Republic of Indonesia 2018 Investor Update Stability at the Forefront with Unwavering Reforms Commitment

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2 Outline

1 Executive Summary

2 Recent Macroeconomic Development

3 Financial Market Condition

4 2018 State Budget Realization Performance

5 Fiscal Incentive to Support Investment and Export

6 Medium Term Fiscal Objectives & 2019 Macro-Fiscal Framework

7 Monetary Policy and Banking Sector

8 Debt Management and Budget Financing

3 01 Widi Island in North Maluku, Indonesia Executive Summary Executive Summary Indonesia in Snapshot

Strong GDP Growth One of the Best GDP Supported by robust domestic activity and Growth Performer increasing role of investment …. with more potential to come Infrastructure Development Acceleration Strategic national projects supported by budget and non-budget financing (private sector) Continuous Reform …. Fiscal, monetary and Real sector Credit Rating Improvement International recognition from global rating agencies

Prudent Debt Management Credible Policy Framework Maintain productive use of public debt ….followed by International Recognitions Reform on the Move 1. Taxation 2. Investment Regulation Preserved Fiscal Prudence 3. Bureaucratic ….improving creditworthiness

5 Indonesia’s GDP Growth Has Been Robust Consumption and investment remain as the main engines of growth

GDP breakdown by expenditure 2016 2017 2018  Domestic and foreign direct investment have (%, YoY) Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 been picking up thanks to the acceleration of infrastructure spending. Household Consumption 4.98 5.10 5.04 5.03 5.04 5.00 5.02 4.95 4.98 4.98 5.01  International trade is rebounding and supporting Government Consumption 3.43 6.21 (2.95) (4.03) (0.14) 2.69 (1.92) 3.48 3.81 2.14 2.73 growth, partly attributed to the increase of commodity prices, but also signals that global Gross Fixed Capital Formation 4.67 4.18 4.24 4.79 4.47 4.77 5.34 7.08 7.27 6.15 7.95 demand improves.

Export (3.10) (1.50) (5.75) 4.15 (1.57) 8.41 2.80 17.01 8.50 9.09 6.17  Indonesia’s growth is still stable and higher than most of its G20 peers Import (5.04) (3.47) (4.13) 2.72 (2.45) 4.81 0.20 15.46 11.81 8.06 12.75  Medium term growth is well maintained through GDP 4.94 5.21 5.03 4.94 5.03 5.01 5.01 5.06 5.19 5.07 5.06 improving investment climate and fiscal incentive

GDP Growth Comparison Amongst G-20 Countries Indonesia GDP Projection

2018 GDP Growth 7.2 7.1 Institutions 6.0 Projection 5.1 Government of Indonesia (2018 Budget) 5.4%

3.0 IMF (WEO Apr 2018) 5.3% 2.5 2.4 2.3 2.2 2.2 2.1 1.7 1.5 1.3 1.1 0.7 World Bank (IEQ June 2018) 5.2% 0.3 0.3

ADB (ADO Apr 2018) 5.3%

Italy

India Brazil

China S&P (May 2018) 5.3%

Korea

Japan

Turkey Russia

France

Mexico Canada

Australia (0.5)

Germany Argentina

Indonesia Fitch (Dec 2017) 5.4%

SouthAfrica

SaudiArabia

UnitedStates UnitedKingdom

Avg. GDP Growth 5 Years Std. Dev. GDP Growth 5 Years

6 Regional Growth Most of regions recorded positive growth in the first quarter 2018

 Government effort aimed to KALIMANTAN: 8.2% of GDP 2017: improve connectivity among 4.33 the islands and bring down the 2017: 2017: logistics cost. The prices of 4.30 6.99 SULAWESI: 6.0% of GDP basic goods in the outlying 2017: 2018: islands are becoming more 4.97 3.25% 2017: 2018: affordable as the result. This 2018: 2017: 2017: 4.14 6.83% 4.37% 6.93 4.89 will translate to improved efficiencies, thriving regional economies, and lowering the 2017: 2018: SUMATERA: 21.5% of GDP 4.40 18.42% development disparity among the regions.

2017: PAPUA: 2.5% of GDP  Infrastructure and connectivity 2017 Regional GDP 5.61 2017: projects to create more 3.73 Growth sustainable and equitable 2017 – Q1 Regional 2017: 2018: 2017 National economic growth in all regions. GDP Growth 2018: 5.69 5.78% 2017: GDP Growth Intergovernmental transfer, 2.93 3.74% 2018 – Q1 Regional including Village Fund, has GDP Growth JAVA: 58.7% of GDP also promoted equality in the BALI & NUSRA: 3.0% of GDP 5.06% region.

 As the industrial center, Java still holds the biggest economic activity accounting for 58.67 percent of GDP  Maluku and Papua recorded high growth of 18.42 percent, underpinned by the increase of commodity price and mining activity

7 Sovereign Rating Credit Upgrade and Improving Global Perception International acknowledgement from various agencies and improving global perception

The 2018 World Bank Ease of Doing Business Ranking1

31 May 2018 20 Dec 2017 12 Feb 2018 BBB-  BBB- BBB-  BBB BBB-  BBB “The sovereign ratings “The focus on macro “infrastructure JUMPED on Indonesia are stability is also development has been 19 ranks supported by the evident in credible gaining momentum under government’s budget strong initiative of President relatively low debt assumptions in the Joko Widodo for levels and its previous few determination of National moderate fiscal years” Strategic Projects (PSN)” 2018 : #72 performance and out of 190 external indebtedness” countries

Score: 66,5 7 Mar 2018 13 Apr 2018 (↑5.0) BBB-  BBB Baa3  Baa2 “Indonesia's economy “The upgrade to Baa2 is 2017: #91 continues its strong increasingly underpinned by a 2016: #106 performance, with inflation credible and effective policy 2015: #120 remaining low and stable. Fiscal framework conducive to 2013 2014 2015 2016 2017 2018 deficits have been reined in, and macroeconomic stability” government debt is low” China Vietnam Indonesia Philippines Brazil India

1 Source: World Bank: Doing Business 2018: Reforming to Create Jobs

8 Inflation has been More Benign Create Substantial Foundation for Robust Consumption

Inflation Rate (YTD, %) Inflation Rate & Components (%)  Inflation is more benign supported 11.1% 12.0% by more stable food inflation as supply side improves. 8.4% 8.4%  The administered price inflation is 7.0% 10.0% the biggest source of pressure in 8.7% 2017, but pressure is easing as 4.3% tariffs are adjusted at the end of 3.8% 3.4% 3.6% 8.0% the first semester of 2017. 2.8% 3.0%  Indonesian Consumer Confidence 1.3% 5.9% is showing a vibrant economic 6.0% activity and good expectation on economy 2008 2010 2012 2014 2016 May-18 4.3% Source: BPS 3.1% 3… 3.6% 4.0% 3.0% 3.0% Consumer Confidence Index 3.2% 130 2.8% 2.0% 125 Future Policies

120 0.7%  Improving logistic and distribution 0.0% and stronger coordination 115 0.2% between institutions are some key 110 factor in inflation management (2.0)%  The monitoring of prices and 105 J F M A M J J A S O N D J F M A M J J A S O N D J F M A M improvements to the trading of 100 2016 2017 2018 some food commodities can J M M J S N J M M J S N J M M anticipate price game practices. Inflation (CPI) Core Inflation Administered Price Volatile Food 2016 2017 2018 Source: BPS Source: Bank Indonesia

9 Direct Investment Grew by 11.8 Percent in Q1-2018 Underpinned by improving investment climate

Direct Investment Realization Direct Investment Share by Sectors Q1-2018

FY-2016 FY-2017 Q1-2018 Metal, Machinery, & Electronic Industry Housing, 12% Nominal Growth Nominal Growth Nominal Growth Estate & (Rp Tn) (% YoY) (Rp Tn) (% YoY) (Rp Tn) (% YoY) Building 15% Domestic 216.2 20.5 262.3 21.3 76.4 11.0 Others Foreign 396.6 8.4 430.5 8.5 108.9 12.4 45% Electricity, Total 612.8 12.4 692.8 13.1 185.3 11.8 Gas, & Water Supply 10% FDI Share by Country Origins Q1-2018 FDI Share by Country Origins 2010-2017 Crops & Transportation, Warehouse, Plantation & Telecommunication Singapore 10% Singapore 32.6% 23.8% 8% Japan 12.2% Source: NSWi BKPM Japan 16.7% US 5.5%  Positive FDI flow shows a high interest in Indonesia. S Korea 5.4% Nevertheless, Java island is still the main destination S Korea 11.6% Netherland 4.7% for direct investment, roughly 55% of total FDI. Malaysia 4.6%  Government Efforts To Improve Investment Climate : China 8.3% (1) Easing Import and Export Restrictions (2) China 3.9% Reducing Dwelling Time (3) Revising and Perfecting Hong Kong 3.5% Tax Incentive (Tax Allowance and Tax Holiday) Hong Kong 6.3% BVI 3.4%  Overall structural reform efforts are expected to boost investment and exports to support Indonesia's Other 32.9% Other 24.5% economic growth in the medium term.

10 Import Growth Upholds Increasing Domestic Economic Activities Until April 2018, Trade Balance is Recording a Deficit of USD1.31 billion

Trade Balance (USD Billion) Cumulative Growth of Export Commodity

Surplus FY 2016: Surplus FY 2017: Deficit Jan-Apr 60.0% 2018: USD9.5 billion USD11.8 billion 40.0% USD1.31 billion 33.4% 3.0 20.0% 5.3% 2.0 0.0% 4.0% (5.1)% 1.0 (20.0)% 0.0 (40.0)% (1.0) (60.0)%

(2.0)

J J J J

F F

A S A A S A

N D N D

O O

M M M M

J J J J

F F

A S A A S A

N D N D

O O

M M M M

2017-J 2018-J

Non O&G O&G Total Agriculture Manufacturing Mining O&G

 Trade balance is recording deficit Top 4 Export/Import (Non-O&G) by Country cumulatively in April 2018, due to Cumulative Growth of Import Goods high import growth that supports April 2018 (USD Billion) growing domestic production Export (Non O&G) Import (Non O&G) 50.0% Contribution to  Import grew by 23.65% (YTD) 31.0% Total Import supported by higher demand for 30.0% 26.1% Capital Goods festive seasons of Ramadhan and 1 1  China 1.8  China 3.4 21.9% 16.3% Idul Fitri; capital good increase to 10.0% support infrastructure development and military equipment; and raw 2 United States 1.4 2 Japan 1.6 (10.0)% Consumption material increase that highlights Goods 9.1% improving domestic productivity and 3 Japan 1.4 3 United States 1.0 (30.0)%

economic activity

J J

S S

N N

M M M M  Export grew by 8.77% (YTD), Raw Materials

4 India 1.0 4 Thailand 0.9 2018-J underpinned by mining commodity 2017-J 74.6% growth of 33.4% and manufacturing of 5.3% Consumption goods Raw materials Capital goods

Source: BPS

11 Macroeconomic Indicators Remain Strong

2016 2017 2018 2019  Indonesia has been able to Revised Submitted maintain robust economic Budget Realized Realized Budget Realized to performance which expected to Indicators (APBN-P) 31 May APBN 31 May (APBN) 31 May Parliament continue in 2018 and 2019.  Inflation is benign supported by 1 Economic growth (%, yoy) 5.2 4.94 5.2 5.011 5.4 5.061 5.4 – 5.8 improving logistic and infrastructure acceleration

 Interest rate and exchange rate Inflation (%, yoy) 4.0 3.3 4.3 4.3 3.5 3.2 2.5 – 4.5 are stable, benefiting from strong fundamental and positive investor perception in the midst of 3-Month Treasury Bill uncertain global condition. 5.5 5.8 5.2 5.1 5.2 4.2 4.6 – 5.2 (SPN) (%)  Increasing commodity price helped in boosting external Exchange Rate 13,700 – position and revenue. 13,500 13,435 13,400 13,336 13,400 13,714 (Average, IDR/USD) 14,000  Indonesia's economy is currently in the process of transitioning. However, Indonesia economy ICP (USD/barrel) 40 34 48 50 48 64 60 – 70 cannot be separated from external conditions (technology, trade, and geopolitics) as well as Oil Production domestic challenges. 820 805 815 784 800 7422 722 – 805 (thousands of barrel/day)

Gas Production 1.15 1.18 1.15 1.14 1.20 1.142 1.21 – 1.30 (millions of barrels/day)

1 Q1 figures. 2 As of April.

12 Performance of State Budget Fiscal Sustainability is Well Preserved as Fiscal Deficit Narrowed and Primary Balance Recorded a Substantial Surplus

2017 2018 May % Real May % Real to % of Growth R-Budget Realization to Budget Budget Realization Budget (YoY) A. Revenue & Grant 1,736.1 594.0 34.2 1,894.7 685.1 36.2 15.3  The robust tax growth and positive performance in export I. Domestic Revenue 1,733.0 593.8 34.3 1,893.5 683.7 36.1 15.1 and import duty good in the 1. Taxation Revenue 1,472.7 470.3 31.9 1,618.1 538.7 33.3 14.5 first quarter of 2018 is a 2. Non Tax Revenue 260.2 123.5 47.5 275.4 145.0 52.6 17.4 positive support. II. Grants 3.1 0.2 6.8 1.2 1.4 118.2 565.9 B. Expenditure 2,133.3 722.8 33.9 2,220.7 779.5 35.1 7.9 I. Central Government Expenditure 1,367.0 388.0 28.4 1,454.5 458.0 31.5 18.0  Central Government 1. Ministerial Spending 798.6 193.0 24.2 847.4 231.5 27.3 19.9 Expenditure grows robustly 2. Non Ministerial Spending 568.4 195.0 34.3 607.1 226.5 37.3 16.2 II. Transfer to Region and Village 766.3 334.7 43.7 766.2 321.5 42.0 (4.0) Fund  Deficit realization of 0.64% of 706.3 306.5 43.4 706.2 300.8 42.6 1. Transfer to Region (1.9) GDP is much lower compared 2. Village Fund 60.0 28.2 47.0 60.0 20.7 34.4 (26.7) to May 2017 C. Primary Balance (178.0) (29.9) 16.8 (87.3) 18.1 (20.7) (160.5) D. Surplus/(Deficit) (397.2) (128.7) 32.4 (325.9) (94.4) 29.0 (26.6) % of GDP (2.92) (0.94) (2.19) (0.64)  Primary balance surplus is E. Financing 397.2 195.6 49.3 325.9 169.9 52.1 (13.1) significantly higher than last % of GDP 2.92 1.45 2.19 1.15 year, highlighting improving I. Debt 461.3 193.9 42.0 399.2 169.0 42.3 (12.8) fiscal performance and II. Investment (59.7) 0.0 0.0 (65.7) 0.0 0.0 0.0 sustainability that well preserved III. SLA (3.7) 1.6 (43.6) (6.7) 0.8 (11.9) (50.1) IV. Guarantee (1.0) 0.0 0.0 (1.1) 0.0 0.0 0.0 V. Other 0.3 0.2 50.6 0.2 0.1 53.4 (35.6) Surplus/(Deficit) Financing 0.0 66.9 - 0.0 75.5 - 12.8

13 Stable Monetary Environment Conducive Monetary Environment Supporting the Economy

US broad based appreciation has triggered regional depreciation, including the Rupiah. Compared to other countries, the Rupiah exchange rate depreciation is more limited underpinned by Indonesia’s sound economic fundamentals and Bank Indonesia’s foreign exchange stabilization policies in the form of dual intervention and policy response in the May Board meeting.

Inflation Remained Under Control Rupiah Depreciated Due To USD Broad Based Appreciation

YoY %

Managed inflation is observed throughout

13,785 13,785 13,392 13,473 13,305 13,568 13,385 13,895 14,043

8.38 12,385 8.36 12,170

Indonesia, well within the target range of 11,876

3.5±1% in the majority of the regions. 10,445

3.61 3.35 3.02 3.23

2013 2014 2015 2016 2017 May-18 2013 2014 2015 2016 2017 May-18 EOP Average Limited Depreciation Compared to Other Countries Measures To Stabilize Rupiah Exchange Rate

As of May 2018 May vs April 2018 1 TRY (10.15) (8.43) To stabilise the rupiah exchange rate, while (5.84) A pre-emptive, front-loading and ahead- BRL consistently controlling inflation within the (6.26) of-the-curve policy response (3.57) 2018-2019 target range of 3.5±1% EUR (3.90) (1.12) ZAR (3.48) 2 (1.11) Dual intervention in the foreign exchange INR To stabilise the rupiah exchange rate, adjust (2.75) market and government securities (Surat (1.46) fair prices in the financial markets and THB (2.08) Berharga Negara – SBN) market in a maintain adequate liquidity in the money (1.41) measured way MYR (1.91) market (1.02) SGD (1.76) 3 IDR 0.13 Strengthening the monetary operations in To maintain adequate liquidity in the rupiah (1.67) the foreign exchange and money markets money market and interbank swap market CNY (1.22) (1.19) KRW (0.85) (0.85) 4 PHP (1.50) Intensive communication, especially to To form rational expectations, thus helping to (0.33) market players, banks, businesses, and mitigate the rupiah overshooting its (12.00) (10.00) (8.00) (6.00) (4.00) (2.00) 0.00 2.00 economists fundamental level.

Point to Point Average

Source: BPS, Bank Indonesia

14 External Sector Remains Resilient Healthy Current Account Deficit and Balance of Payment

Current Account Deficit is Improving, Significantly Lower than 2013 Balance of Payment (2013 – 2017)

(USD bn) % 1 2 Components (USD bn) 2013 2014 2015 2016 2017 Q1-2018 30.0 (1.0) 20.0 Current Account (29.1) (27.5) (17.5) (17.0) (17.5) (5.5) 18.8 (1.5) 10.0 14.0 15.3 5.8 7.0 4.2 5.2 5.5 4.5 4.5 A. Goods 5.8 7.0 14.0 15.3 18.8 2.4 0.0 (2.0) (2.0) (1.8) (1.7) (10.0) (27.1) (28.4) (28.4) (29.6) (33.0) Export, fob 182.1 175.3 149.1 144.5 168.9 44.4 (2.5) (20.0) (17.0) (29.1) (27.5) (17.5) (17.5) (30.0) Import, fob (176.3) (168.3) (135.1) (129.2) (150.1) (42.1) (12.1) (10.0) (8.7) (7.1) (3.0) (7.8) (40.0) B. Services, Primary & (3.1) (34.9) (34.5) (31.6) (32.3) (36.3) (7.9) (50.0) (3.2) (3.5) Secondary Income 1 2013 2014 2015 2016 2017* Primary Income Secondary Income Capital & Financial Account 22.0 44.9 16.9 29.3 29.5 1.9 Goods Services Current Account Current Account (% GDP)-rhs 1. Direct Investment 12.2 14.7 10.7 16.1 19.2 3.1 Ample Foreign Reserves to Buffer Against External Shocks 2. Portfolio Investment 10.9 26.1 16.2 19.0 20.6 (1.2) (USD bn) (Month)

140 116.4 130.2 9 3. Financial Derivatives (0.3) (0.2) 0.0 0.0 (0.1) 0.1 122.9 105.9 8 120 111.9 8.3 4. Other Investment (0.8) 4.3 (10.1) (5.8) (10.2) (0.2) 99.4 8.4 7 100 7.2 7.4 6 6.5 Overall Balance (7.3) 15.2 (1.1) 12.1 11.6 (3.9) 80 5 5.4 60 4 Memorandum: 3 40 Reserve Assets Position 99.4 111.9 105.9 116.4 130.2 126.0 2 20 In months of imports & 1 5.5 6.5 7.4 8.4 8.3 7.7 official debt repayment 0 0 Current Account 2013 2014 2015 2016 2017 18-MayMay-18 (3.2) (3.1) (2.0) (1.8) (1.7) (2.2) (% GDP) International Reserves Months of Imports & Servicing of Government Debt (rhs) Source: Bank Indonesia 1 Provisional figures. 2 Very provisional figures.

15 Balanced Debt Maturity Profile - Resilient Against External Shocks Marked by stable maturity profile and declining risks against interest rate and FX volatilities

More Prudent Risk Management Manageable External Debt Service Requirements

USD billions 14.6 13.4 13.0 86.3% 87.9% 89.3% 89.6% 4.2 9.9 4.5 9.2 9.6 3.9

3.6 4.0 44.5% 3.3 42.6% 40.4% 41.8% 10.4 25.4% 8.9 9.1 21.4% 22.7% 23.0% 5.9 6.0 5.9

2015 2016 2017 2018P² 2019P 2020P 2015 2016 2017 Apr-18 Principal Repayment Interest Repayment FCY debt-to-Total Debt Fixed Interest-to-debt Maturing debt within 3 Years

Well-Balanced Debt Maturity Profile¹ – Average Time to Maturity of 8.7 years

USD billions

29.8

22.5 22.2 22.4 10.8 20.9 20.8 21.1 17.6 16.9 16.6 15.5 9.5 10.3 10.8 8.5 14.5 5.4 11.0 11.5 14.6 7.2 6.9 8.3 9.4 1.6 8.2 8.2 7.8 7.6 19.0 10.8 6.1 1.9 1.5 1.0 0.5 12.2 12.1 12.5 3.9 3.9 2.2 11.5 11.3 9.8 9.4 10.0 9.9 1.3 2.7 7.3 7.5 1.8 6.7 7.2 7.3 1.9 0.7 1.3 7.8 3.7 4.8 2.3 5.3 2.1 0.4 2.1 0.50.1 1.10.1

Source: Ministry of Finance IDR Denominated Other Currencies 1 Debt Maturity Profile as of April 30, 2018. 2 Based on outstanding debt as of 31-May-2018.

16 2018 Progress of Issuance Creating Prudent and Sustainable Fiscal Management

Government Securities to Meet State Budget Financing Issuance Targets for Government Securities

Indicative Budget Target Government Instruments Rp tn USD bn Sukuk Budget Deficit (2.19% of GDP) 325.9 24.3 25%-30% Financing 399.2 29.8 Government Securities (Net) 1 407.2 30.4 Government Government Securities (Gross) 834.3 62.3 Debt Securities 70%-75% Composition Domestic Government Securities 80 - 83% International Government Securities 17 - 20% Alternative of Issuance

Private Domestic Government Securities Auction Book Building Placement Weekly Auction: Conventional securities 24-25x Government Securities Financing Realization Islamic securities 24-25x Realization % Non-Auction Budget 2018 (as of May 2018) Realization Retail Bonds and Retail Sukuk (ORI, SBR, Sukuk Ritel) to Budget 2018 Private Placement Based on request Rp tn USD bn Rp tn USD bn 1 Target avg. tenor maturity for Government Securities Issuance Government securities (net) 407.2 30.4 190.8 14.2 46.8% 7-8 years Government securities (gross) 834.3 62.3 434.9 32.5 52.1% Government debt securities (GDS) 602.2 44.9 303.2 22.6 50.4% International Government Securities Domestic GDS 504.3 37.6 205.3 15.3 • USD  Avoid crowding out in domestic market International bonds 97.9 7.3 97.9 7.3 • Sukuk USD  Provide benchmarks for corporate bonds Government Sukuk 232.1 17.2 131.7 9.7 56.8% • EUR Domestic Government sukuk 190.7 14.2 90.3 6.7 • JPY  Investor base diversification Global Sukuk 41.4 3.0 41.4 3.0 Source: Ministry of Finance 1 Original amount was Rp 414.5 tn, shifting to loan in amount of Rp 7.3 tn.

17 Indonesia’s Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth

Infrastructure Development is a Key Priority Establishment of PPP Unit

 Infrastructure Development in order to: Broad • Champion project preparation and acceleration of the PPP agenda 1. Accelerate growth particularly in rural areas Objective in Indonesia

2. Support industrial development and tourism • Improve quality of project selection under KPPIP – OBC criteria • Support project preparation through Project Development Facility support 3. Reduce unemployment and poverty Core and highly qualified transaction advisors Mandates  Infrastructure fundraising needs: USD 357.9 bn (or equivalent to Rp 4,796.2 tn) • Act on behalf the Minister of Finance in providing government support and approvals for projects  245 National Strategy Projects under National Medium Term Plan for 2015 – 2019 with an estimated total cost of Rp 4,197 tn (USD 313 bn) • Coordinate all public finance instruments  37 priority infrastructure projects with an estimated cost of Rp 2,490tn (USD 180 Additional • Provide input for PPP Policy Development and Regulations bn) Mandates • Implement capacity building program for GCAs  Majority of 37 priority projects are expected to commence commercial operation by • One stop shop for PPP promotion & Information 2018 - 2022

Budget Public Private Partnership SOE & Private Sector

• Central & regional • Certain infrastructure projects to be funded and operated through a • Government to inject capital into SOEs: Intended budget (special partnership between the Indonesian government and the private sector multiplier effect to develop more infrastructure projects allocation fund & rural • Projects ready for auction under the PPP Scheme: • Key focus areas: transfer) • Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung • Infrastructure and maritime development • Primarily to support • Railway projects such as an express line into Soekarno-Hatta International • Transportation and connectivity basic infrastructure Airport • Food security projects: • Water supply projects such as the West Semarang Project • Medium term infrastructure developments to focus • Food security: • Various government support for PPP: on: Irrigation, dams etc. • Project Development Facility (PDF): Helps Government Contracting Agencies • Water Supply (GCAs) in project preparation and transaction • Airports • Maritime: Seaports, • Seaports shipyards etc. • VGF: improves financial viability of PPP projects • Government Guarantees: Supports PPP projects’ bankability by providing • Electricity and power plants • Connectivity: Village sovereign guarantees • Housing roads, public • Infrastructure Financing Fund: Provided through PT SMI and IIGF • Mining transportation etc. • Availability Payment (AP): GCA pays private partner based of availability of infrastructure services

Source: Ministry of Finance; Bappenas; KPPIP: “Komite Kebijakan Percepatan Penyediaan Infrastruktur” or National Committee for the Acceleration of Infrastructure Provision; OBC: Outline Business Case; PDF: Project Development Facility; GCA: Government Contracting Activity

18 Solid Policy Coordination In Managing Financial Markets Volatility

Gov’t Securities Crisis Management Protocol (CMP) The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation  Indicators: for the government to serves at the time of financial crisis in the  Yield of benchmark series; form of Financial System Stability Committee (KSSK)  Exchange rate;  Jakarta Composite Index;  Foreign ownership in government securities  Policies to address the crisis at every level : KSSK members: the Ministry of Finance, Bank Indonesia, the  Repurchase the government securities at secondary market Financial Services Authority, and the Deposit Insurance  Postpone or stop the issuance Corporation Bond Stabilization Framework First Line of Defense

Most important provisions stipulated in the Law:  Buyback fund at DG of Budget Financing and Risk Management  Financial system stability monitoring and maintenance State’s Budget by KSSK members based on crisis management protocol of  Investment fund at Public Service Agency each member; (BLU) (min. level Aware)

 Prevention of financial system crisis, including the State Owned Enterprises mitigation of systemically important bank’s liquidity and  Related SOEs (min. level Aware) solvency problems; (BUMN)’s Budget  Recovery Plan for Systemically Important Banks; Social Security Organizing  BPJS (min. level Aware)  Bank Restructuring Program Agency (BPJS)’s Budget

Gov’t Securities CMP Level Second Line of Defense

 State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget NORMAL AWARE ALERT CRISIS  Accumulated cash surplus (SAL) (min. Level Crisis)

19 02 Recent Macroeconomic

Ampera Bridge in South Sumatera, Development Indonesia Indonesia’s GDP Growth Has Been Robust Consumption and investment remain as the main engines of growth

GDP Growth Comparison Amongst G-20 Countries Indonesia GDP Projection

2018 GDP Growth 7.2 7.1 Institutions 6.0 Projection 5.1 Government of Indonesia (2018 Budget) 5.4%

3.0 IMF (WEO Apr 2018) 5.3% 2.5 2.4 2.3 2.2 2.2 2.1 1.7 1.5 1.3 1.1 0.7 World Bank (IEQ June 2018) 5.2% 0.3 0.3

ADB (ADO Apr 2018) 5.3%

Italy

India Brazil

China S&P (May 2018) 5.3%

Korea

Japan

Turkey Russia

France

Mexico Canada

Australia (0.5)

Germany Argentina

Indonesia Fitch (Dec 2017) 5.4%

SouthAfrica

SaudiArabia

UnitedStates UnitedKingdom

Avg. GDP Growth 5 Years Std. Dev. GDP Growth 5 Years

21 GDP by Production Side Manufacturing improves while service sector generally keeps on recording high growth

Agriculture (%, YoY) Mining (%, YoY) Primary sector grew marginally:

 Agriculture slowed due to production decrease in food 3.81 0.95 3.36 3.14 0.69 0.74 crops

Primary  Mining growth increased supported by increasing metal ores production, but the decline in energy commodity 2016 2017 Q1-2018 2016 2017 Q1-2018 production weighed on overall growth

Manufacturing (%, YoY) Construction (%, YoY) Secondary sector on an improving trend:

 4.26 4.27 4.50 Manufacturing sector growth increased particularly 6.79 7.35 supported by F&B, textile, and metal industries 5.22

Secondary  Construction recorded high growth driven by infrastructure acceleration program

2016 2017 Q1-2018 2016 2017 Q1-2018

Transportation Comm & Info Financial Service Tertiary sector continues to show strong growth: Trade (%,YoY) (%, YoY) (%, YoY) (%, YoY)  Trade accelerated in line with increasing export-import 9.81 8.88 8.90 as well as vehicle sales 8.49 8.59 8.69 7.45

4.96 5.48  Transportation, communication, and information 4.44 4.03 4.38 sectors consistently posted high growth supported by Tertiary improving logistic and digital economy

 Financial service sector grew moderately as credit growth remains soft 2016 2017 Q1-18 2016 2017 Q1-18 2016 2017 Q1-18 2016 2017 Q1-18

22 Regional Growth Most of regions recorded positive growth in the first quarter 2018

23 Direct Investment Grew by 11.8 Percent in Q1-2018 Underpinned by improving investment climate

Direct Investment Realization Direct Investment Share by Sectors Q1-2018

Japan 12.2% Source: NSWi BKPM Japan 16.7% US 5.5% S Korea 5.4%  Positive FDI flow shows a high interest in Indonesia. S Korea 11.6% Nevertheless, Java island is still the main destination Netherland 4.7% for direct investment, roughly 55% of total FDI. Malaysia 4.6% China 8.3%  Government Efforts To Improve Investment Climate : China 3.9% (1) Easing Import and Export Restrictions (2) Reducing Dwelling Time (3) Revising and Perfecting Hong Kong 3.5% Hong Kong 6.3% Tax Incentive (Tax Allowance and Tax Holiday) BVI 3.4%  Overall structural reform efforts are expected to boost Other 24.5% Other 32.9% investment and exports to support Indonesia's economic growth in the medium term.

24 Inflation has been More Benign Create Substantial Foundation for Robust Consumption

25 Import Growth Upholds Increasing Domestic Economic Activities Until April 2018, Trade Balance is Recording a Deficit of USD1.31 billion

Trade Balance (USD Billion) Cumulative Growth of Export Commodity

Surplus FY 2016: Surplus FY 2017: Deficit Jan-Apr 60.0% 2018: USD9.5 billion USD11.8 billion 40.0% USD1.31 billion 33.4% 3.0 20.0% 5.3% 2.0 0.0% 4.0% (5.1)% 1.0 (20.0)% 0.0 (40.0)% (1.0) (60.0)%

(2.0)

J J J J

F F

A S A A S A

N D N D

O O

M M M M

J J J J

F F

A S A A S A

N D N D

O O

M M M M

2017-J 2018-J

Non O&G O&G Total Agriculture Manufacturing Mining O&G

economic activity

J J

S S

N N

M M M M  Export grew by 8.77% (YTD), Raw Materials

4 India 1.0 4 Thailand 0.9 2018-J underpinned by mining commodity 2017-J 74.6% growth of 33.4% and manufacturing of 5.3% Consumption goods Raw materials Capital goods

Source: BPS

26 2018 Growth Outlook Economy is projected to further accelerate in the midst of robust domestic demand and improving international trade

GDP Growth Projection (%, YoY) Opportunities: 5.6  Stable consumption supported by benign inflation 5.4  Rising investment driven by infrastructure development and improving 5.02 5.07 4.9 business climate

 Increasing export as external demand recovering and commodity prices increasing

2015 2016 2017 2018 APBN 2019  Additional contribution from various special occasions such as Asian (Submitted to Games, regional election, general election preparation, and IMF-WB Parliament)¹ annual meeting

2018 Growth Projection from Various Institutions Challenges: IMF (WEO Apr 2018) 5.3%  Consumption growth needs to be boosted more World Bank (IEQ June 2018) 5.2%  Competitiveness needs to be enhanced particularly to fulfill growing domestic demand ADB (ADO Apr 2018) 5.3%  Credit growth needs to be accelerated more S&P (May 2018) 5.3%  External uncertainties: US monetary normalization, trade wars and Fitch (Dec 2017) 5.4% protectionism, and geopolitical tension

1 Mid-point of 5.4% and 5.8% economic growth assumption, submitted to parliament.

27 03 Financial Market Condition

Lake Toba in North Sumatera, Indonesia Global New Normal is Coming Stabilization policy may influence in reaching Indonesia desired growth target

US Policy Rates & 10Y Yield Potential Risk For Indonesia in 2019

4 People preference to saving, Monetary policy normalization 3.10 rather than consumption, not and US recent taxation policy 3 followed by productive could influence capital flow to (intermediate) financial market emerging markets 2 1.75

1 Inward looking policies in “Wait and See” profile of Indonesia’s key trade partner 0 investor due to General with potential trade war

Election process  between US and China.

Jul-13

Apr-12 Oct-14 Apr-17

Jan-11 Jun-11 Jan-16 Jun-16

Feb-13 Mar-15 Feb-18

Nov-11 Sep-12 Dec-13 Aug-15 Nov-16 Sep-17 May-14 Fed Fund Rate upper bound 10Y US Gov't Bonds Strategic Policy Prepared  The Government will continue to monitor global Fiscal Policies to support investment, competitiveness Real Sector Policies condition because it can translates to domestic and export performance. This include:  Law and Regulation certainty economy  Fiscal incentives for investment  Improving business climate  Policy coordination amongst authorities will be continued (Government, Central Bank, FSA,  Expansionary budget policy, supporting productive  Maintaining prudent inflation Deposit insurance Corporation) sectors and assuring infrastructure development. management  Coordinated policy to create Stability in  Private involvement in infrastructure development  Strengthening export performance, include those from non-commodity Exchange rate, Manageable inflation rate,  Well-targeted and well-timed social spending Healthy fiscal deficit, and Supportive current (high value added) related activities account profile  Central and Regional Policy coordination and taping prospective new markets

29 Uncertainties and Policy Dynamics Have Created Volatility in Global Financial Market Depreciation has been widely experienced by global currencies as US monetary normalization continues on

VIX and MOVE Indices Global Currencies Index Against US Dollar (31 Dec 2017 = 100)

120 110 100 108 106 80 104 60 102 100 40 98 96 20 94

0 92

Jul-16 Jul-17 Jul-17

Oct-17 Apr-18

Jan-16 Jan-17 Jan-18 Jun-17 Jan-18

Mar-16 Mar-17 Mar-18 Feb-18 Mar-18

Sep-16 Nov-16 Sep-17 Nov-17 Aug-17 Sep-17 Nov-17 Dec-17

May-16 May-17 May-18 May-18 Indonesia Jepang China India EU Canada UK AUS

Yields & Rupiah Movement 10.0 14,200  US policy normalization and global dynamic have led to volatilities in the 9.0 14,000 financial markets 8.0 13,800 7.0 6.0 13,600  Rupiah, along with global currencies experiences depreciation against US 5.0 13,400 Dollar 4.0 13,200 3.0 13,000  BI has increased 7 Days Reverse Repo Rate in May 2018 by 25 bps to 4.75% 2.0 1.0 12,800 to maintain economic stability in the midst of global financial sector volatilities 0.0 12,600  Deposit insurance rate has increased by 25 bps to 6.00% for commercial bank

(IDR), 50 bps to 1.25% for commercial bank (foreign currency) and by 25 bps

Jul-16 Jul-17

Jan-16 Jan-17 Jan-18

Mar-16 Mar-17 Mar-18

Sep-16 Nov-16 Sep-17 Nov-17

May-17 May-18 May-16 for rural bank in June 2018 Spread T Bond 10 Y SUN 10 Y IDR (RHS)

30 Uncertainties and Policy Dynamics Have Created Volatility in Global Financial Market (Cont’d) There has been volatilities in the stock market and local bond market. However, financial services sectors have remained resilient

Price Performance of Stock Market Indices of 10-Year Local Government Yield of Emerging Market Peers (2018 YTD) Emerging Market Peers (2018 YTD) Commentary

130% 12% There has been volatility in Indonesia’s financial 11.3% markets and yield of local government 10-year bond in 2018, in line with other emerging markets. 10% 120% However, Indonesia’s financial services sector stability and liquidity has remained solid throughout 2018. As of April 2018, 8% 7.8% 110% 7.1%  Financial services institutions have maintained adequate capital and liquidity, with the Capital 6.1% 6% Adequacy Ratio (CAR) in the banking industry

4.2% (%) recorded at 22.38% 100% 1.1% 0.9% 4.7% Yield Yield  RBC of the general insurance and life insurance (1.9)% 4.2% 4% industries recorded at 310% and 454%, respectively

Indexed Prices Indexed (2.3)% 3.6% (5.9)% 2.9%  Excess reserve in the banking industry was Rp 618 90% (6.5)% trillion (10.8)% 2%  Credit and market risk remain credible – gross NPL 80% ratio of 2.79% in the banking industry and NPF ratio Jan- Feb- Mar- Apr- May- Jun- 0% 3.01% as reported by finance companies 2018 2018 2018 2018 2018 2018 Jan- Feb- Mar- Apr- May- Jun- 2018 2018 2018 2018 2018 2018  Deposit guarantee coverage of the Deposit Insurance Corporation (LPS) has reached 99.9% of JCI (Indonesia) KLCI (Malaysia) Indonesia Malaysia Thailand customers and 52.15% in terms of value, SET (Thailand) Hochiminh (Vietnam) PSEI (Philippines) CSI 300 (China) Vietnam Philippines China demonstrating public confidence and trust in the BOVESPA (Brazil) SENSEX 30 (India) Brazil India national banking system

Source: Data Stream as of 1-Jun-2018 Source: Data Stream as of 1-Jun-2018

31 Solid Policy Coordination In Managing Financial Markets Volatility

Gov’t Securities CMP Level Second Line of Defense

 State General Treasury Account (Rekening KUN) (min. level Alert) State’s Budget NORMAL AWARE ALERT CRISIS  Accumulated cash surplus (SAL) (min. Level Crisis)

32 Additional Measures to Strengthen Stability and Growth of Financial Markets

 The Government, Bank Indonesia (BI), The Financial Services Authority (OJK) and The Indonesian Deposit Insurance Corporation are strengthening coordination and implementing an optimal policy mix to maintain economic stability and ongoing development efforts

 Stronger coordination prioritizes short-term stability of economy and financial markets while nurturing medium-term growth

In the Near Term, Bank Indonesia Will Prioritize Monetary Policy Oriented Towards Rupiah Exchange Rate Stability

 First, a pre-emptive, front-loading and ahead-of-the-curve policy response will be pursued to stabilize the rupiah exchange rate, while consistently maintaining low and controlled inflation within the 2018-2019 target corridor of 3.5±1% 1 Pre-emptive policy response  Second, dual intervention in the foreign exchange market and SBN market will 2 constantly be optimized to stabilize the Rupiah exchange rate along with fair price 4 adjustments in the financial markets, while maintaining adequate liquidity in the money market

 Third, the monetary operations strategy will be oriented towards maintaining adequate Intensive Dual Communication intervention liquidity, particularly in the Rupiah money market and interbank swap market with key market , in FX/ SBN industry, markets  Fourth, intensive communication with market players, the banking industry, business business community and economists will be used to form rational expectations, thus helping to stakeholders mitigate the rupiah overshooting the currency’s fundamental value 3  In addition, to maintain and build the current pace of domestic economic growth Strengthening of monetary momentum, Bank Indonesia is preparing follow-up measures to ease macroprudential operations in FX and policy, while also coordinating with the Coordinating Ministry for Economic Affairs, money markets Ministry of Finance and the Financial Services Authority (OJK) to accelerate financial market deepening, particularly for private sector infrastructure financing

33 Additional Measures to Strengthen Stability and Growth of Financial Markets (Cont’d)

Financial Sector Supervision Conducted by the Financial Services LPS is Open to Make Any Necessary Adjustments to the Guarantee Authority (OJK) is Focused on Maintaining a Healthy Financial Rate Sector  The Deposit Insurance Corporation (LPS) will intensify the monitoring  OJK continues to back the financial market deepening program in and evaluation of deposit guarantee schemes along with the Magnitude terms of supply and demand, while strengthening market and Guarantee Rate infrastructure and facilitating municipal bond issuances and asset securitization  LPS is open to make any necessary adjustments to the Guarantee Rate at the first opportunity in accordance with the latest data available and  OJK maintains financial services sector stability through industry assessments of financial system stability resilience, strengthening issuer fundamentals and implementing appropriate policy measures when the financial markets experience  LPS will intensify monitoring and evaluation in order to maintain public pressures confidence in the national banking system of Indonesia

 OJK nurtures credit growth and financial sector financing by prioritizing financing that targets export commodities

 In addition, OJK will continue to advocate financial inclusion to stimulate quality economic growth through the development of People’s Business Loan (KUR) clusters, waqf-based microfinance and FinTech

34 04 2018 State Budget Realization

Komodo National Park in East Nusa Performance Tenggara, Indonesia Macroeconomic Indicators Remain Strong

Gas Production 1.15 1.18 1.15 1.14 1.20 1.142 1.21 – 1.30 (millions of barrels/day)

1 Q1 figures. 2 As of April.

36 Performance of State Budget Fiscal Sustainability is Well Preserved as Fiscal Deficit Narrowed and Primary Balance Recorded a Substantial Surplus

37 Fiscal Deficit and Primary Balance on an Improving Trend

May Realization (RP Tn)

Primary surplus 18.0 Higher than previous 18.0 T period, indicating that 109.2 fiscal sustainability improves (6.0) 66.9 62.2 Surplus of financing 26.0 realization in 30 May 2018 in-line with 62.2 T previous year (29.9)

(71.1) (94.5)

(128.7) Fiscal deficit (94.5) T realization (189.1) (110.3)

2015 2016 2017 2018 Deficit Surplus of Financing Primary Balance

38 Tax Revenue Collection (Non Tax Amnesty) Continues on Positive Trend

Tax Revenue Cumulative Growth (Non TA) Jan-Mar Tax Revenue Cumulative Growth (Non TA) Jan-May

17.45% 16.21%

13.32% 11.82%

(2.62)% (2.39)% (3.46)%

(7.96)%

Jan-Mar 2015 Jan-Mar 2016 Jan-Mar 2017 Jan-Mar 2018 Jan-May 2015 Jan-May 2016 Jan-May 2017 Jan-May 2018

39 Strong Tax Collection Particularly on Corporate, Income, Manufacturing and Trade Driven by expanding economic activity and profitability

Tax Category Cumulative Growth Until May  Positive performance of corporate income tax partly due to the strong increase of Income Tax Article 21 (PPH Pasal 21) 15.54% Income Tax article 29 (tax underpayment assessment). It shows that profitability of 0.38% companies generally increased in 2017

26.97% Corporate Income Tax (PPH Badan) 8.31%

Tax Collection by Sector (May 2018 YTD) 12.12% Domestic VAT (PPN Dalam Negeri) 13.41% Transportation Manufacturing 3.78% 30.03% 25.85% Import Tax (Pajak Atas Impor) 19.05% Others 24.27% 30.27% PPH 22 Impor 16.31%

25.17% Trade Import VAT (PPN Impor) 20.70% 21.22% Construction & 3.14% Real Estate Luxury Import VAT (PPnBM Impor) Financial Services (1.45)% 6.52% 14.19%

2018 2017

40 Custom and Excise Posted the Highest Growth in the Last 3 Years

Custom & Excise Revenue Growth (May YTD) Excise Revenue Growth (May YTD)

16.89% 18.29% 7.83% 6.97%

(8.78)%

(13.80)%

(26.46)% (35.49)% May-2015 May-2016 May-2017 May-2018 May-2015 May-2016 May-2017 May-2018

Import Duty Revenue Growth (May YTD) Export Duty Revenue Growth (May YTD)

84.60% 66.03% 14.11%

6.80% 1.14%

(37.72)% (4.89)% (75.27)% May-2015 May-2016 May-2017 May-2018 May-2015 May-2016 May-2017 May-2018

Source: EIS, CEISA, SPAN as of 1 May 2018

41 Non Tax Revenue Grew by 17.4% Supported by the Increase of Commodity Prices

Supporting factors: Total Rp145.0 T  Increase ICP price  Increase reference coal price 16.6T, Total 38.4% of APBN  Increase public service delivery Rp123.5 T 13.6T, 35.3% of APBNP 40.7T, 48.6% of APBN Total Rp89.1 T 36.8T, 43.3% of APBNP 12.0T, 33.1% of APBNP 22.8T, 51.0% of APBN 26.5T, 34.3T, 64.7% of APBNP 14.2T, 40.8% of APBNP 61.1% of APBN

11.3T, 48.4% of APBNP 19.8T, 58.0% of APBNP 50.6T, 7.6T, 35.2T, 63.0% of APBN 34.7% of APBNP 48.8% of APBNP 15.4T, 22.5% of APBNP

May 2016 YTD May 2017 YTD May 2018 YTD Revenue from Oil and Gas Revenue from Commodity (Non Oil & Gas) Revenue from SOE Other BLU

42 Realization of Transfer to Regions and Village Fund as of May 2018 was 42.0%, Lower than Last Year

Village fund realization in 2018 is lower in Total Total 2018, because: Rp334.7 T Total Rp328.4 T Rp321.5 T 1) Local government is still focused on 8.4T 11.0T 23.7T, 28.2T, 11.1T disbursement of Phase I 20% from 50.3% of APBNP 47.0% of APBNP 20.7T, RKUD to villages 34.4% 2) There are changes in the of APBN 68.9T, 65.3T, 56.3T, implementation of cash advance 32.6% of APBNP 35.4% of APBNP 30.3% of APBN program in villages  30% of village funds for development are used for wages

192.3T, 199.7T, 200.2T, 49.9% of APBNP 50.1% of APBNP 49.9% of APBN

35.1T, 30.5T, 33.2T, 32.1% of APBNP 32.0% of APBNP 37.2% of APBN May 2016 YTD May 2017 YTD May 2018 YTD Revenue Sharing General Allocation Fund Specific Transfer Fund Village Fund Other

43 Budget Financing Realization is 52.1% of Target

2016 2017 2018 Budget Financing is Lower than Last Year (May YTD) % Real % Real % Real RP T May to May to May to 46.8 RP T Budget Real. Budget Budget Real. Budget Budget Real. Budget 300.0 50.0 250.0 40.0 215.1 I. Debt 371.6 213.1 57.3 461.3 193.9 42.0 399.2 169.0 42.3 195.6 30.0 200.0 180.3 19.3 169.9 20.0 150.0 Government 10.0 Securities 364.9 221.5 60.7 467.3 210.6 45.1 414.5 179.3 43.2 100.0 0.0 (Net) (9.0) (13.1) 50.0 (10.0)

Loan (Net) 6.7 (8.5) (126.7) (6.0) (16.8) 280.7 (15.3) (10.2)¹ 66.9 0.0 (20.0) 2015 2016 2017 2018 Pembiayaan Anggaran Growth (%)

II. Investment (94.0) 0.0 0.0 (59.7) 0.0 0.0 (65.7) 0.0 0.0 Government Securities Has Been Declining (May YTD)

300.0 50.0 III. Government 0.5 1.9 404.8 (3.7) 1.6 (43.6) (6.7) 0.8 (11.9) 38.9 Lending 40.0 250.0 221.5 210.6 192.5 30.0 200.0 179.3 IV. Guarantee (0.7) 0.0 0.0 (1.0) 0.0 0.0 (1.1) 0.0 0.0 15.1 20.0 150.0 10.0 100.0 (4.9) 0.0 V. Other 19.3 0.1 0.7 0.3 0.2 50.6 0.2 0.1 53.4 50.0 (14.9) (10.0)

0.0 (20.0) 2015 2016 2017 2018 Total 296.7 215.1 72.5 397.2 195.6 49.3 325.9 169.9 52.1 Government Securities (Net) Growth (%)

¹ Includes repayment of foreign loan of RP 19.42 T (37.82% of target)

44 05 Fiscal Incentives to Support

Borobudur Temple in Central Java, Investment & Export Indonesia Taxation Incentive Scheme for Investment & Export (1/2)

Tax Incentive for General / Specific Sectors

VAT Exemption Import Duty Import Duties Borne Import Duties Tax Allowance Tax Holiday By Government/ Exemption Facility For strategic goods Incentive for power plant Investment allowance of Income tax discount for BMDTP including macineries industries for public For machineries and 30% from investment pioneer industries up to and industrial equipment For specific industries capital goods for 2 years value (5% a year for 6 100% between 5 to 20 according to and can be extended years), accelerated years in accordance recommendation from (PMK 176/2009 stdtd depreciation and with investment value. Ministry of Industry for 1 PMK 188/2015) amortization, Dividend Transition time for 2 year tariff for foreign years with tax deduction taxpayers up tp 10% or of 50% according to tax treaty, extended loss compensation beyond 5 years (maximum 10 years)

Tax Incentive for Income Tax Incentive Income Tax and VAT Income Tax Incentive Upstream Oil & Gas for Local Incorporated Incentives for the for Export Proceeds Bank development of Deposit Gross Split & Cost REIT/KIK DIRE Recovery Income tax for deposit interest from export proceeds 0%-10%. (normal tariff is 20%)

46 Taxation Incentive Scheme for Investment & Export (2/2)

Tax Incentive for Spatial/Zone Special Tax Incentives to Support Export To reduce disparities and support economic growth

Bonded Free Trade Industrial Zone Special Bonded Storage Area Special Export The ease of imports Storage Area Zone Economic Zone Assignment used in the (Kawasan Facilities: tax Facilities: (Penugasan Khusus production goods Penimbunan Exemption of allowance, tax Facilities: Import Ekspor) which will be fully Berikat) import duties, holiday, import Duties, VAT, Import duties, VAT, exported VAT, luxury duties, import Luxury goods Import Income Tax Export financing for (Kemudahan Impor Facilities: Import goods tax, VAT tax, excise, local specific sectors Tujuan Ekspor) duties, VAT, excise content through Indonesia’s luxury goods, utilization Export Financing Facilities: import duty excise incentive, special Agency (Lembaga exemption, Import VAT income tax Pembiayaan Ekspor exemption of raw Indonesia) that are materials used in considered important production goods will but commercially not be exported feasible

This assignment has been given to PT INKA (export of train coach to Bangladesh), PT DI (export of aircraft to Africa) and small medium industries

47 Revision of Tax Holiday Regulation To streamline administrative procedures and increase the effectiveness

PMK 103/2015 PMK 35/2018

Subject New Tax Payers New Investment

Percentage of tax 100% 10-100% discount (single rate)

Adjusted with investment value  Rp500 billion – less than Rp1 trillion : 5 years 5-15 years  Rp1 trillion - less than Rp5 trillion : 7 years Timeline can be extended up to 20 years with Finance Minister’s discretion  Rp5 trillion - less than Rp15 trillion : 10 years  Rp15 trillion - less than Rp30 trillion : 15 years  Minimum Rp30 trillion : 20 years

Transition Not regulated 50% for 2 years

Coverage of Industry 8 pioneer industries 17 pioneer industries

48 06 Medium Term Fiscal Objectives

Wayang – Traditional Puppet & 2019 Macro-fiscal Framework Theaters, Indonesia Macroeconomic Assumptions 2019

2016 2017 2018 2019 Indicators Realized Realized APBN Outlook

a. Economic growth 5.02 5.07 5.4 5.4 – 5.8 (%, YoY)

b. Inflation 3.02 3.61 3.5 2.5 – 4.5 (%, YoY)

c. 3-Month Treasury Bill 5.7 4.98 5.2 4.6 – 5.2 (%)

d. Exchange Rate 13,307 13,384 13,400 13,700 – 14,000 (Rp/US$)

e. ICP 40.2 51.2 48 60 – 70 (US$/barrel)

f. Oil Lifting (thousands of barrel per 829 803.91 800 722 – 805 day) g. Gas Lifting (thousand barrels per day 1,180 1,142.33 1,200 1,210 – 1,300 oil equivalent)

50 2019 Macro-fiscal Posture (% of GDP) Revenue mobilization, productive and effective spending, innovative financing

Line State Revenue State Expenditure Ministries (5.0 - 5.6) Taxation Revenue (12.7 - 13.5) (14.2 - 15.4) (10.8 - 11.3) Central Govt 2018: 5.7 2018: 12.8 2018: 15.0 Spending (9.3 - 10.1) Non Line 2018: 10.9 Ministries Primary balance ((0.30) - 0.05) (4.3 - 4.5) Non Tax Revenue Deficit Rp48.7T - Surplus Rp8.1T (1.8 - 2.1) 2018: 9.8 2018: 4.1 2018: 1.9 2018: (0.59)  (Rp87.3 T)

Grants (0.05 - 0.07) Deficit ((1.9) - (1.6)) Transfer to Region and Village 2018: 0.01 2018: (2.19) Fund (4.9 - 5.3) Notes: Financing  Tax ratio 2018: 11.6%; 2019: (1.9 - 1.6) 2018: 5.2 11.4-11.9%  Tax ratio includes revenue from oil and gas and general mining Govt Bonds Net Investment (2.1 - 2.5 ) ((0.2) - (0.4)) APBN 2018 Debt Ratio (29.2 - 28.8) 2018: 29.07

51 Medium Term Fiscal Framework Focusing on quality and productive spending, expanding fiscal space and sustainability

Items (% of GDP) APBN 2018 20192 2020 2021 2022

Revenue & Grants 12.8 12.7 – 13.5 12.7 – 13.9 13.5 – 14.0 13.6 – 14.4

Tax Ratio1 11.6 11.4 – 11.9 11.4 – 12.5 11.6 – 13.0 11.8 – 13.6

Total Spending 15.0 14.2 – 15.4 14.3 – 15.6 15.0 – 15.7 15.1 – 16.0

Capital Expenditure 1.4 1.5 - 1.7 1.8 – 2.3 2.2 – 2.7 2.3 – 3.0

Primary Balance (0.59) 0.05 - (0.30) 0.05 – 0.1 0.10 – 0.01 0.1 – 0.05

Budget Deficit (2.19) (1.6) - (1.9) (1.6) - (1.7) (1.5) - (1.7) (1.5) - (1.6)

Debt Ratio 29.07 28.8 – 29.2 28.5 - 28.6 27.8 – 28.3 26.3 – 27.9

 Strengthening quality of spending by increasing productive avenues  Developing creative and innovative financing

 Enlarging fiscal space through revenue increase  Manageable deficit and debt level

 Efficiencies in non-priority spending  Positive primary balance in 2020

1 Including revenue from oil & gas and general mining. 2 Submitted to parliament for discussion.

52 07 Monetary Policy and

Raja Ampat in West Papua, Banking Sector Indonesia Stable Monetary Environment Conducive Monetary Environment Supporting the Economy

Inflation Remained Under Control Rupiah Depreciated Due To USD Broad Based Appreciation

(YoY %)

Managed inflation is observed throughout

13,785 13,785 13,392 13,473 13,305 13,568 13,385 13,895 14,043

8.38 12,385 8.36 12,170

Indonesia, well within the target range of 11,876

3.5±1% in the majority of the regions. 10,445

3.61 3.35 3.02 3.23

2013 2014 2015 2016 2017 May-18 2013 2014 2015 2016 2017 May-18 EOP Average Limited Depreciation Compared to Other Countries

As of May 2018 May vs April 2018 As of May 2018 YTD 2018 vs 2017 TRY (10.15) (15.69)% (8.43) TRY (8.56)% (5.84) BRL (11.05)% BRL (6.26) (4.82)% (3.57) PHP (5.10)% EUR (3.90) (2.57)% (2.36)% (1.12) IDR (2.41)% ZAR (3.48) (1.11) (5.25)% INR INR (0.18)% (2.75) 3.45% JPY THB (1.46) 3.42% (2.08) (0.18)% (1.41) SGD MYR 4.43% (1.91) (0.91)% KRW 5.46% SGD (1.02) (1.76) CNY 1.50% 0.13 6.41% IDR (1.67) (2.79)% EUR 7.33% CNY (1.22) 1.67% (1.19) THB 7.39% KRW (0.85) 1.68% (0.85) MYR 9.57% PHP (1.50) ZAR (1.47)% (0.33) 10.06% (12.00) (10.00) (8.00) (6.00) (4.00) (2.00) 0.00 2.00 (20.00)% (15.00)% (10.00)% (5.00)% 0.00% 5.00% 10.00% 15.00%

Point to Point Average point-to-point average Source: BPS; Bank Indonesia

54 External Sector Remains Resilient Healthy Current Account Deficit and Balance of Payment

Current Account Deficit is Improving, Significantly Lower than 2013 Balance of Payment (2013 – 2017)

(USD bn) 1 2 % Components (USD bn) 2013 2014 2015 2016 2017 Q1-2018 30.0 (1.0) 20.0 Current Account (29.1) (27.5) (17.5) (17.0) (17.5) (5.5) 18.8 (1.5) 10.0 14.0 15.3 5.8 7.0 4.2 5.2 5.5 4.5 4.5 A. Goods 5.8 7.0 14.0 15.3 18.8 2.4 0.0 (2.0) (2.0) (1.8) (1.7) (10.0) (27.1) (28.4) (28.4) (29.6) (33.0) Export, fob 182.1 175.3 149.1 144.5 168.9 44.4 (2.5) (20.0) (17.0) (29.1) (27.5) (17.5) (17.5) (30.0) Import, fob (176.3) (168.3) (135.1) (129.2) (150.1) (42.1) (12.1) (10.0) (8.7) (7.1) (3.0) (7.8) (40.0) B. Services, Primary & (3.1) (34.9) (34.5) (31.6) (32.3) (36.3) (7.9) (50.0) (3.2) (3.5) Secondary Income 1 2013 2014 2015 2016 2017* Primary Income Secondary Income Capital & Financial Account 22.0 44.9 16.9 29.3 29.5 1.9 Goods Services Current Account Current Account (% GDP)-rhs 1. Direct Investment 12.2 14.7 10.7 16.1 19.2 3.1 Balance of Payment Remains Favourable 2. Portfolio Investment 10.9 26.1 16.2 19.0 20.6 (1.2) (USD bn) 50.0 3. Financial Derivatives (0.3) (0.2) 0.0 0.0 (0.1) 0.1

4. Other Investment (0.8) 4.3 (10.1) (5.8) (10.2) (0.2) 44.9 29.5 20.0 12.1 15.2 29.3 22.0 16.9 11.6 Overall Balance (7.3) 15.2 (1.1) 12.1 11.6 (3.9) (1.1) (10.0) (7.3) (17.5) (17.0) (17.5) (29.1) (27.5) Memorandum:

Reserve Assets Position 99.4 111.9 105.9 116.4 130.2 126.0 (40.0) 1 2013 2014 2015 2016 2017 In months of imports & 5.5 6.5 7.4 8.4 8.3 7.7 official debt repayment Current Account Capital & Financial Account Overall Balance Current Account (3.2) (3.1) (2.0) (1.8) (1.7) (2.2) (% GDP)

Source: Bank Indonesia 1 Provisional figures. 2 Very provisional figures.

55 External Sector Remains Resilient Supported by Prudential Regulation and Ample Lines of Defense

Under the ASA, BSA, and CMIM, a total of USD46.1 billion of foreign currency swap is Prudential Regulation on External Debt currently available to the Republic, while swap lines are also available with Japan and Phase 1 Phase 2 Phase 3 under BCSAs with Korea and Australia Jan 1,2015 – Jan 1,2016 – Jan 1, 2017 & Swap Arrangements Regulation Key Points Dec 31,2015 Dec 31,2016 beyond Object of Regulation Governs all Foreign Currency Debt  USD22.76 billion swap line with Japan currently in place Hedging Ratio Japan  The quantum of the swap line was increased from USD12 < 3 months 20% 25% billion in December 2013 > 3 – 6 months 20% 25%  Renewed a 3 year KRW / IDR swap arrangement with the size Liquidity Ratio (< 3 months) 50% 70% South Korea of up to KRW 10.7 tn / IDR 115 tn in March 2017

Credit Rating Not applicable Minimum rating of BB- Bilateral Hedging transaction to meet Not necessary be done with a bank in Must be done with a  Established a 3 year A$/IDR swap arrangement in December hedge ratio Indonesia bank in Indonesia Australia 2015 Sanction As of Q IV-2015 Applied

 Entitled to a maximum swap of USD600 million under ASA Ample Foreign Reserves to Buffer Against External Shocks ASEAN Swap  The first MoU on the ASA was signed in 1977 among 5 ASEAN Arrangement (USD bn) (Month) Central Banks with total facility USD100 million (ASA) 140 116.4 130.2 9  Doubled to USD2 billion in 2005 105.9 122.9 111.9 8 120 8.3 99.4 8.4 7  Entitled to a maximum swap amount of USD22.76 billion under Chiang Mai 100 7.4 7.2 the ASEAN+3 (Japan, China, and Korea) FX reserves pool

6 Regional 6.5 Initiative created under the agreement 80 5 Multilateralization 5.4 (CMIM)  Came into effect in 2010 with a pool of USD120 billion 4 60 Agreement 3  Doubled to USD240 billion effective July 2014 40 2 20 1  Indonesia is able to access IMF facilities for crisis prevention 0 0 IMF Global to address potential (actual) BOP difficulties 2013 2014 2015 2016 2017 18-MayMay-18 Financial Safety  Such facilities include the Flexible Credit Line (FCL) and International Reserves Months of Imports & Servicing of Government Debt (rhs) Global Net – GSFN Precautionary and Liquidity Line (PLL)

Source: Bank Indonesia

56 Sound and Resilient Banking System Supported by Robust Capitalization and Relatively Low NPL

Sound Banking System with High CAR and Manageable NPL Pick Up in Credit Growth (%) (%) (%)

25 22.9 23.2 22.5 3.5 21.4 11.58 19.6 3.0 20 18.1 10.45 2.9 2.8 2.5 8.50 2.5 2.6 7.86 8.20 15 2.0 2.2 10 1.8 1.5 1.0 5 0.5

0 0.0 2013 2014 2015 2016 2017 Mar-18 2014 2015 2016 2017 Mar-18 CAR Gross NPL (Rhs)

Law on Financial System Crisis Prevention and Resolution as a Landmark for the Conduct in Safeguarding Macroeconomic and Financial Stability

 Clear division of responsibilities and coordination mechanism among the 4 financial  Credit growth is beginning to improve in many regions, with notable increase authorities recorded in Kalimantan, Bali, Nusa Tenggara, Sulawesi, Maluku, and Papua.  Defined Systemically Important Banks (SIBs)  With the domestic economy gaining momentum and ongoing consolidation in the corporate and banking sectors, Bank Indonesia projects stronger credit and deposit  Resolution mechanism for banks facing liquidity problem growth in 2018 at 10.0-12.0% (yoy) and 9.0-11.0% (yoy) respectively.  Resolution mechanism for SIBs facing solvency problem  In time of financial system distress, the president has full authorities to decide on how to handle the crisis  Banking Restructuring Program (BRP) focuses on bail-in mechanism  Immunity and Legal Protection

Source: Bank Indonesia

57 Recent Monetary Policy Decisions Pre-emptive Policy to Strengthen Stability

On 16th and 17th May 2018, the BI Board of Governors agreed to raise the BI 7-day Reverse Repo Rate by 25 bps to 4.50%, while also raising the Deposit Facility (DF) and Lending Facility (LF) rates by 25 bps to 3.75% and 5.25% respectively, effective 18-May-2018

The current The financial Global economic Domestic economic The rupiah Inflation in April 2018 account deficit system remains growth in 2018 is growth in Indonesia depreciated in the was controlled within the narrowed in the stable and the projected to improve, was solid in the first first quarter of target corridor, first quarter of bank despite the ongoing quarter of 2018, 2018, sparked by underpinned by food 2018, backed by intermediation global liquidity bolstered by global USD price corrections and external sector function is rebalancing process. domestic demand appreciation anchored expectations resilience improving

On 30th May 2018, the BI Board of Governors agreed to raise the BI 7-day Reverse Repo Rate by 25 bps to 4.75%, while also raising the Deposit Facility (DF) and Lending Facility (LF) rates by 25 bps to 4.00% and 5.50% respectively, effective 31-May-2018

The decision to increase the interest rate is part of Bank Indonesia's short-term policy action which prioritizes monetary policy on stability particularly for the rupiah exchange rate

Source: Bank Indonesia as of May 31, 2018

58 Bank Indonesia’s Policy Direction To Maintain Rupiah Stability and Support Growth

Measures to Stabilize Rupiah Exchange Rate Measures to Support Growth

1 1 To stabilise the rupiah exchange A pre-emptive, front-loading To bolster the growth of the property rate, while consistently controlling Further easing of and ahead-of-the-curve policy sector which has positive impact to the inflation within the 2018-2019 target macroprudential policy response economy range of 3.5±1%

2 2 Dual intervention in the foreign Coordination with the Coordinating To stabilise the rupiah exchange exchange market and Policy coordination to Ministry of Economic Affairs, the rate, adjust fair prices in the financial government securities (Surat accelerate financial market Ministry of Finance, and the Financial markets and maintain adequate Berharga Negara – SBN) deepening Services Authority to accelerate liquidity in the money market market in a measured way financial market deepening, particularly in private financing for infrastructure.

3 3 Electronification to support social Strengthening the monetary To maintain adequate liquidity in the Payment system development assistance disbursement and financial operations in the foreign rupiah money market and interbank to support digital economy transcation of the central and regional exchange and money markets swap market government

4 4 Sharia economy and finance Intensive communication, To form rational expectations, thus Sharia economy and finance development to create halal economy especially to market players, helping to mitigate the rupiah development chain, sharia financal sector banks, businesses, and overshooting its fundamental level. development both for commercial and economists social purposes, including its education and communication

Source: Bank Indonesia

59 08 Debt Management and

Bromo Tengger Semeru National Budget Financing Park in East Java, Indonesia 2018 Progress of Issuance Creating Prudent and Sustainable Fiscal Management

Government Securities to Meet State Budget Financing Issuance Targets for Government Securities

61 Prudent and Sustainable Fiscal Management Decrease in Primary Balance and Well Managed External Risks

Government Securities to Meet State Budget Financing Increase in Funding Sourced from Domestic Public Markets

(ID tn) 37% (USD bn) 173.2 175.3

441.8 150.2 407.3 407.2 362.3 127.2 125.9 18% 113.5 118.8 117.5 103.7 102.2 111.4 12% 91.0 91.2 90.9 264.6 8%

(8)%

2014 2015 2016 2017 2018P 2012 2013 2014 2015 2016 2017 Apr-18

Total Government Securities Net YoY Growth Domestic Public Debt External Public Debt

Policy Strategies

 Productivity: Utilizing debt for productive projects, i.e supporting the acceleration of  Financial market deepening and development in order to achieve debt financing at national development priorities, education, health, infrastructure for local region optimum cost and risk

 Efficiency: Maintaining reasonable ratio of interest payment to debt outstanding.  Decreasing primary balance

 Prudent Management: Sustaining debt/GDP under 30%  Promoting independence by prioritizing domestic as financing sources, a less risky form of debt

Source: Ministry of Finance Note: Subject to change in market conditions and other factors.

62 Sound Government Debt Portfolio Management Portfolio management characterized by stable debt/GDP ratio and well-diversified debt

Manageable Debt to GDP Ratio Over the Years Declining Exchange Rate Risks

USD billions 46.8 43.4 44.5 29.2% 29.6% 42.6 41.8 27.4% 28.3% 40.4 24.9% 24.7% 54.9 55.0 54.7 54.7 54.5 58.7 243.8 11.7 10.7 12.2 12.1 11.7 12.6 207.0 235.8 174.7 136.3 155.2

2013 2014 2015 2016 2017 May-18 2013 2014 2015 2016 2017 Apr-18 Bonds Loans Debt-to-GDP ratio Foreign Debt to GDP Ratio Foreign Debt to Total Debt Ratio

Diversified Mix of External Funding Sources Proven Access to Funding Across Multiple Currencies and Markets

USD billions 3% 2% 2% 1% 1% 1% 3% 4% 4% 3% 3% 6% 5% 12% 9% 8% 7% 6% 50.9 51.3 52.3 50.4 50.8 46% 44% 42% 29% 31% 29% 30% 55% 50% 29% 32%

60.5 66.2 73.6 60% 40.5 51.4 53% 57% 55% 57% 58% 54% 56% 58% 45% 50%

2014 2015 2016 2017 Apr-2018 2013 2014 2015 2016 2017 Apr-18 Commercial Debt¹ Concessional & Semi-Concessional Loans IDR USD JPY EUR Other

Source: Ministry of Finance 1 Commercial comprises bonds/sukuk issued in the international capital markets and commercial loans.

63 Stronger and More Prudent Debt Management Risk Indicators Target in 2018 – 2021

FX Debt Portion (%) Debt to GDP Ratio (%)

45.0 Range: +/- 3.0 43.0 29.2 29.3 29.3 40.0 29.1 39.0 38.0 37.0 37.0 28.7 28.3

27.4

2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021

Average Time to Maturity (ATM) (years) Interest Payment to GDP (%)

9.4 9.0 Range: +/- 0.5 8.6 1.6 1.6 1.6 1.6 1.6 8.3 8.0 7.7 7.6

1.5

1.4

2015 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021

Note: Based on medium term debt management strategy

64 Balanced Debt Maturity Profile - Resilient Against External Shocks Marked by stable maturity profile and declining risks against interest rate and FX volatilities

More Prudent Risk Management Manageable External Debt Service Requirements

USD billions 14.6 13.4 13.0 86.3% 87.9% 89.3% 89.6% 4.2 9.9 4.5 9.2 9.6 3.9

3.6 4.0 44.5% 3.3 42.6% 40.4% 41.8% 10.4 25.4% 8.9 9.1 21.4% 22.7% 23.0% 5.9 6.0 5.9

2015 2016 2017 2018P² 2019P 2020P 2015 2016 2017 Apr-18 Principal Repayment Interest Repayment FCY debt-to-Total Debt Fixed Interest-to-debt Maturing debt within 3 Years

Well-Balanced Debt Maturity Profile¹ – Average Time to Maturity of 8.7 years

USD billions

29.8

Source: Ministry of Finance IDR Denominated Other Currencies 1 Debt Maturity Profile as of April 30, 2018. 2 Based on outstanding debt as of 31-May-2018.

65 Indonesia’s Infrastructure Projects and Financing Schemes Promotion of Infrastructure Development to Accelerate Economic Growth

Infrastructure Development is a Key Priority Establishment of PPP Unit

 Infrastructure Development in order to: Broad  Champion project preparation and acceleration of the PPP agenda 1. Accelerate growth particularly in rural areas Objective in Indonesia 2. Support industrial development and tourism  Improve quality of project selection under KPPIP – OBC criteria

3. Reduce unemployment and poverty Core  Support project preparation through Project Development Facility support and highly qualified transaction advisors Mandates  Infrastructure fundraising needs: USD357.9 bn (or equivalent to Rp4,796.2 tn)  Act on behalf the Minister of Finance in providing government support and  245 National Strategy Projects under National Medium Term Plan for 2015 – 2019 with an approvals for projects estimated total cost of Rp4,197 tn (USD313 bn)  Coordinate all public finance instruments  37 priority infrastructure projects with an estimated cost of Rp2,490 tn (USD180 bn) Additional  Provide input for PPP Policy Development and Regulations  Majority of 37 priority projects are expected to commence commercial operation by 2018 - Mandates  Implement capacity building program for GCAs 2022  One stop shop for PPP promotion & Information

Budget Public Private Partnership SOE & Private Sector  Central & regional budget  Certain infrastructure projects to be funded and operated through a partnership  Government to inject capital into SOEs: Intended (special allocation fund & between the Indonesian government and the private sector multiplier effect to develop more infrastructure projects rural transfer)  Projects ready for auction under the PPP Scheme:  Key focus areas:  Primarily to support basic  Toll roads projects such as Balikpapan-Samarinda and Manado-Bitung  Infrastructure and maritime development infrastructure projects:  Railway projects such as an express line into Soekarno-Hatta International Airport  Transportation and connectivity  Food security:  Water supply projects such as the West Semarang Project  Food security Irrigation, dams etc.  Various government support for PPP:  Medium term infrastructure developments to focus on:  Maritime: Seaports, shipyards etc.  Project Development Facility (PDF): Helps Government Contracting Agencies  Water Supply (GCAs) in project preparation and transaction  Connectivity: Village  Airports roads, public  VGF: improves financial viability of PPP projects  Seaports transportation etc.  Government Guarantees: Supports PPP projects’ bankability by providing  Electricity and power plants sovereign guarantees  Housing  Infrastructure Financing Fund: Provided through PT SMI and IIGF  Mining  Availability Payment (AP): GCA pays private partner based of availability of infrastructure services

66 Government Guarantee for Basic Infrastructure Development Sovereign guarantee reflects strong commitment to national development planning

Government Guarantee Program Government Guarantees Portfolio

Committed Exposure / Central Government Guarantee for Guarantee • Power (Electricity) – Full credit guarantee for PLN’s Guarantee Amount Outstanding Infrastructure Programs Documents default on its payment obligation (FTP 1 10,000 MW, (USD bn) (USD bn) 35GW) • Water – 70% guarantee of PDAM’s principal payment Coal Power Plant 10,000MW Fast 1 34 6.70 2.49 obligation Track Program (FTP 1) • Infrastructure - Full credit guarantee on SOE’s default Credit (for lending from international financial institution) & Guarantee guarantee for PT SMI (local infrastructure financing) 2 Clean Water Supply Program 9 0.02 0.01 • Toll road – Full credit guarantee on Hutama Karya’s payment obligation (Sumatra Toll Road Development) Direct Lending from International • Public Transportation (Light Rail Transit) – Full credit 3 4 2.03 0.56 Financial Institution to SOEs guarantee for PT Kereta Api Indonesia’s debt payment obligations for the development of LRT Jabodebek

4 Sumatra Toll Road 5 0.60 0.48

• Power (Electricity) – Guarantee on the viability of Business PLN obligation under Power Purchase Renewable energy, Coals & Gas Viability 5 11 11.59 1.59 Agreements with IPPs (off-take and political risks) Power Plant 10,000 MW (FTP 2) Guarantee under FTP-2 10.000MW and 35GW programs*

6 Public-Private Partnerships (PPP) 5 5.74 1.42 • Infrastructure – Guarantee on the obligation of PPP Government related entities in accordance to the Guarantee 7 Regional infrastructure financing 1 0.20 0.09 Agreement

Light Rail Transit (LRT) Jakarta 8 1 1.40 - • Infrastructure – Guarantee against infrastructure Bogor Depok Bekasi Political Risk risks for National Strategic Projects (Presidential Guarantee Decree No.58/2017) which are not covered by Total 70 28.29 6.63 other type of guarantees Note: From 2008 to Q1-2018, the Government has issued 75 guarantee documents with total value of USD28.84 billion, 5 of which (worth USD0.05 billion) have expired.

67 Thank You