring financial sector based on international standards
Risk-based supervision for all financial sectors Regulations on domestic systemically-important banks
and capital surcharge Enhancement of crisis management protocol and
interagency coordination
Financial conglomerates account for 75.5% of the total assets of financial sector…
Improving the integrated regulation & supervision framework…
Such improvement has become even more important due to the dominance of financial conglomerates in the domestic financial sector.
OJK has issued regulations on GCG, risk management, and minimum capital requirements for financial conglomerates. These will be followed by regulations on liquidity management, capital management, and intragroup transaction exposures.
Source: Financial Service Authority (OJK)
Financial Conglomerates 75.5%
Others24.5%
69
A Comprehensive Financial Deepening Program...strategy to tackle challenges in deepening Indonesia’s financial markets
Source: Bank Indonesia
Financial Market Deepening Program
First Priority:Continuous Basis
Market Development Coordination
Monitoring, match making, and solution:• Repo
• Hedging
Money MarketEncourage well-functioning money market (deep and efficient, risk mitigation, and market integrity), through:• 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 PaperAlternative sources of financing for non-bank corporations, as well as an investment outlet for investors
FX Market• Development roadmap of Indonesia CCP in OTC Derivatives
To support FX market development and reduce market segmentation.• Establish Local Currency Settlement Framework
Reducing dependency on USD payment for international trade.• Encourage product development to increase hedging Supply in domestic market
To provide hedging instrument alternative for corporations to manage their risk exposure
• Corporate Bonds
• Government Bonds
• Medium term notes
• Other instruments
• Infrastructure (ETP, etc)
Supporting Regulations
Money Broker Certification of Dealer and Code of ConductStrengthening JISDOR
• Increase the governance of money broker• Revitalize role of money broker in financial
market
• Obligation on certification for dealers• Obligation to honor code of conduct
• Dealers’ training for certification
• Strengthening the credibility of JISDOR• Extend the usage of JISDOR
Inter-agency Cooperation
On April 2016, the Minister of Finance, the Governor of Bank Indonesia, and the Chairman of the Board of Commissioners of the Financial Services Authority have launched a Coordination Forum for the Development Financing through Financial Market (FK-PPPK). The three authorities have agreed to formulate “The National Strategy to Develop Indonesian Financial
Market Towards 2025” which is expected to be concluded by the end of 2017/early 2018.
70
Continuous Program on Capital Market Deepening…continuously strengthened, including through capital market deepening initiatives
The utilization of capital markets by domestic corporations (including financial institutions) demonstrates an increasing trend
Strengthening market infrastructure
Expansion of Single Investor Identification (SID) coverage Development of electronic trading platform (ETP) in the
debt market Development of integrated investment management
system Enhancement of the clearing and settlement process Enhancement of capital market data warehouse
Enhancing the supply-side
Simplification of public-offering requirements & procedures
Development of financial market products (mutual funds, private equity funds, REITs, ABS)
Development of municipal bonds Cross-border offering (harmonizing regulations with
ASEAN Disclosure Standards established by ACMF)
Enhancing the demand-side
Expansion of the domestic investor base (conducting investor education programs)
Expansion of mutual fund distribution channels, including the marketing methods of securities companies
Strengthening governance
Development of market players’ capacity Enhancement of GCG for publicly-listed companies Development of repo regulations and infrastructure
Source: Financial Service Authority (OJK)
71
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.
72
Financial Sector: Fostering Domestic Growth…boosting domestic economic activities and supporting the national economic development
Funding of infrastructure & priority economic sectors
Enhancement of NBFI ownership in government bonds
Private equity funds for infrastructure financing Asset-backed securities specifically designed for
secondary mortgage financing Insurance for farmers and fishermen
Capacity building of financial institutions
Strengthening the capital of financial institutions to increase their financing capacity
Expansion of the business lines of multifinancecompanies
Capital requirements for rural banks based on their operational zones
Development of financial products & services
Expansion of the distribution channels for financial products & services
Development of sustainable finance regulations Utilization of KYC information from third parties Facilitating access to capital market as a source of
funding (e.g. simplification of public offering procedures)
Capital market deepening initiatives
Development of Islamic financial sector
Strengthening the capital of Islamic financial institutions
Spin-off of the Islamic business units of commercial banks
Development of Islamic financial product regulations (sukuk, mutual funds, asset-backed securities)
Continuous education & socialization on Islamic financial products & services
73
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
Aug-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%2008
27.9%
Q4-2016
8.6x1998
3.1x2008 2.7x
Q4-2016
116.8%1998
33.2%2008
34.0%
Q4-2016
More Liquid Market (%)
External Debt (Public & Private) to FX Reserve Ratio
External Debt/GDP
Inflation controlled within the target range IDR still appreciated in early 2017
NPL level is below the maximum threshold of 5%
Consistently well-maintained below 30%
Significantly higher than 1998 & 2008, ample to cover 8.5 months of import and external debt repayment
Significantly lower than 1998 crisisSlightly higher than 2008, but significantly lower than 1998
Feb 17 119.9Feb 17 3.83 (yoy)
Jan 17 3.1
62
10.55.7
1998 2008 Jul-15
Overnight interbank money market rate is relatively lower
Feb 17
4.24
1.0 (ytd)Feb 17
74
Outlook of Domestic Economy Remains Robust...domestic economic growth is predicted to be higher in 2017
2017 Economic Outlook
Economic recovery is expected to continue, driven by exports and investments as financing increases from bank loans and non-bank
financing. Meanwhile, household consumption is predicted to remain stable.
Inflation is predicted to be within the 2017 inflation target of 4±1%, with the current account deficit projected below 2.5% of GDP
Credit is projected to grow 10-12% in line with increased economic activity and the looser monetary and macroprudential policy
stance adopted
2016(Realization)
Economic Growth
5.02%
Inflation
3.02%
CAD (% GDP)
1.8%
Credit Growth
7.9%
2017 5.0-5.4% 4.0±1% <2.5% 10-12%
Global Domestic
Opportunities • Improving global economic growth• Increasing global commodity prices, oil and non-oil
• Improving domestic economic growth• Relatively low current account deficit
Challenges • Increasing global inflation• US Policy: Fiscal expansion & tightening monetary policy,
trade protectionist, relaxation of financial regulation.• Geopolitical risks, especially populism in Europe.
• Pressures on exchange rate from global factors.• Pressures on inflation from administered prices• Effectiveness of monetary transmission through
bank lending and interest rate.
2017 Economic Opportunities & Challenges
Source : Bank Indonesia
Progressive Infrastructure Development:Strong Commitment on Acceleration of Infrastructure Provision
Section 6
76
The Government has Enacted Various Reforms to Accelerate Infrastructure Provision
Fiscal Reforms Institutional Reforms Regulatory Reforms
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
Viability Gap Funding (VGF) KPPIP Direct Lending
Issuance of MoF Reg. No. 223/2012. To increase project financial feasibility by contributing up to 49% of the construction cost
Availability Payment
Land Revolving Fund
Risk-sharing Guidelines
Issuance of regulatory framework for annuity payment scheme by the Government (MoF Reg. No. 190/2015 for Central Gov’r and MoHA Reg. No. 96/2016 for Regional Gov’t.) during the concession period after the project operational by private sector in order to make the project bankable
Issuance of MoF Reg. No. 220/2010. A revolving-fund sourced from State Budget, to accelerate land acquisition
IIGF has issues risk allocation and mitigation guidelines for PPP project
KPPIP is actively involved in accelerating delivery of priority infrastructure projects
PT. Sarana Multi Infrastruktur
Merging between PT. SMI and Gov’t Investment Center (PIP) to become an infrastructure funding company
Indonesia Infrastructure Guarantee Fund (IIGF)
IIGF has the potential to provide project guarantee for non-PPP projects
PPP Unit
Provide facilities to help GCA on preparing PPP project (PDF/TA)
BLU LMAN
The State Asset Management Agency is mandated to provide land fund for National Strategic Projects to ensure timely land acquisition process
Issuance of Presidential Reg. No. 82/2015.Allow guarantee for direct lending to SOE to accelerate financial close process for infrastructure projects
Land Acquisition
Issuance of Presidential Reg. No. 148/2015.To stipulate land acquisition acceleration based on Law No. 2/2012
Economy Packages
Conduct deregulation for issues hindering infrastructure delivery and develop a task force under CMEA to ensure the effectiveness of economic packages implementation
77
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 Fund
Tax FacilitiesAvailability Payment
Land 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
Gov’t. 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 central or regional government after the completion of an asset.MoF Regulation, and MoHARegulation on Availability Payment has been ratified.
Managing entity:Ministry of Finance & Ministry of Home Affairs
A facility to support land acquisition for infrastructure projects particularly projects that involve private sector
Managing enitiy:Ministry of Finance, Ministry of Agrarian and Land Spatial/BPN and BLU-LMAN
Gov’t. commitment:US$ 12 mn (2016)
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
78
Efforts to Accelerate Infrastructure Provision
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 certaintyabout the land acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583days maximum time to complete the land acquisition process.
For its implementation, the Law No. 2 of 2012 was supported by the PresidentialRegulation No. 71 of 2012 on Land Acquisition Implementation for DevelopingPublic Facilities, which has been revised into the Presidential Regulation No. 30of 2015. The Amendment to the Regulation allows a Business Entity to allocatefunding for a land acquisition which can be reimbursed by the Governmentfollowing the completion of land acquisition process. With this Regulation, theland acquisition process is expected not to be delayed by the unallocatedbudget or the delay on the budget disbursement.
Land Procurement Process as Stipulated in Law No. 2 of 2012
Law No. 2/2012 was successfully applied in:
1. Palembang – Indralaya section of the TransSumatera Toll Road Project
2. Java North Line Double Track Rail Project
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
79
Efforts to Accelerate Infrastructure Provision Indonesia Asset Management Agency (LMAN) Establishment
Legal Basis
1. Government Regulation No.27 of 2014 on the Management of State/Region Property
2. Finance Minister Regulation No.219/PMK/2015 on the Governance and Organization of State Asset Management
3. Finance Minister Regulation No.1319/KMK.05/2015 on the Appointment of Indonesia Asset Management Agency as Government Agency to Implement Financial Management of Public Service Agency
Mandate
1. Property Management
2. Land Funding for National Strategic Project
Portfolio Asset
1. Asset of ex-Pertamina: LNG Badak Bontang, LNG Arun, and Tarogong Land
2. Asset of ex-Indonesian Bank Restructuring Agency (BPPN)
Other portfolio: Asset of ex-Asset Management Company (PPA) and ex-Contractor Cooperation Contract (KKKS)
Source: Ministry of Finance
On December 12th, 2016, Indonesia Asset Management Agency (Lembaga Manajemen Aset Negara/LMAN) has been launched to optimize the use of state assets. LMAN should plan for funding and utilization of land banks as well as pay compensation for land acquisition to support the government’s infrastructure development program
80
Progress on 225 National Strategic Projects
SECTORS
LOCATIONS
1. Sumatera 46
2. Java 89
3. Kalimantan 24
4. Bali & Nusa Tenggara
16
4. Sulawesi 28
6. Maluku & Papua 13
7. National 10
9%
43%
6%
35%
7%
* Projects are taken out becausethose projects doesn’t fulfil PSN basic,strategic and/or operational criterias
20 projects are completed
96 projects are under construction
12 projects are during transaction
81 projects are in preparation
16 projects are taken out*
RoadCommuni-cation
National Borders
Economic Zones
52 3 7 25
Housing EnergyFisheries/Maritim
e
WaterSupply
Airport
3 7 3 10 17
Seaport Railway Dams Smelter Power
13 19 60 6 1
Progress of National Strategic Projects (as of February 2017)
The Estimated Investment Cost of National Strategic Projects
Private(IDR1,778 tn)
SOE(IDR813 tn)
StateBudget
(IDR360 tn)
IDR2,952 tn
Notes:• The investment cost was calculated for 164 NSP.
• Excluding cost of NSP that finished construction, under review, and have not finished their estimation of construction cost
• Including the costs for the 35,000 MW Program
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
81
Progress on 30 Priority Projects
1. Balikpapan-Samarinda Toll Road2. Manado-Bitung Toll Road3. Panimbang-Serang Toll Road4. Trans-Sumatera Toll Road (8 Sections)5. SHIA Express Railway6. MRT Jakarta South-North Line7. Makassar-Parepare Railway8. Kuala Tanjung International Port Hub9. Bitung International Port Hub10. Karangkates IV & V (2x250MW)
Hydro-Electric Plant11. Kesamben (37MW) Hydro-Electric Plant12. Lodoyo (10MW) Hydro-Electric Plant
13. Inland Waterways Cikarang-Bekasi-Laut (CBL)14. Light Rail Transit (LRT) South Sumatera15. Integrated LRT Jakarta-Depok-Bogor-Bekasi16. National Capital Integrated Coastal Development
(NCICD) Phase A17. Jakarta Sewerage System18. West Semarang Water Supply19. High Voltage Direct Current (HVDC)20. Sumatera 500 kV Transmission Line
21. Central-West Java 500 kV Transmission Line22. Batang, Central Java Powerplant23. Indramayu Powerplant24. Mine to Mouth Powerplant Sumatera Selatan 8-
1025. Bontang Refinery26. Revitalization of the Existing Refineries
(Balikpapan, Cilacap, Balongan, Dumai, Plaju)27. New Port Development in West Java (North Part)28. Tuban Refinery29. Palapa Ring Broadband30. East Kalimantan Railway
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
1112
19
24
Construction
From the National Strategic Projects, the Government has selected a list of 30 Priority Project to be the focus ofinfrastructure delivery in the beginning of 2016.
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
82
Progress on 30 Priority Projects
Recent MilestonesProgress of 30 Priority Projects (as of February 2017)
Funding Scheme of 30 Priority Projects
3%
40%
40%
17%12 projects are in construction
1 project is under construction
12 projects are in preparation
5 projects are reassessed
Private(IDR769 tn)
SOE(IDR324 tn)
StateBudget
(IDR245 tn)
KA-ANDAL (environment impact) assessment process is completed after fulfilling administrative pre-requirements including letter from Spatial Planning Director General, Seaport Transport Director General and project’s inclusion in National Port Masterplan.
Integrated Pre-FS/OBC has been finalized to integrate port development plan and supporting infrastructure.
All Spatial Planning issues have been resolved and location determination for all location has been done.
COD is postponed until 2023, in order to adjust the completion of New Duri 500kV Transmission to Muara Enim
15 projects reassessed include HVDC; Mine Mouth South Sumatera 8,9,10 Plant; Karangkates, Kesamben and Lodoyo Plants.
Patimban Port:
Kuala Tanjung International Hub Port:
Central-West Java Transmission Line:
Sumsel 8 Mine Mouth Coal Fired Power Plant:
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
83
Energy Sector: the Progress of 35.000 MW Program
No Phase MW %
1 Planning 5,824 16.31
2 Procurement 10,560 29.57
3 Power-purchase Agreement 8,478 23.74
4 Construction 10,141 28.40
5 Commercial Operation Date 706 1.98
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 onRUPTL 2015-2024)
Jan ‘15
Debottlenecking through regulation:
1. Regulation No.1/2015 concerning electricitysupply cooperation & joint utilization of theelectrical network among license holders.
2. Regulation No.3/2015, concerningProcedures of Purchasing Electrical Powerand benchmark prices for Electrical Powerthrough the Direct Selection & Appointment.
16 Mar ‘15 4 May ‘15
Feb ‘17
Cabinet MeetingProgress of 35,000 MW
Launching 35.000 MW by the President in Goa Beach Sanden
DIY
The progress so far:
Source: KPPIP
SulawesiPLN: 2,000 MWPrivate: 1,470 MWTransmission: 5,275 ckt.kmSubstation: 4,390 MVA
MalukuPLN: 260 MWPrivate: 12 MWTransmission: 653 ckt.kmSubstation: 620 MVA
PapuaPLN : 220 MWPrivate: 0 MWTransmission: 364 ckt.kmSubstation: 460 MVA
KalimantanPLN: 900 MWPrivate: 1,735 MWTransmission: 5,604 ckt.kmSubstation: 3,500 MVA
Nusa TenggaraPLN: 670 MWPrivate: 0 MWTransmission: 2,347 ckt.kmSubstation: 1,410 MVA
SumateraPLN: 1,100 MWPrivate: 8,990 MWTransmission: 18,729 ckt.kmSubstation: 35,521 MVA
Jawa & BaliPLN: 5,000 MWPrivate: 13,697 MWTransmission: 9,185 ckt.kmSubstation: 66,265 MVA
35,000 MW Program Distribution
Source: PLN
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
84
Acceleration of 35.000 MW Program
Government
PT PLN
EPC Powerplant and Transmission
PLN Subsidiary(Joint Venture)
IndependentPower Producer
Strengthen Equity
2B1
Government Support (outside Guarantee)• Provision of Primary Energy• Provision of Renewable Energy• Simplicity of Permits and non-Licensing• Spatial Planning• Land acquisition• Resolution on Legal Matters
Local Content Obligation on the usage of local content through an open book system, price guideline, reverse engineering or other methods to maximise the local content.
2A
Assignment
SJKU* Ministry of Finance
Strengthen PLN‘s Balance Sheet
*)SJKU=Surat Jaminan Kelayakan Usaha/ Business Viability Guarantee Letter
The Government has issued Presidential Regulation No. 4/2016 on Electricity Infrastructure Acceleration to accelerate power projects
Provision of Electricity
Refinancing Hedging
Financial Asset OptimizationDirect Lending
Direct Lending
Bond issuance by PT PLN
Company Tax Holiday
PT PLN’s divident allocation
Loan from independent lenders
Asset Revaluation
Other typesof funding
Equity Injection by the Government
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
85
Significant Progress on Infrastructure Projects
DatabaseProject information such as map, track, existing study and
latest project status.
An integrated IT system with
monitoring capacity for stakeholders, so that they can have
real time data.
Platform data outlook that is efficient and functional using a user-friendly framework.
Record decisions related to projects and synchronize the implementation schedule that can be utilized by stakeholders.
KPPIP developed an integrated IT System for monitoring ofnational strategic and priority projects, providing database onprojects’ latest status which can be effectively utilized formonitoring and decision-making purposes.
Improving Monitoring System on Infrastructure Projects1Roads
Trans-Sumatra Toll Road Merah Putih Bridge, Ambon
Dams
Jatigede Dam (Operational)
Transportation
Jakarta MRT Project2
Drinking Water Processing
Umbulan Drinking Water Provision System, East Java
1 Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)2 Not funded from National Budget
Terminal 3 Ultimate Soekarno-Hatta2
New Tanjung Priok Port Project2 Nop Goliat Dekai, Papua
86
Existing Iron Ore Refinery Facility
No. Company ProductOre Input
Capacity (ton)Concentrate Input Capacity
(ton)Investment(USD mn)
Progress Completion Date
1 PT DPS Steel 1.100.000 220.000 40 100% 2011
2 PT MJISSponge iron, slab, billet
3.300.000 660.000 150 100% 2013
No. Company ProductOre Input
Capacity (ton)Concentrate Input Capacity (ton)
Investment (USD mn)
Progress Completion Date
1 PT SILO Sponge iron 6.300.000 4.939.200 170 92% 2017
2 PT SBP Pig iron 240.000 50.000 120 35% 2017
3 PT MIS Pig iron 1.200.000 900.000 73 54% 2018
4 PT MMP Pig iron 6.300.000 5.400.000 86.570 83% 2018
5 PT RS Sponge iron 3.000.000 600.000 4.394 5% 2018
6 PT QEP Sponge iron 2.000.000 400.000 8.417 8% 2018
7 PT JMI Pig Iron 3.000.000 600.000 73 6% 2019
Completed but not operating
No. Company Product Input Capacity (ton)Investment (US$ mn)
Progress Completion Date
1PT Indonesia Chemical
AluminaChemical Grade Alumina 1,000,000 0,49 100% 2013
2 PT Well Harvest Winning Smelter Grade Alumina 1,000,000 1,1Phase 1 : 100% Phase 2 : 0%
2016 (Phase 1)2017 (Phase 2)
Upcoming Iron Ore Refinery Facility
Existing Alumina and Bauxite Refinery Facility
Completed and operating
Investment in Iron Ore, Alumina and Bauxite Smelter
88
Infrastructure Financing
88
Source: Ministry of Finance
124.6
SOE Private
200.4 75.8
Financing
Needs
Gov’t
Budget
Financing
Gap
341.4 141.0
(USD bn)*
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 is mainly targeted for projects that are both economically and financially feasible.
The government can provide financial facilites to support PPP & SOE schemes
*) USD/IDR = 13,343 (as of Jan 31st, 2017)
PPP scheme and facilities provided to PPP Projects
• The government may appoint certain SOEs to assign specific infrastructure projects
• 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
89
Government Financial Facilities for PPP Projects
Financial Facilities from Ministry of Finance to Attract More Private Participation
Those financial facilities were instrumental in supporting the execution of PPP projects, indicated by the signing of financial close of the following PPP projects:
Viability Gap Fund (VGF)
Project Development Facility (PDF)
Government Guarantees
(directly by MoF or through IIGF)
Financing from PT. SMI and PT.
IIF
Availability Payment Schemes
No Project Name Project Cost (IDR tn) Financial Facilities Status
1 Central Java Power Plant 40 Government Guarantee (MoF & IIGF) Financial Close on June 6th, 2016
2 Palapa Ring – West Package 1.28 IIGF Guarantee & Availability Payment Financial Close on August 11th, 2016
3 Palapa Ring – Central Package 1.38 IIGF Guarantee & Availability Payment Financial Close on August 29th, 2016
4 Umbulan Water 2.1 PDF, VGF & IIGF Guarantee Financial Close on August 30th, 2016
More Funding Schemes are in the Pipelines
LCS(Limited
Concession Scheme)
PINA(Non-
Government Budget
Infrastructure Financing)
Project Financing funded by the private sector through the granting of concessions for an operating asset owned by
the Government/SOE (based on the policy of the Government) to the private sector to be operated &
managed.
Project Financing funded by any source of funds other than Government’s budget, e.g. long term management funds (insurance, repatriated funds from tax amnesty,
pension funds, etc.), private equity investors and infrastructure funds. Supported & facilitated by National
Development Planning Ministry/Bappenas.
• Asset is owned by public sector• Operating asset, not greenfield project• Records positive cash flow for the last several years• Predicted revenue
• Asset is owned by private sector• Greenfield / brownfield / operating projects
Scheme Characteristics
Scheme Characteristics
90
New Guarantee Schemes for Non-PPP Projects
Progress of projects benefiting from guarantees on SOE direct lending:
The Government had issued Presidential Regulation No 82/2015 and Ministry of Finance Regulation No 189/2015 to provideguarantee for SOE Direct Lending from IFIs for the Development of Infrastructure Projects.
Guarantee on SOE Direct Lending from International Financial Institutions (IFIs)
Guarantee for Regional Infrastructure Financing Provision
No Project NameProject Cost (IDR mn)
Lender SOE Status
1 Sumatera Power Transmissionand Distribution
600 ADB PT. PLN Guarantee is effective
2 Sumatera Power Distribution
500 World Bank
PT. PLN Guarantee is effective
State finance soundness
Fiscal sustainabiliy
Best practice of fiscal risk management
The objective of this guarantee is to provide credit enhancement in terms of low interest rate and long
tenor financing, with 3 main principles:
The Government had issuedMinistry of Finance Regulation No174 of 2016 to provide guaranteeto PT SMI on the assignment ofregional infrastructure financingprovision, by loan to localgovernments that is transferredfrom PIP to PT SMI, and new loanchanneled by PT SMI to the localgovernment.
Based on Government RegulationNo. 95/2015 and Ministry ofFinance Regulation No. 232/2015,Minister of Finance assigns PT SMI(Sarana Multi Infrastruktur) to carryout functions in providing loan tolocal government, as previouslycarried out by PIP (GovernmentInvestment Center).
The objective is to give stimulus tothe acceleration of localinfrastructure development throughthe ease of access to infrastructurefinancing and to boost localeconomic growth, as well as toprovide alternative financingschemes in order to meet localinfrastructure development needsand to reduce reliance onstate/local budget.