The Republic of Indonesia Recent Economic Developments

Transcription

1 The Republic of Indonesia Recent Economic Developments June 2013

2 About Investor Relations Unit (IRU) ABOUT THE REPUBLIC OF INDONESIA INVESTOR RELATIONS UNIT The Republic of Indonesia Investor Relations Unit (IRU) has been established as the join effort between the Coordinating Ministry of Economic Affairs, Ministry of Finance and Bank Indonesia in The main objective of IRU is to actively communicating Indonesian economic policy and address concerns of investors, especially financial market investors. IRU is expected to serve as a single point of contact for the financial market participants. As an important part of it communication measures IRU maintains a website under Bank Indonesia website which is being administrated by the International Department of Bank Indonesia. However, investor relations activities involve a coordinated efforts which are supported by all relevant government agencies, namely Bank Indonesia, the Ministry of Finance, the Coordinating Ministry for Economic Affairs, Investment Coordinating Board, Ministry of Trade, Ministry of Industry, State Ministry of State Owned Enterprises, Asset of State Management Company and the Central Bureau of Statistics. IRU also hold an investor conference call on a quarterly basis, answers questions through , 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: Bimo Epyanto (International Department - Bank Indonesia, Phone: ) Siska Indirawati (Fiscal Policy Office Ministry of Finance, Phone: ) Singgih Gunarsa (Debt Management Office - Ministry of Finance, Phone: ) contactiru-dl@bi.go.id 1

3 Table of Content Executive Summary Improved International Perception and Rising Investment Preserved Macroeconomic Stability to Support Further Growth Prudent Fiscal Management Improved Government Debt Position 2

4 Executive Summary 3

5 Executive Summary Indonesia's economy in Q is projected to grow in the the lower bound of 5.9%-6.1%. The economic growth is primarily driven by continuous strong household consumption and investment in construction. Lower global economic growth has restrained the growth of export and investment, especially nonconstruction investment. Economic growth is forecasted to arrive at the lower band of 6.2% -6.6% in Domestic Direct Investment (DDI) and Foreign Direct Investment (FDI) still experienced robust growth in Q1-2013, reflecting Indonesia s solid fundamentals and positive sentiment from investors part. The distribution of investment activities outside Indonesia s most populous island (Java) was also increased, which create more added values of domestic goods/services in order to accelerate the quality of national economic growth. Indonesia's balance of payments (BOP) is expected to improve in Q as a result of considerable surplus in the capital and financial account, despite a deficit in the Q International reserves at the end of May 2013 reached US$105.1 billion, equivalent to 5.8 months of imports and government s external debt services, above the adequacy level of international standard. Consumer Price Index (CPI) in May 2013 recorded a deflation at -0.03% (mtm) or 5.47%(yoy). Supported by a sound policy mix, together with increasingly close coordination with the government, inflation in 2013 is expected to remain controlled within its target corridor of 4.5%±1%. On the fiscal front, Indonesia continues to perform prudent fiscal management in Q with strong commitment to fiscal consolidation, aiming on continue declining in debt-to-gdp ratio, diversifying government debt profile, and reducing funding reliance on international capital market. Q budget deficit realization is maintained at a safe level of 0.2% of GDP (unaudited). Financial system stability remained solid with improved intermediation function within prudential manner as indicated by high capital adequacy ratio (CAR) which is well above the minimum level of 8% and gross non-performing loan (NPL) below 5%. As of April 2013, credit growth slowed down to 21.9% (yoy). Investment loan recorded the highest growth of 23.7% (yoy), in line with the increase in investment. In the Board of Governors' Meeting convened on June 13th, 2013, Bank Indonesia decided to raise the BI rate by 25bps to 6.00% while maintaining the deposit facility and lending facility rates at 4.25% and 6.75%, as a pre-emptive response to rising inflation expectations. Bank Indonesia believes that the implementation of policy mix together with strengthen coordination with the Government will be able to maintain macroeconomic and financial system stability and sustainable economic growth amid increasing uncertainty in global markets. 4

6 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Executive Summary GDP Growth Inflation * Bank Indonesia projection Balance of Payments Foreign Exchange Reserves billion USD Indonesia's Balance of Payments billion USD Billion USD * Curr. Account Overall Balance Cap & Fin. Account Reserves Assets (RHS) Source: Bank Indonesia

7 Executive Summary Debt to GDP Ratio (% of GDP) Debt Composition 40% 35,2% 33,1% 28,3% 120% 30% 26,1% 24,3% 24,0% 23,1% 100% 80% 47% 47% 52% 47% 46% 45% 44% 43% 20% 60% 10% 40% 20% 53% 53% 48% 53% 54% 55% 56% 57% 0% * 2013** 0% May-13 Domestic Debt Foreign Debt Table of Debt to GDP Ratio End of Year GDP , , , , , , ,3 Debt Outstanding (billion IDR) , , , , , , ,8 - Domestic Debt (Loan+Securities) , , , , , , ,2 - Foreign Debt (Loan+Securities) , , , , , , ,6 Debt to GDP Ratio 39,0% 35,2% 33,1% 28,4% 26,1% 24,4% 24,0% - Domestic Debt to GDP Ratio 20,8% 18,7% 15,8% 14,9% 14,1% 13,4% 13,3% - Foreign Debt to GDP Ratio 18,2% 16,5% 17,2% 13,5% 12,1% 11,0% 10,6% *: Realization December 2012 (unaudited) **: Budget 2013 Source: Ministry of Finance 6

8 2013 Policy Summary Government coordinates policy tools to maximize growth with macroeconomic management Revenue and tax policy An Increase of non-taxable income threshold by 54%, from Rp15.8 million to Rp24.3 million. Extend and widen tax base through tax extensification. VAT tariff adjustment for a number of luxury goods. Improve monitoring and service in custom & excise. Excise tax extensification and intensification. Fiscal incentives provision for strategic economic activities i.e. Hybrid and low carbon emission motor vehicles. Monetary policy Raise the policy rate by 25bps to 6.00% from 5.75% as a preemptive response to rising inflation expectations. Maintain IDR exchange rate stability Strengthen monetary policy by implementing monetary and macroprudential policy mix Deepening of the foreign exchange market Expenditure policy Prioritize capital expenditure allocation to support infrastructure development. Reallocate consumptive spending to more productive activities. Increase infrastructure spending to support energy and food security, domestic connectivity, and tourism. Redesign subsidy policy from price subsidy to targeted subsidy. Improve budget disbursement Financing and debt management policy Prioritize funding from domestic market and financial institutions Debt instruments development Active government bonds portfolio management Selective external loan only for priority projects/needs Implementation of the Crisis Management Protocol and the establishment of Financial System Stability Coordination Forum (FKSSK) 7

9 Improved International Perception and Rising Investment 8

10 Improving International Perception: Acknowledged by Rating Agencies Resilient economy, which impressively navigates through the global crisis and continued confidence in economic outlook, the Republic continued to receive good reviews. S&P (May 2, 2013): affirmed Indonesia s sovereign credit rating, at BB+ level for long-term and B level for short-term and revised its outlook to stable from positive. S&P stated that stable outlook on Indonesia reflects the weakened policy environment and external pressures are fairly balanced against the country's strong growth prospects, conservative fiscal policy, and favorable debt trajectories. Fitch Ratings (November 21, 2012): affirmed Indonesia's sovereign credit rating at BBB- level with stable outlook. The key factors supporting the decision of affirming Indonesia s sovereign credit rating are the relatively high economic growth that is resilient to the declining global condition, high investment rate, low and declining public debt ratios and the strong overall macroeconomic policy framework. Japan Credit Rating Agency, Ltd (November 13, 2012): affirmed Indonesia s foreign currency long-term senior debt at BBB- and local currency long term senior debt BBB with stable outlook. JCR stated that key factors supporting the decision of affirmation the sovereign credit rating of Indonesia (1) the country s sustainable economic growth outlook underpinned by solid domestic demand, (2) low level of public debt burden brought by prudent fiscal management, (3) reinforced resilience to external shocks by its accumulated foreign exchange reserves. Rating and Investment Information, Inc (October 18, 2012): upgraded Sovereign Credit Rating of the Republic of Indonesia to BBB-/stable outlook. R&I stated key factors supporting the decision of upgrading the sovereign credit rating of Indonesia:(1) Indonesian economic resilience in achieving high growth amid the global economic downturn (2) conservative fiscal management (3) Government s debt burden is kept low and (4 ) financial system has become more stable. Moody s Investors Service (January 18, 2012): upgraded Republic of Indonesia s foreign and local-currency bond ratings to Baa3 with stable outlook. Moody's stated the key factors supporting this action were (1) Moody s anticipation that government financial metrics will remain in line with Baa peers (2) The demonstrated resilience of Indonesia s economic growth to large external shocks (3) The presence of policy buffers and tools that address financial vulnerabilities and (4) A healthier banking system capable of withstanding stress. 9

11 Rating agencies comments Rating history Sovereign Rating History Solid economic fundamentals supported the improvement of Indonesia s sovereign credit rating since 2001 Baa3/ Stable BB+ / Stable BBB- / Stable Moody s 18 January 2012 Indonesia s cyclical resilience to large external shocks points to sustainably high trend growth over the medium term. A more favorable assessment of Indonesia s economic strength is underpinned by gains in investment spending, improved prospects for infrastructure development following key policy reforms, and a well managed financial system. S&P 2 May 2013 The rating on Indonesia fairly balances institutional and external constraints with a strong growth prospects, conservative fiscal policy, and favorable debt trajectories. The revised outlook from positive to stable signals the diminished potential for an upgrade due to the stalling of reform momentum and a weaker external profile. Fitch 21 November 2012 The key factors supporting the decision of affirming Indonesia s sovereign credit rating are the relatively high economic growth that is resilient to the declining global condition, high investment rate, low and declining public debt ratios and the strong overall macroeconomic policy framework. 10

12 Positive Perceptions from International Institutions McKinsey Report (The Archipelago Economy: Unleashing Indonesia s Potential), September 2012 Indonesia will be the 7th largest economy in the world in 2030, and additional 90 million Indonesians could join the global consuming class (individuals with net income of more than US$ 3,600 per annum in PPP). Over the past decade, compared with any advanced countries in OECD and BRIC plus South Africa, Indonesia has had the lowest volatility in economic growth, fallen debt to GDP ratio (5th lowest), and third strongest economic growth after China and India. To achieve growth target, Indonesia needs to push labor productivity, address social gap issue and manage increasing demand. IMF (Article IV Consultation), September 2012 Indonesian economic growth will remain solid, at 6 percent in 2012, but strong domestic demand may push inflation to 5 percent by end year. The main risks to the outlook stem from a sharper-than-envisaged slowdown in external demand and risk aversion spikes, stemming either from an intensification of the Euro area crisis or a hard landing in China. Overall, though, the economy s strong fundamentals and ample fiscal and reserve buffers should enable Indonesia to manage these risks. Fiscal reforms must become a priority by speed up budget implementation, and replace energy subsidies with direct cash assistance, to create infrastructure, health and education improvement. OECD Economic Survey Indonesia, September 2012 The real GDP is projected to grow at 6,0% in 2012 and 6,2% in 2013, while the current account is projected to contract 0,8% in 2012 due to the imports growth especially for capital goods. The main risks to the short-term outlook are external. Increased global risk aversion, could reverse the capital inflows of the past few years, endangering the financing conditions for government and banks alike and cutting growth. The key challenges to achieving growth targets is raising infrastructure fund, social spending and tax revenue, also lowering energy subsidies. Further institutional and policy reform would boost productivity growth and help the government reach its objective of becoming one of the 10 largest economies in the world by World Bank Indonesia Economic Quarterly, March 2013 Indonesia s economy continued to grow at a steady pace in the final quarter of 2012, taking full-year GDP growth to 6.2 percent, a resilient performance considering the weak global environment and unsettled financial market conditions which prevailed for much of the year. Indonesia should be able to maintain a solid pace of growth, but there is no room for complacency, as a number of pressures are mounting which could move the economy off this trajectory. 11

13 Preserved Macroeconomic Stability 12

14 Robust and Stable Economy Continues to Chart Strong Growth Indonesia's economy in Q is projected to grow in the lower bound of 5.9%-6.1%. The economic growth is primarily driven by continuous strong household consumption and investment in construction. Lower global economic growth has restrained the growth of export and investment, especially nonconstruction investment. Economic growth is forecasted toward the lower range of 6.2% -6.6% in Forecast of Economic Growth - Demand Side S e c t o r I II III IV I II* 2013* 2014* Private Consumption Government Consumption Gross Fixed Capital Formation Exports of Goods and Services Imports of Goods and Services GDP Forecast of Economic Growth - Supply Side S e c t o r I II III IV I II* 2013* 2014* Agriculture Mining and Quarrying Manufacturing Electricity, Gas, and Water Supply Construction Trade, Hotels, and Restaurant Transportation and Communication Financial, Rental, and Business Services Services GDP Source: Bank Indonesia Economic growth is forecasted to arrive at the lower band of 6.2% -6.6% in

15 Young and Dynamic Population Rising young and dynamic population marked by decreasing dependency ratio that will continue on until Rising income per capita and growing ranks of the middle income class. Labor force participation rate is nearly 70% and open unemployment rate only 6.3% (February 2012), -0.5% yoy. Fourth Largest Population in the World Dependency Ratio Keeps Falling Until 2025 China 1.3 billion India 1.2 billion US 0.31 billion Indonesia 0.24 billion Increasing Middle Income Class Population Rising GDP per capita (USD) Source: BPS, Bappenas, UNPP, McKinsey Notes: Based on purchasing power parity per capita GDP, * Estimate 14

16 Investment is Becoming the New Engine of Growth Investment both by domestic and foreign direct investors continues on the expanding trend, supporting economic growth at a time of slowing down exports Investment of GDP (%) Direct investment growth (%, yoy) 15

17 Strong Investment Underpinned by Competitiveness and Stability The investment realization on Q is Rp 93.0 trillion consisted of Rp 27.5 trillion of Domestic Direct Investment (DDI) and Rp 65.5 trillion of Foreign Direct Investment (FDI). It increases 30.6% compared to the same period in The distribution of project location from January to March 2013 outside of Java is Rp 44.4 trillion or 47.7% from total investment realization. Compared to the same period in 2012 it increases around 32.1%. Realized Foreign Direct Investment (USD billion) Realized Domestic Direct Investment (USD billion) Source: BKPM Source: BKPM 16

18 Strong Investment Underpinned by Competitiveness and Stability FDI Realization by Location Q (USD Million) DDI Realization by Location Q (USD Million) FDI by Countries Q (USD Million) Source: BKPM 17

19 Strong Investment Underpinned by Competitiveness and Stability FDI By Sector (USD million) Source: BKPM 18

20 The Inflation Remains Under Control Inflation has fallen sharply, reaching a single digit in last decade. Core inflation has been fairly stable in the last 3 years at around 4%. Going forward, In addition to enhancing its policy mix, Bank Indonesia will strengthen coordination with the government to address rising inflation expectation to ensure inflation in 2013 remain controlled within its target corridor. Inflation by component 12.06% 3.99% 3.62% 5.46% Source: Bank Indonesia 19

21 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1** Balance of Payments Q1/2013 Indonesia's external balance improved in Q1/2013 as reflected in the reduced current account deficit at 2.4% of GDP, compared to the previous quarter's deficit of 3.5% of GDP. Meanwhile, the capital & financial account recorded a US$1.4 billion deficit in line with Bank Indonesia policy for bolstering supply of foreign currency for oil import payment. The deficits in both the current account and the capital & financial account resulted with the overall balance of payments deficit of US$6.6 billion. As a consequence, the international reserves position at the end of March 2013 eased to US$104.8 billion, equivalent to 5.7 months of imports and servicing of government external debt. billion USD Balance of Payments Indonesia's Balance of Payments billion USD * 2013 Source: Bank Indonesia Curr. Account Overall Balance Cap & Fin. Account Reserves Assets (RHS) 20

22 Exchange Rate In May 2013, by average Rupiah depreciated by 0.36% (mtm) to Rp9.758 per USD from the previous month which was recorded at Rp per USD. In the future, Bank Indonesia will continue to maintain the stability of Rupiah exchange rate consistent with its economic fundamentals and provides adequate liquidity in the foreign exchange market. Rupiah Exchange Rate Monthly Appreciation/Depreciation of Regional Currency & Euro Source: Bank Indonesia 21

23 Monetary Policy Stance In the Board of Governors' Meeting convened on June 13th, 2013, Bank Indonesia decided to raise the BI rate by 25bps to 6.00%. The current policy rate is a pre-emptive response to rising inflation expectations and considered consistent with inflation forecast within the target range of 4.5%±1% in 2013 and Going forward, Bank Indonesia remains vigilant on some risk factors from the global economy, and will strengthen policies to manage external balance to a sustainable level while also providing support for economic growth. BI Rate Source: Bank Indonesia 22

24 Sound Financial Sector Supported by various policies implemented by Bank Indonesia, banking industry has been more resilient, as indicated by secure level of CAR above the minimum level of 8% (18.6% at the end of April 2013) and gross NPLs managed at comfortably safe level below 5% (1.96% at the end of April 2013). Further improvement in banking intermediation is also reflected in progressively improving credit growth, recorded in April 2013 at 21.9% (yoy), in which investment credit, working capital credit, and consumption credit grew by 23.7% (yoy), 23.0% (yoy), and 18.8% (yoy), respectively. Steady Loan Growth Capital Adequacy Ratio (CAR) Comfortably High NPL (gross) Historically Low Steady Loan-to-Deposit Ratio Source: Bank Indonesia 23

25 Prudent Fiscal Management 24

26 Fiscal Policy Directions Government Work Plan (RKP) Theme Strengthening Domestic Economy for Social Welfare Improvement and Extension Pro Growth 4 Pillars of Development Pro Job Pro Poor Fiscal Policy Direction Pro Environment Encouraging Sustainable Economic Growth through Fiscal Restructuring Optimize State Revenue Improve spending quality Control budget deficit Reduce Debt Ratio to GDP 25

27 2013 Macroeconomic Assumption Indicators APBN RAPBNP APBNP Economic Growth (%) Exchange Rate (Rp/US$) 9,300 9,600 9,600 Inflation (%) Interest rate/ 3 months T-bills rate (%) Oil Price ICP (US$/barrel) Oil Lifting (thousands barrel/day) Gas Lifting (thousands barrel/day oil equivalent) 1,360 1,240 1,240 Subsidized fuel consumption 46 jt KL 48 jt KL 48 jt KL Note: APBN : Original Budget RAPBNP: Proposed Revised Budget APBNP: Revised Budget 26

28 2013 Revised Budget POSTUR SEMENTARA APBNP 2013 ITEMS (Rp Trillion) (triliun rupiah) APBN RAPBNP APBNP A. STATE REVENUES A. PENDAPATAN NEGARA 1.529, , ,0 I. DOMESTIC PENDAPATAN REVENUES DALAM NEGERI 1.525, , , TAX PENERIMAAN REVENUE PERPAJAKAN 1.193, , , NON PENERIMAAN TAX REVENUE NEGARA BUKAN PAJAK 332,2 344,5 349,2 II. GRANTS PENERIMAAN HIBAH 4,5 4,5 4,5 B. STATE EXPENDITURES B. BELANJA NEGARA 1.683, , ,2 I. I Central Belanja Government Pemerintah Expenditures Pusat 1.154, , ,8 1. Line Belanja Ministries K/L 594,6 587,4 622,0 2. Non Belanja Line Ministries Non KL 559,8 605,9 574,8 i.e. a.l Fuel, - Subsidi LPG & biofuel BBM, LPG subsidy & BBN 193,8 209,9 199,9 II. II. Transfer TRANSFER to Regions KE DAERAH 528,6 528,7 529,4 1. Balance Dana Fund Perimbangan 444,8 444,9 445,5 a.l i.e. Revenue Dana Bagi Sharing Hasil 102,0 102,1 102,7 2. Special Dana Autonomy Otonomi & Khusus Adjustment dan Fund Penyesuaian 83,8 83,8 83,8 EDUCATION TOTAL ANGGARAN BUDGET TOTAL PENDIDIKAN , , ,1 EDUCATION Rasio Anggaran BUDGET Pendidikan RATIO (%) Total (%) 20,0 20,0 20,0 C. PRIMARY BALANCE D. SURPLUS/DEFICIT (A - B) C. KESEIMBANGAN PRIMER (40,1) (120,8) (111,7) D. SURPLUS DEFISIT ANGGARAN (A - B) (153,3) (233,7) (224,2) % Deficit Defisit of GDP terhadap (%) PDB (1,65) (2,48) (2,38) E. FINANCING (I+II) E. PEMBIAYAAN (I + II) 153,3 233,7 224,2 I. DOMESTIC PEMBIAYAAN FINANCING DALAM NEGERI 172,8 250,6 241,1 a.l i.e. Accumulated - SAL cash surplus (SAL) 10,0 30,0 30,0 - Government Surat Berharga Bonds (Nett) Negara (neto) 180,4 241,3 231,8 II. II. FOREIGN PEMBIAYAAN FINANCING LUAR (NETT) NEGERI (neto) (19,5) (16,9) (16,9) i.e. a.l Program - Pinjaman Loan Program 6,5 11,1 11,1 SURPLUS/(DEFICIT) FINANCING KELEBIHAN/(KEKURANGAN) PEMBIAYAAN (0,0) 0,0 0,0 Source: Ministry of Finance 27

29 Croatia, BBB- Indonesia, BB+ France, AA+ Iceland, BBB- Australia, AAA Uruguay, BBB- Colombia, BBB- Median, BBB- India, BBB- United Kingdom, AAA Morocco, BBB- Favorable current macro conditions is supported by prudent fiscal management Indonesia Fiscal Deficit 2012 Fiscal Balance (% of GDP) years average 0.99% Revised Budget (1.2) (1.8) (2.1) (2.7) (2.8) (2.9) (2.9) (2.9) (3.0) (3.6) (8.2) Indonesia's low budget deficit compared to developing Asia and developed economies are beneficial as buffers against potential vulnerabilities. In the last 8 years, Indonesia budget deficit averaged at 0.99 %. 28

30 Indonesia s Fiscal Policy in Mitigating Global Crisis Crisis Prevention & Mitigation: Extremely prudent with fiscal deficits and debt ratios among lowest in the world Addresses growth and social needs through capital spending and subsidies while lowering debt to GDP Aims for quality spending with capital expenditures increasing Crisis mitigation measures in place Coordination Forum for Financial System Stability Crisis Management Protocol Bond Stabilization Framework Flexibility in State Budget Law for Crisis Mitigation Action Deferred Drawdown Option 6 Chiang Mai Initiatives Multilateralization/CMI-M 29

31 Improved Government Debt Position 30

32 Budget Financing Realization, FINANCING, (billion of rupiah) Description Budget Budget % to GDP Budget A. Domestic Financing , ,8 102, ,1 I. Domestic Bank Financing , ,5 103, ,6 1. Revenue Amortization of Subsidiary Loan Agreement 4.387, ,5 146, ,6 2. Financing Surplus , ,0 100, ,0 II. Non Bank Financing , ,3 102, ,5 1. Privatization (netto) 0,0 138,3 0,0 0,0 2. Asset Management 280, ,2 406,9 475,0 3. Government Securities (net) , ,3 100, ,9 4. Domestic Loan 991, ,2 148,0 500,0 - Domestic Loan Disbursement (gross) 1.132, ,8 135,8 750,0 - Domestic Installment Payment (141,3) (70,6) 50,0 (250,0) 5. Gov't Infrastructure Fund & GCP (19.265,1) (18.862,614) 97,9 (12.223,4) a. Govt. Investment (3.299,6) (3.299,6) 100,0 (1.000,0) b. Gov't Capital Participation (GCP) (8.922,1) (8.519,6) 95,5 (6.387,6) c. Revolving Fund (7.043,4) (7.043,4) 100,0 (4.835,8) 6. National Education Development Fund (7.000,0) (7.000,0) 100,0 (5.000,0) 7. Guarantee Liabilities (633,3) - 0,0 (706,0) 8. PT. PLN's Borrowing 0,0-0,0 0,0 9. Reserve Fund 0,0-0,0 (5.000,0) B. Foreign Financing (Nett) (4.425,7) (19.147,6) 432,6 (19.454,2) I. Gross Drawing , ,9 63, ,1 1. Program Loan , ,5 96, ,0 2. Project Loan (Nett) , ,4 50, ,1 a. Central Government Project Loan , ,5 57, ,8 i. Line Ministries , ,5 60, ,9 ii. Non-Line Ministries 0,0-0,0 0,0 ii. On-granting 1.718,4-0, ,0 b. Proceed of Subsidiary Loan 8.431, ,9 25, ,3 II. Subsidiary Loan (8.431,8) (2.160,9) 25,6 (6.968,3) III. Amortization (49.724,9) (51.157,6) 102,9 (58.405,0) T O T A L , ,2 94, ,0

33 Domestic Market is Arising The amount of incoming bids for long tenor bonds from local banks remains high in recent auctions 52% 51% 51% 51% 53% 48% 49% 45% 45% 44% 43% 41% 45% 41% 41% 39% 41% 38% 35% 33% 35% 37% 38% 37% 32% 32% 30% 29% 28% 29% 24% 26% 24% 26% 24% 24% 24% 24% 25% 23% 22% 22% 19% 20% 20% 14% 16% 17% 17% 14% Jan-12 Feb-12 Mar-12 Apr-12 Incoming Bid - Long Tenor ( 10 years) May-12 Jun-12 Jul-12 Aug-12 Sep-12 Others* : Domestic pension funds, insurance companies and mutual funds Oct-12 59% Nov-12 Jan-13 Feb-13 Mar-13 Foreign Local Bank & Central Bank Others Apr-13 May-13 Jun-13 Trilion IDR ,92 10,42 13,97 95,57 53,98 24,60 11,71 23,57 48,73 22,54 39,30 10,14 10,01 189,46 11,86 136,18 70,78 66,06 10,04 198,23 79,20 315,91 7, as of June 3, 2013 Total Incoming Bid Total Bid Accepted Yield at Tenor 10 year (RHS) 101,90 393,41 5,96 138,85 430,59 5,30 152,77 5,96 186,99 88, Increasing demand in domestic primary market align with downward trend in borrowing cost

34 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Secondary Market Performance of Government Bonds INDO CDS 5Y to Peers Countries Yield of Benchmark Series As of March 7, 2013 Indonesia Turkey Brazil Mexico [In Percentage] 22,00 20,00 18,00 16,00 Global Financial Crisis As of June 13, Y 10Y 15Y 20Y , ,00 10, , ,00 4,00 2,00 Eurozone sovereign debt crisis Apr'13 Jan'13 Okt'12 Jul'12 Apr'12 Jan'12 Okt'11 Jul'11 Apr'11 Jan'11 Okt'10 Jul'10 Apr'10 Jan'10 Okt'09 Jul'09 Apr'09 Jan'09 Okt'08 Jul'08 Apr'08 Compare to the peers countries, Indonesia CDS 5Y and yield on benchmark yield are steadily decreased

35 Government Securities Realization *Adjusted by changes in Cash Management & Debt Switch (Million IDR) Budget 2013 Realization (ao June 13, 2013) % Realization Government Securities Maturity ,18% Government Securities Net ,35% Buyback ,05% Issuance Need 2013* ,40% Government Debt Securities (GDS) Domestic GDS Coupon GDS Conventional T-Bills Retail Bonds International Bonds USD Global Bonds Samurai Bonds Government Islamic Debt Securities Domestic Government Islamic Debt Securities IFR/PBS (Islamic Fixed Rated Bond/Proje Islamic T-Bills - Retail Sukuk SDHI International Sukuk

36 Outstanding of Total Central Government Debt [USD billion] Loan Government Securities ,35 63,52 73,30 76,64 71,29 70,51 82,34 85,26 82,78 104,20 118,39 130,97 140,75 148, ,10 58,90 63,74 68,91 68,59 63,09 62,02 62,25 66,69 65,02 68,65 68,51 63,53 59, April 2013 [in percentage] Year April 2013 Loan 47% 48% 47% 47% 49% 47% 43% 42% 45% 38% 37% 37% 31% 29% Government Securities 53% 52% 53% 53% 51% 53% 57% 58% 55% 62% 63% 63% 69% 71% Source: Ministry of Finance 35

37 Total Debt Maturity Profile as of April 2013 Maturity Profile of Central Government by Instruments (in trillion IDR) Gov't Securities Loan Maturity Profile of Central Government by Currencies (in trillion IDR) Domestic Foreign 36

38 Government Debt Securities Issuance Plan Revised Budget Budget IDR (trillion) $ USD (billion) IDR (trillion) $ USD (billion) Deficit (190,1) (19,23) (153,3) (15,51) Amortization (158,8) (16,07) (159,5) (16,14) External Loan (50) (5) (58) (6) Govt Securities (incl Buyback) (109) (11) (100,9) (10) Domestic Loan (0,14) (0,01) (0,25) (0,03) Non Debt Financing Expenditures (26,62) (2,69) (22,93) (2,32) Two Steps Loan (8,4) (0,85) (7,0) (0,70) Financing Needs (384,0) (38,8) (342,8) (34,7) Financing Sources 384,0 38,8 342,8 34,7 Non Debt (Gross) 60,6 6,13 14,8 1,50 Debt (Gross) 323,4 32,71 328,0 33,18 Govt Securities 268,5 27,2 281,3 28,5 Program Loan 15,6 1,6 6,5 0,7 Project Loan (Bruto) 38,1 3,9 39,4 4,0 Domestic Loan 1,1 0,1 0,8 0, Revised Budget (trillion IDR) % of GDP Budget (trillion IDR) % of GDP Total Revenue & Grants 1.358,2 15,9% 1.529,7 16,5% of which Tax Revenue 1.016,2 11,9% 1.192,99 12,9% Non Tax Revenue 341,14 4,0% 332,20 3,6% Expenditure 1.548,3 18,1% 1.683,0 18,2% of which Interest payment 117,8 1,4% 0,0% 113,2 1,2% 0,0% Subsidy 245,1 2,9% 317,2 3,4% Primary Balance (72,3) -0,8% (40,1) -0,4% Overall Balance (deficit) (190,1) -2,2% (153,3) -1,7% Financing 190,1 2,2% 153,3 1,7% Non Debt (Net) 33,9 0,4% (8,1) -0,1% Debt 156,2 1,8% 0,0% 161,5 1,7% 0,0% Govt Securities (Net) 159,6 1,9% 0,0% 180,4 1,9% 0,0% Domestic Official Borrowing 1,0 0,0% 0,5 0,0% External Official Borrowing (Net) (4,4) -0,1% (19,5) -0,2% Disbursement 53,7 0,6% 45,9 0,5% Program Loan 15,6 0,2% 6,5 0,1% Project Loan (Bruto) 38,1 0,4% 39,4 0,4% On lending (8,4) -0,1% (7,0) -0,1% Repayment (49,7) -0,6% (58,4) -0,6% Assumptions: Item GDP (trillion) 8.542, ,6 Growth (%) 6,5 6,8 Inflation (%) 6,8 4,9 3-months SPN (% avg) 5,0 5,0 Rp / USD (avg) 9.000, ,0 Oil Price (USD/barrel) 105,0 100,0 Oil Lifting (MBCD) 930,0 900,0 Exchange Rate Assumption (IDR/USD 1) a.o June 14, 2013: IDR Source: Ministry of Finance 37

39 Holders of Tradable Government Securities Continued Increasing proportion of foreign ownership of Indonesian Government securities. Holders of Tradable Domestic Government Securities Foreign Ownership of Gov t Domestic Debt Securities 16,36% 16,66% 24,30% 29,74% 18,56% 37,71% 30,53% 30,80% 32,98% 32,65% 100% 80% 60% 49% 46% 38% 45% 44% 32,98% 32,65% 30,53% 30,80% 40% 35,59% 32,58% 30,49% 32,89% 59,34% 53,60% 43,72% 33,88% 36,63% 36,53% 34,46% Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec Jun-13 40% 20% 0% 19% 25% 21% 28% 29% 22% 17% 18% 20% 16% 8% 18% 5% 3% 5% 10% 12% 3% 4% 8% 6% Dec-09 Dec-10 Dec-11 Dec Jun-13 20% 0% Foreign Holders Domestic Non-Banks Domestic Banks >10 >5-10 >2-5 > % Foreign Ownership to Total (RHS) Source: Ministry of Finance 38

40 Profile of Government Debt Securities GOVERNMENT DEBT SECURITIES (GDS) Dec-09 Dec-10 Dec-11 Dec-12 May Jun Domestic Tradable GDS IDR IDR IDR IDR IDR IDR a. Zero Coupon IDR IDR IDR IDR IDR IDR Government Treasury Bills IDR IDR IDR IDR IDR IDR Zero Coupon Bond IDR IDR IDR IDR IDR - IDR 1 b. Government Domestic Bonds IDR IDR IDR IDR IDR IDR Fixed Rate *) +) IDR IDR IDR IDR IDR IDR Variable Rate *) IDR IDR IDR IDR IDR IDR Promissory Notes to Bank Indonesia **) ***) IDR IDR IDR IDR IDR IDR Total GDS (2+3) IDR IDR IDR IDR IDR IDR Total Government International Bonds *) USD USD USD USD USD USD TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption)) IDR IDR IDR IDR IDR IDR GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS) 6. Domestic Tradable GIDS IDR IDR IDR IDR IDR IDR a. Fixed Rate *)++) IDR IDR IDR IDR IDR IDR b. Zero Coupon IDR IDR 195 IDR IDR Domestic Non Tradable GIDS IDR IDR IDR IDR IDR IDR Government International Islamic Bonds 1. Fixed Rate *) USD 650 USD 650 USD USD USD USD TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption)) IDR IDR IDR IDR IDR IDR TOTAL GOVERNMENT SECURITIES IDR IDR IDR IDR IDR IDR Notes: - Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds) - *) Tradable - **) Non-Tradable - +) Including ORI (IDR Billion)) IDR IDR IDR IDR IDR IDR ) Including Sukuk Ritel/SR (IDR Billion) IDR IDR IDR IDR IDR IDR Exchange Rate Assumption (IDR/USD1) IDR IDR IDR IDR IDR IDR Exchange Rate Assumption (IDR/JPY1) IDR 101,70 IDR 110,29 IDR 116,80 IDR 111,97 IDR 97,50 IDR 104,02 - Since October 2006, Government and Central Bank committed to replace interest payment of Promissory Notes to Bank Indonesia (SU-002 & SU-004) with new bond (SU-007) and omitted indexation of SU-002 & SU-004 Source: Ministry of Finance 39

41 Debt Switch & Cash Buyback Program Debt Switch Program [in billion IDR] Auction Date Auction Frequency Source Bonds Tenor Series Offer Received Offer Awarded series up to 21 series up to 21 series up to 31 series up to 28 series up to 28 series up to 27 series up to 20 series up to 13 series Total Buyback Program Year Auctions Frequencies Direct Transactions Volume (IDR billion) GRAND TOTAL

42 Jan-08 Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 INDO-14 INDO-15 INDO-16 INDO-17 Indo-18 INDO-18 (Reopening) Indo-19 Indo- 20 INDO-21 R10422 RI0423 Global Bonds Issuance Result (10 year) & Secondary Market Yield 100% 80% 60% 40% 20% 0% Cost of 10 y global bonds is declining, alongside the decline of CDS 18% 35% 29% 49% 47% 34% 50% 49% 49% 28% 31% 29% 21% 47% 29% 20% 27% 22% 17% 17% 50% 20% 66% 53% 36% 40% 30% 24% 30% 19% 24% 29% 30% Yield - 10 y USD Indonesia Global Bond As of April 30, 2013 Asia Europe USA Indonesia Phillipine Turkey 10Y CDS (as of April 30, 2013) Apr-13 Feb-13 Dec-12 Oct-12 Aug-12 Jun-12 Apr-12 Feb-12 Dec-11 Oct-11 Aug-11 Jun-11 Apr-11 Feb-11 Dec-10 Oct-10 Aug-10 Jun-10 Apr-10 Feb-10 Dec-09 Oct-09 Aug-09 Jun-09 Apr-09 Feb-09 Dec-08 Oct-08 Aug-08 Jun-08 Yield - 10 y Global Bond Source : Bloomberg CDS 10 y (RHS) 41

43 Maturity Profile of Tradable Government securities as of June 15, ,00 [IDR Trillion] 80,00 60,00 40,00 20, TOTAL 36,8 82,8 77,2 66,6 49,7 83,1 56,8 69,4 60,0 92,2 61,1 18,0 27,5 19,6 44,3 48,2-25,6 27,1 42,8 43,0 15,8 4,11 31,3 35,4-13,5 34,2 16,8 SUKUK USD - 6, , , SUKUK IDR 2,58 7,34 18,9 14,9 1,17 8,71-0,25-1, ,55-2, , ,11 10, ,05 SUN JPY ,64 6,24-6, SUN USD - 22,7 9,89 8,90 9,89 18,7 19,7 19,7 24,7 19,7 14, ,8-14,8 19, ,2 14,8 SUN IDR 34,2 46,3 48,4 42,7 38,7 45,7 33,4 43,2 35,3 55,1 46,3 18,0 26,0 19,6 41,4 48,2-23,5 27,1 42,8 43, ,40 15,6-13,5 12,0 - Source: Ministry of Finance 42

44 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May Jun-13 Daily Transaction & Offshore Ownership Average Daily transaction Govt Bonds Net Buyer (Seller) Non Resident [Trillion IDR] ,00 20,00 15,00 10,00 5,00 0,00 (5,00) (10,00) Capital Inflows Capital inflows over total foreign holders 19,52 17,97 13,11 10,13 9,35 8,06 7,83 8,44 4,15 4,22 2,68 0,68 (0,08) (2,27) (1,41) (0,88) (4,37) (8,99) (10,22) 10,0% 8,0% 6,0% 4,0% 2,0% 0,0% -2,0% -4,0% Jan '13 Feb '13 Mar '13 Apr '13 May '13 - (15,00) -6,0% Volume (billion rupiah) - LHS Frequency - RHS Source: Ministry of Finance 43

45 Ownership of IDR Tradable Government Securities (IDR Trillion) Dec-09 Dec-10 Dec-11 Dec-12 Mar-13 Apr-13 May Jun-13 Banks 254,36 43,72% 217,27 33,88% 265,03 36,63% 299,66 36,73% 315,89 36,67% 298,27 34,11% 306,26 34,19% 308,93 34,46% Govt Institutions 22,50 3,87% 17,42 2,72% 7,84 1,08% 3,07 0,37% 4,86 0,56% 19,19 2,19% 22,81 2,55% 31,18 3,48% Non-Banks 304,89 52,41% 406,53 63,40% 450,75 62,29% 517,53 63,09% 540,76 62,77% 557,02 63,70% 566,71 63,26% 556,39 62,06% Mutual Funds 45,22 7,77% 51,16 7,98% 47,22 6,53% 43,19 5,27% 41,91 4,87% 41,46 4,74% 41,45 4,63% 41,45 4,62% Insurance Company 72,58 12,48% 79,30 12,37% 93,09 12,86% 83,42 10,17% 120,78 14,02% 121,88 13,94% 127,17 14,20% 127,62 14,24% Foreign Holders 108,00 18,56% 195,76 30,53% 222,86 30,80% 270,52 32,98% 280,75 32,59% 298,72 34,16% 302,94 33,82% 292,72 32,65% Insurance 0,06 0,01% 1,35 0,21% 2,94 0,41% 3,59 0,44% 3,79 0,44% 3,99 0,46% 4,65 0,52% 4,96 1,69% Pension Fund 1,23 0,21% 2,31 0,36% 2,76 0,38% 4,40 0,54% 4,78 0,55% 4,94 0,57% 5,14 0,57% 5,11 1,75% Corporate 3,66 0,63% 5,71 0,89% 6,59 0,91% 10,78 1,31% 15,05 1,75% 15,15 1,73% 14,90 1,66% 14,37 4,91% Fin. Institutions 78,41 13,48% 126,69 19,76% 133,63 18,47% 159,09 19,39% 158,02 18,34% 172,17 19,69% 172,28 19,23% 163,88 55,99% Individual 0,06 0,01% 0,10 0,02% 0,09 0,01% 0,10 0,01% 0,09 0,01% 0,10 0,01% 0,09 0,01% 0,09 0,03% Mutual Fund 21,53 3,70% 53,53 8,35% 68,30 9,44% 70,09 8,55% 74,27 8,62% 76,60 8,76% 79,69 8,90% 78,63 26,86% Securities 2,65 0,45% 4,34 0,68% 4,88 0,67% 5,56 0,68% 4,85 0,56% 4,77 0,55% 3,98 0,44% 3,76 1,28% Foundation 0,07 0,01% 0,06 0,01% 0,07 0,01% 0,06 0,01% 0,07 0,01% 0,09 0,01% 0,09 0,03% Others 0,39 0,07% 1,64 0,26% 3,60 0,50% 16,84 2,05% 19,85 2,30% 20,94 2,39% 22,12 2,47% 21,83 7,46% Pension Fund 37,50 6,45% 36,75 5,73% 34,39 4,75% 56,46 6,88% 27,61 3,20% 27,53 3,15% 28,46 3,18% 28,75 3,21% Securities Company 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,30 0,04% 1,04 0,12% 0,77 0,09% 0,92 0,10% 0,89 0,10% Individual 27,56 3,20% 26,26 3,00% 25,29 2,82% 25,10 2,80% Others 41,12 7,07% 43,43 6,77% 53,05 7,33% 63,64 7,76% 41,12 4,77% 40,40 4,62% 40,48 4,52% 39,87 4,45% Total 581,75 100% 641,21 100% 723,61 100% 820,27 100% 861,52 100% 874,49 100% 895,77 100% 896,50 100% Notes: - Foreign Holders (offshore) are non-resident Private Banking, Fund/Asset Mgmt, Securities Co, Insurance, Pension Fund, etc - Others are Corporate, Foundations, etc. - Private Banks Recap and Non Recap Banks include foreign banks branches and subsidiaries Source: Ministry of Finance 44