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Republic of Indonesia
October 2016
Synergy for Progressive Reforms
1
Investor Relations Unit (IRU) of the Republic of Indonesia has been established as a joint effort between Coordinating Ministry of Economic Affairs,
Ministry of Finance and Bank Indonesia since 2005. The main objective of IRU is to actively communicate Indonesian economic policy and to
address concerns of investors, especially financial market investors.
As an important part of its communication measures, IRU maintains a website under Bank Indonesia website which is administered by
International Department of Bank Indonesia. However, day-to-day activities of IRU are supported by all relevant government agencies, among
others: Bank Indonesia, Ministry of Finance, Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry
of State Owned Enterprises, Ministry of Energy and Mineral Resources and Financial Services Authority.
IRU also convenes an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of
banks/financial institutions to Bank Indonesia and other relevant government offices.
Published by Investor Relations Unit – Republic of Indonesia
Contact: Wiwit Widyastuti K. (International Department - Bank Indonesia, Phone: +6221 2981 8279)
Dalyono (Fiscal Policy Office – Ministry of Finance)
Farid Arif Wibowo (Directorate General of Budget Financing and Risk Management- Ministry of Finance)
E-mail: [email protected]
About Investor Relations Unit of the Republic of Indonesia
2
Overview
Institutional And Governance Effectiveness: Accelerated Reforms Agenda with Institutional Improvement
Fiscal Performance and Flexibility:
More Fiscal Stimulus with Prudent Fiscal Management
Monetary and Financial Factor:
Credible Monetary Policy Track Record and Favourable Financial Sector
Economic Factor:
Strong and Stable Growth Prospects Remain Intact
External Factor:
Improved External Resiliency
1
2
3
4
5
Accelerated Reforms Agenda with Institutional Improvement
Institutional and Government Effectiveness:1
4
Positive Global Perception
52
25
46
4038
15
25
35
45
55
2010 2011 2012 2013 2014 2015
Voice and Accountability Political Stability/Absence of Violence
Government Effectiveness Regulatory Quality
Rule of Law Control of Corruption
1. Source: World Bank;
2. Source: Transparency International;
3. Source: World Economic Forum
World Governance Indicators1
Ease of Doing Business1
Global Competitiveness Index3
Corruption Perception Index2
Higher rank is better
Higher score is better
36
38*
35
45
20
25
30
35
40
45
50
55
2010 2011 2012 2013 2014 2015
Indonesia India Brazil Philippines Turkey
* Both India and Brazil shared the same score (38) in 2015
Higher rank is better
41
39
81
57
55
30
45
60
75
90
2009 2010 2011 2012 2013 2014 2015 2016
Indonesia India Brazil Phillipines Turkey
Higher rank is better
91
130123
99
69
50
70
90
110
130
150
2008 2009 2010 2011 2012 2013 2014 2015 2016
Indonesia India Brazil Philippines Turkey
* Both ‘Rule of Law’ and ‘Regulatory Quality’ shared the same score (40) in 2015
5
Indonesia Remains the Investment Destination of Choice
3,9
3,9
4,6
5,5
6,2
7,9
11,1
11,5
16,6
23,6
27,5
30,7
38,8
38,8
40,4
0 5 10 15 20 25 30 35 40 45
Turkey
Korea
Singapore
Russia
Malaysia
Myanmar
Brazil
Philippines
USA
Mexico
Vietnam
Thailand
China
Indonesia
India
% of surveyed who consider each country has promising prospects
1. Source: Indonesia Investment Coordinating Board (BKPM);
2. Source: IMF World Economic Outlook, Database October 2016, * actual figures;
3. The Economist – Asia Business Outlook Survey 2016;
4. Source: JBIC – Outlook for Japanese Foreign Direct Investment (27th Annual Survey);
IDR tn
2016E
To
tal In
vestm
en
t / G
DP
(%
)
Indonesia Enjoys Large Investments Relative to Peers within the Region2
JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for
business investment (December 2015)4
The Economist: Indonesia among the top 3 destination for attracting
investors in Asia (January 2016)3
18,9
22,9
23,6
24,8
27,1
28,3
29,0
30,1
32,2
32,7
37,2
48,0
58,2
69,3
0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0
Taiwan
Hong Kong
South Korea
Singapore
Australia
Japan
Thailand
Vietnam
Myanmar
Malaysia
Philippines
Indonesia
China
India
% of surveyed who plan to increase investment in each country
155.3
55.6
99.7
2013 2014 2015 2016
Rising Direct Investments1
17,96
31,6634,65
26,1523,74 24,42
0
5
10
15
20
25
30
35
Brazil India* Indonesia Malaysia Philippines Thailand
0
40
80
120
160
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
FDI DDI TOTAL
6
National Strategic Development Plan (Nawa Cita)
Human Development
Education
Health
Housing
Character
Priority Sector Development
Food Security
Energy & Electrical Security
Maritime & Marine
Tourism & Industry
Water Security, Basic Infrastructure & Connectivity
Equitable Development
Inter- Income Group
Inter-Region:
(1) Rural Area,
(2) Periphery,
(3) Outside Java,
(4) Eastern Area.
Security & Order Politic & Democracy Governance
The 3 Dimensions on Economic Development
Necessary Condition
Legal Certainty & Law Enforcement
7
Improving Investment Climate:Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS)
BKPM
• Arrive at OSS at BKPM directly from the airport
• Consult with Director of Investment Service
• Submit the required documents & data
Requirement for utilizing 3-hour Investment Lisencing Service:
No requirements for investment in infrastructure sector
9 documents obtained
Wait at the lounge while documents are
processed by BKPM, in-house notary,
ministries, & other government institutions
Obtain eight documents & letter of land
availability within three hours to start the
business
• RPTKA / Employment plan
• IMTA / Working permit
• Investment license
• Certificate of incorporation
• NPWP / Tax Registration Number
• TDP / Company Registration
• APIP / Import identification
• NIK / Customs registration
• Letter of land availability
Until October 2016, 130 companies have utilized the “3 hours services”
Certainty to start a business
Certainty to Import capital goods
Certainty to work Accurate land information
1. Minimum investment of IDR 100 billion (USD 8 million) and/or employing 1,000 local workers.
2. Application must be submitted directly by at least one candidate of the proposed company stakeholder
2 documents needed
• ID Card
• And/or Deed of Establishment (Indonesian company) or Article
of Association (Foreign company)
• Containing workflow from raw material production to the
finished products
Investor identitiy as the prospective shareholders
Flowchart of business activities workflow
Source: Investment Coordinating Board (BKPM)
8
Improving Investment Climate:Introduce the 3-hour investment licensing service to complement the One Stop Service (OSS)
Direct Construction (KLIK)
No Requirements• No minimum investments or workers is
required.
• Available for 14 selected industrial parks.
• Construction permits can be obtained in parallel
with construction process.
Investors can directly start their project construction before obtaining construction permits. This service is supported by
both Central and Regional Governments which become the first step to synergize between central and local licensing
Obtain investment licence at OSS
at national or regional level.• Survey a land within selected
industrial parks.
• Acquire the land for your industry.
• Start the construction of your project.
No other permits are required.
• Apply for building construction permit &
environmental permit, in parallel with
construction process.
Priority Investment Service
Source: Investment Coordinating Board (BKPM)
Until September 2016, 66 projects have utilized the “KLIK services”
9
Improving Investment Realization (Q3-2016)
Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period
Rp140.3 T
Rp155.3 T
Rp92.5 T
Rp99.7 T
Rp47.8 T
Rp55.6 T
373,560276,023
10.7% 26.1%
7.8% 16.3%
Q3-2015 Q3-2016
Q3-2015 Q3-2016
Q3-2015 Q3-2016
Q3-2015 Q3-2016
*
* person
Decreasing
10
FDI Realization by Sectors (Q3-2016)
Mining
Chemical and
Pharmaceutical Industry
Transport Equip and Other
Transport IndustryMetal, Machinery and
Electronic Industry
Source: Investment Coordinating Board (BKPM), compared to Q3-2015 period
US$569.75 mn
US$663.85 mn
US$688.41 mn
US$764.06 mn
US$1,231.41 mn
US$632.24 mn
Food Industry
50.3%
US$694.39 mnFood Crops
24.4%
70.1%
15.8%
30.8%
3.2%
37.7%
Investment Realization
Electricity, Gas
and Water Supply
11
30 Priority Projects Within the Pipeline
OBC Development
Ready for PPP Tender
Permit and Land
Acquisition
Financial Close
Construction
1. National Capital Integrated Coastal
Development (NCICD) Tahap A (Rp2.4 tn)
2. Trans-Sumatera Toll Road (>Rp81.2 tn)
3. Makasar-Parepare Railway (Rp9.4 tn)
4. SHIA Express Railway (Rp24 tn)
5. MRT Jakarta (Rp25 tn)
6. LRT Jabodetabek (Rp20.6 tn)
7. LRT Palembang (Rp12.5 tn)
8. Kuala Tanjung Int’l Hub Port (Rp30 tn)
9. Manado-Bitung Toll Road (Rp8.9 tn)
10.Balikpapan-Samarinda Toll Road (Rp9.9 tn)
11.Batang 2.000 MW Power Plant (Rp40 tn)
1. Palapa Ring Broadband (Rp8.1 tn)
1. 1.000MW Indramayu Power Plant (Rp20 tn)
2. 500 kV Central-West Java Transmission Line
(Rp7.64 tn)
3. 2x50MW Karangkates Power Plant (Rp1.6 tn) ***
4. 37MW Kesamben Power Plant (Rp1.1 tn)***
5. 10MW Lodoyo Power Plant (Rp0,3 tn) ***
6. Bitung Port Development (Rp34 tn)
7. Kalimantan Timur Railways (Rp52 tn)
8. Sumsel 8 Power Plant***
9. High Voltage Direct Voltage Transmission
(Rp33.4 tn)*
1. Jakarta Sewerage System (Rp1.5 tn)**
2. Tuban Refinery (Rp108 tn)**
3. Sumatera 500 kV Transmission (Rp24.4 tn)
4. Panimbang-Serang Toll Road (Rp10.7 tn)
5. Sumsel 9, 10 Power Plant (Rp72 tn)
1. SPAM Semarang Barat
(Rp0.9 tn)
1. Existing Refinery Upgrading
Project (Cilacap, Balongan,
Plaju, Dumai, dan Balikpapan)
(Rp210 tn)
2. Patimban Port (Rp43.2 tn)
3. Inland Waterways/ Cikarang –
Bekasi – Laut (CBL) (Rp3.4 tn)
4. Bontang Refinery (Rp150 tn)
Implementation StagePreparation Stage
*The project is cancelled by PLN
** Possibly not using PPP funding scheme
*** Feasibility Study of the project will be revisited by PLN
**** Part of Sumsel 9 and 10 Power Plant Package Source: KPPIP
12
Significant Progress on Key Infrastructure Projects
Roads Dams Housing
Trans-Sumatra Highway Cikampek-Palimanan Highway (Operational) Jatigede Dam (Operational) Raja Ampat Housing Project, Papua
Transportation
Jakarta MRT Project1 Terminal 3 Ultimate Soekarno-Hatta1New Tanjung Priok Port Project1
Komodo Airport, NTT Matahora Airport, Southeast Sulawesi Tual Airport, Maluku Juwata Airport, Tarakan
1 Not funded from National Budget
13
Progress of Some Infrastructure Initiatives under SOEs
* Source: Ministry of State Owned Enterprises
** Source: Anecdotal information (Ministry of Finance and various media e.g. Kompas, Media Indonesia, Liputan6, Republika, Tribunnews, Merdeka, etc.)
DescriptionLength
(km)*
Investment
(IDR tn)*Concession By** Status** Remarks**
Completion
Target**
Medan-Binjai 16.7 1.6 Hutama Karya In ProgressLand Clearing: 77,9% completed
Construction: 19,2% completed2018
Medan-Kualanamu-Tb. Tinggi 61.7 4.1 Jasamarga Kualanamu Toll In ProgressLand Clearing: 86,4% completed
Construction: 6% completed2017
Pekanbaru-Kandis-Dumai 135 16.2 Hutama Karya In ProgressLand Clearing: 22,23% completed
Construction: 1% completed2019
Palembang-Indralaya 24.5 3.3 Hutama Karya In ProgressLand Clearing: 92,3% completed
Construction: 17,7% completed2017
Kayuagung-Palembang-Betung 111.7 14.4 Sriwijaya Markmore Persada In ProgressLand Clearing: 100% completed
Construction: n/a2018
Bakauheni-Terbanggi Besar 155 16.8 Hutama Karya In ProgressLand Clearing: 19,8% (25,2 km) completed
Construction: 5% completed2018
Cinere-Serpong 10.1 2.2 Serpong Cinere Jaya In ProgressLand Clearing: 3,4% completed
Construction: n/a2019
Bekasi-Cawang-Kp. Melayu 21 7.2 Waskita Karya In Progress
Groundbreaking: October 2014
Land Clearing: 30,1% completed
Construction: 28,3% completed
2019
Ciawi-Sukabumi 54 7.7 Trans Jabar Toll In ProgressLand Clearing: 26,6% completed
Construction: 3% completed2019
Soreang-Pasir Koja 10.6 1.5 Citra Marga Lintas Jabar In ProgressLand Clearing: 96% completed
Construction: 40,2% completed2016
Pejagan-Pemalang 57.5 5.5 Waskita Karya In ProgressLand Clearing: 99% completed
Construction: Section I & II 92% completed2017
Pemalang-Batang 39.2 4.8 Pemalang Toll Road In ProgressLand Clearing: 12% completed
Construction: n/a2018
Batang-Semarang 74.4 11 Jasa Marga Semarang Batang In ProgressLand Clearing: 20% completed
Construction: n/a2018
Solo-Ngawi-Kertosono 177.1 10 Solo Ngawi Jaya In ProgressSolo-Ngawi: Construction 80% completed
Ngawi-Kertosono: Construction 40% completed2018
Pandaan-Malang 37.6 5.9 Jasamarga Pandaan Malang In ProgressLand Clearing: 64% completed (Section I)
Construction: 4%2019
Manado-Bitung 39 5.1 Jasamarga Manado Bitung In ProgressLand Clearing: 36,3% completed
Construction: n/a2019
Balikpapan-Samarinda 99.2 9.9 Jasamarga Balikpapan In ProgressLand Clearing: 86% completed
Construction: 36,3% completed2019
Total 1,124.3 127.2
14
Energy Sector: the Progress of 35.000 MW Program
No Phase MW %
1 Planning 7,640 20.83
2 Procurement 10,844 29.56
3 Power-purchase Agreement 9,790 26.69
4 Construction 8,215 22.39
5 Commercial Operation Date 195 0.53
17 Dec ‘14
Cabinet Meeting
“There’s electricity crisis in
Indonesia, requires construction
of large capacity plant "
Jan ‘15
Average economic growth of 6.7%
requires 7,000 MW / year or 35,000
MW / 5 years
(Kepmen ESDM No. 0074/2015 on
RUPTL 2015-2024)
Jan ‘15
Debottlenecking through regulation:
1. Regulation No.1/2015 concerning electricity
supply cooperation and joint utilization of the
electrical network among license holders.
2. Regulation No.3/2015, concerning Procedures
of Purchasing Electrical Power and benchmark
prices for Electrical Power through the Direct
Selection and Appointment.
16 Mar ‘15 4 May ‘15
Sept ‘16
Cabinet Meeting
Progress of
35,000 MW
Launching 35.000 MW
by the President in
Goa Beach Sanden DIY
The progress so far:
Source: KPPIP
Sulawesi
PLN: 2,000 MW
Private: 1,470 MW
Transmission: 5,275 ckt.km
Substation: 4,390 MVA
Maluku
PLN: 260 MW
Private: 12 MW
Transmission: 653 ckt.km
Substation: 620 MVA
Papua
PLN : 220 MW
Private: 0 MW
Transmission: 364 ckt.km
Substation: 460 MVA
Kalimantan
PLN: 900 MW
Private: 1,735 MW
Transmission: 5,604 ckt.km
Substation: 3,500 MVA
Nusa Tenggara
PLN: 670 MW
Private: 0 MW
Transmission: 2,347 ckt.km
Substation: 1,410 MVA
Sumatera
PLN: 1,100 MW
Private: 8,990 MW
Transmission: 18,729 ckt.km
Substation: 35,521 MVA
Jawa & Bali
PLN: 5,000 MW
Private: 13,697 MW
Transmission: 9,185 ckt.km
Substation: 66,265 MVA
35,000 MW Program Distribution
Source: PLN
15
The Economic Policy Packages
“To improve national industry competitiveness, export and investment to generate significant economic growth”
Phase III (7 Oct ’15)Financial services facilitation, export financing and elimination of business unnecessary burden
Phase IV (15 Oct ’15)Social safety net and betterment of people welfare
Phase V (22 Oct ’15)Improving industry and investment climate through tax incentives and deregulation on sharia banking
Harmonizing Regulations Simplifying Bureaucratic Process Ensuring Law Enforceability
Phase VI (6 Nov ’15)Stimulating economic activities in border areas and facilitating strategic commodities availability
Phase VIII (21 Dec ’15)Resolving land acquisition disputes, intensifying domestic oil
production, stimulating domestic parts and aviation industries
Phase IX (27 Jan ’16)Accelerating electricity generation, stabilizing meat prices and
improving rural –urban logistics sector
Phase X (11 Feb ’16)Revising Negative investment List and improving
protection for SMEs
Phase I (9 Sept ’15)Improving national industry competitiveness
Phase II (29 Sept ’15)Easing permit requirement and simplifying export proceeds requirement
Phase XI (29 Mar ’16)Stimulating national economy through facilitation to SMEs
and industries
Phase XII (28 Apr’16)Improving Indonesia’s rank on Ease of Doing Business (EODB)
Phase VII (7 Dec ’15)Stimulating business activities in labor-intensive industries nation-wide through incentives in the form of accelerating land certification process for individuals
Phase XIII (24 Aug ’16)Low Cost Housing for Low-Income Communities
16
Thematic Policy Issues on Deregulation
Next Phase of Policy Packages based on Sectoral and Thematic Issues
Six policy issues under Packages I-XIII:
improvement of
industry competitiveness
improvement of
society’spurchasing power
widening of
investment
expansion of
export
efficiency of
logistics sector
improvement of
tourism sector
Education and
Vocational
Training
Logistics Agrarian reform Energy
Industry, Manufacture,
Tourism, Fishery &
Service sector
FoodInvention, Innovation
and Creative Economy
17
Progress of the Economic Policy Packages
204 regulation has been deregulated
As of 21 September 2016, deregulation of 202
regulations are finished (99%), comprising 48
regulations at Presidential level and 154 regulations at
Ministrial/Institutional level
Unfinished regulation, (a) Proposed Presidential
Regulation concerning Gas Buffer Enterprises
(Agregator); and (b) Proposed Presidential Regulation
concerning Acceleration on Housing Construction
Lisencing for Low-Income Communities
As of 21 September 2016, from total 26 technical
regulations, 24 regulations are deregulated, which
left 2 regulation in process of deregulation
I–XII
202SET 99%
204TOTAL REGULATIONS
2 ON GOING
DISCUSSION 1%
154
TOTAL 154MINISTRIAL/INSTITUTIONAL LEVEL
100%
47 42SELESAI
PRESIDENTIAL50
TOTAL 48 FINISHED
PRESIDENTIAL LEVEL
96%
I–XIII
FINISHED
TECHNICAL REGULATIONS
18
Early Outputs: Positive Influence on Investment
1Bonded Logistics Center (Pusat Logistik Berikat/ PLB)
Total 28 BLC has been launched, including airplane
maintenance industry and oil6
Export Financing/KURBE
Export of Train Wagon to Bangladesh
2Investment Permit - 3 Hours
Granted for 130 companies with investment value of
Rp. 291 T (as of October 2016) and 77.000 additional
workforce
3
Industrial Zones (IZ)
The Province of Central Java proposed 3 IZ’s: Kendal,
Demak, and Ungaran
Pharmaceutical IZ in Bitung (North Sulawesi) in 2017
5Facilities and Incentives for SEZ
Total value of Rp 33.8 T (as of September 2016)
7EoDB for SMEs
Streamline/Simplify permits and procedures which
shorten lead time and costs in 10 indicators
4
Wage Systems
14 Provinces have set 2016 Minimum Wage System in
accordance to the Government Regulation (GR)
No. 78/2015 (Kepri, Kalbar, NTB, Sumbar, Jambi, NAD,
Kalsel, Banten, Gorontalo, NTT, Jabar, Bali, Sumut, and
Babel).
8Simplification of Fiscal Incentive Process
Used by 18 companies with average processing time
of 13.4 days (previously 2 years)
9SME’s Export Product Aggregator/Consolidator
Launched with maiden export from North Sulawesi
through SOEs’ Synergism Program
10Revision to Negative List (PP No. 44/2016)
Implemented since 24 June 2016 with participation of 527
companies with planned investment of USD 12.926 bn
19
Ministry of Finance Policy Package…comprehensive approach across sectors
Source: Ministry of Finance
Stimulus to Enhance Household Purchasing Power
• Increase non-taxable income threshold to IDR 36.0 million (~US$ 2,570) from IDR 24.3 million (~US$ 1,671)
• Increase distribution of rice for low income household by two months, to 14 months
• Faster turnaround for drawdown and realization of village fund budget
• Provision of official guidance on realization of village fund on labor intensive sectors and projects
• Slated to provide IDR 4-5 Tn (~US$ 286 – 357 million) in additional income and provides additional 800 thousand – 1 million workforce across
Indonesia
Stimulus to Increase Incentive for Businesses
• Revision of Tax Allowance and Tax Holiday policies
• Levy of luxury tax (for houses, vehicles, airplanes and firearms) to provide competitive
advantage on domestic industries
• Support small business through interest rate subsidies in small business credit (KUR).
lowered to 12%, less than general SMEs credit rate
• Implementation of 4:1 Debt-Equity ratio for tax purposes to encourage capital inflow and
improvements in capital structure
• Construction of integrated logistic centers, in Cikarang (Manufacturing) and Merak (Fuels)
• Higher threshold for property luxury tax to IDR 10 billion (~US$ 714 thousand) for
apartments and IDR 20 billion (~US$ 1.4 million) for landed houses
• Support export financing for domestic industries through Indonesia Exim Bank via
government capital allocation and National Interest Account
• Lower tax on asset revaluation. 3% tax before Dec 31st
• Remove double taxation for Real estate investment trusts (REITs)
• Lower tax on dollar deposit interest, especially for exporters
• Elimination of VAT levy on certain transportation industries (trains, river shipping and
airplanes, including spare parts)
Implemented
• Taxation Administrative and Regulatory Reform, including
amendment of Income Tax Law, VAT Law, General Tax
Administration Law and regulation regarding Tax
Amnesty
• Develop more Special Industrial Zones outside Java
with special incentives (tax allowance, tax holiday and
elimination of customs fee)
• Support economic activities in Special Economic Zones
via longer tax holiday up to 25 years
• Revision on Ease of Import for Export Destination
(KITE) regulations by providing free import fee facilities
and more efficient administration process
On Pipeline
20
Bank Indonesia Backs the Government’s
September Policy Package (9th Sept. 2015)
• Preserving foreignexchange marketconfidence by controllingcurrency volatility
• Maintaining marketconfidence in tradablegovernment securities(SBN) through purchaseson the secondary market,while monitoring its impacton SBN availability interms of inflow and moneymarket liquidity.
Strengthening
inflation control
and stimulating the
real sector from the
supply side
Maintaining
rupiah exchange
rate stabilization
Strengthening liquidity
management Rupiah,
through Open Market
Operations (OMO), in order
to divert the daily liquidity to
longer tenors
• Strengthening coordinationamongst the National andRegional Inflation ControlTeams to accelerateimplementation of thenational and regionalinflation control roadmap.There are currently morethan 430 regional inflationcontrol teams throughoutIndonesia, each having aregional inflation roadmap.
• Strengthening RegionalEconomic and Financialcooperation between BankIndonesia and theGovernment
• Changing the auction mechanism ofReverse Repo (RR) SBN fromvariable rate tender into fixed ratetender, adjust the pricing of RR SBN,and extend the tenor by issuing RRSBN 3 months
• Changing the auction mechanism ofCertificates of Deposit of BankIndonesia (SDBI) from variable ratetender into fixed rate tender, adjustthe pricing of SDBI, and issue SDBIwith 6 months tenor
• Reissue Bank Indonesia Certificates(SBI) tenor of 9 months and 12months with a fixed rate tenderauction mechanism as well as pricingadjustment
Strengthening foreign
exchange supply and
demand management
• Adjust the frequency of theauctions of Foreign Exchange(FX) swap from 2 times/week to1 time/week
• Change the Foreign CurrencyTerm Deposit (TD) auctionmechanism from variable ratetender into fixed rate tender,pricing adjustment, and extendthe tenor of up to 3 months;
• Lower the purchase limit offoreign currency by verifying theunderlying documents from US$100,000 to US$ 25,000 percustomer per month andrequires the use of TaxIdentification Number (NPWP)
• Expediting the bank foreign debtapproval process while adheringto prudential principles
Deepening the
money market
• Providing swap hedgingfacilities to shore upinvestment infrastructureand simultaneouslystrengthen foreignexchange reserve assets.
• Refining money marketregulations covering allcomponents of marketdevelopment, including theinstruments, players andinfrastructure.
In line with the government’s effort to promote economic growth, Bank Indonesia introduced the September Policy Package to support
macroeconomic and financial system stability
21
Monetary Policy Package: September II30th September 2015
Maintaining Rupiah Exchange
Rate Stability
The presence of Bank Indonesia in the domestic foreign exchange
market to stabilise the rupiah exchange rate was strengthened
through intervention in the forward market. In addition to
intervention in the spot market, Bank Indonesia also intervenes in
the forward market to help balance supply and demand.
Maintaining balance in the forward market is important to alleviate
pressures in the spot market.
Strengthening Rupiah
Liquidity Management
Bank Indonesia reinforced rupiah liquidity management by releasing
three-month Bank Indonesia Certificates of Deposit (SDBI) along
with two-week reverse repo tradable government securities (SBN).
The release of such open market operation instruments will absorb
liquidity, prompting a shift towards longer tenor instruments, which
should reduce the risk of excessive use of rupiah liquidity that could
intensify pressures on the rupiah exchange rate.
Strengthening Foreign Exchange Supply and Demand Management
• Policy to manage supply and demand on the forward market was strengthened. The policy aims to encourage forward selling transactions
of foreign currencies/rupiah and clarify underlying forward buys of foreign currencies/rupiah by raising the forward selling threshold that
requires an underlying document from US$1 million to US$5 million per transaction per customer and broaden the scope of underlying
assets for forward sells to include domestic and offshore foreign currency term deposits.
• Foreign currency Bank Indonesia securities (SBBI) were also issued to back financial market deepening efforts, especially on the foreign
exchange market.
• The holding period of Bank Indonesia Certificates (SBI) was reduced from 1 month to 1 week in order to attract foreign capital inflows.
• Incentive was provided in the form of a reduction in the interest tax paid on term deposits for exporters depositing their FX earnings at
banks in Indonesia or converting the proceeds into rupiah as requested by the government. The policy is expected to keep FX earnings in
the country for longer.
• BI ensured greater transparency and information availability when using FX by strengthening the FX flow report (LLD). In this case, LLD
participants are obliged to report their use of FX through supplementary supporting documentation for transactions of a certain value. The
regulation is pursuant to Act No. 24 of 1999 concerning the Flow FX and the Exchange Rate System, where Bank Indonesia is authorised
to request information and data regarding the flow of FX from residents.
Strong and Stable Growth Prospects Remain Intact
Economic Factor:2
23
Conducive Environment Underpinning Strong Growth Fundamentals
Largest Economy in
South East Asia
4th Most Populous
country in the
World; 64% in
productive age
Manageable Inflation
Rate
Growing Middle
Income Class
From commodity-based to industrialized-
natural resources-based economy via
infrastructure development
From consumption-led to investment-led
growth via a stronger manufacturing sector
and more investment initiatives
Policies to maintain purchasing power to
stimulate domestic economy in the midst of
weakening macroeconomic conditions
Budget reform as a
part of larger
economic reform
initiative
Tax base to be
broadened from one
reduce dependency
on commodities
Fuel subsidies
significantly
reduced and
spending redirected
to more productive
allocation
Prudent debt
management
Reform-Oriented
Administration
Three main sources of financing for IDR 5 tn
investment needs: State and regional budget,
State Owned Enterprises and PPP
Continuing from 2015 policy, infrastructure
will be higher than fuel subsidy
Fiscal and non-fiscal incentives to attract
infrastructure investment and promote PPP
Infrastructure spending focused on basic
infrastructure projects
Large and Stable
Economy
Consistent Budget
Reform
New Economic
Structure
High Infrastructure
Investments
24
Indonesia’s Strong GDP
Growth ProspectGDP Growth Based on Expenditures1
Strong GDP Growth1
By expenditure2014 2015 2016
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
Household
consumption 5.3 5.1 5.1 5.1 5.0 5.0 5.0 4.9 4.9 5.0
Non profit household
consumption 23.2 22.4 5.8 (0.5) (8.1) (8.0) 6.6 8.3 6.4 6.7
Government
consumption 6.1 (1.8) 1.2 0.9 2.9 2.6 7.1 7.3 2.9 6.3
Investment 5.2 4.1 4.5 4.6 4.6 3.9 4.8 6.9 5.6 4.6
Exports 3.2 1.4 4.8 (4.6) (0.6) 0.0 (0.6) (6.4) (3.9) (2.7)
Imports 5.0 0.4 0.3 3.2 (2.2) (7.0) (5.9) (8.1) (4.2) (3.0)
GDP 5.1 5.0 5.0 5.0 4.7 4.7 4.7 5.0 4.9 5.2
QoQ YoY
%
Institutions 2016 GDP growth (%YoY)
2016 Revised Budget 5.2
Bank Indonesia 4.9 – 5.3
IMF 4.9
World Bank 5.1
ADB 5.0
Consensus Forecast (October 2016) 5.0
0,06
3,833,29
-2,11
-0,23
3,75 3,36
-1,83
-0,34
4,02
5,14 4,96 4,97 5,04 4,73 4,66 4,74 5,04 4,92 5,18
-3,0
-1,0
1,0
3,0
5,0
7,0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2014 2015 2016
Favourable GDP Growth Compared to Peers2
1. Source: Central Bureau of Statistics of Indonesia (BPS)
2. Source: World Economic Outlook Database, October 2016; * indicates estimated figure
%
-4,0
-2,0
0,0
2,0
4,0
6,0
8,0
2011 2012 2013 2014 2015 2016 2017 2018
Brazil India Indonesia Malaysia
Philippines Singapore Thailand
* *
25
Strong and Stable GDP Performance
Shifting from Commodity-based Economy to Manufacturing and Service SectorsContributors to GDP Growth by Sector
Spatial GDP Growth
Majority of growth was driven from Java
Drop in commodity prices affected
commodity-based regions such as
Sumatra, Kalimantan, Papua
Sulawesi, Bali, Nusa Tenggara & Java
continue to grow above the national
average
Government policies continue to
encourage regional growth
%GDP growth by sectors
(YoY) (%)
2014 2015 2016
Q1 Q2 Q3 Q4 Yearly Q1 Q2 Q3 Q4 Yearly Q1 Q2
Agriculture, forestry, and
fishery5.2 4.9 3.6 3.3 4.2 4.0 6.9 3.3 1.6 4.0 1.8 3.2
Mining (1.0) 1.1 1.2 1.5 0.7 (1.3) (5.2) (5.7) (7.9) (5.1) (1.3) (0.7)
Industrial processing 4.5 4.8 5.0 4.2 4.6 4.0 4.1 4.5 4.4 4.2 4.6 4.7
Construction 7.2 6.5 6.5 7.7 7.0 6.0 5.4 6.8 8.2 6.6 7.9 6.2
Big traders, wholesale, retail 6.1 5.0 5.2 4.5 5.2 4.1 1.7 1.4 2.8 2.5 4.0 4.0
Transportation and
warehousing7.0 7.6 7.7 7.2 7.4 5.8 5.9 7.3 7.7 6.7 7.9 6.8
Information and
communication9.8 10.5 9.8 10.3 10.1 10.1 9.7 10.7 9.7 10.1 8.3 8.5
Financial service and
insurance3.6 5.5 1.9 7.9 4.7 8.6 2.6 10.4 12.5 8.5 9.3 13.5
Other1 5.4 4.7 5.9 6.5 5.7 5.1 6.5 5.0 5.9 5.6 7.9 7.9
GDP 5.1 5.0 5.0 5.0 5.0 4.7 4.7 4.7 5.0 4.8 4.9 5.2
Java: 58.8%
Sumatera: 22.0%
Maluku & Papua: 2.4%
Sulawesi: 6.1%
Kalimantan: 7.6%
Bali & Nusa
Tenggara: 3.1%
Spatial GDP Growth Contribution
Sumatera
GDP Growth
Q2 2016: 4.5%
Java
GDP Growth
Q2 2016: 5.7%
Kalimantan
GDP Growth
Q2 2016:1.1% Sulawesi
GDP Growth
Q2 2016:8.5%Maluku & Papua
GDP Growth
Q2 2016: -1.6%
Bali & Nusa
Tenggara
GDP Growth
Q2 2016: 7.4%
Source: BPS
-10
-5
0
5
10
15
Manufacture Service(Financial)
Agriculture Mining
Q2 2015 Q2 2016
Improved External Resiliency
External Factor:3
27
A Narrower, Structurally-Stronger Current Account Deficit
Improving Current Account DeficitStrong Balance of Payments
Supported by Substantial FX Reserves to Mitigate External ChallengesTrade Balance Surplus Continues
Source: Bank IndonesiaSource: Bank Indonesia
US$bn US$bn
109.8
7.4
(2.2)
(4.7)
2011: CA SurplusUS$1.7bn
2015: CA Deficit(US$17.8bn)
2012: CA Deficit(US$24.4bn)
2013: CA Deficit(US$29.1bn)
2014: CA Deficit(US$27.5bn)
US$bn
(7.6)
(1.9)
3.7
1.2
(4.7)
Source: Bank Indonesia
FX Reserves as of Sep 2016: US$115.7bn
(Equiv. to 8.5 months of imports + servicing of government debt) MonthUS$bn
FX Reserves (LHS) Month of Import & Debt Service (RHS)
2016**: CA Deficit(US$4.7bn)
0
20
40
60
80
100
120
140
160
-20
-15
-10
-5
0
5
10
15
20
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
*
Q3
*
Q4
*
Q1
*
Q2
**
2010 2011 2012 2013 2014 2015* 2016**
Th
ou
san
ds
Current Account Capital & Financial Account
Overall Balance Reserve Assets (RHS) -15
-10
-5
0
5
10
15
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
*
Q3
*
Q4
*
Q1
*
Q2
**
2011 2012 2013 2014 2015* 2016**
Goods Services Income Secondary Inc. Current Acc.
Source: BPS
2015:
Surplus
US$7.52bn
2014
Deficit
US$1.89bnUS$bn
Jan-Sep 2016:
Surplus
US$5.65bn
-
3
6
9
12
15
-
20
40
60
80
100
120
140
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9
2012 2013 2014 2015 2016
-2,5
-2,0
-1,5
-1,0
-0,5
0,0
0,5
1,0
1,5
2,0
2,5
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9
2014 2015 2016
Non-OG OG Total
28
Exchange Rate In Line with Fundamentals
Stable Movement of Rupiah
Source: Bank Indonesia
YTD 2016* vs 2015
Source: Bank Indonesia
Rupiah Exchange Rate Relatively Well Compared to Peers
IDR/US$
Sep 2016* vs Aug 2016
Source: Bank Indonesia
IDR/USD Monthly Average Quarterly Average
* data as of 30 Sept 2016
* data as of 30 Sept 2016
Average Point-to-point
* data as of 30 Sept 2016-3,92
-1,72
-1,43
-1,09
0,09
0,11
0,53
1,24
0,83
1,64
1,86
5,62
-1,96
-2,02
-0,18
-1,37
0,03
-0,33
0,28
0,19
0,07
0,41
-0,6
-1,65
-5,00 -4,00 -3,00 -2,00 -1,00 0,00 1,00 2,00 3,00 4,00 5,00 6,00
PHP
MYR
TRY
BRL
THB
CNY
INR
KRW
EUR
IDR
JPY
ZAR
%-3,22
-2,45
-0,69
2,89
3,76
4,19
5,62
6,71
13,92
21,41
-6,00 -3,00 0,00 3,00 6,00 9,00 12,00 15,00 18,00 21,00 24,00
PHP
TRY
INR
EUR
MYR
THB
IDR
KRW
ZAR
BRL
%
The rupiah appreciated by an average of 0.41% to a
level of Rp13,051 per USD as of September 2016. At
home, positive sentiment concerning the domestic
economy, stemming from maintained macroeconomic
stability together with sound implementation of the Tax
Amnesty, bolstered rupiah appreciation. Externally,
the rupiah appreciated as global risk surrounding the
timing of the proposed FFR hike eased.
29
Lines of Defense Against External Shocks
FX Reserve Ample of level of FX reserves to buffer against external shock
FX Reserves as of September 2016: US$115.7 billion
South Korea Established a 3 year KRW/IDR swap arrangement with the size of up to 10.7 trillion KRW / IDR 115 trillion in March 2014
Australia
Exchange of local currencies between the two central banks of up to A$10 billion or IDR 100 trillion
Effective as of December 15, 2015. The effective period will be three years, and could be extended by mutual consent of both
sides
First Line of Defence
Second Line of Defence
BI’s Existing Bilateral Currency Swap Arrangement (BCSA)
* In addition to the above facilities, Indonesia is entitled to access IMF facilities for crisis prevention to address potential (actual) BOP problem as part of IMF’s
Global Financial Safety Net (GSFN) initiative. Such facilities include Flexible Credit Line (FCL) and Precautionary and Liquidity Line (PLL)
Japan US$ 22.76 billion swap line with the Bank of Japan currently in place
The quantum of the swap line was increased from US$12 billion in December 2013
Chiang Mai
Initiative
Multilateralization
(CMIM)
Agreement
Entitled to a maximum swap amount of US$ 22.76 billion under the ASEAN+3 (Japan, China, and Korea) FX reserves pool
created under the agreement
Came into effect in 2010 with a pool of US$120 billion
Doubled to US$ 240 billion effective July 2014
Source: Bank Indonesia
30
Comprehensive Stabilization Framework Ensures Proactive Risk Management of Financial System
Implementing Crisis
Management Protocol
Implementing Bond
Stabilization Framework
Enhancing coordination
between government
institutions and
continuous dialogue with
market participants
Specific policies in place
in the 2014 budget law to
address crisis
Swap facility
arrangements based on
international cooperation
Chiang Mai Initiative
Multilateralization
Specific articles in the 2014 State Budget Law that provide flexibility for Government to take quick mitigation action if necessary, with Parliament approval that has to be given
within 24 hours
The FKSSK, Consists of Minister of Finance, BI Governor, Head of Indonesian FSA and Head of Indonesian Deposit Insurance Corporation, manages
the Nationwide Crisis Management Protocol (CMP) Framework as guidance and procedures for national crisis prevention and mitigation measures.
The nationwide CMP incorporates the Exchange Rate, Banking, Non-Bank Financial Institution, Capital Market, Government Bonds Market (SBN), and
Fiscal CMPs.
Coordination Meeting is conducted regularly to discuss and assess the current level of Financial System Stability and current issues related to the
financial system
In 2013, FKSSK has conducted two crisis simulations: Full Dress Simulation (ministerial level) and activation of pre-emptive instrument (CMIM) at
technical
In March 2016, the Parliament has approved Financial System Crisis Prevention and Mitigation Law (UU PPKSK) which contains some key features,
ie: Clear division of tasks and responsibilities between the Ministry of Finance, BI, OJK and LPS; Clarity of Systemically Important Banks (SIBs)
definition based on international criteria; Application of the bail-in principle according to international best practices; and Resolution mechanism in
which Lender of Last Resort (LoLR) still provided by central banks to address short-term liquidity difficulties.
Several indicators are monitored daily: yield of benchmark series, exchange rate, Jakarta Composite Index and foreign ownership in government
securities
Crisis Management Protocol
Related State Owned Enterprises (min. Aware Level)
State Budget
SOE Budget
BPJS Budget
Buyback fund at the DG of BFRM and Investment fund at PSA (min Aware Level)
BPJS/Social Security Organizing Agency (min. Aware Level)
Bond Stabilization Framework
1
2
3
4
5
6
Fiscal buffers to prevent crises and mitigate risks
First Line of
Defence
Related State Owned Enterprises (min. level Alert )
State Budget
SOE Budget
BPJS Budget
State General Treasury Account/KUN (min. level Alert)
and Accumulated Cash Surplus/SAL (min. Level Crisis)
BPJS/Social Security Organizing Agency (min. Alert Level)
Second Line of
Defence
31
Strengthened Private External Debt Risk Management
(US$bn)
Source: External Debt Statistics of Indonesia, October 2016
(%)
Source: Moody’s Statistical Handbook, May 2016
Despite Increasing Trend of External Debt… Debt Burden Indicator (External Debt / GDP) Remains Comparable to Peers
Regulation Key Points
Phase 1
Jan 1,2015 –
Dec 31,2015
Phase 2
Jan 1,2016 –
Dec 31,2016
Phase 3
Jan 1, 2017 and
beyond
Object of Regulation Governs all Foreign Currency Debt
Hedging Ratio
< 3 months 20% * 25%**
> 3 – 6 months 20%* 25%**
Liquidity Ratio ( < 3 months) 50% 70%
Credit Rating Not applicable Minimum rating of BB-
Hedging transaction to meet
hedge ratio
not necessarily be done with a bank in
Indonesia
Must be done with
a bank in Indonesia
Sanction As of Q IV-2015 Applied
Prudent External Debt Management
External Debt / GDP (%)Total FCY Debt:
US$323.0 bn
Private Sector
FCY Debt: US$163.3 bn
Oct 2014, introduced prudential principles in managing external debt for the
nonbank corporation to mitigate risk emerging from external debt activity.
Corporations holding external debt required to fulfil:
Minimum hedging ratio in order to mitigate currency risk
Minimum forex liquidity ratio to mitigate liquidity risk
Minimum credit rating to mitigate overleverage risk
Regulation update in Dec 2014 including among others: broadening the
coverage of components of FX Assets and Liabilities, extension of credit
rating’s status validity period
23,3
27,3
34,7
33,0
29,5
50,4
22,9
26,5
32,7
36,0
37,5
55,4
0,0 10,0 20,0 30,0 40,0 50,0 60,0
India
Philippines
Thailand
Indonesia
Brazil
Turkey
2015 20140
50
100
150
200
250
300
350
0
50
100
150
200
250
300
2005 2007 2009 2011 2013 2015* Feb2016*
Apr 2016* Jun2016*
Aug2016**
Public (Govt. & BI) Private Total (RHS)
(US$bn)
32
Manageable External Debt Profile... short term non-bank corporate debt (non affiliation) represents only 9.7% of total private external debt
External Debt Position as of August 20161 Based on remaining maturity
Source: External Debt Statistics of Indonesia, October 2016
Private
Short-Term1
Private
Non-Bank
External Debt
Position
Affiliation
Non Affiliation
US$323.0bn
US$163.3bn
or
50.6%
of total
Ext. Debt
US$47.8bn
or
29.8%
of Private
Ext. Debt
US$159.7 Bn
or
49.4%
of Total Ext.
Debt
US$115.5 Bn
or
70.7%
of Private Ext.
Debt
US$19.1 Bn
or
11.7%
of Private
Ext. Debt
US$13.0 Bn
or
8.0%
of Private
Ext. Debt
US$15.8 Bn
or
9.7%
of Private
Ext. Debt
US$28.8bn
or
17.6%
of Private
Ext. Debt
Public Long Term 1 Private Bank
More Fiscal Stimulus with Prudent Fiscal Policy
Fiscal Performance and Flexibility:4
34
The Authorities Has Prepared Policies to Support Growth…and ensure sustainable and equitable economic growth
• Sustainable revenue sources
(shift away from commodity-based
revenues)
• Broaden tax coverage
• Higher spending productivity
• Well targeted subsidy scheme
• Empowerment of local governments
• Prudent deficit & debt management
• Maintain purchasing power
• Improve investment climate)
• Prudent monetary policy
• Appropriate macro-prudential policy
• Exchange rate management to reduce volatility
POLICY PACKAGES
MONETARY POLICY
(Bank Indonesia)
FISCAL POLICY
STRUCTURAL
REFORM POLICY
(Real Sector)
35
Budget Reform as a Part of Larger Economic Reform Initiative…to support sustainable and equitable economic growth
Challenges
Slow and low
disbursement performance
Revenue Shortfall
(tax, low oil and commodity prices)
Dependency on
foreign financingNarrow tax baseMiss targeted subsidy
Objective: Creating a Sustainable and Equitable Economic Growth for Indonesia
Pil
lar
IR
eve
nu
e O
ptim
iza
tio
n
Pil
lar
IIQ
ua
lity o
f S
pe
nd
ing
Pil
lar
III
Su
sta
ina
ble
Fin
an
cin
g
I. Shift from commodity-based revenues
II. Broaden tax coverage
III. Improve tax compliance and prevent
leakages
IV. Strengthen taxation institution
I. Higher spending productivity
II. Better targeted subsidy scheme
III. Empowerment of local governments
I. Secure budget financing
II. Effective utilization of domestic and
international funding sources
III. Financing schemes to support
infrastructure development program
Implemented:
Reinventing policy
e-Invoice
Compliance risk management
Adjustment of non-taxable income
threshold
ICT improvement in Tax Office
Initiatives:
Tax Amnesty
Tax Administrative Reform
Regulatory Reform (tax provisions &
procedures (UU KUP), non tax revenue
(UU PNBP)
Development of
Semi-Autonomous Tax Office
Initiatives:
Improve government procurement
regulation
Continue targeted subsidy reform
(electricity, seed, fertilizer, interest (KUR))
Larger budgetary allocations for:
Infrastructure projects
Social welfare
Cashless smart cards
Rural transfer
Initiatives:
Maintain manageable budget deficit
Improve bilateral and multilateral financing
sources, including BSA and DDOs
Increase financing instruments
Increase capital injection to SOEs to
include SOEs in infrastructure
development
Source: Ministry of Finance
36
Long Term Strategies to Achieve Sustainable Growth…stimuli to maintain purchasing power
The Virtuous Cycle of Purchasing Power Stimuli
Consumption is still the largest contributor to Indonesia’s GDP
Private consumption has been a key factor driving Indonesia’s
economic growth in recent years
The government has designed stimulus program to maintain and
enhance purchasing power for households
The government has increased non-taxable income level and
adjusted wage policy to ensure that the lowest income bracket
has the greatest support
Funds are targeted at not only to improve basic village
infrastructure but also to create jobs through labor intensive
projects as well as other job creation programs
u
Fuel price and
electricity
adjustment
Predictable
labour
wages
Boosting
housing
development
Elimination of luxury goods
tax for consumer goods
2 months
addition of
rice subsidy
program
Rural
transfer for
productive
spending
Ease of land
certification
and licensing
for street
vendors
Maintaining
Purchasing
Power
Increase non-taxable
income limit
Stabilized
price for
meat
products
37
Long Term Strategies to Achieve Sustainable Growth…stimuli to promote investments
Licensing Incentives Tax Incentives Other IncentivesBusiness and Infrastructure Incentives
Tax incentives
on property
Special
economic
zones
Relaxation of
negative foreign
investment list
Integrated
logistics zones
CPO
fundSupport for
export-oriented
industries
Village-city
logistics
improvement
Acceleration
of power
infrastructure
Income tax relief for
labor intensive
industries
Permit &
licensing
simplfication
One map policyIncentives for
footwear and
apparel industries
Simplification of
import licensing for
drugs and raw food
Accelerating
infrastructure
development
Water
management
and regulation
Tax incentives
for REITSRelaxation of
entry visa
policies
Expansion of coverage
and interest subsidy
for MSME
Dwelling time
optimization
Oil refinery
development
Aviation
sector
incentives
Downstream
industries
Debt To
equity ratio
38
‘The Big Bang” Policy on Relaxation of Foreign Investment…promoting competition and growth from investments
Introduction of New Foreign Ownership Regulation for Strategic Sectors
1 For total project value of IDR10bn and above
Before
Cold storage Restaurants, Bars Pharmaceutical Raw Materials
Manufacturing
Sports Center,
Film Processing Lab, Crumb Rubber
49%
Revision of "Partnership" category to refer to partnership with Micro,
Small and Medium Enterprises (MSMEs)
Grandfather Law: If a particular sector is tightened in future, existing
foreign investor does not need to comply with tighter stake
Key Reforms in Negative Foreign
Investment List
Strengthen implementation of negative investment law through
active roles from ministries, agencies and regional governments
100%49%
100%51%
100% 85% 100%
95%100%
33%67%
51%67%
51%67%
55%67%
65%67%
Distribution, Warehousing Private Museum, Catering, apparel
Manufacturing, Exhibitions &
Conventions
Toll Road Operator,
Telecommunication Testing Company
Consultancy for Construction1Telecommunication Provider
with Integrated Services
Professional Training, Golf Course
Management, Air Transport Support Services,
Travel Bureau
After Before After Before After Before After
Before After Before After Before After
Before After Before After Before After
39
Prevention and Resolution for Financial System Crisis …regulation acting as the basis of policymaking and coordination among financial system stability committee (KSSK) members
Source: Ministry of Finance, Bank Indonesia
Key Summary Task of KSSK
Strengthening the role, function, and coordination among the 4
financial authorities (Ministry of Finance, Bank Indonesia, OJK,
LPS) in the crisis prevention and resolution
Financial crisis prevention by strengthening the regulatory and
supervisory functions of banking especially against systematically
important banks
Strengthening the resolution of systemic bank issues by
prioritizing bail-in principle
BI provides Short-Term Liquidity Loans (PLJP) to banks which are
solvent and has sufficient collateral
Implementation of the action plan (recovery plan) by OJK and early
intervention by LPS in the event of a systemic bank experiencing
solvency issues
Indonesia House of Representatives recently passed the bill on prevention and resolution
of financial crisis in Indonesia
The regulation emphasizes on: Monitoring and maintaining financial system
stability
Resolution for financial system crisis
Resolution for systemically important banks
In financial distress, the president has full authority to take
decisions for crisis handling
Immunity and Legal Protection for KSSK members (Ministry of
Finance, Bank Indonesia, OJK, LPS)
40
Tax Amnesty as Policy Breakthrough...easing taxpayers to declare, repatriate, and reinvest their additional wealth in domestic market
NET ASSET
Additional
Asset
Value
Liabilities
related
with
Additional
Asset
• Assets located in Indonesia; or
• Assets located overseas and
repatriated;
1 Jul – 30 Sep 16
1 Okt – 31 Des 16
1 Jan – 31 Mar 17
• Assets located overseas and not
repatriated
• Government securities;
• Bonds issued by State Owned Companies;
• Bonds issued by Government-owned
financing companies;
• Financial investments in designated banks;
• Bonds issued by private companies and
registered with the Financial Services
Authority (OJK);
• Investment in government infrastructure
projects;
• Investment in other government priority
projects;
• Any other form of lawful investments.
Investment instruments options
for repatriated assets
• SME’s special tariff (sales turnover
up to IDR 4,8 billion/year)
Recognized as
government
revenue
REDEMPTION RATE AMNESTY FEE
Calculation of Tax Amnesty Fee
2%
3%
5%
4%
6%
10%
0,5%
2%
1 Jul – 30 Sep 16
1 Okt – 31 Des 16
1 Jan – 31 Mar 17
declared assets worth > IDR 10 bio
declared assets worth up to IDR 10 bio
Tax Amnesty Program Update*
TypeValue
(IDR bn)
Redemption 94,095.83
Repatriation 142,679.98
Foreign Declaration 982,952.28
Domestic Declaration 2,753,728.39
Total Declaration 3,879,360.64
*as of October, 28th, 2016; based on SPH
(Surat Pernyataan Harta/Asset Declaration Letter)
Source: DG Tax, Ministry of Finance
41
One of the Most Succesful Tax Amnesty in the World...proving the huge potential on Indonesia tax base
Indiv. Non MSME
Indiv. MSME
Corp. Non MSMECorp. MSME
0,04%
0,12%
0,24%
0,35%
0,62%
0,76%
0,0%
0,1%
0,2%
0,3%
0,4%
0,5%
0,6%
0,7%
0,8%
Austalia Spain Italy India Chile Indonesia
0%2% 2%
4%
8%
23%
0%
5%
10%
15%
20%
25%
Australia India Spain Italy Chile Indonesia
% of GDP Penalty as % of GDP
Source: Ministry of Finance, Deutsche Bank Calculation
7.14
0.03 0.23
7.4186.52
10.33
71.52
268.45.71
0.19
0.71
6.6
Tax Amnesty Revenue Realization, Based on
Tax Payment Slip (US$ bn)Tax Amnesty Revenue Realization, Based on
Tax Declaration Letter (US$ bn)
Realization Of Asset Declaration From Tax
Amnesty (US$ bn)
Repatriation
Onshore DeclarationOffshore Declaration
Tax Arrears Payment
Redemption (TPS)Preliminary Evidence Payment
Declared Assets Revenue From Tax Amnesty
42
Worldwide Declaration and Repatriation
(in IDR tn)
BelgiumDeclaration
10.15Repatriation
0.6
USADeclaration
17.33Repatriation
0.73
Cayman
Island
Declaration
52,54Repatriation
16.51Virgin
Island
Declaration
72.57Repatriation
2.49
SingaporeDeclaration
643.2Repatriation
78.69 AustraliaDeclaration
32.91Repatriation
1.22
MalaysiaDeclaration
7.61Repatriation
0.61
HongkongDeclaration
38.39Repatriation
14.05
ChinaDeclaration
13.68Repatriation
5.56
43
2015 Budget Realization
Indicators2015
Revised Budget Realization1
Economic growth (%, YoY) 5.7 4.8
Inflation rate (%, YoY) 5.0 3.4
3-month-SPN (Treasury bills, %) 6.2 6.0
Exchange rate (US$/IDR,Average) 12,500 13,392
Indonesia crude price (US$/bbl) 60 50
Oil lifting (thousand bbl/day) 825 779
Gas lifting (thousand bbl/day oil equivalent) 1,221 1,195
Description
(IDR tn)
2015
Realization% to
Budget
Δ 2015 –
2014
(IDRtn)Per 31 Dec
A. Revenue 1,505 85.4% (46)
I. Domestic revenue 1,494 85.0% (51)
1. Tax revenue 1,240 83.3% 94
2. Non tax revenue 254 94.3% (145)
II. Grant 10 314.9% 5
B. Government spending 1,797 90.5% 19
I. Central government 1,174 88.9% (30)
1. Personnel, operational & capital
spending 725 91.1% 148
2. Subsidies, interest payment & others 449 85.7% (178)
II. Inter-governmental transfers 623 93.7% 49
1. Transfer to regional & local
governments 602 93.5% 29
2. Rural transfer 21 100.0% 21
C. Primary balance (136) 203.8% (43)
D. Surplus/deficit (292) 131.3% (65)
% deficit to GDP (2.5%) (0.3%)
E. Financing 318 143.0% 69
I. Domestic financing 308 126.9% 47
II. Foreign financing (net) 10 (51.9%) 23
Surplus/(deficit) financing 26 4
Source: Ministry of Finance1 As of Dec 31st 2015
Pressures on macroeconomic indicators in 2015 due to:
Global economic slowdown
Drop in commodities prices
Non-oil & gas tax revenue went up by 12.6%
Slow down in manufacturing and mining sector led to lower tax
revenue collected in these sectors
The improved budget structure has created a base for acceleration
of economic development in the midst of global uncertainty
Capital expenditure in 2015 reached IDR209tn (41.8% increase
from 2014 realization)
Rural transfer initiatives, started in 2015, amounted to IDR20.8tn
as of December 2015, have been entirely distributed
44
2016 Revised, Outlook and 2017 Budget...adjustment on macroeconomic assumption as well as revenue target and efficient spending
Description
(IDR tn)
2016 2017
R-Budget Outlook Budget
A. REVENUE 1,786.2 1,582.9 1,737.6
I. Domestic Revenue 1,784.2 1,580.9 1,737.6
1. Tax Revenue 1,539.2 1,320.2 1,495.9
2. Non Tax Revenue 245.1 260.7 240.4
II. Grant 2.0 2,0 1.4
B. GOVERNMENT SPENDING 2,082.9 1,898.6 2,070.5
I. Central Government 1,306.7 1,195.3 1,310.4
1. Ministerial Spending 767.8 672.0 758.4
2. Non Ministerial Spending 538.9 523.3 552.1
II. Intergovernmental Transfer 776.3 703.3 760.1
1. Regional Transfer 729.3 659.1 700.0
2. Rural Transfer 47.0 44.2 60.0
C. PRIMARY BALANCE (105.5) (126.4) (111.4)
D. BUDGET SURPLUS/(DEFICIT) (296.7) (315.7) (332.8)
% deficit to GDP (2.35) (2.50) (2.41)
E. FINANCING 296.7 315.7 332.8
I. Debt Financing 371.6 387.8 389
II. Investment Financing (94.0) (91.5) (49.1)
III. Loan Disbursement 0.5 0.7 (6.4)
IV. Insurance Liabilities (0.7) (0.7) (0.9)
V. Other Financing 19.3 19.3 0.3
Macroeconomic Assumption 2016 Revised, Outlook and 2017 Budget
Indicator2016 2017
R-budget Outlook Budget
Economic growth
(%, yoy)5.2 5.0 5.1
Inflation
(%, yoy)4.0 3.2 4.0
3-Month T-Bills
(%)5.5 5.4 5.3
Exchange Rate
(Rp/US$)13,500 13,300 13,300
ICP
(US$/barrel)40 40 45
Oil Lifting
(thousand
barrel/day)
820 820 815
Gas Lifting
(thousand barrel
oil equivalent/day)
1,150 1,150 1,150
45
Efforts in Preserving 2016 Revised Budget Credibility...spending adjustment that in line with revenue shortfall projection
• To control central government spending, government regulate Presidential Instruction Ref. 8/2016
• Government suspends transfer to regions and village fund through MoF Decree Ref. 125/PMK.07/2016
• Revenue projections are made to be the baseline of 2017 budget proposal and subject to change due
to certain condition
SHORTFALL
PROJECTION
State Revenue
IDR 203.3 tn
Taxation Revenue
IDR 219 tn
Adjustment from:
a)Global and domestic
slowdown;
b)Commodity prices
decline (oil, coal, and
CPO)
LINE MINISTRIES SPENDING
SAVINGIDR 64.7 tn (outside natural
saving)• Maintaining priority programs to keep
rolling
• Budget cut to the less productive
spendings
• Budget cut is directed to activities that
have not yet been contracted
• Budget cut is directed to not urgent
activities and/or can be carried forward
to the next year
TRANSFER TO THE
REGIONS & VILLAGE FUNDS
SAVINGIDR 72.9 tn• Carry over of revenue sharing for
regions that have fiscal capacity and
abundant cash accumulation
• Postpontment of selected General
Allocation Fund
• Natural savings of Specific Allocation
Fund
• Village Fund saving
Maintaining credibility to keep deficit< 3%
More realistic budget posture
Preserving idomestic business climate.
2016 fiscal consolidation as the basis
calculation for a more realistic and credible
2017 Proposed Budget
2016 R-BUDGET ADJUSTMENT
OBJECTIVES
STA
TE
RE
VE
NU
E
STA
TE
EX
PE
ND
ITU
RE
46
2016 Revised Budget Outlook...maintaining credibility in the state budget management
Description
(in Rp Trillion)
2016
R-Budget Outlook*Δ Outlook –
R Budget
A. State Revenue 1.786,2 1.582,9 (203,3)
I. Domestic Revenue 1.784,2 1.580,9 (203,3)
1. Taxation Revenue 1.539,2 1.320,2 (219,0)
- Domestic Tax 1.503,3 1.285,3 (218,0)
a. Income Tax 855,8 673,5 (182,4)
b. VAT 474,2 416,3 (57,9)
d. Other 173,2 171,2 (2,0)
- International Trade Tax 35,9 34,9 (1,0)
2. Non tax Revenue 245,1 260,7 15,6
II. Grants 2,0 2,0 (0,0)
B. State Expenditure 2.082,9 1.898,6 (184,3)
I. Central Government Expenditure 1.306,7 1.195,3 (111,4)
1. Line Ministries 767,8 672,0 (95,8)
2. Non Line Ministries 538,9 523,3 (15,6)
II. Transfer to The Region & Village Fund 776,3 703,3 (73,0)
1. Transfer to the Region 729,3 659,1 (70,1)
2. Village Fund 47,0 44,2 (2,8)
C. Primary Balance (105,5) (126,4) (20,9)
D. Surplus/(Deficit) of Budget (296,7) (315,7) (19,0)
% of GDP (2,35) (2,50)
E. Financing 296,7 315,7 19,0
I. Debt Financing 371,6 387,8 16,3
- Government Securities (Net) 364,9 382,3 17,4
II. Other Financing (74,8) (72,2) 2,7
47
2016 Budget Realization as of September 2016...moderating deficit as the result of tax amnesty collection
2015 2016
R-Budget 30-Sep % d-Budget R-Budget 30-Sep % R-Budget
A. STATE REVENUE 1.761,6 990,3 56,2 1.786,2 1.081,2 60,5
I. DOMESTIC REVENUE 1.758,3 989,2 56,3 1.784,2 1.080,0 60,5
1. Taxation Revenue 1.489,3 800,9 53,8 1.539,2 896,1 58,2
2. Non Tax Revenue 269,1 188,3 70 245,1 183,8 75,0
II. GRANT 3,3 1,1 33,9 2,0 1,2 62,3
B. STATE EXPENDITURE 1.984,1 1.249,00 62,9 2.082,9 1.305,5 62,7
I. CENTRAL GOVERNMENT EXPENDITURE 1.319,5 737,7 55,9 1.306,7 767,7 58,8
1. Line Ministries 795,5 384,7 48,4 767,8 428,6 55,8
2. Non Line Ministries 524,1 353 67,4 538,9 339,1 62,9
II. TRANSFER TO THE REGION & VILLAGE FUND 664,6 511,2 76,9 776,3 537,8 69,3
1. Transfer to the Region 643,8 494,6 76,8 729,3 501,0 68,7
2. Village Fund 20,8 16,6 80 47,0 36,8 78,2
C. PRIMARY BALANCE -66,8 -135,9 203,5 -105,5 -77,7 73,6
D. SURPLUS/(DEFICIT) OF BUDGET -222,5 -258,7 116,2 -296,7 -224,3 75,6
% of GDP -1,9 -2,24 -2,35 -1,79
E. FINANCING (I + II) 222,5 297,4 133,7 296,7 391,9 132,1
I. DOMESTIC FINANCING 242,5 263,8 108,8 299,3 405,1 135,4
II. FOREIGN FINANCING (net) -20,0 33,6 -168,0 -2,5 -13,2 0,0
FINANCING SURPLUS/(DEFICIT) 0,0 38,8 0 167,6
48
Financing Policy 2016
Description (IDR tn)2016 2016
Budget R-Budget
I. Domestic Financing 272.8 299.3
1. Domestic Banking 5.5 25.4
2. Domestic Non-Banking 267.3 273.9
II. Foreign Banking 0.4 -2.53
1. Foreign Outstanding Loan (Gross) 75.1 72.9
a. Program Loan 36.8 35.8
b. Project-Based Loan 38.3 37.2
2. Standby Loan Agreement (SLA) -5.9 -5.8
3. Foreign Debt Principal Repayment -68.8 -69.7
TOTAL 273.2 296.7
(0,73)
(1,14)
(1,86)
(2,33) (2,25)
(1,90)(2,35)
(3,0)
(2,0)
(1,0)
0,0
(300)
(250)
(200)
(150)
(100)
(50)
0 2010 2011 2012 2013 2014
2016
Budget
2016
R-Budget%IDR tn
Deficit
% to PDB
• Manageable Debt-to-GDP ratio
• Financial inclusion & market deepening
• Debt issuance for productive activity
• Selective external loan (infrastructure and energy sector)
• Loan as an alternative instrument for financing
• Active debt management and Asset Liabilities Management
(ALM)
• Sharpen PMN recipients and purposes
• Provide government guarantee for infrastructure project
• Support accessibility for education and housing for low
income class
Debt Financing
Non Debt Financing
49
Budget Financing Breakdown in 2016
Debt (Gross)
IDR729.03tn
Redemption
IDR316.51tn
Budget Financing
IDR344.39tn
Non-Debt Financing
IDR69.01tn
Breakdown of Budget Financing IDR tn US$ bn
Government Debt (net) 407.79 31.37
Government Securities (net) 407.89 31.38
Issuance 654.42 50.35
Redemption & Cash Management (243.54) (18.04)
Debt Portfolio Management (3.00) (0.23)
Domestic Loans (net) 3.25 0.25
Withdrawal 3.58 0.28
Redemption (0.33) (0.02)
Foreign Loans (net) (3.35) (0.26)
Withdrawal 71.02 5.46
Redemption (74.37) (5.72)
Source: Ministry of Finance. USD/IDR: 12,998 (as of end of September 2016)
50
Government Securities – Financing Plan for 2016
Instruments
Revised Budget
Indicative Target
(IDR bn)
Indicative Target
(US$ mm)
Government Securities (Net) 407,886 31,381
Redemption 215,089 16,548
Cash Management 27,874 2,144
Buyback 3,000 231
Gov’t Securities Conversion 573 44
Government Securities
(Gross)654,422 50,348
Composition
Domestic 78%
Auction 63%
Non-Auction 15%
International Bond 22%
Government Issuance Targets International Bonds
• Issuance of international bonds
as a complement to diversify
investor base in domestic
market and to avoid crowding
out the domestic market
• Provides benchmark for
Indonesia corporate issuances,
consisting of USD, JPY and
EUR denominated bonds
• Target maximum 27% of
issuance via international bonds
Source: Ministry of Finance
Domestic Bonds
Weekly Auction:
Conventional securities 23 x
Islamic securities 23 x
ATM for Government Securities (SBN) by auction
9-11 years
Non-Auction:
Retail bondsSukuk Retail (Q1), SBR1 (Q2), Sukuk
Tabungan2 (Q3), and ORI3 (Q4)
Private Placement Based on request
Front Loading Issuance For Budget Financing
• Pre-funding to optimize cost ahead of potential Fed rate hikes
• Anticipate developments in global environment
• Our target is to front load 74% of the annual budget in 1H16
Government Debt Outstanding (as of end of August 2016)
IDR tn US$ bn
Total government debt outstanding 3,444 265.0
Loan 743 57.2
Securities 2,701 207.8 Debt
Securities
72%
Sukuk
28%
US$/IDR: 12,998 (as of end of Sept, 2016)1 SBR: “Savings Bond Ritel” or Retail Savings Bond2 Sukuk Tabungan means Sukuk Savings Bond3 ORI: “Obligasi Negara Ritel” or Indonesian Retail Bond
51
Disciplined and Sophisticated Debt Portfolio Management
Stable Debt to GDP Ratio Over the Years
Weighted Average Debt Maturity of ~9.2 Years (As of Sep. 2016)**
US$ bn
Remarkable Debt Reduction Initiative Over the Past 10 Years
Change in Debt to GDP Ratio (2006 – 2016) (%)
Source: IMF World Economic Outlook Database, October 2016
Well Diversified Across Different Currencies
% of Yearly Issuance
Government Debt / GDP (%)
Source: Ministry of Finance
Source: Ministry of Finance Source: Ministry of Finance
(1)
9,32
9,70
9,60
9,73
9,40
9,19
9,0
9,3
9,5
9,8
10,0
2011 2012 2013 2014 2015 Sep-16**
55% 56% 53% 57% 56% 58%
22% 24% 29%29% 31% 29%
17% 14% 12% 9% 8% 8%3% 3% 3% 3% 3% 4%3% 3% 3% 2% 2% 2%
0%
20%
40%
60%
80%
100%
2011 2012 2013 2014 2015 Sep-16
IDR USD JPY EUR Others***
Years
131 141 136 155 175209
69 64 5854
55
56
23.1% 23.0% 24.9% 24.7%
27.4% 27.7%
0,0
5,0
10,0
15,0
20,0
25,0
30,0
0
50
100
150
200
250
300
2011 2012 2013 2014 2015 2016*
Securities (LHS) Loans (LHS) Govt Debt / GDP (%) (RHS)
* Revised Budget 2016 Figure, ** Using GDP assumption in 2016 R-Budget, ***SDR, AUD, and other
-35,3
-31,9
-29,0
-11,2
2,8
11,0
11,4
18,9
29,9
32,9
34,6
40,8
64,9
70,1
117,0
-60,0 0,0 60,0 120,0 180,0 240,0 300,0
Philippines
Turkey
Indonesia
India
Germany
Poland
Thailand
Brazil
Italy
Colombia
Japan
Malaysia
South Africa
United States
United Kingdom
Chile
Australia
52
Well Balanced Maturity Profile With Strong Resilience Against External Shocks
Declining Interest Rate Risks
Debt Maturity Profile
%
Declining Exchange Rate Risks
%
Upcoming Maturities (Next 5 Years)
%IDR tn
Source: Ministry of Finance
18,8
16,2 16,014,8
13,712,3
25,9
22,5 23,2
21,0 20,7
17,9
0
5
10
15
20
25
30
2011 2012 2013 2014 2015 Sep-2016**
Variable Rate Ratio¹ Refixing Rate²
46
123 1
59
146
99 1
33
86 93
168
45
126
55
53
100
29
112
46 52
97
5
64
22
22
7 15 26
23
20 25
23
92
109 1
34
109
123
102
102
84
112
85
25 44
19
18
16
16 15
11
28
4
23
28
1
1 1
30
21 27
27
18
0
50
100
150
200
250
300
2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046-2055
IDR-Denominated Other Currencies
10,4 10,2 11,7 10,7 12,2 11,5
45,1 44,446,7
43,4 44,542,0
0
10
20
30
40
50
2011 2012 2013 2014 2015 Sep-2016**
FX Debt to GDP Ratio* FX Debt to Total Debt Ratio
8,2 7,28,6 7,7 8,4
6,9
22,7 21,5 21,820,1 21,4
23,1
34,632,4 33,4 33,9 34,7
37,0
0
10
20
30
40
2011 2012 2013 2014 2015 Sep-2016**
In < 1 year In < 3 year In < 5 year
1 Variable Rate Ratio is defined as ratio between debt instruments with variable rate divided by total debt instruments (variable + fixed rates)2 Refixing Rate ratio is defined as ratio between debt instruments with variable rate + debt instruments with fixed rate maturing in 1 year divided by total debt instruments (variable + fixed rates)
**Using GDP assumption in 2016 R-Budget; **Preliminary figures;
53
2011 2012 2013 2014 Jun-15 Dec-15 Jan-16 Apr-16 Jun-16 Sep-16
Loan Government Securities
Profile of Total Central Government Debt
Government Debt Outstanding Increasing Foreign Ownership of Government Securities at Longer Tenors
(%)
Foreign Holders of Government IDR Bonds – Composition September 2016
USD bn
%
209.41199.48 204.51 194.55 214.88 224.60 229.70 248.30 255.14 (%)259.50
74.1368.82 70.04 75.81 75.73 76.14 77.1665.66 77.99 78.41
25.8734.34 31.18 29.96 24.27 23.8624.19 22.84 22.01 21.5911,87 7,84 5,2 4,65 3,23 3,04 3,28 2,69 3,02
24,9719,32
18,29 18,9613,1 13,44 12,45 13,73
20,9
63,16 72,84 76,5 76,39 83,66 83,52 84,27 83,57 76,08
30,80 32,98 32,5438,13 38,21 38,94 38,59 39,10 39,16
0
20
40
60
80
100
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Jan-16 Mar-16 Jun-16 Sep-16
0-1 1-5 >5 Foreign Ownership to Total
30,80 32,98 32,54 38,13 38,12 38,98 38,28 39,39 38,87 39,16
32,58 30,49 33,7630,83
37,85 30,48 34,05 32,49 35,02 39,77
36,63 36,53 33,70 31,0423,95
30,53 27,63 28,12 26,11 21,07
0
20
40
60
80
100
Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Feb-16 May-16 Jul-16 Aug-16 Sep-16
Foreign Holder Domestic Non Banks Domestic Banks
54
Ownership of IDR Tradable Central Government Securities
1) Non Resident consists of Private Bank, Fund/Asset Manager, Securities Company, Insurance Company, and Pension Fund.
2) Others such as Securities Company, Corporation, and Foundation.
*) Including the Government Securities used in monetary operation with Bank Indonesia.
**) net, excluding Government Securities used in monetary operation with Banks.
(IDR tn)
Description
Banks* 375.55 31.04% 350.07 23.95% 442.76 29.81% 460.39 30.53% 451.00 28.63% 462.62 28.70% 361.54 21.95% 368.63 21.07%
Govt Institutions (Bank Indonesia**) 41.63 3.44% 148.91 10.19% 56.41 3.80% 47.04 3.12% 52.70 3.35% 54.37 3.37% 150.13 9.12% 158.66 9.07%
Bank Indonesia (gross) 150.18 10.11% 150.58 9.99% 149.98 9.52% 149.49 9.28% 149.07 9.05% 148.62 8.50%
GS use for Monetary Operation 93.77 6.31% 103.54 6.87% 97.28 6.18% 95.13 5.90% -1.05 -0.06% -10.05 -0.57%
Non-Banks 792.78 65.52% 962.86 65.87% 985.99 66.39% 1000.37 66.35% 1071.42 68.02% 1094.70 67.92% 1135.18 68.93% 1222.09 69.86%
Mutual Funds 45.79 3.78% 61.60 4.21% 61.48 4.14% 62.71 4.16% 67.57 4.29% 73.02 4.53% 76.44 4.64% 78.51 4.49%
Insurance Company 150.60 12.45% 171.62 11.74% 173.26 11.67% 179.03 11.87% 192.29 12.21% 203.41 12.62% 214.47 13.02% 227.38 13.00%
Foreign Holders 461.35 38.13% 558.52 38.21% 578.32 38.94% 587.78 38.98% 606.08 38.48% 626.17 38.85% 643.99 39.10% 684.98 39.16%
Foreign Govt's&Central Banks 103.42 8.55% 110.32 7.55% 110.98 7.47% 112.31 7.45% 112.31 7.13% 112.49 6.98% 118.53 7.20% 118.45 6.77%
Pension Fund 43.30 3.58% 49.83 3.41% 52.24 3.52% 54.47 3.61% 56.15 3.57% 57.41 3.56% 64.67 3.93% 81.75 4.67%
Individual 30.41 2.51% 42.53 2.91% 41.42 2.79% 35.33 2.34% 65.85 4.18% 49.19 3.05% 48.90 2.97% 46.56 2.66%
Others 60.51 5.00% 78.50 5.37% 78.99 5.32% 81.05 5.38% 83.47 5.30% 85.50 5.31% 86.72 5.27% 102.90 5.88%
Total 1,209.96 100% 1,461.85 100% 1,485.16 100% 1,507.81 100% 1,575.12 100% 1,611.69 100% 1,646.85 100% 1,749.38 100%
Dec-14 Jan-16 Feb-16Dec-15 Jun-16Mar-16 Sep-16Apr-16
55
Government Securities Realization
Note:
- Issuance Government Securities Conversion 572,581
- Matured Government Securities Conversion 360,814
Nett Issuance Government Securities Conversion 211,767
(IDR mn, as of end of September 2016; budget deficit: 2.7%)
Revised Budget
2016
Widening Budget
Deficit 2.7%
Realization
(a.o. September 30,
2016)
% Realization to
Revised Budget
2016
Government Securities Net 364,866,887 407,885,860 388,017,485 95.13%
Government Securities Maturing in 2016 and Buyback 246,535,735 246,535,735 197,649,869 80.17%
Issuance Need for 2016 611,402,622 654,421,595 585,667,354 89.49%
Government Debt Securities (GDS) 415,393,702
Domestic GDS 306,354,982
-Coupon GDS 224,350,000
-Conventional T-Bills 46,190,000
-Private Placement* 31,895,977
-Retail Bonds 3,919,005
International Bonds 109,038,720
-USD GMTN 48,643,000
-Euro GMTN 44,975,610
-Samurai Bonds 12,760,910
-Domestic USD Bonds 2,659,200
Government Islamic Debt Securities 170,273,652
Domestic Government Islamic Debt Securities 136,866,152
- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based Sukuk) 95,446,000
- Retail Sukuk 34,085,122
- Private Placement 7,335,030
Global Sukuk 33,407,500
*Including the issuance of Government Securities Conversion
- Issuance Government Securities Conversion 572,581
- Matured Government Securities Conversion 360,814
Nett Issuance Government Securities Conversion 211,767
56
Indonesia Infrastructure Projects and Financing Schemes
Financing Breakdown (2015 – 2019)
Govt & Local
Budget(41.3%)
Financing Gap
Total Financing
Needs:
~ US$345.1 bn
~ US$142.4bn
SOE
(22.2%)
PPP
(36.5%)
~ US$76.7bn
~ US$126.0bn
Alternative
Financing
Scheme
Establishment of PPP Unit
• Champion project preparation and acceleration of the PPP agenda in Indonesia
Broad
Objective
Core
Mandates
• Improve quality of project selection under KKPPI – OBC criteria
• Support project preparation through PDF support and use a high quality Transaction Advisor
• Act on behalf the Minister of Finance in providing government support approvals for projects
Additional
Mandates
• Coordinate all public finance instruments
• Provide input for PPP Policy Development and Regulations
• Implement capacity building program to GCA
• One stop shop for PPP promotion & Information
New Roads 2,650 km
Highway 1,000 km
Road maintenance46,770
km
Bus Corridors 2
New Sea Ports 24
Sea port developments 59
Railway Lines 2,159 km
Intra City Rail Lines 1,099 km
New Airports 15
Airplanes for new routes 20
Sea Port
Roads
Railways
Airport
Budget Public Private PartnershipState Owned Enterprise
& Private Sector
• Central & Regional
Budget (Special
Allocation Fund &
Rural Transfer)
• Mainly to support
basic infrastructure
projects:
‒ Food Security:
Irrigation, dams
etc.
‒ Maritime:
Seaports,
shipyards etc.
‒ Connectivity:
Village roads,
public
transportation etc.
• Certain infrastructure projects to be funded and operated
through a partnership between the Indonesian government
and private sector companies
‒ Projects Ready for Auction under PPP Scheme:
‒ Toll roads projects such as Balikpapan-Samarinda and
Manado-Bitung
‒ Railway projects such as an Express Line into Soekarno-
Hatta International Airport
‒ Water supply such as West Semarang water supply project
• Government to support the PPP via initiatives:
‒ Land Fund: Modification and simplification of land
acquisition process
‒ Project Development Facility (PDF) through PT Sarana
Multi Infrastructure
‒ Indonesia Infrastructure Guarantee Fund (IIGF): A
mutual government guarantee scheme for infrastructure
risks
‒ Viability Gap Fund (VGF) for PPP projects with near-term
financial constraints
‒ Infrastructure Fund: To offer long term financing for
infrastructure projects
‒ Availability Payment (AP): To allow availability of
infrastructure services provided by PPP companies
• Government to inject
capital into SOEs –
intention is that through a
multiplier effect, more
infrastructure projects can
be developed
• Key focus areas:
‒ Infrastructure and
maritime development
‒ Transportation and
connectivity
‒ Food security
• Medium term
infrastructure
developments in focus:
‒ Water Supply
‒ Airports
‒ Seaports
‒ Electricity and power
plants
‒ Housing
‒ Mining
57
Alternative Source of Infrastructure Financing
2015 – 2019 Infrastructure Plan
SOEs and PPP Become Alternative Source of Funding as Government Budget Could Only Support ~20% of Our Infrastructure Needs
Central & Regional Budget (Special Allocation Fund & Rural
Transfer)
Mainly to support basic infrastructure projects:
► Food Security: Irrigation, dams etc.
► Maritime: Seaports, shipyards etc.
► Connectivity: Village roads, public transportation etc.
Bu
dg
et
Government to inject capital to SOEs – with leveraging process a
multiplier effect, more infrastructure projects can be developed
Key focus areas:
► For commercial and/or complex projects
Medium term infrastructure developments focus: electricity and
power plants, toll road
Sta
te
Ow
ned
En
terp
rises
New Sea Ports – 24
Sea Port Development – 59
Pioneer Cargo Ships
New Airports – 15
Airport Infrastructure
Development
Airplanes – 20 Rail lines – 2,159 km
Intra City Rail Lines – 1,099 km
New Roads – 2,650 km
Highway – 1,000 km
Road Maintainance – 46,770 km
Bus Corridors – 2
Infrastructure Financing Needs2015 - 2019
Scenario 1(Full
Scenario)
Scenario 2(Partial
Scenario)
Baseline(Baseline)
Roads 1,274 851 637
Rail System 278 222 140
Urban Transportation 155 115 75
Sea Transportation 563 424 282
Ferry and Other Waster Transportation 91 80 60
Air Transportation 182 165 100
Electricity 1,080 762 714
Other Energy dan Gas 535 420 268
Waer Resources 1,091 845 645
Water and Sanitation 666 450 330
Public Housing 384 247 180
Information and Communication Technology
242 200 130
Total 6,541 4,781 3,561
Government support for PPP :
► Land Fund: Modification and simplification of land acquisition process
► Project Development Facility (PDF) through PT Sarana Multi Infrastructure
► Indonesia Infrastructure Guarantee Fund (IIGF)
► Viability Gap Fund (VGF)
► Infrastructure Fund & Availability Payment (AP)
Pu
blic P
rivate
Part
ners
hip
An
d P
rivate
Secto
r
Projects Ready for Auction under PPP Scheme:
► Toll roads projects such as Balikpapan-Samarinda, Manado-
Bitung
► Railway projects such as Halim-Soetta Airport Express Railway
► Water supply such as West Semarang water supply project
58
Government Guarantee for Basic Infrastructure Development
1 USD/IDR exchange rate of 13,200
Guarantee Program based on Guarantee Classification
In 2016, Government will add credit guarantee program (i) infrastructure financing
through direct loans from international financial institutions (ii) acceleration of toll
road construction in Sumatera
75,8
67,3
47,2 46,3
69,2
60,0
45,0
3,8
1,1
0,8 2,7
0,2
0,1
0.1
4,5
3,7
3,8
24,5
79,5
68,5
48,0
53,4
73,0
63,9
69,6
2010 2011 2012 2013 2014 RevisedBudget2015
2016
Electricity Development Clean Water Program PPP & Electricity Dev. Project
Budget Allocation for Claims on Government Guarantee (1)
ProgramGuaranteed
Party
No. of
LettersCurrency
Value
(bn)
Outstanding as
of 2015 (bn)
A Credit Guarantee 47US$ 4.0 2.7
IDR 36,007.0 19,138.9
●
Acceleration of coal-
fired power plant
project (10,000 MW) –
stage 1
PLN
11 US$ 4.0 2.7
25 IDR 35,678.7 18,975.7
●Acceleration of drinking
water supply projectPDAM 11 IDR 328.3 163.2
B Investment Guarantee 10US$ 8.2 –
IDR – –
●
Acceleration of coal-
fired power plant
project (10,000 MW) –
stage 2
IPP 9 US$ 5.0 –
●
Government
partnership with
Enterprise
Infrastructure
Guarantee Agency
Private 1 US$ 3.2 –
Total 57US$ 12.1 2.7
IDR 36,007.0 19,138.9
Source: Ministry of Finance
(US$ mm)
1,000.0 889.0 623.3 611.2 913.7 792.0 593.9
50.0 15.0 10.0 35.0 2.2 1.8 0.9
– – – 59.2 48.2 49.7 323.2
(IDR bn equivalent)
59
Financing the Acceleration of Infrastructure Development
• Acceleration of public infrastructure development is partly translated into programs to increase private participation and SOEs involvement
in the development of public infrastructure.
• Ministry of Finance provide a number of financial facilities to attract more private participation as well as to increase the capacity of SOEs
in developing public infrastructure.
Guarantees Amount of Guarantees (IDR mn) Outstanding Exposures (IDR mn) Number of Guarantees
Fast Track Project 1 87,871.54 50,821.29 36
PDAM 328.30 181.32 11
PPP 42,176.00 6,608.98 1
FTP 2 66,982.93 16,538.24 10
SOE Direct Lending 14,498.00 1,581.60 2
Sumatra Toll Roads 1,721.34 - 2
Total 213,578.10 75,731.42 62
Financial Facilities for PPP Projects Financial Facilities for Non-PPP Projects
• Project Development Facility (PDF)
• Viability Gap Fund (VGF)
• Government Guarantees (provided directly by MoF or
through IIIGF)
• Availability Payment scheme
• Government guarantees to SOEs’ loans from IFIs for
the Development Infrastructure Projects
• Government guarantees to SOEs’ loans for the
development of Sumatra Toll Roads
• Business Viability Guarantee Letter for PT. PLN power
projects
• Credit guarantees for Regional Water Companies
So far, the government has provided a number of guarantees to PPP and non-PPP projects as well as developed close monitoring to maintain
the fiscal sustainability. The issued guarantees are currently as follows:
60
PPP Projects
No. Project NameProject
cost (IDR)Financial Facility from MoF Status
1. Central Java Power Plant Project 40 T Guarantee (MoF and IIGF) Financial close on 6 June 2016
2. Umbulan Water Project 2.1 T PDF, VGF and IIGF Guarantee PPP agreement signed on 21 July 2016
3. Bandar Lampung Water Project 900 B PDF, VGF and IIGF Guarantee Feasibility study in progress
4. Palapa Ring Project – West Package 1.28 T IIGF Guarantee and AP Financial Close on 11 August 2016
5. Palapa Ring Project – Central Package 1.38 T IIGF Guarantee and AP Financial Close on 29 September 2016
6. Palapa Ring Project – East Package 5.13 T IIGF Guarantee and AP PPP & guarantee contracts signed on 29 September 2016
7. Minemouth Coal Power Project 9 & 10 80 T Co-guarantee (MoF and IIGF) Bid submission delayed
8. Batang – Semarang Toll Road Project 11 T IIGF Guarantee PPP & guarantee contracts signed on 27 April 2016
9. Manado – Bitung Toll Road Project 5.1 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016
10. Balikpapan – Samarinda Toll Road Project 9.9 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016
11. Pandaan – Malang Toll Road Project 5.9 T IIGF Guarantee PPP & guarantee contracts signed on 8 June 2016
12. Serpong – Balaraja Toll Road Project 6 T - PPP contracts signed on 8 June 2016
13. Pirngadi Regional Hospital Project 546 B PDF and AP Market sounding preparation
14. Bontang Oil Refinery 120 T PDF OBC development
15. Jakarta-Cikampek Toll Road Project 16.4 T Co guarantee (IIGF and MoF) RfP Final on 16 September 2016
16. Krian-Legundi-Manyar Toll Road Project 9.12 T Co guarantee (IIGF and MoF) RfP Final on 16 September 2016
17. Cileunyi-Sumedang-Dawuan Toll Road Project 5.7 T Co guarantee (IIGF and MoF) In-principal co-guarantee approval letter has signed by
Ministry of Finance on 19 September 2016
PDF : Project Development Facility VGF : Viability Gap Fund IIGF : Indonesia Infrastructure Guarantee Fund AP : Availability Payment
With new PPP unit in the Ministry of Finance and some facilities are already in place, some PPP projects already reached the stage of financial
close while more projects are expected to reach that stage in the next few months
61
Non-PPP Projects
No. Project NameProject cost
(IDR mn.)Lender SOE Status
1. Sumatera Power Transmission and Distribution 600 ADB PT. PLN Guarantee is effective
2. Sumatera Power Distrubution 500 World Bank PT. PLN Guarantee is issued but still ineffective
3. The Enhancement of Electricity Grid 330 IDB PT. PLN Proposal has been submitted
No. SectionProject cost
(IDR bn.)Status
1. Medan – Binjai (17 km) 1,604 Financial close
2. Palembang - Indralaya (22 km) 3,301 Financial close
3. Bakauheni – Terbanggi Besar (140 km) 16,795 Finding financing
4. Pekanbaru – Dumai (131 km) 16,210 Finding financing
5. Terbanggi Besar – Pematang Panggang (100 km) 11,871 Pre-FS updating
6. Pematang Panggang – Kayu Agung (85 km) 10,121 Pre-FS updating
7. Kisaran – Tebing Tinggi (60 km) 6,991 Pre-FS updating
8. Palembang – Tanjung Api-api (90 km) 14,289 Pre-FS updating
• To increase SOEs’ capacity in financing infrastructure development, the government not only provided additional capital placement PMN)
but also developed some financial facilities including government guarantees.
• One of the new facilities is the guarantee on direct lending of SOEs to International Financial Institutions for the development of
infrastructure projects. So far, this type of guarantee has been provided as follow:
• The government have also issued government guarantees to loans of PT. Hutama Karya in the development of Sumatra Toll Road,
which comprise as follow:
62
Policy Updates on Infrastructure Financing (as of June 2016)
PPP Projects:
On Government guarantees of direct lending
On the implementation of Presidential regulation number 3/2016 on National Strategic Projects
and Presidential Regulation number 4/2016 on Power Infrastructure Projects
MoF regulation on the Availability Payment Scheme is currently drafted and under discussion in the MoF
A new ammendment of MoF regulation on the provision of infrastructure guarantees is currently being reviewed by
the MoF legal bureau.
An MoF regulation on the government guarantee provision to support both Presidential Regulations is currently being
drafted.
Presidential regulaton and MoF regulation for the legal basis of Guarantees to SOE Direct Lending have been issued
1
2
3
63
Efforts to Accelerate Infrastructure Provision
Improvement on PPP Regulation
By taking into account the growth of PPP project potential, the Government of Indonesia has revised the Presidential Regulation No. 67 of 2005
on PPP and its amendments by issuing the new Presidential Regulation No. 38 of 2015 on PPP on 20 March 2015.
This new Presidential Regulation addresses the constraints which contributes to delays in PPP implementation, such as: PPP for the social
infrastructure; a low quality of pre-feasibility studies; gaps of quality in assets that were partly constructed by the Government; unattractive
investment return scheme; and weak Ministries/Institutions commitment for PPP projects.
The Ministry of National Development Planning has issued the Ministerial Regulation No. 4 of 2015 on the implementation Procedures for a
Public-Private Partnership in Infrastructure Provision. This Ministerial Regulation is a derivative regulation to supplement the Presidential
Regulation No. 38 of 2015 on PPP.
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
64
Efforts to Accelerate Infrastructure Provision (continued)
Regulation improvement to accelerate land procurement process
The Government of Indonesia issued Law No. 2 of 2012 on Land Acquisition for Public Interest, with a purpose to provide certainty about the land
acquisition duration for the Government Contracting Agencies and the Investors. The Law sets an estimated 583 days maximum time to complete
the land acquisition process.
For its implementation, the Law No. 2 of 2012 was supported by the Presidential
Regulation No. 71 of 2012 on Land Acquisition Implementation for Developing Public
Facilities, which has been revised into the Presidential Regulation No. 30 of 2015. The
Amendment to the Regulation allows a Business Entity to allocate funding for a land
acquisition which can be reimbursed by the Government following the completion of land
acquisition process. With this Regulation, the land acquisition process is expected not to
be delayed by the unallocated budget or the delay on the budget disbursement.
Land Procurement Process as Stipulated in Law No. 2 of 2012
Source: Committee for Acceleration of Priority Infrastructure Delivery (KPPIP)
Credible Monetary Policy Track Record and Favourable Financial Sector
Monetary and Financial Factor:5
66
Bank Indonesia Policy Mix: 2015 - 2016
18 March 2016
• Cut BI Rate 25 bps to
6.75%
• Cut DF & LF Rate at 4.75%
& 7.25% respectively
18 February 2016
• Cut BI Rate 25 bps to
7%
• Cut DF & LF Rate at 5%
& 7.5% resp.
• BI lowered the rupiah
denominated primary
reserve requirement by
1%, from 7.5% to 6.5%,
effective from 16th
March 2016
16 June 2016
• Cut BI Rate 25 bps to 6.5%
• Cut DF & LF Rate at 4.5% & 7.0%
respectively
• Relaxed the loan-to-value ratio (LTV) and
financing-to-value ratio (FTV) on housing
loans/financing
• Relaxed partially prepaid loans/financing
• Raised the floor on the Reserve
Requirement - Loan to Funding Ratio (RR-
LFR) from 78% to 80%, with the ceiling
maintained at 92%. The change was
effective on August 2016.
21 April 2016
• Held BI Rate at 6.75%, and
maintained DF & LF Rate at 4.75% &
7.25% respectively.
• Reformulated policy rate from BI
Rate into the 7 day (Reverse) Repo
Rate to improve the effectiveness of
monetary policy transmission. The
change was effective on August 19th
2016
14 January 2016
• Cut BI Rate 25 bps to
7.25%
• Cut DF & LF Rate at
5.25% & 7.75% resp.
• BI lowered its monetary
operation rates even
further, ranging from
25bps to 45bps (O/N to
1Y)
19 August 2016
• Held BI 7-day RR
Rate and DF Rate
at 5.25% and
4.5%
• Cut LF Rate to
6.00%.
21 July 2016
• Held BI Rate at 6.5%, and maintained BI 7-
day RR Rate, DF & LF Rate at 5.25%, 4.5%
& 7.00% respectively.
• BI continued to conduct financial market
deepening by introducing new investment
and hedging products in the financial
market, strengthened monetary
management strategies, and encouraged
the real sector to make optimal use of
repatriation funds to support the
implementation of the 2016 Tax Amnesty
Law
17 November 2015
Lowered IDR
Primary RR by
50bps from 8.0% to
7.5%. Effective
since 1 Dec 2015
22 September 2016
• Lowered BI 7-day RR
Rate to 5.0%
• Lowered DF and LF
Rate to 4.25% and
5.75%
20 October 2016
• Lowered BI 7-day RR
Rate to 4.75%
• Lowered DF and LF Rate
to 4.00% and 5.50%
67
Bank Indonesia Policy Mix: October 2016
The BI Board of Governors agreed on 20 October 2016 to lower the BI 7-days Repo Rate to 4.75%,
as well as the Deposit Facility at 4.00% and cut the Lending Facility rates to 5.50%
Lower the BI 7-
day Repo Rate
to 4.75%
Convinces that
monetary and
macroprudential
policy easing will
catalyse credit growth
in order to stimulate
economic growth
moving forward
Remains vigilant towards global
developments, specifically downward
correction on US growth, as well as
expected adjustment of the Federal
Funds Rate (FFR), Europe’s labour
market improvements that led to
stronger growth than previously
expected, stronger economic growth in
India and the continuation of the
international commodity prices
improvement
Continues to coordinate
with the Government in
ensuring that inflation
control, growth stimulus
strenghtening, and
implementation of structural
reform, are well underway
to support sustainable
economic growth
Maintains exchange
rate stability in line
with the currency’s
fundamental value
68
Enhancement of Monetary Operations Framework
Bank Indonesia will enhance themonetary operations framework that issupported by the deepening of thefinancial markets in order to strengthenthe transmission of monetary policy.
BI RATE
• BI Rate reflects monetary policystance as a tool to anchor economicagent’ inflation expectations
• BI Rate is used as a benchmarkinterest rate for transactions infinancial markets and eventually toinfluence general interest rate
• BI Rate effectively affect bankinginterest rate
• Excess liquidity due to massivecapital inflows post 2008 globalfinancial crisis draw down overnightinterbank rates around DF Rate.Meanwhile, the BI rate is currentlyaround 9-12 months OM instrument.
• The shallow financial markets alsoinhibit the transmission of monetarypolicy.
CHALLENGES
ENHANCEMENT
BI rate as reference rate
Challenges: Transmission of
monetary policy is less effective
Enhancement of monetary operations
framework
12 months
(equivalent)7 day
Non-TransactionalTransactional
(Central Bank)
Not optimally
reflected in money
market interest rates
Stronger relationship
to the money market
interest rates
Cost of being
illiquid is lower,
support financial
deepening
BI rate BI 7-day repo rate
OMO term structure
Character
Transmission
Financial Deepening
Cost of being illiquid is too
high, does not support
financial deepening
69
Stable Monetary Environment Despite Challenges
Source: Bank Indonesia
Rupiah Exchange Rate Remains Comparable to Peers
YTD 2016* vs. 2015
Strengthened Monetary Policy
(%)
Credit Growth Supported by Macroprudential Policy
Managed Core Inflation Over The Past Few Months
3.07
(0.36)
(%)
-1
4
9
14
19
1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9 11 1 3 5 7 9
2011 2012 2013 2014 2015 2016
CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)
8.2%
4.7%
6.8%
9.4%
0%
5%
10%
15%
20%
25%
30%
35%
40%
1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8
2013 2014 2015 2016
Total Growth Working Capital loansInvestment Loans Consumption Loans
YoY
-3,22
-2,45
-0,69
2,89
3,76
4,19
5,62
6,71
13,92
21,41
-6,00 -3,00 0,00 3,00 6,00 9,00 12,00 15,00 18,00 21,00 24,00
PHP
TRY
INR
EUR
MYR
THB
IDR
KRW
ZAR
BRL
%* data as of 30 Sept 2016
3,0
3,5
4,0
4,5
5,0
5,5
6,0
6,5
7,0
7,5
8,0
Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Okt-16
LF Rate BI Rate BI-7Day RR Rate DF Rate
LF Rate: 7.00
LF Rate:
5.50
BI Rate: 6.50
BI 7Day RR Rate:
4.75
DF Rate: 4.50
DF Rate:
4.25
19 August 2016
The New
Monetary
Operation
Framework
3.21
6.51
70
Financial Intermediaries Development
The has been an improvement in the growths of bank loan & multifinance financing, in line with the improving growth in H2-2016. Capital
raising from the capital market is relatively stable amidst the fluctuating market. Meanwhile, gross premium in the insurance industry is
continuously expanding.
Source: OJK
The growth of financing distributed by multifinance companies
demonstrates an improvement as well, after contracting in 2015
Gross premium revenue in the domestic insurance industry also
demonstrates a positive development in 2016Capital raising through IPOs, rights issues, and corporate bond
issuance in the capital market is relatively stable
After four consecutive years of declining growth (2012-2015), there is
a slight improvement in banking loan growth in 2016
IDR tn IDR tn
IDR tn IDR mn
71
Financial Institutions Remain Robust and Less Vulnerable
Source: OJK
Banking sector’s capital adequacy ratio (CAR) is maintained high
Risk-based capital (RBC) of the insurance industry also remains
high, well above the minimum threshold
Gearing ratio of multifinance companies is well below the maximum
requirement, providing ample room for future growthProfitability of the banking sector is relatively stable
Financial performance of domestic financial institutions generally remains robust. Capital adequacy is well above the minimum
requirements. Profitability and leverage are maintained at a sufficient level. Further, gearing (debt-to-equity) ratio of multifinance
companies provides ample room for future growth.
%
%
72
Adequate Liquidity, Manageable Credit Risks
Source: OJK
Banks are found to possess adequate liquid assets to anticipate depositors’ withdrawal. Insurance industry also demonstrates an enhanced
level of investment adequacy ratio. The non-performing loan/financing (NPF/NPL) ratio is also maintained below the threshold.
The ratio of liquid assets to deposits in the banking sector is well
maintained at a high level
Non-performing loan (NPL) in the banking sector remains at a low level.
The gross & net NPL ratio are 3.2% & 1.5% respectively
NPF ratio in the multifinance industry is 2.2%, maintained below the
5% threshold
Investment adequacy ratio in the insurance industry is maintained
above 100%
%
% %
73
Manageable Market Risk Amidst Fluctuations
Source: OJK
Being exposed to fluctuations in the securities market and IDR exchange rate, financial institutions demonstrated resilience in dealing with
such risks. Net open position of the banking sector remains low, while the investment value of domestic institutional investors (mutual funds,
insurers, and pension funds) continues to expand. Multifinance companies’ exposures to the exchange risks have generally been mitigated
through hedging measures.
Net open position in the banking sector is kept far below the
maximum requirement (20%)
Amidst the fluctuating market in recent periods, the investment
value of insurers & pension funds continues to expand
Multifinance companies’ exposures to foreign debt have generally been
mitigated through hedging measures
The movement of mutual funds’ net asset value (NAV) is in line with
the market index, but with much lower volatility
IDR tn
IDR tnIDR tnIDR tn
IDR tn
74
Capital Market Demonstrate Strengthening Trend
Volatility in the domestic capital market tends to ease in 2016. The market indices are back to a strengthening trend, accompanied by
significant nonresident capital inflows. In the government bond market, 2016 also witnessed a remarkable decline in the bond yields.
Source: Bloomberg, IBPA, Indonesia Stock Exchange, Ministry of Finance
Both the stock & bond indices demonstrated a strengthening index in
2016, supported by favorable domestic environment
In line with the stabilizing IDR and improving domestic prospects, the
government bond yield continues to decline
Despite uncertain external factor, favorable domestic environment
attracts nonresident inflow especially in Q3
The IDX Composite Index demonstrated a positive growth and listed
among the best-performing indices (ytd) in the region
Yield (%)IDR tn
75
Macroprudential Policy Mix to Support Growth
Effective from August 29th, 2016, Bank Indonesia relaxed the Loan to Value Ratio (LTV) and Financing to Value Ratio (FTV) on housing
loans at 85-90% for the first mortgage lending facility, 80-85% for the second mortgage lending facility, and 75-80% for the third mortgage
lending facility.
Housing Loans and Financing
Based on Murabahah and Istishna Contracts
Property
type (m2)
Lending/Financing Facility
First Second Third
House
>70 m2 85% 80% 75%
22 - 70 m2 - 85% 80%
<21 m2 - - -
Apartment
>70 m2 85% 80% 75%
22 - 70 m2 90% 85% 80%
<21 m2 - 85% 80%
Home
Shop/Office- 85% 80%
Housing Financing Based on MMQ and IMBT Contracts
Property
type (m2)
Lending/Financing Facility
First Second Third
House
>70 m2 90% 85% 80%
22 - 70 m2 - 90% 85%
<21 m2 - - -
Apartment
>70 m2 90% 85% 80%
22 - 70 m2 90% 85% 80%
<21 m2 - 85% 80%
Home
Shop/Office- 85% 80%
The relaxation is only applicable to banks with nett NPL for total loan below 5% and gross NPL for property loan/financing below 5%.
The rationale is to stimulate domestic demand in order to drive domestic economic growth momentum while maintaining compliance to
prudential principles.
76
A Comprehensive Financial Deepening Program...strategy to tackle challenges in deepening Indonesia’s financial markets
Source: Bank Indonesia
Financial Market Deepening Program
First Priority:
Continuous BasisMarket Development Coordination
Monitoring, match
making, and solution:
• Repo
• Hedging
Money Market
• Bank Indonesia Regulation (PBI) on Money Market
Encourage well-functioning money market (deep and efficient, risk mitigation, and market integrity),
• Bank Indonesia Regulation (PBI) on Negotiable Certificate of Deposit (NCD)
Enriching money market instruments, encourage banks to raise long term funding, and acts as an alternative investment for
investors
• Bank Indonesia Regulation (PBI) on Commercial Paper
Alternative sources of financing for non-bank corporations, as well as an investment outlet for investors
FX Market
• Swap Link Deposit
a combination of foreign currency deposits with FX Swap against the rupiah.
• Dual Currency Deposit
a combination of assets (deposits) and derivatives (FX Options).
• Corporate Bonds
• Government
Bonds
• Other instruments
Supporting Regulations
Market Code of Conduct Certification of DealerStrengthening JIBOR
• More comprehensive code of conduct
• The use of technology and public security
• Obligation on certification for dealers
• Dealers’ training for certification
• Extension of window time
• Increase in IDR nominal
• Lengthening tenor of up to 3 months
Inter-agency Cooperation
Signing of MoU on April 8th, 2016, between MoF, BI, and
OJK on Coordination in the Context of Financial Markets
Development and Deepening to Support National
Development Financing
The Signing of this MoU is driven by the need for:
• Sufficient development financing,
• Financial markets deepening, and
• Good coordination among related institutions
77
Stronger Fundamentals Facing the Headwinds
82,4
12,1
6,8
1998
2008
Sep-15
197,0
35,0
15,5
1998
2008
Sep-15
30,0
3,8
2,8
1998
2008
Agu-15
17,4
50,2
1998
2008
Sep-15
Inflation Rate IDR Depreciation
Non-Performing Loan (NPL)
Government Debt/GDP
Foreign Reserves
100.0%
1998
27.4%
200818.0%
Q2-2016
8.6x
1998
3.1x
2008 2.9x
Q2-2016
116.8%
199833.2%
200836.8%
Q2-2016
More Liquid Market
External Debt (Public &
Private) to FX Reserve RatioExternal Debt/GDP
Inflation controlled under the revised
Budget targetDepreciation rate lower than 1998 & 2009
NPL level is below the maximum threshold of 5%
Continue to decline and allocated to
productive sectors
Significantly higher than 1998 & 2008, ample to cover
8.5 months of import and external debt repayment
Significantly lower than 1998 crisisSlightly higher than 2008, but
significantly lower than 1998
Sep 16 5.62 (ytd) Sep 16 115.7Sep 16 3.07 (yoy)
Aug 16 3.2
62
10,55,7
1998 2008 Jul-15
Overnight interbank money market rate
is relatively lower
Sep 16
4.95
78
Outlook of Domestic Economy Improves...domestic economic growth is predicted to be higher in 2016
2016 Economic Outlook
Economic growth expected to increase, supported by fiscal stimulus linked specifically to accelerated infrastructure project
development. Private investment is expected to increase as a result of government policy packages and measurable
monetary easing
Inflation projected at the midpoint of the 4±1% inflation target, with the current account deficit is projected below
3% of GDP
Credit is projected to grow 7-9% in line with looser monetary and macroprudential policy mix as well as acceleration of
fiscal stimulus
2015
2016
4.79%
Economic Growth
4.9-5.3%
Inflation
3.35%
4.0±1%
CAD (% GDP)
2.06%
<2%
Credit Growth
10.45%
7-9%