Government Debt Securities Management August 11 th, 2017

Government Debt Securities Management August 11 th, 2017 Directorate of Government Debt Securities Directorate General of Budget Financing and Risk Management Ministry of Finance of The Republic of Indonesia

Outline 1 Introduction 3 2 Legal Framework of Government Debt Securities 11 3 Front Office Operations 15 4 Accessing International Capital Market 26 5 Developing Government Securities 32

Introduction

Organizational Structure Directorate of Government Debt Securities Division Division Division Division Government Debt Securities Portfolio Management Government Debt Securities Market Development Financial & Government Debt Securities Market Analysis Government Debt Securities Regulation and Performance Evaluation 1 Director, 4 Deputy Director that each of Deputies has 4 Managers 4

Milestone of GDS Management 5

Financing Trend, 2006 2017 3.00 370 320 270 220 170 1.26 1.58 1.14 1.80 2.33 2.25 2.50 2.35 2.41 2.50 2.00 1.50 120 70 0.87 0.73 1.00 0.50 20-30 0.08 - -80 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016* 2017** Gov't Securities (Net) 35.99 57.17 85.92 99.47 91.10 119.86 159.70 224.67 264.63 362.30 364.90 399.90 Domestic Loan (Net) - - - - 0.39 0.62 0.80 0.47 0.95 0.80 3.39 1.49 Foreign Loan (Net) (26.57) (26.58) (18.41) (12.42) (4.57) (17.80) (23.46) (5.81) (12.35) 15.30 2.53 (16.79) Others/Non Debt (Net) 20.00 9.14 16.56 25.53 4.62 28.26 38.12 18.05 (4.33) (55.20) (69.01) (54.50) Budget Deficit, % of GDP 0.87 1.26 0.08 1.58 0.73 1.14 1.80 2.33 2.25 2.50 2.35 2.41 (0.50) Notes: * Revised Budget 2016 ** Budget 2017 6

Government Budget FY 2016-2017 Description (IDR Trillion) 2016 2017 Audited Realization Budget R-Budget Outlook R-Budget to Budget In trillion IDR 1H Realization % Realization to Budget A. Revenues and Grants 1,555.9 1,750.3 1,736.1 1,736.1 (14.2) 718.2 41.0% I. Domestic Revenue 1,546.9 1,748.9 1,733.0 1,733.0 (15.9) 718.0 41.0% 1. Tax Revenue 1,284.9 1,498.9 1,472.7 1,472.7 (26.2) 571.9 38.2% 2. Non Tax Revenue 262.0 250.0 260.2 260.2 10.2 146.1 58.4% II. Grants 9.0 1.4 3.1 3.1 1.7 0.2 15.5% B. Expenditure 1,864.3 2,080.5 2,133.3 2,098.9 52.8 893.3 42.9% I. Central Government Expenditure 1,154.0 1,315.5 1,367.0 1,343.1 51.5 498.6 37.9% 1. Ministerial Spending 684.2 763.6 773.1 769.2 9.5 263.9 34.6% 2. Non Ministerial Spending 469.8 552.0 593.9 573.9 41.9 234.6 42.5% II. Transfer to Region and Village Fund 710.3 764.9 766.3 755.9 1.4 394.8 51.6% 1. Regional Transfer 663.6 704.9 706.3 697.7 1.4 360.4 51.1% 2. Village Fund 46.7 60.0 60.0 58.2-34.4 7.3% C. Primary Balance (125.6) (109.0) (178.0) (144.3) (69.0) (68.2) 62.6% D. Surplus (Deficit) (308.3) (330.2) (397.2) (362.9) (67.0) (175.1) 53.0% % of GDP (2.49) (2.41) (2.92) (2.67) (0.51) (1.29) E. Financing 334.9 330.2 397.2 362.9 67.0 209.4 63.4% I. Debt Financing 403.0 384.7 461.3 427.0 II. Investment Financing (89.08) (47.49) (59.73) (59.73) III. Loan 1.7 (6.41) (3.67) (3.67) IV. Guarantee (0.65) (0.92) (1.0) (1.0) V. Others 19.56 0.3 0.3 0.3 7

Government Securities Indicative Financing Plan 2017 Instruments Indicative Target (IDR bn) 2017 Budget Government Securities (Net) 399,993 Redemption 162,842 Cash Management 119,000 Buyback 3,000 Government Securities (Gross) 684,835 Composition Domestic 79% Auction 93% Non-Auction 7% International Bond 21% Front loading issuance for budget financing Government Securities issuance in semester I: Target: 57.4% from gross issuance target Realization: 57.7% from gross issuance target Rupiah Government Securities issuance in semester I: Target: 42.7% from gross issuance target Realization: 43.1% from gross issuance target Domestic Issuance Weekly Auction: Conventional Securities: 24x Islamic Securities: 24x Non-Auction: Retail bonds Private Placements: Based on request International Bonds Issuance (USD, EUR, JPY-denominated) Issuance of International Bonds as complement to avoid crowding out in domestic market consists of USD, YEN or EURO global bonds; International bond issuance can be maximized up to 25% from gross target, depends on financing need. Issuance targets for GDS, Sukuk and ATM target Government Debt Securities (SUN): 71 %; Sukuk : 29% ATM for Government Securities (SBN): 6-8 years. 8

Securities Financing Realization 2017 (In Million IDR) Budget 2017 Budget Realization (as of Aug 1, 2017) % Realization to Budget 2017 Government Securities Net 399,992,586 314,321,445 78.58% Government Securities Maturing in 2017 and Buyback 284,735,024 177,757,300 62.43% Issuance Need for 2017* 684,727,610 492,078,745 71.86% Government Debt Securities (GDS) 353,244,478 IDR Denominated GDS 251,223,000 -Coupon GDS 130,880,000 -Conventional T-Bills 119,950,000 -Private Placement 393,000 -Retail Bonds - International Bonds 102,021,478 -USD GMTN 73,825,500 -Euro GMTN 15,352,390 -Samurai Bonds 12,117,580 -Domestic Foreign Denominated Bonds 726,008 Government Islamic Debt Securities 138,834,267 Domestic Government Islamic Debt Securities 98,865,267 - IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based Sukuk) 82,827,957 - Retail Sukuk 14,037,310 - Indonesia Hajj Fund Sukuk 2,000,000 Global Sukuk 39,969,000 *Adjusted with issuance related to cash management realization. 9

Outstanding Central Government Debt By Instrument Description Nominal % a. Foreign Loan (in billion USD) 68.4 63.6 58.4 54.2 54.4 54.0 54.6 19.6% Bilateral 42.1 37.2 31.5 26.9 24.7 23.2 23.3 8.4% Multilateral 23.5 23.8 23.7 23.5 26.1 27.5 27.6 9.9% Commercial 2.8 2.5 3.3 3.8 3.6 3.3 3.2 1.2% Suppliers 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0% b Domestic Loan (in billion USD) 0.1 0.19 0.2 0.3 0.3 0.4 0.4 0.1% c. Government Securities (in billion USD) 131.0 140.8 136.3 155.2 174.7 207.0 223.7 80.3% Foreign Currency Denominated 21.6 27.4 32.8 36.7 47.8 57.1 59.5 21.3% Rupiah Denominated 109.4 113.4 103.5 118.5 126.9 149.9 164.2 58.9% Total Central Government Debt (in billion USD) 2011 2012 2013 2014 2015 2016*) 199.5 204.5 194.9 209.7 229.4 261.3 278.7 June 17 Total Central Government Debt (in trilion IDR) 1,808.9 1,977.7 2,375.5 2,608.8 3,165.1 3,511.0 3,706.5 Exchange Rate Assumption (IDR/USD1) 9,068.0 9,670.0 12,189.0 12,440.0 13,795.0 13,436.0 13,319.0 GDP (in trillion IDR) 7,831.7 8,615.7 9,524.7 10,542.7 11,540.8 12,406.8 Debt to GDP Ratio 23.1% 23.0% 24.9% 24.7% 27.4% 28.3% *) Preliminary Figures 10

USD bn Sound Government Debt Portfolio Management Stable Debt to GDP Ratio Over the Years Well Diversified Across Different Currencies 300 250 200 23.0% Government debt/gdp (%) 27.4% 24.9% 24.7% 54.74 28.3% 28.1% 54.37 54.58 30.0% 25.0% 20.0% 3% 3% 3% 3% 14% 12% 24% 29% 2% 2% 1% 1% 3% 3% 4% 4% 9% 8% 7% 7% 29% 32% 31% 29% 63.76 58.61 54.47 150 15.0% 100 140.76 136.27 155.24 174.7 206.95 223.7 10.0% 56% 53% 57% 55% 58% 59% 50 5.0% 0 2012 2013 2014 2015 2016 June-2017*) 0.0% 2012 2013 2014 2015 2016 June-2017 Securities Loan Gross debt/gdp (%) *) Using GDP assumption in 2017 Budget IDR USD JPY EUR Other 11

Risk Indicators Interest Rate Risk Variable Rate Ratio (%) Refixing Rate (%) 22.5 23.2 21.0 20.7 17.8 16.2 16.0 14.8 13.7 12.3 11.3 19.3 Exchange Rate Risk FX Debt to GDP Ratio (%)** FX Debt to Total Debt Ratio (%) 46.7 44.4 43.4 44.5 41.8 40.8 10.2 11.7 10.7 12.2 11.7 11.0 2012 2013 2014 2015 2016*) Jun-17 Debt Average Time to Maturity 2012 2013 2014 2015 2016*) Jun-17 Debt Maturing ATM (in years) In < 1 year In < 3 year In < 5 year 9.7 9.6 9.7 9.4 9.0 8.9 39.1 32.4 33.4 33.9 34.7 36.5 21.5 21.8 20.1 21.4 23.0 23.5 7.2 8.6 7.7 8.4 6.6 9.1 2012 2013 2014 2015 2016*) Jun-17 2012 2013 2014 2015 2016*) Jun-17 *) Preliminary figures **) Using GDP assumption in 2017 Budget -Risk indicators are improving amidst pressure from rupiah depreciation -Risk indicators show improvements in interest rate risk and stability in exchange and refinancing risks 12

Legal Framework of Government Debt Securities

Regulatory Framework LAW Law No. 24 Year 2004 concerning Government Debt Securities GOVERNMENT REGULATIONS Government Regulations No. 76 Year 2005 concerning Management, Responsibility, and Information Publication of Government Debt Securities Management REGULATIONS OF FINANCE MINISTER -- Issuance through auction -- -- Issuance through private placement mechanism -- -- Securities buyback -- -- Issuance of foreign currency denominated bonds -- -- Issuance of retail bonds -- REGULATIONS OF DIRECTOR GENERAL -- Administrative requirements and registration for resident -- -- Guidance of the use of PDs trading infrastructure -- 14

The Law Number 24 Year 2002 (1) Definition: Government Debt Securities are financial securities in the form of letters of indebtedness from the government, in Rupiah as well as in foreign currencies, which payments of the principal and interests are guaranteed by the Republic of Indonesia, in accordance with validity period thereof. Types of Government Securities: T-Bills: Government Debt Securities with a period of up to and including 12 (twelve) months, with the interest in the form of a discount. Government Bonds: Government Debt Securities with a period of more than 12 (twelve) months with coupons and/or with the interest in the form of a discount. 15

The Law Number 24 Year 2002 (2) Objective Government Securities shall be issued for the following purposes: Financing deficits of the State Budget; covering short-term cash shortfall due to the mismatch between the cash flows of revenues and expenditures in the State Cash Accounts within one fiscal year; managing the state debt portfolio; Authorization to issue Government Securities is embedded and implemented by the Minister of Finance Consultation with Central Bank Should be approved by the parliament (on a net basis) The fund for the payment of interests and principal amounts are provided annually in the Budget Central Bank acts as central registry and Fiscal Agent (payment, clearing and settlement). Central Bank also acts as auction agent. 16

Front Office Operations

Primary Dealership and Establishing Benchmark Series Primary Dealership Strengthening the Government Debt Securities market by: 1. Helping to build stable, dependable source of demand for securities in the primary market. 2. Providing liquidity in the secondary market 3. Devoting capital resources for market making (as a proprietary buyer) 4. Building distribution channels 5. Providing market information including prices, volumes and spreads between bids and offer Establishing Benchmark Series 1. To improve the government bond market liquidity 2. To provide a reference yield for private sector issuing corporate bonds 3. To support the overall yield curve 18

Government Securities Continuous efforts in providing diversified instruments Government Securities (GS)* Government Debt Securities (GDS) Government Sharia Securities (SUKUK) Government Bonds (GB) Treasury Bills By Tenor GB - Domestic USD GB - Foreign Currency GB Rupiah By Currency Samurai Bonds (JPY) Global Bonds (USD) Global Bonds (Euro) Variable Rate (Rp) Fixed Rate (Rp) By Coupon Type Savings Bond Ritel Variable Rate (Regular) Fixed Rate (Regular) Zero Coupon (Regular) Retail Bond Notes: *) GS consist of Tradable and Non Tradable GS 19

Product Development A fixed coupon First issuance in 1999 Issued through auction Coupon is paid every 6 months Retail obligation, sold through a selling agent. Issued through book building Minimum order IDR5 million ORI, first issuance in 2006 SBR, first issuance in 2014 A variable coupon First issuance in 1999 Issued through auction Rate determined every 3 months based on 3 months-t Bills T Bills (maturity less than 12 months) Government issues 12 months & 3 months T Bills Issued through auction Discount paper First issuance in 2007 First issuance in 2007 No coupon payment schedule Sold at discount price and nominal will be paid at its maturity time. Non tradable securities First issued in 2009 to local government 20

Product Development (2) Issued in international capital market Dominated in US$, first issued in 2004 Dominated in EUR, first issued in 2014 USD Bond issued in domestic market First issued in 2013 Issued in Japan capital market Denominated in Yen Japan First issued in 2009 under JBIC guarantee 21

Issuance Method of Issuance 1 2 3 Auction Private Placement Book Building 22

Auction Mechanism (IDR and USD in Domestic Market) 23

Private Placement Mechanism 24

Retail Bond Issuance Process - Book Building Mechanism SBR/ORI Issuance Plan Request for Proposal Selling Agent Selling Agent Selection Process Allotment & Setelment Marketing Coupon Determination 25

Debt Switch & Buyback Objectives Debt Switch Debt management program to reduce the refinancing risk, smoothening maturity (redemption) profile, as well as maintaining liquid series. Exchange of illiquid short dated series, with liquid long dated benchmark. Buyback Debt management program to stabilize market, debt portfolio management (reducing high coupon and illiquid series), and to reduce refinancing risk (short dated debt securities). The amount is flexible, as long as the net issuance target is achieved. 26

Debt Switch & Buyback Mechanism DSUN - MoF Auction Plan Announcement 1 day before 1 Auction Registration Dealer A Dealer B Primary Dealers 2 Offering 7 Awarded Offers 3 Rules and Monitoring on auction MOFiDS Ministry of Finance Dealing System 4 Data Offering Auction Results Announcement Settlement 5 DSS-MoF 6 Tabulation, allocation Decision Support System Auction results, Determined by MoF Settlement BI-SSSS v.s. BI-RTGS 8 Settlement Payments Securities delivery (govt bonds) 27

Direct Transaction Direct transaction is a transaction (buy or sell) of government securities between government and eligible parties (Primary Dealers, Central Bank, Deposit Insurance Corporation), through Dealing Room facility. Objectives: Stabilizing the government securities market. Managing the portfolio of government securities. Achieving net government securities target. 28

Accessing International Capital Market

Objectives: Objectives & Strategy Raise capital to meet financing needs Diversify financing sources Creating a benchmark for valuation of sovereign credit risk and facilitate future issuance by sovereign, local government, public enterprises Reduce crowding out effect in domestic bond market Promote credit story of Indonesia Global Bond Issuance Strategy: 1 2 3 4 Volume: less than 30% of total gross issuance target Timing: considering financial market condition e.g. interest rate and market liquidity Instruments composition: based on cost calculation, potential demand, risk management and prioritizing global bond in USD (more than 50%) Currency: USD, EUR, JPY Directorate General of Debt Management 30

Risk Entailed Risk Entailed and Issuance Format 1 Foreign Exchange Risk the probability to adjust prices and costs to offset changes in exchange rate. 2 Rollover Risk when debt is about to mature and needs to be rolled over into new debt. If interest rates rise adversely, countries would have to refinance their debt at a higher rate and incur more interest charges in the future. Issuance Format Global Medium Term Notes Benefits: 1) High flexibility in global bond issuance since the time required for the transaction is shorter 2) Issuance costs and documentation are relatively cheaper than stand alone issuance 3) Effectively achives global distribution including Qualified Institutional Buyers (QIBs at USA) 4) Less onereous documentation requirements Stand Alone Issuance Drawback: 1) Less flexibility, since the time required for the transaction is relatively longer 2) Full documentation is required for each issuance 31

International Bonds Issuance Process Global Medium Term Note (GMTN) Process Preparation Selection Documentation - MoF Decision - Selection Committee - Request For Proposal and TOR - Technical proposal evaluation - Beauty Contest - Expenses Negotiation - Appointment of Panel, - JLM and LC - Engagement Letter Notes: Total amount of GMTN program: USD 50 billion (up to 2017) Current balance of GMTN program: USD 9.97 billion Samurai Bond Process Private Placement with JBIC Guarantee - Offering circular - Listing requirement - Legal document - Rating confirmation - Due diligence - Road show (optional) Preparation Selection Documentation Execution Bring down due diligence Pricing Settlement Listing Signing Closing Execution - Selection Committee - TOR and RfP - Preliminary discussion with JBIC: Program Agreement Draft Indemnity Agreement JBIC guarantee fee - Preparation for Underlying Transaction - Panel Appointment - Appointment of JLM & LC - Appointment of CCB and IPAA - Engagement Letter Private Placement Memorandum Non Deal road show presentation Other Legal Documents Price Guidance Bookbuilding Single spread and maximum yield Pricing Settlement/Closing Notes: CCB: Commissioned Companies for Bondholders IPAA: Issuing and Paying Agent and Administrative 32 Directorate General of Debt Management

International Bonds Issuance Process Samurai Bond Process Private Placement without JBIC Guarantee Preparation Selection Documentation Execution - Selection Committee - TOR and RfP - Panel Appointment - Appointment of JLM & LC -Appointment of IPAA (Fiscal Agent) - Engagement Letter Private Placement Memorandum Non Deal road show presentation Other Legal Documents Price Guidance Bookbuilding Single spread and maximum yield Pricing Settlement/Closing Samurai Bond Process Public Offering Preparation Selection Documentation Directorate General of Debt Management Execution - Selection Committee - TOR and RfP - Panel Appointment - Appointment of JLM & LC - Appointment of IPAA (Fiscal Agent) - Engagement Letter Securities Registration Statement (SRS) Non Deal road show presentation Other Legal Documents Price Guidance Bookbuilding Single spread and maximum yield Pricing Settlement/Closing 33

Investor Relations Programs The role of investor relations programs: 1 2 3 4 5 6 7 Provide economic data and information on economic policies, either directly or through a website. Explain the context behind data releases and, therefore, actively shape investor sentiment in line with fundamentals. Correct inaccurate information and dispel false rumors. Supply information on international and domestic government securities. Provide answers to questions of both retail and institutional investors either directly or through e- mail. Serve as a sounding board for sovereign financing operations. Help policymakers interpret evolving market techniques, practices, and sentiment. The programs include: Non Deal Road show Investor Teleconference Investor Mailing List Information/Data Dissemination through website 34 Directorate General of Debt Management

The Need for Credit Rating Credit rating is measurement of willingness and ability of debitor to service its obligations. Credit ratings allow the issuer to tap a wide investor base as most fund managers are required to invest only in rated securities. The role of credit ratings: To overcome the asymmetry of information or lack of familiarity with a given country. To indicate that a country s investment climate, creditworthiness, and capacity to service existing debt. To provide an independent mechanism to validate and encourage the pursuit of appropriate macroeconomic policies and the government s commitment to the adoption of market-friendly economic reform. To promote good governance and foster transparency in government decision-making and in the collection and dissemination of information. To promote investments by institutional and retail investors in mature markets Directorate General of Debt Management 35

Credit Rating Improvement (RHS) Directorate General of Debt Management 36

Primary Market Performance 2017: Global Bonds (USD) Issuer RI0122 RI0127 RI0147 Issuer Issuer Rating Issue Rating Republic of Indonesia Baa3 (Moody s) / BBB- (Fitch) Baa3 (Moody s) / BBB- (Fitch) Issue USD Fixed Rate USD Fixed Rate USD Fixed rate Size USD$0.75bn USD$1.25bn USD$1.50bn Pricing/Settlement Date December 1, 2016 / December 8, 2016 Maturity January 8, 2022 January 8, 2027 January 8, 2047 Coupon 3.700% 4.350% 5.250% Re-offer Yield/Price 3.750%/ 99.767% Format Listing 4.400%/ 99.592% Rule 144 A / Reg S SGX-ST and Frankfurt Stock Exchange 5.300%/ 99.246% Total Book Order USD5.20bn USD3.50bn USD3.30bn 34

Primary Market Performance 2017 Global Bonds (USD) Allocation by Geography RI0147 RI0122 RI0127 1% 3% 18% 29% 12% 58% 48% 22% 27% 38% 18% 26% Indonesia Asia (Ex. Indonesia) Europe USA Allocation by Investor Type RI0122 Indonesia Asia (Ex. Indonesia) Europe USA RI0127 Indonesia Asia (Ex. Indonesia) Europe USA RI0147 9% 27% 12% 5% 0 5% 18% 2% 22% 53% 62% 3% 2% 6% 74% Asset Managers/ Fund Manager Bank Central Bank/Sovereign Funds Insurance/ Pension Funds Private Banks Asset Managers/ Fund Manager Bank Central Bank/Sovereign Funds Insurance/ Pension Funds Private Banks Asset Managers/ Fund Manager Bank Central Bank/Sovereign Funds Insurance/ Pension Funds Private Banks 35

Primary Market Performance 2017: Samurai Bonds (JPY) Issuer Issuer Rating Format Type of Notes Republic of Indonesia Baa3 (Moody s) / BBB- (S&P) / BBB- (Fitch) / BBB- (R&I) / BBB- (JCR) Samurai Bonds Senior Unsecured Bond Rating Baa3 (Moody s) / BBB- (Fitch) / BBB- (R&I) Pricing Date May 31, 2017 Settlement Date June 8, 2017 Total Issue amount JPY 100bn Series #1 #2 #3 Tenor 3yr FIX 5yr FIX 7yr FIX Trance Size JPY 40bn JPY 50bn JPY 10bn Coupon 0.65% 0.89% 1.04% Re-offer Spread +55bps +75bps +85bps 39

Primary Market Performance 2017: Samurai Bonds (JPY) Allocation by Geography RIJPY0620 RIJPY0622 RIJPY0624 100% 100% 100% Asia Allocation by Investor Type RIJPY0620 RIJPY0622 18.0% Asia Asia RIJPY0624 26.0% 6.8% 4.0% 11.3% 2.0% 15.8% 25.0% 1.8% 8.8% 23.4% 23.4% 24.6% 52.0% 20.0% 8.0% 5.0% 15.0% 9.3% City Banks Trust Banks Specialized Banks Life Insurance Asset Managers Regional Banks Shinkins Others Trust Banks Life Insurance Asset Managers Regional Banks Shinkins Others Life Insurance Asset Managers Regional Banks Shinkins Others 40

Primary Market Performance 2017: Dual Currency (EUR & USD) Issuer RIEUR0724 RI0727 RI0747 Issuer Issuer Rating Issue Rating Republic of Indonesia Baa3 (Moody s) / BBB- (Fitch) Baa3 (Moody s) / BBB- (Fitch) Issue EUR Fixed Rate USD Fixed Rate USD Fixed rate Size EUR 1.00bn USD$1.00bn USD$1.00bn Pricing/Settlement Date July 11, 2017 / July 18, 2017 Maturity July 18, 2024 July 18, 2027 July18, 2047 Coupon 2.150% 3.850% 4.750% Re-offer Yield/Price 2.178%/ 3.900%/ 4.800%/ 99.820% 99.589% 99.209% Re-offer Spread +158bps - - Format Rule 144 A / Reg S Listing SGX-ST and Frankfurt Open Market Total Book Order EUR4,3bn USD4.1bn USD3.2bn 41

Primary Market Performance 2017: Dual Currency (EUR & USD) Allocation by Geography RIEUR0724 RI0727 RI0747 2.5% 11% 10% 15% 13% 5% 7% 8% 13% 17% 16% 38% 22% 25% 38% 24% 35.5% Indonesia Asia (Ex. Indonesia) Inggris Raya Jerman Swiss Itali Perancis Eropa lainnya USA Allocation by Investor Type RIEUR0724 Indonesia Asia (Ex. Indonesia) Europe USA RI0727 Indonesia Asia (Ex. Indonesia) Europe USA RI0747 17% 10% 7% 28% 14% 17% 52% 27% 56% 6% 11% 55% Fund/Asset Managers Central Bank/Sovereign Funds Bank/ Private Banks Insurance/ Pension Funds Fund/Asset Managers Central Bank/Sovereign Funds Bank/ Private Banks Insurance/ Pension Funds Fund/Asset Managers Central Bank/Sovereign Funds 42 Bank/ Private Banks Insurance/ Pension Funds 42

Developing Government Securities

Government Securities Market Development Framework DEMAND DEEP, ACTIVE, AND LIQUID MARKET Sufficient market capacity to absorb and efficient price/yield MARKET INFRASTRUCTURE PRIMARY MARKET SUPPLY Banks Central Banks Foreign Investors Insurance Pension Funds Mutual Funds Corporates Securities Houses Retail Investors LPS (Indonesia Deposit Insurance Corporation) BLU (Public Service Agency) SOE (State Owned Enterprise) Others Activities: Regular issuance (auction, book building), private placement Infrastructure: Auction system for domestic and global issuance, settlement system for retail bonds SECONDARY MARKET Activities: Buyback, debt switch, securities lending facility Infrastructure: - Primary dealers quotation system - Trading system through IDX - INDOBeX - Electronic Trading Platform (ETP): for retail bonds (under development) Price Discovery Mechanism: - IBPA (Indonesia Bond Pricing Agency) - PLTE (Penerima Laporan Transaksi Efek) - Yield curve for benchmark series. Repo Instruments and Derivatives: MRA, GMRA & Indonesia Government Bond Futures REGULATION, SUPERVISION, INSTITUTIONAL SUPPORT, AND MARKET COMMUNICATION GOVERNMENT BOND: Local Currency Bonds Foreign Currency Denominated Bonds TREASURY BILLS 44

Improving market infrastructure UNDER DEVELOPMENT MARKET MECHANISM Establishment of BI-SSSS ETP (Electronic Trading Platform) for secondary market Developing IGBF (Indonesia Government Bond Futures) PRICE DISCOVERY MECHANISM Establishment of IBPA (Indonesia Bond Pricing Agency) Centralised transaction report through PLTE Yield curve for benchmark series and all tenors Establishment of primary dealers system for govt debt securities & PDs quotation system Establishment of MoFIDs Development of INDOBeX (Indonesia Government Bond Index) Debt switch through many-to-many and staple bonds mechanism GMRA as a standard master agreement for repo transactions Implementation of SID (Single Investor Identification) BI-SSSS= Bank Indonesia Scripless Securities Settlement System MoFIDS = Ministry of Finance Dealing System 45

Coordination among Authorities Ministry of Finance Ministry of Finance Indonesia Deposit Insurance Corporation (LPS) FINANCIAL MARKET STABILISATION Bank Indonesia FINANCIAL MARKET DEVELOPMENT Indonesia Financial Services Authority (OJK) Indonesia Financial Services Authority (OJK) Bank Indonesia 46

GDS* PRIMARY MARKET PERFORMANCE 2017 - Auction [In Trillion IDR ] 160 140 as of Aug 2, 2017 Incoming Bids Awarded Bids % Bid to Cover Ratio (RHS) 4.72 Average incoming bids 2017 = IDR36.7T/auction 5.00 4.50 4.00 120 100 Average awarded bids 2016= IDR13.37T/auction Average incoming bids 2016 = IDR25.55T/auction 2.60 Average awarded bids 2017= IDR16.7T/auction 2.62 3.50 3.00 80 2.44 2.38 2.50 60 40 1.97 1.89 1.11 1.73 1.74 1.94 2.14 1.39 1.58 1.75 1.93 2.01 1.31 1.83 2.00 1.50 1.00 20 0.50 - - *) Surat Utang Negara (SUN) Average Incoming Bid 2016 = IDR25.55T while Average Awarded Bid 2016 = IDR13.37T 47 47

GS Maturity Profile S-1 2017 [In Trillion IDR ] 220 200 180 160 140 120 100 80 60 40 20 0 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2040 2041 2042 2043 2044 2045 2046 2047 TOTAL 142 192 204 124 169 154 120 199 106 160 116 72.6 93.4 25.7 93.3 64.3 48.2 92.4 21.3 84.3 39.8 42.3 0 7.53 7.53 17.2 43.4 29.9 54.8 26.6 16.6 20 SUKUK USD 0 13.3 20 0 0 13.3 0 20 26.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SUKUK IDR 48 33.3 31.5 38.8 0 1.22 0 0 1.55 0 3.79 0 0 2.18 0 0 0 0 0 4.11 10.1 0 0 7.53 7.53 0 0 9.93 0 0 0 0 SUN JPY 0 2.7 11.6 14.7 4.56 13.3 0 1.21 6.6 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SUN EUR 0 0 0 0.74 14.9 0 22.3 0 18.6 0 0 22.3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 SUN USD 13.3 25.3 26.6 26.6 33.3 36.6 33.3 26.6 26.6 36 16.6 0 0 0 0 0 0 0 21.3 0 20 26.6 0 0 0 0 30 20 26.6 26.6 16.6 20 SUN IDR 80.9 118 114 43.1 116 89.6 64.4 151 26 124 95.7 50.3 93.4 23.5 93.3 64.3 48.2 92.4 0 80.2 9.63 15.7 0 0 0 17.2 13.4 0 28.2 0 0 0 48

GDS Secondary Market Performance (%) 22 20 As of Aug 1, 2017 Yield of Benchmark Series 5Y 10Y 15Y 20Y [In IDR ] 40.00 Average Daily Trading OUTRIGHT REPO BANK REPO BI As of Aug 1, 2017 18 16 14 12 10 8 6 4 2 Aug'11 Nov'11 Feb'12 May'12 Aug'12 Nov'12 Feb'13 May'13 Aug'13 Nov'13 Feb'14 May'14 Aug'14 Nov'14 Feb'15 6.68 (5Y), 6.88 (10Y), 7.33 (15Y), 7.56 (20Y) Source: IBPA May'17 Feb'17 Nov'16 Aug'16 May'16 Feb'16 Nov'15 Aug'15 May'15 Aug'17 30.00 20.00 10.00-15.84 15.34 15.50 15.59 10.15 8.80 0.82 0.75 6.46 3.07 0.72 0.61 0.41 1.54 0.76 0.16 0.38 0.25 12.36 11.40 7.91 9.38 9.54 9.20 5.88 5.73 5.31 2011 2012 2013 2014 2015 2016 Mar-17 Jun-17 Jul-17 SERIES/ TENOR PRICE/ YIELD Quotation of Benchmark Series (ao Aug 1, 2017) TODAY A DAY BEFORE 5 DAYS BEFORE MONTH TO DATE YEAR TO DATE A DAY BEFORE CHANGES (bps) 5 DAYS BEFORE FR0061 PRICE 101.28 101.13 100.99 101.13 97.96 15 29 15 332 5Y YIELD 6.68% 6.72% 6.75% 6.72% 7.47% (4) (7) (4) (79) FR0059 PRICE 100.80 100.48 100.60 100.48 94.98 32 20 32 582 10Y YIELD 6.88% 6.93% 6.91% 6.93% 7.71% (5) (3) (5) (83) FR0074 PRICE 101.50 101.26 101.75 101.26 101.18 24 (25) 24 32 15Y YIELD 7.33% 7.36% 7.31% 7.36% 8.13% (3) 2 (3) (80) FR0072 PRICE 106.88 106.26 106.96 106.26 97.19 62 (8) 62 969 20Y YIELD 7.56% 7.62% 7.55% 7.62% 7.81% (6) 1 (6) (25) MTD YTD Foreign Ownership V. 10Y Yield Movement 49

Ownership of Tradable Domestic Government Securities Description Dec-14 Dec-15 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. (in trillion IDR) 01-Aug-17 Banks* 375.55 30.98% 350.07 23.95% 399.46 22.53% 493.82 27.27% 399.19 20.45% 550.79 27.95% Govt Institutions (Bank Indonesia**) 41.63 3.43% 148.91 10.19% 134.25 7.57% 53.31 2.94% 175.89 9.01% 32.59 1.65% Bank Indonesia (gross) 157.88 8.90% 163.63 9.03% 180.28 9.23% 180.25 9.15% GS used for Monetary Operation 23.63 1.33% 110.32 6.09% 4.39 0.22% 147.66 7.49% Non-Banks 795.17 65.59% 962.86 65.87% 1239.57 69.90% 1264.02 69.79% 1377.15 70.54% 1387.53 70.40% Mutual Funds 45.79 3.78% 61.60 4.21% 85.66 4.83% 87.84 4.85% 91.56 4.69% 91.80 4.66% Insurance Company 150.60 12.42% 171.62 11.74% 238.24 13.43% 241.25 13.32% 254.21 13.02% 257.31 13.06% Foreign Holders 461.35 38.05% 558.52 38.21% 665.81 37.55% 685.51 37.85% 770.55 39.47% 776.24 39.38% Foreign Govt's&Central Banks 103.41 8.53% 110.32 7.55% 120.84 6.81% 118.91 6.57% 131.94 6.76% 132.92 6.74% Pension Fund 43.30 3.57% 49.83 3.41% 87.28 4.92% 86.95 4.80% 89.11 4.56% 89.85 4.56% Individual 32.80 2.71% 42.53 2.91% 57.75 3.26% 57.69 3.19% 60.49 3.10% 60.02 3.05% Others 61.32 5.06% 78.50 5.37% 104.84 5.91% 104.78 5.79% 111.23 5.70% 112.31 5.70% Total 1,212.35 100% 1,461.85 100% 1,773.28 100% 1,811.14 100% 1,952.23 100.00% 1,970.91 100.00% Dec-16 Jan-17 Jun-17 50

Yield of Govt Bonds on Peers Market LCY 10 Year Government Bonds Latest Yield (%) YTD Change (BP) MTD Change (BP) [in percentage] 22 20 HK 1.542-43.2 +2.4 ID 6.925-104.8-2.6 JP 0.078 +3.2-0.5 KR 2.260 +16.8 +3.3 MY 3.988-24.0-0.5 PH 4.989 +36.1 +31.5 SG 2.130-34.4 +3.4 TH 2.413-23.5-1.8 US 2.253-19.1-4.1 VN 5.456-91.9 +1.0 18 16 14 12 10 8 6 4 2-1 Aug '17 25 Jul '17 3 Jul '17 9 Feb '12 22 Sep '11 27 Oct '08 13 Sep'05 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y Market Watch as of August 2, 2017 Source: Asian Bonds Online Source: IDMA, Bloomberg, as of Nov. 22 2016 51

Crisis Management Protocol & Bond Stabilization Framework

Implement Measures to Manage External Volatility Pre-emptive Measures Implementing Crisis Management Protocol (CMP) Implementing Bond Stabilization Framework (BSF) Enhancing coordination between government institutions and continuous dialogue with market participants Specific policies in place to address crises enacted in 2015 budget law Crisis Management Protocol Swap facility arrangements based on international Indicators to determine cooperation crisis level of Government Securities Market condition (normal, aware, alert, crisis) Several market indicators that are monitored daily: - Yield of benchmark series; - Exchange rate; - Jakarta Composite Index; - Foreign ownership in government securities Policies to address the crisis at every level : - Repurchase the government securities at secondary market - Postpone or stop the issuance Bond Stabilization Framework First Line of Defense State s Budget State Owned Enterprises (BUMN) s Budget Social Security Organizing Agency (BPJS) s Budget Second Line of Defense State s Budget State Owned Enterprises (BUMN) s Budget Social Security Organizing Agency (BPJS) s Budget Buyback fund at DG of Budget Financing and Risk Management Investment fund at Public Service Agency (BLU) (min. level Aware) Related BUMNs (min. level Aware) BPJS (min. level Aware) State General Treasury Account (Rekening KUN) (min. level Alert) Accumulated cash surplus (SAL) (min. Level Crisis) Related BUMNs (min. level Alert) BPJS (min. level Alert) 53

Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Foreign Investor Activity Dominated By High Quality Long Term Investors Foreign Ownership - Proportion by Tenor Monthly Net Buyer (Seller) - Non Resident 100% [In Trillion IDR ] 50.00 Net Inflows [LHS] Net Inflows Over Total Foreign Holdings [RHS] 0.1 80% 60% 40% 36.0% 38.8% 44.5% 42.8% 44.7% 38.1% 38.2% 37.5% 37.8% 32.5% 37.4% 32.0% 33.6% 38.0% 36.2% 36.0% 39.5% 39.1% 35.9% 36.2% 40.00 30.00 20.00 10.00 0.00 (10.00) 14.67 15.95 12.49 13.17 21.34 39.48 23.04 6.84 4.10 6.31 (3.59) (3.90) (7.96) 8.38 5.39 (2.30) 21.37 19.80 9.46 18.30 20.09 As of July 17, 2017 (4.21) 22.03 15.04 9.06 16.89 (9.35) 9.75 19.70 6.38 31.33 22.59 10.33 14.40 (0.41) (7.60) 0.08 0.06 0.04 0.02 0-0.02-0.04 20% 0% 39.0% 12.9% 17.8% 17.4% 18.2% 15.2% 17.8% 11.8% 5.4% 3.7% 5.1% 5.3% 5.2% 1.3% 2.0% 5.2% 4.6% 3.2% 3.5% 3.4% 5.4% 4.4% Dec 13 Dec 14 Dec-15 Dec-16 Jan-17 Jun-17 17-Jul-17 (20.00) (30.00) (19.84) (19.58) -0.06-0.08 0-1 1-2 2-5 5-10 10 %Foreign Ownership of Total 54

Domestic Institutional Investors FSA (OJK) Regulation No 1/POJK.05/2016* on Investment in Government Securities for Non-Bank Financial Institution Life Insurance Company General Insurance, Reinsurance & Guarantee Company Employer Pension Fund BPJS Ketenagakerjaan (The Social Security Administration Body for Employment) BPJS Kesehatan (Healthcare Social Security Agency) Min. 20% of total investment ( by Dec. 31 2016). Min. 10% of total investment ( by Dec. 31 2016). Min. 20% of total investment ( by Dec. 31 2016) Min. 50% of total investment of Employment Social Security Fund (by Dec. 31 2016). Min. 30% of total investment of BPJS Kesehatan (by Dec. 31 2016). Min 30% of total investment ( by Dec. 31 2017). Min. 20% of total investment ( by Dec. 31 2017). Min 30% of total investment ( by Dec. 31 2017). Min. 30% of total portfolio investment of BPJS Ketenagakerjaan (by Dec. 31 2016) *Since November 14, 2016 this regulation is revised to be FSA (OJK) Regulation No.36/POJK.05/2016. The revised regulation has added SOE infrastructure bonds as instrument other than Gov t Securities that can be utilized to fulfill the minimum investment requirement. 55

Domestic Investor Activity Increasing Demand From Non-bank Institutional Others Individual 17.44 15.22 12.12 26.08 Pension Fund 6.52 37.45 Insurance Company 21.02 66.62 Foreign Holders 97.17 107.29 Mutual Fund 15.81 24.06 Bank Indonesia** 7.78 18.63 Banks* 26.94 63.17-20 40 60 80 100 120 IDR tn NET BUY 2016 NET BUY 2015

Challenges How to mitigate risk resulted from high foreign participation in the domestic market How to improve liquidity of govt securities: Benchmark; Non-benchmark series; and 3M SPN (Treasury Bills) How to increase repo transactions among market players 57

END OF PRESENTATION Directorate General of Budget Financing and Risk Management Ministry of Finance of Republic of Indonesia Directorate of Government Debt Securities Frans Seda building, 4 th floor, Jl. Wahidin Raya No. 1, Jakarta Pusat Postal Code: 10710 Phone: +6221 3810175 Fax. : +6221 3846516 Site: www.djppr.kemenkeu.go.id

Financing Strategy 2017 General Objective & Policy To meet financing needs at optimum cost and tolerable risk To support market development To enhance public accountability as part of transparent Government debt management To optimize the use of external and domestic loans To strengthen the function of Investor Relations Unit To direct debt use to productive activities To manage debt-to- GDP ratio General Policy To conduct active debt portfolio To increase debt management efficiency To achieve optimal participatio n of society To optimize currency mix of issuance 59

Integrated Reforms to Bolster Growth International acknowledgement from various agencies and improving global perception Continuous Improvement in Indonesia s Credit Quality Ease of Doing Business 1 In May 2017, S&P upgraded Indonesia s long-term sovereign credit ratings to an investment grade rating of BBB- with stable outlook, from BB+. This reflects: Reduced risks to Indonesia s fiscal metrics More realistic revenue targets Effective expenditure management Increased predicability of economic and financial policy S&P stated that long-term ratings could be raised if there are significant improvements in the external and fiscal balance 2008 2009 2010 2011 2012 2013 2014 2015 2016 50 Lower rank is 60 better 70 80 90 100 69 91 98 In February 2017, Moody s changed its outlook on Indonesia to positive (Baa3). The positive outlook reflects their view of: Improved policy effectiveness (as evidenced by positive improvements in institutions, track record of macrostability and fiscal stability) Expected reduction in vulnerability to external shocks due to narrowing current account deficits and a slower growth in private sector external debt In July 19, 2017, Fitch affirmsindonesia ast BBB- with outlook Positive. The positive rating reflects: Al low government debt burden Strong macroeconomic policy with focus on macro stability and sustainable growth Further increase in foreign exchange buffers Improving business environment 110 120 130 140 150 Indonesia India Brazil Philippines Turkey 123 130 1. Source: World Bank. 60