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The Republic of IndonesiaThe Republic of IndonesiaAccelerating Momentum
January 2008
DisclaimerDisclaimer
The presentation is being made to you on the basis that you have confirmed your representation to each of Barclays Capital, HSBC and Lehman Brothers (the Joint Bookrunners ) that (i) you are not resident in the United States nor a U.S. Person, as defined in Regulation S under the U.S. Securities Act of 1933, as amended (the Securities Act ), nor acting on behalf of a U.S. Person and, to the extent you purchase the securities described herein you will be doing so pursuant to Regulation S under the Securities Act OR (ii) you are acting on behalf of, or you are, a qualified institutional buyer, as defined in Rule 144A under the Securities Act. THE SECURITIES HAVE NOT BEEN, AND WILL NOT BE, REGISTERED UNDER THE SECURITIES ACT, OR THE SECURITIES LAWS OF ANY STATE OF THE U.S. OR OTHER JURISDICTION AND MAY NOT BE OFFERED OR SOLD WITHIN THE U.S. OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS (AS DEFINED IN REGULATION S UNDER THE SECURITIES ACT), EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND ANY APPLICABLE STATE OR LOCAL SECURITIES LAWS. ANY INVESTMENT DECISION SHOULD BE MADE ON THE BASIS OF THE FINAL TERMS AND CONDITIONS OF THE SECURITIES AND THE INFORMATION CONTAINED IN AN OFFERING MEMORANDUM AND/OR OTHER MATERIALS THAT WILL BE DISTRIBUTED TO YOU PRIOR TO THE CLOSING DATE AND NOT ON THE BASIS OF THIS PRESENTATION.This presentation is confidential and has been prepared by the Republic of Indonesia ( RoI ) for information purposes only. Neither the Joint Bookrunners, their respective affiliates, nor their respective officers, employees or representatives make any representation or warranty, express or implied, as to the completeness or accuracy of the information contained herein, nor havethey independently verified such information. Opinions and estimates contained herein constitute the sole judgment of the RoIas of the date of this material and are subject to change without notice. The Joint Bookrunners, their respective affiliates and their respective officers, employees and representatives expressly disclaim any and all liability (whether direct or indirect, in contract, tort or otherwise) relating to or resulting from the use of the information contained herein by a prospective investor or any of its affiliates or representatives. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, estimates or statements about the future prospect or performance of RoI. Past performance is not indicative of future results. Any securities, financial instruments or strategies mentioned herein may not be suitable for all investors. A prospective investor must make its own independent decision regarding any securities of financial instruments. The Joint Bookrunners may act as market maker or trade on a principal basis, or have undertaken or may undertake to trade for their own account, transactions in the financial instruments or related instruments of any issuer discussed herein and may act as underwriter, placement agent, advisor or lender to such issuer. The Joint Bookrunners and/or their employees may hold a position in any securities or financial instruments mentioned herein.
Summary Terms of the OfferingSummary Terms of the Offering
The Republic of Indonesia
Moody s: Ba3 (stable)S&P: BB- (stable)Fitch: BB- (positive)
Reg S / 144A
US$ benchmark
Fixed Rate Senior Unsecured Notes
10 years and / or 30 years
General funding purposes
Singapore Stock Exchange
New York
Barclays Capital, HSBC, Lehman Brothers
Issuer
Ratings
Format
Offering Size
Maturity
Use of Proceeds
Listing
Instrument
1
Governing Law
Bookrunners
Table of ContentsTable of Contents
Economic Performance
Monetary Policy
Fiscal Policy
Government Debt Profile
Section 1
Section 2
Section 3
Section 4
Economic Performance
Section 1
Accelerating Economic GrowthAccelerating Economic Growth
Indonesia: Real GDP Growth
6.1%5.9% 5.8%
5.0% 5.0% 5.0%
5.9%6.1% 6.0%
6.3%6.5% 6.4% 6.3%
7.0%6.8% 6.7%
5.8% 5.7%5.4%
6.6% 6.6% 6.5%
7.0% 6.9%
0%
1%
2%
3%
4%
5%
6%
7%
8%
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07E 2007E
GDP Growth Non Oil & Gas Growth
Source: Ministry of Finance, IMF World Outlook Oct 20071. Newly Industrialized Asian Economies is composed of 4 areas: Hong Kong SAR, Korea, Singapore, Taiwan Province of China2. ASEAN-4 consists of Indonesia, Malaysia, Philippines and Thailand3. Real GDP growth for the first nine months of 2007 compared to the first nine months of 20064. Ministry of Finance estimates5. Assumed GDP growth based on Revised 2007 Budget
2
Economic growth is powered by non-oil & gas sectors and is expected to exceed growth projections for ASEAN-4 (1), newly industrialized Asia (2), and the world average
2005 FY: 5.68% 2006 FY: 5.48% 9 Months 2007 (3): 6.3%
(4) (5)
ASEAN-4: 5.6%World: 5.2%Newly Industrialized Asia: 4.9%
Solid Growth Supported by Strength in Consumption, Exports and InvestmentPrivate consumption growth has exceeded pre-crisis levels while investment growth is supported by favorable climate
Source: Ministry of Finance1. Preliminary2. Real growth for the first nine months of 2007 compared to the first nine months of 2006
3
Sources of Economic Growth
4.0%
17.1%
3.2% 2.9%
9.2%
4.9%
7.9%8.8%
6.6%
10.8%
16.4%
9.6%7.6%
4.7%
8.0%
0%
3%
6%
9%
12%
15%
18%
Private Consumption Government Consumption Investment Exports Imports
Growth
2005 2006 2007
Investment climate has been enhanced by the New Investment Law, which key features are:Equal treatment for both domestic and foreign investorsAbolishment of requirement for gradual divestment by foreign investorsExtension of validity of land titlesRight to appoint foreign managementProhibition of nationalization without indemnification at market valueUnrestricted repatriation of profits and capital
(1) (1) (2)
Growth Driven by Non-oil & Gas Sectors
Economic Growth by Major Sectors
4
Manufacturing is the single largest sector and growth outlook is supported byInfrastructure spending
Pro-industry policies
Double-digit growth in transportation and telecommunication supported by infrastructure development and consumption
3.7%4.3%
5.0%7.4%
12.2%
7.9%
0%
3%
6%
9%
12%
15%
Agriculture Mining & Quarrying Manufacturing Trading, Hotel,Restaurant
Transportation &Communications
Finance
2005 2006 2007
Sector as a % of GDP (3) 14.5% 8.8% 27.3% 17.0% 7.0% 9.3%
Growth is broad based but highlighted by strengths in infrastructure and telecom
(1) (1) (2)
Source: Ministry of Finance1. Preliminary2. Real growth for the first nine months of 2007 compared to the first nine months of 20063. Sector composition of GDP (at constant market prices) for the first nine months of 2007
Continued Growth in InvestmentContinued Growth in Investment
Quarterly Imports of Capital Goods
0
500
1,000
1,500
2,000
2,500
3,000
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q070%
10%
20%
30%
40%
50%
60%
Value of Imports % Growth (y-o-y)
% GrowthUS$ mn
Investment and Working Capital Credit GrowthGrowth (y-o-y)
Recovery in imported capital goods and steady increase in investment credit reflect increasing investment
5
64.5%84.5% 90.2%
0%
20%
40%
60%
80%
100%
2005 2006 2007
Realized Government Capital Expenditure% Realization
0%
5%
10%
15%
20%
25%
30%
35%
1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07
Investment Credit Working Capital Credit
Source: Ministry of Finance, Bank Indonesia1. Preliminary
(1)
Increasing Foreign InvestmentSignificant foreign portfolio inflows demonstrate resilience against the subprimemortgage crisis
Foreign Portfolio Investment
1,896
8,336
5,580
4,429
01,0002,0003,0004,0005,0006,0007,0008,0009,000
2004 2005 2006 2007
US$mn
6
Source: Bank Indonesia1. Preliminary2. For the first nine months of 2007
(2)(1)
19% growth in net FDI inflow in the first nine months of 2007 supported by:Increase in reinvested earnings
Establishment of the Batam, Bintan and Karimun SEZs
Increase in approvals for foreign investment applications
Creation of tax incentives
Significant growth of over 160% in foreign portfolio investmentKey components of FPI include purchases of government bonds and Bank Indonesia certificates
Inflows dropped substantially in the 3rd quarter following the subprime crisis but inflows in September recovered to levels consistent with the early part of the year
Foreign Direct Investment
4,0565,270
6,058
10,521
0
2,000
4,000
6,000
8,000
10,000
12,000
2004 2005 2006 2007
US$mn
(2)(1)
Improving External PositionImproving External PositionImproving Balance of Payments position with record high current account surplus, contributing to a significant increase in foreign currency reserves
Balance of Payments (1)
Source: Bank Indonesia1. Balance of Payments from 2004 onwards are based on the revised BOP reporting system2. For the first nine months of 20073. Preliminary
7
Foreign Currency ReservesUS$ bnMonths
5,030
3,655
309
9,189
444
14,510
-2,000
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
2002 2003 2004 2005 2006 2007
US$mn
Current Account Balance Capital and Financial AccountOverall Balance
32.036.3 36.3 34.7
42.6
57.0
6.6
7.1
5.5
4.0
4.5
5.7
0
1
2
3
4
5
6
7
8
2002 2003 2004 2005 2006 20070
10
20
30
40
50
60
International Reserves (RHS)
Months of Imports and Official Debt Repayment (LHS)
(2) (3)
Record High ExportsRecord High ExportsStrong growth in non-oil & gas exports following solid global demand and price increases in international commodities
Composition of Exports by Major Groups
8
Indonesian Export Price Index
50
100
150
200
250
300
2002 2003 2004 2005 2006 2007
Index
IDEXXPG Index (Non-oil & Gas)
IDEXPEGS Index (Oil & Gas)
59.264.1
70.8
87.0
103.5
86.2
0
20
40
60
80
100
120
2002 2003 2004 2005 2006 2007
US$bn
Agricultural Products Mineral Products
Manufactured Products Crude Oil and Oil Products
LNG, LPG and Natural Gas Total
(2002 = 100)
Source: Bank Indonesia, Bloomberg1. Preliminary2. Exports for the first nine months of 2007
(2)(1)
Monetary Policy
Section 2
0.0%
0.4%
0.8%
1.2%
1.6%
J F M A M J J A S O N D J F M A M J J A S O N D0.0%
5.0%
10.0%
15.0%
20.0%
M-o-M (LHS) Y-o-Y (RHS)
Monetary Policy Designed to Achieve Monetary Policy Designed to Achieve Macroeconomic StabilityMacroeconomic StabilityBuilding macroeconomic stability through inflation targeting
Monetary Policy Strategy
9
Consistent implementation of inflation targeting
Maintain a prudent, measured course in monetary policy by careful monitoring of dynamics changes in the economy and coordination with the MOF
Foster macroeconomic stability by intervening to avoid excessive volatility in the exchange rate to support sustainable growth
Improve banking supervision and prudent regulation
Inflation
2007 Target: 6% ± 1%
2008 Target: 5% ± 1%
BI Rate Exchange Rate (USD/IDR)
2006 2007
8,6008,7008,8008,9009,0009,1009,2009,3009,4009,5009,600
J F M A M J J A S O N D J F M A M J J A S O N D
2006 2007
2006 Avg. Rate: Rp 9,164 2007 Avg. Rate: Rp 9,139
6%
7%
8%
9%
10%
11%
12%
13%
14%
J F M A M J J A S O N D J F M A M J J A S O N D
2006 2007
Source: Bank Indonesia
Prudent Regulations Bolster the Banking Sector Prudent Regulations Bolster the Banking Sector PerformancePerformance
Main Banking Indicators (%) Commercial Bank Earning Assets
Prudent Regulations Bolster the Banking Sector Performance
22.4%
19.4% 19.4% 19.3%
21.3%
20.7% 20.7%
20.0%
18%
19%
20%
21%
22%
23%
2002 2003 2004 2005 2006 1Q07 2Q07 3Q070.0%
3.0%
6.0%
9.0%
12.0%
15.0%
Average CAR Gross NPL Net NPL
Loans
BI Bills
Other Securities
Recap Bonds
Interbank
0
20
40
60
80
100
120
140
160
180
200
2002 2003 2004 2005 2006 1Q07 2Q07 3Q07
10
Source: Bank Indonesia
US$ bn
Fiscal Policy
Section 3
Resilience Against Higher Oil PricesResilience Against Higher Oil Prices
Effect of Oil Price on Budget, 2007
Oil Imports and Exports, 2007 Oil & Gas Imports and Exports, 2007
2.6
(3.5)
(0.9)
(4)
(3)
(2)
(1)
0
1
2
3US$ bn
Revenue Expenditure Deficit / Surplus
Assuming US$72/Bbl; compared to 2007 Budget assumption of US$60/Bbl
25.2
(18.1)
7.0
(30)
(20)
(10)
0
10
20
30US$ bn
Exports Imports Trade Balance
Historical and Futures Brent Oil Price Index
Negative
Surplus
No significant impact on 2007 budget, an additional US$0.9 bn deficit was incurred
11
30
40
50
60
70
80
90
100
Jan-07
Mar-07
May-07
Jul-07
Sep-07
Nov-07
Jan-08
Feb-08
Apr-08
Jun-08
Aug-08
Oct-08
Dec-08
US$/Bbl
Source: Ministry of Finance, Bloomberg
Brent futures contracts
Close as of Dec 31, 2007
13.0
(18.0)
(6.1)
(30)
(20)
(10)
0
10
20
30US$ bn
Exports Imports Trade Balance
Government Fuel Subsidies Remain an Issue
Electricity and Fuel Subsidies
Domestic fuel subsidies2007 fuel subsidy has grown 31% over 2006 due to:
Higher oil pricesHigher domestic oil consumption
Electricity subsidies2007 electricity subsidy has grown 21% due to:
Higher sales ( 6.8%), energy losses ( 9.75% 10.14%), and increased use of fuel to generate electricity ( 32%)Higher fuel consumption and fuel price
3.5
6.6 7.0
9.2
0.4 0.41.6
3.34.0
3.4
10.7
0.4
0
2
4
6
8
10
12
2002 2003 2004 2005 2006 2007
US$ bn
Fuel Electricity
12
(1)
Source: Ministry of Finance1. Preliminary
Highlights
Fiscal Policy Fiscal Policy 2007 State Budget2007 State Budget
Key Assumptions
Targeted deficit at 1.5% of GDP, current realization of 1.1% of GDP
Tax ratio declined slightly from 13.1% to 13.0% of GDP
Spending on energy subsidies increased from 2.8% to 3.18% of GDP
Budget financing to rely more on domestic sources, primarily government debt
State Budget 2007 Outcome
Revised Budget Realization
GDP Growth (%) 6.3% 6.3%
Inflation (%) 6.00% 6.59%
Exchange Rate (US$/IDR) 9,050 9,139
3 Month SBI Rate (%) 8.0% 8.0%
Crude Oil Price (US$/Bbl) 60 72
Lifting (mn Bbl/day) 0.950 0.899
In US$ bn Revised RealizationTotal Revenues & Grants 76.7 77.9
Tax Revenues 54.4 53.8
Non-tax Revenues 21.9 23.9
Grants 0.4 0.2
Total Expenditures 83.1 82.6Central Government 55.0 54.9
Of which: Energy Subsidies 9.7 13.1
Transfer To Region 28.1 27.7
Overall Balance (Deficit) (6.4) (4.7)
In US$ bn Revised Realization
Domestic Financing 7.8 7.4
Domestic Bank Financing 1.2 1.0
Domestic Non-bank Financing 6.7 6.4
Privatization Proceeds and Asset Recovery 0.4 0.3
Government Bonds, Net 6.5 6.3
Infrastructure Support (0.2) (0.2)
Foreign Financing, Net (1.4) (2.6)Program Loans 2.1 2.2
Project Loans 2.6 1.6
Amortization (6.1) (6.4)
Total Financing 6.4 4.7
13
Source: Ministry of Finance
Fiscal prudence whilst maintaining strong growth and resilience to external factors
2008 State Budget2008 State Budget
Targets of 2008 Budget:To expand economic growth by increasing infrastructure expenditureTo lower Indonesia s total debt to 33% of GDP
Projected total Government revenue (including grants) of US$85.9 bnDeficit of US$8.1 bn expected to be financed mainly from domestic sources, primarily through issuance of domestic bonds
Infrastructure investment for job creation and acceleration of growth
Key Assumptions Budget Highlights
Official State Budget 2008
Official
GDP Growth (%) 6.8%
Inflation (%) 6.0%
Exchange Rate (US$/IDR) 9,100.0
3 Month SBI Rate (%) 7.5%
Crude Oil Price (US$/Bbl) 60.0
Crude Oil Production (mm Bbl/day) 1.034
In US$ bn Budget % of GDPTotal Revenues & Grants 85.9 18.1%
Tax Revenues (1) 65.1 13.7%
Non-tax Revenues 20.6 4.3%
Grants 0.2 0.0%
Total Expenditures 93.9 19.8%
Central Government 63.0 13.3%
Transfer To Region 30.9 6.5%
Overall Balance (Deficit) (8.1) (1.7%)
In US$ bn Budget % of GDP
Domestic Financing 9.9 2.1%
Domestic Bank Financing 0.03 0.0%
Domestic Non-bank Financing 9.9 2.1%
Privatization and Asset Recovery 0.2 0.0%
Government Bonds, Net 10.1 2.1%
Infrastructure Support (0.4) (0.1)%
Foreign Financing, Net (1.8) (0.4%)Program Loans 2.1 0.4%
Project Loans 2.6 0.6%
Amortization (6.6) (1.4%)
Total Financing 8.1 (1.7%)
14
Source: Ministry of Finance
Impact of Oil Price, Production & Consumption on Impact of Oil Price, Production & Consumption on the 2008 State Budget the 2008 State Budget
15
Sensitivity of Budget Deficit to Oil Prices
(US$/Bbl)
Source: Ministry of Finance
In US$ mn $90 $95 $100
Oil Revenue (Tax & Non-tax) +9,967 +11,835 +13,703
Expenditure (Subsidies & Transfers) +15,165 +17,429 +19,714
Deficit w/o Policy Measures (5,198) (5,593) (6,011)
Total Deficit as a % of 2008 GDP (2.8%) (2.9%) (3.0%)
Deficit w/ Policy Measures (22) (132) (286)
Total Deficit as a % of 2008 GDP (1.7%) (1.7%) (1.8%)
1. Usage of contingent fund in the Budget
2. Usage of unrealized expenditure in the Budget
3. Bond issuance to the oil producing (windfall) region
4. Prioritization of Government expenditures
5. Energy policy with regards to production and subsidy of oil and gas and power
6. Improvement in Pertamina and PLN efficiency
7. Tax revenue increase and dividends from SOEs
8. Additional bonds / Government securities issuance
9. Counter cyclical fiscal policy measures
9 Fiscal Policy Measures
Government is prepared to ensure fiscal prudence in the face of rising oil prices
Central Government RevenueCentral Government Revenue
16
Source: Ministry of Finance1. Preliminary2. Assumed based on state Budget 2008
Central Government Sources of Revenue
32.1
39.7
44.8
50.7
69.6
77.7
85.7
0
10
20
30
40
50
60
70
80
90
2002 2003 2004 2005 2006 2007 2008E
US$ bn
Tax Non-tax
Tax and Customs Reform
Historical and Projected Tax Ratio
11.3%
11.8%12.2%
12.7%12.3%
13.0%
13.6%
10%
11%
12%
13%
14%
2002 2003 2004 2005 2006 2007 2008E
% of GDP
Apply the new tax administration law
Improve tax and custom administration through modernization of tax offices
Improve tax compliance, tax audit and speed up VAT refund process
Provide tax and import duty incentives
Free Trade Agreements (FTA), Economic Partnership Agreements (EPA) and National Single Window (NSW)
(1)
(1) (2)
(2)
Central Government ExpenditureCentral Government ExpenditureCentral Government Expenditure by Function (1)
17
Source: Ministry of Finance Budget 20071 Beginning 2005, certain categories in Government expenditure have been reclassified. Current expenditures and development
expenditures have been merged.2 Preliminary3 Assumed based on state Budget 2008
Reallocation of Government Expenditure
34.6
44.047.6
52.5
73.3
82.6
94.1
0
10
20
30
40
50
60
70
80
90
100
2002 2003 2004 2005 2006 2007 2008E
US$ bn
Material Capital Interest Payments
Subsidies Transfers to Regions Others
Realization of Transfer to Regions
30.927.7
24.7
15.414.414.0
10.5
0
5
10
15
20
25
30
35
2002 2003 2004 2005 2006 2007 2008E
US$ bn
6.45.2 5.6 5.8
7.1
11.2
3.4 3.0
0
2
4
6
8
10
12
2005 2006 2007 2008E
US$ bn
Capital Expenditure Material Expenditure
(2)
(2) (3)
(2) (3)(3)
Commitment Towards PrivatizationCommitment Towards Privatization
Privatization Proceeds
18
Source: Ministry of Finance, State Budget 2004 to 20081 Preliminary2 Assumed based on state Budget 2008
0.020.0
215.7
295.4
0.043.7
0.0
259.5352.3
164.8
391.7
25.9 56.90.0
0
100
200
300
400
2004 2005 2006 2007 2008E
US$ mn
Gross Privatization Proceeds Government Equity Injection Net to Budget
(1) (2)
Up till 2005, privatization proceeds were wholly used as a source of budget deficit financing
Now, privatization is not just a source of budget deficit financing, but a means for improving corporate governance and is instrumental in disciplining the SOEs and improving their performance
From 2008, the government will no longer inject capital into SOEs in order to encourage SOEs to rely on independent financial resources and increase equity participation from the private sector
Privatization is one of the main themes in the roadmap for Indonesian SOEs
Government Debt Profile
Section 4
Effective Debt Management Strategy Effective Debt Management Strategy Indonesia practices a disciplined approach to sovereign debt management
Source: Ministry of Finance
19
Portfolio Management
Prudent RulesDomestic Bond
Market Development External Loan
Financing
Prioritise debt securities issuance in domestic market for deficit financing & debt refinancing
Diversify debt instruments to widen investor baseDevelop market infrastructure to support efficient price discovery mechanism
Meet Millennium Development Goals (MDGs), (E.g. poverty reduction)Finance cost recovery projectsEnhance project readiness criteria
Issue benchmark bonds on regular basis (E.g. 5, 7, 10, 15 and 20 years)Aggressively conduct debt switching to extend durationBuyback bonds to reduce outstanding debt and stabilize marketDiversify funding sources (e.g., Sukuk)
To minimize cost of debt within manageable risk
Objective
Effective Coordination amongst Fiscal, Monetary and Capital Market Authorities
Issuance of Government Securities to Fund the Issuance of Government Securities to Fund the DeficitDeficitGovernment securities are the major source of financing for the budget deficit, debt refinancing and infrastructure support
Budget Deficit Financing
Source: Ministry of Finance1. Preliminary2. Assumed based on Proposed State Budget 2008
0.8%
1.1%
1.6%
2.1%
0.5%
1.7%
0.9%
1.1%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
2005 2006 2007 2008
Budget Deficit, % of GDP Government Securities - Net, % of GDP
% of GDP
(1) (2)
20
Effective Debt Management Effective Debt Management Indonesia s debt-to-GDP and debt service ratio is improving
Central Government Debt to GDP Ratio
Central Government Debt Service Ratio
26.1%26.8%33.2%
25.8%24.7%
34.8%
0%
10%
20%
30%
40%
2002 2003 2004 2005 2006 2007
62%
36%
32% 28% 24% 21% 19%
27%23%
18% 16%
55%
47%
39%
69%
36%
33%29%
0%
20%
40%
60%
80%
2002 2003 2004 2005 2006 2007
Total Debt to GDP Ratio Domestic Debt to GDP Ratio External Debt to GDP Ratio
Source: Ministry of Finance1. Preliminary2. Ratio of external debt as at September 30, 2006 over GDP for the period September 30, 2007 to September 30, 2007 21
% of Revenue
(1) (1) (2)
(1) (1)(1)
Composition of DebtComposition of Debt
Debt Composition, Sep 2007 By Currency, Sep 2007
54% 53% 50% 50% 53% 54%
46% 47% 50% 50% 47% 46%
0%
25%
50%
75%
100%
2002 2003 2004 2005 2006 2007E
Domestic Debt External Debt
IDR54% USD
17%
EUR7%
Others4%
GBP1%
JPY17%
By Maturity and Interest Rate, Sep 2007
In US$ bn Interest Type TotalTenor Fixed Variable Nominal %
Short term: up to 3 years 17,716 9,927 27,643 19.23%
Medium term: 4 to 10 years 30,062 12,898 42,960 29.89%
Long term: more than 10 years 56,002 17,127 73,129 50.88%
Total 103,779 39,953 143,732 100.00%
22
Debt is balanced between domestic and external sources with a majority of debt being either Rp denominated or long-dated
Source: Ministry of Finance
Holders of Government SecuritiesHolders of Government Securities
Holders of Domestic Government Securities
Source: Ministry of Finance
23
72% 75% 66% 59%
25%
17%
21%24%
3%
8%
13%
16%
28
33
38
43
48
53
Dec-04 Dec-05 Dec-06 Dec-07
Banks Non-Banks Foreign Holders
Composition of Foreign Holders of Government Securities by Maturity
0-2 yrs11%
>10 yrs42%
5-10 yrs25%
2-5 yrs22%
US$ bn
Total: US$8.3 bn
As of December 28, 2007
15.8%15.0%
15.7%
13.4%
14.9%15.3%14.3%14.0% 14.3%
7.6%
8.7%9.0%9.3%9.9%9.6%
7.7%8.4%8.6%
9.1%9.2%9.6%9.6% 10.0%10.5% 10.5% 10.7%
13.4%
10.4%10.2%10.1%10.0%9.9%9.8%
-
1
2
3
4
5
6
7
8
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028 .
2037
US$bn
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
16.0%
18.0%
Dec 2001 eoy 2003 eoy 2005 28 Dec'07
Yield Curve as of 31 Aug'05 (RHS) Yield Curve as of 31 Dec '06 (RHS) Yield Curve as of 28Dec'07 (RHS)
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Yield
Maturity Profile of Tradable Domestic Government Maturity Profile of Tradable Domestic Government SecuritiesSecuritiesMaturity profile has been improving over time towards a more balanced structure
Source: Ministry of Finance
Unbalanced maturity profile at the end of 2001 had been restructured with re-profiling programs in Q4 2002 and Q1 2003
IndonesiaIndonesia s Credit Rating Historys Credit Rating HistoryPrudent government debt securities management helped the improvement of Indonesia s sovereign credit rating
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Source: Ministry of Finance
CCC-
CCC+
B
BB-
BB+
BBB
SD/DDD
R/C
CC
CCC
B-
B+
BB
BBB-
Ca
Caa2
B3
B1
Ba2
Baa3
Baa1BBB+
C
Caa3
Caa1
B2
Ba3
Ba1
Baa2
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
S&P's Fitch's Moody's (RHS)
Credit Rating History
Oct 07 upgrade to Ba3 (stable) by
Moody s
Economic Crisis in 1998
Banks Recapitalization
Continuous fiscal adjustment, improving liquidity and
structural improvements in real economy
Diminished likelihood that the Government will seek
additional debt rescheduling
Gradually improving external liquidity,
macroeconomic stability and improved political
conditions
Sound record of fiscal management on the
success of Government efforts to improve the
investment climate
Final Remarks
Demonstrated resilience against the recent external shocks due to the sub-prime crisis and the escalating oil price
2007 budget deficit was 1.1% of GDP; lower than target of 1.5% of GDP
Higher macroeconomic growth expected by government based on continued strong household demand, an increase in exports and acceleration of investment in infrastructure projects
On track to achieve 6.3% GDP growth in 2007Assumed GDP growth of 6.8% in Budget 2008
In order to minimize the impact that higher oil prices have had on the fiscal deficit, the Government expects to maintain a prudent approach to fiscal policy
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