Transcript Executive Summary

0
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 joint effort between the 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 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 its 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, i.e. 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, State Asset Management Company, and the Central Bureau of
Statistics.
IRU also holds 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)
Subhan Noor (Debt Management Office - Ministry of Finance, Phone: +6221 381 0175)
E-mail: [email protected]
1
Table of Content
Executive Summary
Improved International Perception and Rising Investment
Preserved Macroeconomic Stability
Prudent Fiscal Management
Government Debt Performance
Wide Range of Policy Reforms to Boost Economic Growth
2
Executive Summary
3
Executive Summary
 The economy of Indonesia slowed in 2015 in line with weaker global growth. Domestic economic growth was projected at 4.8%
annually, down from the 5.0% (yoy) achieved in 2014. The slowdown was prompted by sluggish exports on the back of weaker global
demand and lower commodity prices. In 2016, economic growth in Indonesia is projected in the range of 5.2-5.6% (yoy), bolstered by fiscal
stimuli, primarily in the form of infrastructure projects, and tenacious consumption.
 The 2015 current account was expected improve from the previous year at around 2% of GDP. Improvements in the non-oil and gas
as well as oil and gas trade balances contributed to the smaller current account deficit as imports decreased significantly. This was in line
with the considerably weak domestic demand and exports due to lower commodity prices and dwindling global demand.
 Depreciatory pressures on the exchange rate have escalated in 2015, triggered by uncertainties in the FFR hike and Yuan
depreciation. Through to November 2015, the rupiah depreciated by an average of 11.05% to a level of Rp13,351 per USD. Rupiah
depreciation was precipitated by a number of externalities, including uncertainty surrounding the timing and magnitude of the FFR hike,
concerns over fiscal negotiations in Greece and Yuan depreciation against a backdrop of economic moderation in China.
 Inflation in 2015 was projected below 3%. Low inflation was supported by volatile foods, deflation of administered prices and
controlled core inflation. In November 2015, Consumer Price Index (CPI) data recorded inflation of 0.21% (mtm), affecting all components.
Consequently, CPI inflation from January-November 2015 was recorded at 2.37% (ytd) or 4.89% (yoy) on an annualised basis. Inflation in
2016 was predicted to remain within the target corridor of 4±1%.
 Financial system stability remained solid, underpinned by a resilient banking system and relatively stable financial markets.
Banking industry resilience endured, with credit, liquidity and market risks well mitigated. In October 2015, the Capital Adequacy Ratio
(CAR) remained well above the 8% minimum threshold at 20.8%, while non-performing loans (NPL) were low and stable at 2.7% (gross) or
1.4% (net).
 The BI Board of Governors agreed on 17th December 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility
rate at 5.50% and the Lending Facility rate at 8.00%. Bank Indonesia believes that rooms for monetary easing are open, on the back of
preserved macroeconomic stability, specifically end-2015 inflation that is projected to be below 3%, and current account deficit, projected
at around 2% of GDP. However, with the lingering uncertainty in the global financial market, Bank Indonesia will remain vigilant in easing
its monetary policy.
 On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal
consolidation. Recent policy reforms represent an essential step and integral part of structural reforms to strengthen economic
fundamentals in Indonesia. The budget deficit for 2015 will be maintained below the threshold of 3.0% of GDP.
4
Executive Summary
GDP Growth
Inflation
(%)
7.0
6.3
5.7
6.0
6.1
6.0
6.5
6.0
5.6
5.5
5.0
4.6
5.0
4.7
4.7
4.7
4.0
3.0
2.0
1.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014*
Q1
Q2
Q3
2015 2015 2015
Source: Bank Indonesia
Source: BPS, Bank Indonesia
Fiscal Balance
Balance of Payments
20
140
15
120
10
100
Thousands
billion USD
billion USD
(%)
(0.5)
Current Account
Source: Bank Indonesia
2012
Capital & Financial Account
2013
2014
Overall Balance
Q1*
Q2**
Q4*
Q3*
Q2*
Q1*
Q4
Q3
Q2
Q1
Q4
Q3
0
Q2
-15
Q1
20
Q4
-10
Q3
(2.0)
Q2
40
Q1
-5
Q4
(1.5)
Q3
60
Q2
0
Q1
80
2011
1.1%
(1.0)
5
2010
-0.7%
1.8%
2.2%
2.2%
2013
2014
(2.5)
(3.0)
2010
2011
2012
2015
Fiscal Surplus / (Deficit) (% of GDP)
Reserve Assets
* Preliminary Figures
Source: BPS
5
Executive Summary
Central Government Debt to GDP Ratio (% of GDP)
Debt Composition
30%
25%
120%
24.5%
23.1%
23.0%
24.9%
24.7%
100%
80%
20%
46.3%
45.1%
44.5%
46.8%
43.3%
44.0%
53.7%
54.9%
55.5%
53.2%
56.7%
56.0%
2010
2011
2012
2013
2014
Nov-15
60%
15%
40%
10%
20%
5%
0%
0%
2010
2011
2012
2013
2014*
Domestic Debt
Foreign Debt
Table of Debt to GDP Ratio
Note:
Using GDP at Current Market Prices [2010 Version]
*) Preliminary Figures
Source: Ministry of Finance
6
2015 Policy Summary
Government’s coordinated policy tools to promote growth through macroeconomic management
Quality of Spending
 Fuel subsidy savings of IDR 211.3 trillion.
 Reallocation of savings towards basic infrastructure (food security,
connectivity and maritime) and social welfare.
Monetary Policy Mix
 Bold and pre-emptive policy through BI Policy Rate, responsively
adjusting to current macroeconomic condition.
 Exchange rate flexibility to facilitate external adjustments.
 Infrastructure expenditure is higher than energy subsidy.
 Financial market deepening and capital flows management.
 Food security spending larger than energy subsidy.
 Accommodative measures of macroprudential policy.
 Additional allocation for village funds.
 Policy coordination with the government and financial stability
 Cashless smart cards system for better targeted subsidy.
 Capital injection to SOEs.
forum.
 Central bank cooperations, including second line of defences.
State Revenues Optimization
Financing and Debt Management Policy
 Capital
Strategies:
 Improving compliance rate.
 Closing tax leakage (especially VAT Refund).
 Expanding tax base (Mapping Tax Payer).
injection to state-owned companies, as agents of
development in supporting national priorities.
 Optimizes Governments securities issuance from domestic sources
to fulfill Budget need and uses foreign debts as complimentary.
 Determines debt instrument by taken into account of market need
in regard to market development and portfolio management.
 Issues Retail Bond for instrument diversification and financial
Manageable Fiscal Deficit
 Fiscal deficit to be maintained below 3% of GDP
 Spacious fiscal room for maneuver to anticipate global uncertainty.
inclusion.
 Optimizes foreign and domestic loan instrument to fulfill Budget
need on capital expenditure.
 Conducts active portfolio management of Government securities in
order to promote market liquidity and stability.
 Strengthens the function of Investor Relations Unit.
7
Improved International Perception
and Rising Investment
8
Improving International Perception:
Acknowledged by Rating Agencies
Investment grade
BBB-
Baa3 / Stable
BB+
Jan 2015
Moody’s
BB
“Indonesia’s Baa3 government bond rating is supported by narrow fiscal
deficits, low government debt ratios, the large size of the Indonesian
economy and its healthy GDP growth prospects.
BBB+
B
B-
Jun-15
Sep-14
Dec-13
Mar-13
Jul-12
Oct-11
Jan-11
Apr-10
Jul-09
Oct-08
Jan-08
May-07
Aug-06
Nov-05
Feb-05
May-04
Aug-03
Dec-02
Mar-02
Jun-01
Sep-00
Dec-99
CCC
Mar-99
CCC+
The stable outlook on the rating is supported by our expectation of
continued policy efforts to maintain the macro-economic balance in the face
of lower prices for Indonesia’s commodity exports and possible global
financial volatility in 2015.”
Investment grade
BBB-
BB+ / Positive
BB+
May 2015
BB
“S&P outlook revision reflects S&P’s view of Indonesia's improved policy
credibility stemming from initiatives to bolster monetary and financial
sector management as well as economic performance. S&P expects these
actions to improve Indonesia's growth prospects and external resilience.
S&P
BBB+
B
BCCC+
BBB-
Jun-15
Sep-14
Dec-13
Mar-13
Jul-12
Oct-11
Jan-11
Apr-10
Jul-09
Oct-08
Jan-08
May-07
Aug-06
Nov-05
Feb-05
May-04
Aug-03
Dec-02
Mar-02
Jun-01
Sep-00
Dec-99
Mar-99
CCC
The ratings on Indonesia balance the country's low per capita income and
developing policy and institutional settings against the improved credibility
of its monetary policy, buoyant economic growth, and sound public
finances.”
Investment grade
BBB- / Stable
BB+
BB
Dec 2011 (affirmed Nov 2015)
B+
Positive Watch
B
Positive Outlook
B-
Negative Outlook
CCC+
Stable Outlook
Jun-15
Sep-14
Dec-13
Mar-13
Jul-12
Oct-11
Jan-11
Apr-10
Jul-09
Oct-08
Jan-08
May-07
Aug-06
Nov-05
Feb-05
May-04
Aug-03
Dec-02
Mar-02
Jun-01
Sep-00
Dec-99
CCC
Mar-99
Fitch
BB-
“The recent wave of reform initiatives by the government is likely to
improve the business sentiment. The series of packages contain a
number of measures with the potential in the longer run to significantly
change the business environment, which can currently be characterised
as difficult. The reform agenda may signal a structural change from a
more nationalistic approach to economic policy of the recent past. Fitch
expects annual real GDP growth to pick up to 5.3% in 2016 and 5.5% in
2017 from 4.8% in 2015..”
Source: Moody’s, S&P, Fitch
9
International institutions outlook shows some optimism
though there is still downside risk for Indonesia in 2015
IMF Staff 2015
Article IV Mission
to Indonesia
(December 2015)
“Medium-term prospects are
favorable, supported by an
inclusive growth-enhancing
policy agenda that also places
emphasis on stability”
• Economic growth has stabilized
and is projected to reach 4.7% this
year. A moderate acceleration to
around 5% is forecast in 2016.
• Inflation has fallen sharply and is
projected to reach 3% at end2015. Next year, it is expected to
remain within the official band (3–
5%).
• CAD will narrow significantly in
2015, to an estimated 2% of GDP,
and is projected to increase
moderately in 2016
.
Risk
• Downside risk are mainly from
external factors incl. more volatile
global financial conditions, a
deeper-than-expected slowdown
in emerging market trading
partners, and further declines in
commodity prices.
• Domestic risks could arise from
slower-than-expected progress on
implementation of key structural
reforms, tax revenue and
infrastructure spending.
World Bank IEQ
(December 2015)
“The government is responding
and demonstrating intent to
implement reforms. For
example, it increased capital
spending by an estimated
49.8% (yoy) in real terms in the
third quarter.”
• GDP growth is expected to
bottom out at 4.7% in 2015,
picking up to 5.3% in 2016.
• Increased public sector spending
has helped support growth, with
the GDP growing at 4.7% yoy in
the third quarter, the same pace
as in Q1 and Q2 2015.
• The Dana Desa, or Village Fund,
is set to increase substantially
next year, potentially
contributing to public
infrastructure spending
Risk
• If revenue collection remains
weak in 2016, the ongoing public
infrastructure spending
momentum and its growth
impulse may be at risk.
Asian Development
Outlook
(March 2015)
“Policy reform to improve the
investment climate is
expected to spur economic
recovery this year and next”
• GDP growth is forecast to recover to
5.5% this year and 6.0% in 2016
• Inflation is projected to subside to
average 5.5% in 2015 and 4.0% in
2016
• Exports are expected to rise slightly
this year—by 1.2% in US dollar
terms—before trending higher in
2016.
• The trade surplus is projected to rise
this year and the current account
deficit to narrow gradually over the
next 2 years. Inflows of direct and
portfolio investment should keep the
balance of payments in surplus.
Risk
• Downside domestic risks to the
outlook are shortfalls in government
revenue and slowing momentum on
reform.
• External risks would be posed by
unexpected weakness in the growth
of major trading partners and
disruption to capital flows to
emerging markets triggered by the
expected rise in US interest rates.
10
OECD
Economic
Forecast
(June 2015)
“…activity is projected to
pick up later in 2015 and
strengthen further in
2016…”
• …as public spending gathers
pace, confidence recovers and
the expansionary impact of the
depreciation of the rupiah
takes hold.
• Inflation is now moderating, in
large part because of the fall in
energy prices. `
• Official interest rates are
assumed to remain unchanged
through 2015 and then fall
slightly in 2016.
• The abolition of fuel subsidies
has provided the necessary
fiscal space for increased public
infrastructure investment.
Risk
• The exchange rate may remain
fragile as the external
imbalance persists
Preserved Macroeconomic Stability
11
The Economy Slowed in 2015, Expected to
Pick Up in 2016
Economic Growth - Expenditure Side
Economic Growth
• In line with weaker global growth, the economy of Indonesia
also slowed in 2015. Accordingly, domestic economic
growth was projected at 4.8% annually, down from the 5.0%
(yoy) achieved in 2014.
• The slowdown was prompted by sluggish exports on the
back of weaker global demand and lower commodity prices.
Such conditions were more pronounced in regions reliant on
natural resources. In line with the continuously weak export,
limited investment growth was also recorded.
• Construction growth bucked the downward trend due to the
realisation of government infrastructure projects, while nonconstruction growth was limited. Notwithstanding, robust
household and government consumption supported
economic growth.
• In 2016, economic growth in Indonesia is projected in the
range of 5.2-5.6% (yoy), bolstered by fiscal stimuli, primarily
in the form of infrastructure projects, and tenacious
consumption.
• Meanwhile, investment is expected to increase in line with
solid macroeconomic stability and the implementation of
government policy packages designed to attract investment.
• In addition, government measures to boost public
purchasing power coupled with effective fiscal stimuli will
play a key role in terms of catalysing economic growth in
2016.
Sector
2013
2014
I
II
III
IV
2014
2015
I
II
III
5.0
5.0
5.0
Household Consumption
5.4
5.4
5.1
5.1
5.0
5.1
NPI Serving Household Consumption Expenditure
8.2
23.7
22.8
5.6
(-0.2)
12.4
Gross Fixed Capital Formation
5.3
4.7
3.7
3.9
4.3
4.1
4.4
3.7
4.6
Government Consumption
6.9
6.1
(-1.5)
1.3
2.8
2.0
2.7
2.1
6.6
Exports of Goods and Services
4.2
3.2
1.4
4.9
(-4.5)
1.0
(-1.0) (-0.1) (-0.7)
(-2.4) (-7.0) (-6.1)
Imports of Goods and Services
1.9
5.0
0.4
0.3
3.2
2.2
GDP
5.6
5.1
5.0
4.9
5.0
5.0
(-8.3) (-7.9)
4.7
4.7
6.4
4.7
Economic Growth - Supply Side
Sector
2013
2014
I
II
III
IV
2014
2015
I
II
III
4.0
6.8
3.2
Agriculture, Forestry, and Fisheries
4.2
5.3
5.0
3.6
2.8
4.2
Mining and Quarrying
1.7
(-2.0)
1.1
0.8
2.2
0.5
Manufacturing
4.5
4.5
4.8
5.0
4.2
4.6
4.0
4.3
4.3
Electricity and Gas
5.2
3.3
6.5
6.0
6.5
5.6
1.7
0.8
0.6
Water Supply, Waste Management and Recycling
4.1
3.6
3.2
2.8
2.7
3.0
2.9
6.0
7.6
Construction
6.1
7.2
6.5
6.5
7.7
7.0
6.0
5.4
6.8
Wholesale and Retail Trade; Automotives
4.7
6.1
5.1
4.8
3.5
4.8
4.0
1.8
1.5
Transportation and Warehousing
8.4
8.4
8.5
8.0
7.1
8.0
6.3
6.5
7.1
Provision of Accommodation and Food & Beverage
6.8
6.5
6.4
5.9
4.9
5.9
3.6
3.9
4.5
Information and Communication
10.4
9.8
10.5
9.8
10.0
10.0
10.1
9.8
10.8
Financial Services and Insurance
9.1
3.2
4.9
1.5
10.2
4.9
7.6
2.5
10.4
Real Estate
6.5
4.7
4.9
5.1
5.3
5.0
5.3
5.0
4.8
Business Services
7.9
10.3
10.0
9.3
9.7
9.8
7.4
7.6
7.6
Administration, Defence, and Social Security
2.4
2.9
(-2.5)
2.6
6.9
2.5
4.7
6.6
1.2
Education Services
8.2
5.2
5.4
7.3
7.1
6.3
5.8
12.2
8.3
Health Services and Social Activities
7.8
7.7
8.5
9.9
6.1
8.0
7.3
8.2
6.5
Other Services
6.4
8.4
9.5
9.5
8.4
8.9
8.0
8.1
8.2
GDP
5.6
5.1
5.0
4.9
5.0
5.0
4.7
4.7
4.7
Source: BPS, Bank Indonesia
(-1.5) (-6.2) (-5.6)
12
Signs of Growth Pick-Up:
Investment and Consumption Rebound
Cement sales increase significantly

Non-building investment is expected remain limited due to
lower revenues from commodity exports and weak business
sentiments.

On the other hand, building investment surged as
government infrastructure projects realization improved in
the second half of 2015. The increase in building investment
is reflected in the rising cement sales.
Cement Sales
GFCF: Building (RHS)
Indication of an improvement is reflected in the increase of motorcycle and car sales

Government consumption in 2015 is expected to be higher
than the previous year driven by increased goods
consumption.

Robust household consumptions owed to the “smoothing
behaviour” of consumers as indicated by the increased use
of savings and credit card.

Strong household consumption is also reflected in the
improving trend of motor vehicle sales.
Car Sales
Motorcycle Sales
Source: CEIC Gaikindo, Astra
Strong and Stable GDP Performance
Spatial GDP Growth
Spatial GDP Growth Contribution
Sumatera
GDP Growth
2014: 4.7%
2015Q1: 3.5%
2015Q2: 2.9%
2015Q3: 3.0%
Bali & Nusa
Tenggara
GDP Growth
2014: 5.9%
2015Q1: 8.9%
2015Q2: 8.9%
2015Q3: 11.8%
Sulawesi
GDP Growth
2014: 6.9%
2015Q1: 7.3%
2015Q2: 8.6%
2015Q3: 8.2%
Kalimantan
GDP Growth
2014: 3.2%
2015Q1: 1.1%
2015Q2: 1.5%
2015Q3: -0.41%
2015Q3 GDP Growth: 4.73%
Maluku & Papua
GDP Growth
2014: 4.3%
Sulawesi: 6.1%
2015Q1: 3.7%
2015Q2: 10.2%
2015Q3: 2.28% Kalimantan: 8.0%
Maluku & Papua: 2.2%
Sumatera: 22.4%
Bali & Nusa
Tenggara: 3.1%
Java
GDP Growth
2014: 5.6%
2015Q1: 5.2%
2015Q2: 5.1%
2015Q3: 5.2%
Java:
58.3%
Source: BPS
Source: BPS
Main Contributors to GDP Growth
Shifting from Commodity-based economy
(%)
(%)
5.6
15.0
5.4
10.0
5.2
5.0
5.0
5.0
-0.7
4.8
(-5.0)
-6.1
6.6
4.6
0.0
4.6
(-10.0)
I
II
III
2013
IV
I
2013
II
III
IV
2014
I
2014
II
2015
GDP (LHS)
Household Consumption (RHS)
Govt Consumption (RHS)
Investment
Export (RHS)
Import (RHS)
III
 In 3rd Quarter 2015, Indonesia booked 4.73% GDP growth (yoy),
slight increase from 4.67% in 2nd Quarter 2015.
 Majority of the growth
was driven from Java island, contributed
58.3% of Indonesia’s GDP growth and at 5.2% (yoy).
 Growth
in Java is higher than resource-rich regions such as
Sumatra and Kalimantan, given its high industrialization and
larger consumption base
 Indonesia
continues to drive growth in resource-based
industrialization to shift from commodity-based economy
Source: Bank Indonesia
14
15
Conducive Environment Underpinning Growth
Fundamentals
The fundamental long term growth drivers for Indonesia remain strong – equipped with abundant natural resources, a young and technically
trained workforce and a large consumer base with a fast growing spending power
The largest economy in
South-East Asia




According to McKinsey, Indonesia is
projected to be the 7th largest
economy in the world by 2030
5.9% average real GDP growth over
the period 2008-2013
Exports are 23.7% of GDP for the
year of 2013, one of the lowest in
Asia, creating low volatility in GDP
Foreign direct investment grew at
an average rate of 21.1% from
2010-2013
Nominal GDP – Strong Growth to
Continue
1.14
(USD tn)
0.88
A large, culturally diverse, young
and vibrant workforce




4th most populous country in the
world
66.6% of the population is of
working age(1) and 68.5% were 39
years and younger as of 2012
Working population projected to
grow at 0.7% compared to 0.5%
CAGR for total population from
2012-2017
A high literacy rate of more than
90%




~7mn people are expected to join
the middle class each year
Consumer expenditure has grown
at a 12.3% CAGR from 2007-2012
and is expected to continue at a
9.1% rate from 2012-2017
Disposable incomes are projected
to grow at 12.1% from 2012-2017
According to McKinsey, 135-170mn
people will join the consuming class
by 2030
Middle Class Households
Demographic Dividend – Young
Population
(‘000)
Male
Increase in infrastructure
investment to improve overall
efficiency
Large consumer base with fast
growing spending power
60,740




Announced an expansion of fiscal
spending on infrastructure by 19.2%
CAGR from 2012 to 2014
Infrastructure investments are
spread over Indonesia’s 6 economic
corridors
Encompass various sectors such as
seaports, roads, railways, airports,
energy and many others
Government continues to align
regional and national regulations to
attract further private sector
investors
Annual Budgeted Capital Spending
(IDR tn)
Female
39,340
2007
2012
2017E
2007
145.8
145.1
21,980
0.43
2012
176.1
172.4
2017E
2012
2013
Realized
2014
Realized
2015
Budget
Globally Competitive and a Top Investment
Destination
Indonesia’s stage of development is categorized as efficiency-driven with a strong and well balanced performance across all 12 pillars of competitiveness
Indonesia is in the Top 40 of the Global Competitiveness Index (“GCI”)
No.(1)
Country
Institutions
Infrastructure
Macro-economic
Environtment
Health and
primary
education
Higher
education and
training
Goods
market
efficiency
Labor
market
efficiency
Financial market
development
Technological
readiness
Market
size
Business
sophistication
Innovation
2008(2)
2015(3)
Score
Score
Score
Score
Score
Score
Score
Score
Score
Score
Score
Score
1
Spain
29
33
3.9
5.9
4.0
6.2
5.1
4.3
4.0
3.8
5.6
5.4
4.5
3.7
2
Thailand
34
32
3.7
4.6
5.7
5.8
4.6
4.7
4.2
4.4
4.2
5.2
4.4
3.4
3
Indonesia
55
37
4.1
4.2
5.5
5.6
4.5
4.4
3.7
4.2
3.5
5.7
4.3
3.9
4
Turkey
63
51
3.8
4.4
4.7
5.7
4.6
4.5
3.5
3.9
4.1
5.4
4.1
3.4
5
Italy
49
43
3.4
5.4
4.1
6.3
4.8
4.3
3.5
3.2
4.9
5.6
4.8
3.9
6
South Africa
45
49
4.4
4.1
4.5
4.2
4.1
4.6
3.8
5.0
4.6
4.9
4.4
3.7
7
Mexico
60
57
3.3
4.2
4.9
5.7
4.0
4.2
3.8
4.2
3.8
5.7
4.2
3.4
8
Brazil
64
75
3.2
3.9
4.0
5.1
3.8
3.7
3.7
4.0
4.4
5.8
4.1
3.2
9
Philippines
71
47
3.8
3.4
5.7
5.5
4.5
4.2
4.1
4.2
3.9
4.9
4.3
3.5
Source: Global Competitiveness Index 2015-2016, WEF
(1)
Countries with sovereign ratings in the Baa1-Baa3 category and population larger than 40 million
(2)
Rank among 134 countries
(3)
Rank among 140 countries
JBIC: Amongst ASEAN countries, Indonesia is the most preferred place
for business investment
Rank
2013
2014
2
1
4
3
5
7
6
10
9
8
1
2
3
4
5
6
7
8
9
10
Country / Region
India
Indonesia
China
Thailand
Vietnam
Mexico
Brazil
USA
Russia
Myanmar
No. of Companies
229
228
218
176
155
101
83
66
60
55
(1)
Percentage Share (%)
45.9
45.7
43.7
35.3
31.1
20.2
16.6
13.2
12.0
11.0
The Economist: Indonesia has taken over India in #2 Investment
Destination in Asia since 2014
China
Indonesia
India
Malaysia
Vietnam
Singapore
Thailand
Philippines
Australia
Hong Kong
South Korea
Myanmar
Japan
Taiwan
71
59.9
57.9
42.1
41.3
41.2
36.2
33.3
32.2
31.3
30.3
29.6
24.3
18.3
0
Source:
(1)
Japan Bank for International Cooperation (“JBIC”) FY2014 Survey Report on Overseas Business Operations by Japanese
Manufacturing Companies
Total number of companies that responded was 499
10
20
30
40
50
60
70
80
% of surveyed who plan to invest in each country
Source: The Economist – Asia Economic Outlook Survey 2015, January 2015
16
Strong Investment Underpinned by Competitiveness
and Stability

Investment Realization in Quarter III 2015 is Rp140.3 T, increases around 3.8% from Quarter II 2015 (Rp 135.1 T) or increases around 17.0% from
Quarter III 2014 (Rp 119.9 T). The value of investment is based on investment realization report from DDI and FDI companies (Oil and Gas,
Banking, Non-Bank Financial Institution, Insurance, Leasing and Home Industry are excluded).

Investment realization in January – September 2015 is Rp400.0 T, increases around 16.7% from that in January – September 2014 (Rp 342.7 T).

Foreign Direct Investment realization in Quarter III 2015 based on sectors (five leading sectors) are: Electricity, Gas, and Water Supply (US$ 1064.94
million); Mining (US$ 907.74 million); Real Estates, Industrial Estates, and Office Building (US$ 820.08 million); Metal, Machinery, and Electronic
Industry (US$ 723.92 million); and Chemical and Pharmaceutical Industry (US$ 578.24 million).
Trillion Rp
Investment Realization Progress Q3-2015
FDI by Sectors (Millions USD)
600.0
8,000
500.0
7,000
400.0
6,000
496
214
161
685
300.0
200.0
QI2014
QII2014
QIII2014
DDI
34.6
38.2
41.6
114.4
42.5
42.9
47.8
133.2
175.8
75.8%
FDI
72.0
78.0
78.3
228.3
82.1
92.2
92.5
266.8
343.7
77.6%
TOTAL 106.6
116.2
119.9
342.7
124.6
135.1
140.3
400.0
519.5
77.0%
QI2015
QII2015
QIII2015
JanSep
2015
Achiev
Target
ement
2015*
**
Source: BKPM
*) 2015 Investment Target, BKPM’s Strategic Planning 2015-2019
**) Achievements January-September 2015 towards 2015 target
1,154
1,442
896
296
197
221
564
283
297
442
395
582
189
560
559
422
460
468
21
574
4,000
399
511
505
684
460
2,000
JanSep
2014
1,436
1,070
606
3,000
0.0
762
5,000
515
100.0
711
1,000
778
999
1,287
590
1,646
133
482
765
929
345
37
593
611
507
619
1,094
1,053
872
Q2 2014
Q3 2014
Q4 2014
486
105
534
1,187
374
2,160
174
129
777
1,065
710
526
373
724
610
578
186
421
644
413
201
286
1,136
1,046
908
Q1 2015
Q2 2015
Q3 2015
573
0
Q1 2014
Mining
Food Industry
Chemical and Pharmaceutical Industry
Transport Equip. and Other Transport Industry
Electricity, Gas, and Water Supply
Transportation, Warehouse, and Telecommunication
Other Primary Sector
Paper and Printing Industry
Metal, Machinery, and Electronic Industry
Other Secondary Sector
Trade and Reparation
Other Tertiary Sector
Source: BKPM
17
Java is Still the Main Investment Destination
Realized Foreign Direct Investment (Jan – Sep 2015)
14,000
11,441
12,000
10,000
USD Million
Based on Economic Corridor, in January – September 2015 period
the highest realization of DDI and FDI is located in Java Corridor. The
further ranks of realization of the DDI is in Sumatera, Kalimantan,
Sulawesi, Bali and Nusa Tenggara, also Maluku and Papua Corridor.
The further ranks of realization of the FDI is also in Kalimantan,
Sumatera, Sulawesi, Bali and Nusa Tenggara, as well as Maluku and
Papua Corridor.
8,000
6,000
4,000
DDI and FDI by Economic Corridor Q3-2015 (Million USD)
3,898
2,825
2,000
1,005
985
1,184
Sulawesi
Maluku &
Papua
0
Sumatera
Java
Bali & Nusa Kalimantan
Tenggara
Source: BKPM
Realized Domestic Direct Investment (Jan – Sep 2015)
90,000
76,344
80,000
70,000
Rp Billion
60,000
50,000
40,000
30,555
30,000
16,235
20,000
7,559
10,000
Source: BKPM
1,492
1,104
0
Sumatera
Java
Bali & Nusa Kalimantan
Tenggara
Sulawesi
Maluku &
Papua
Source: BKPM
18
Inflation Remains Under Control
• Consumer Price Index (CPI) of November 2015 shows inflation of 0.21% (mtm), with all components contribute to this month’s
inflation. Therefore, CPI inflation from January to 2015 (year to date/ytd) is recorded 2.37% (ytd), reaching 4.89% (yoy).
• Inflation of volatile food is recorded 0.35% (mtm) or 4.84% (yoy). Such inflation primarily comes from rice, purebred chicken
meat and purebred chicken eggs. Meanwhile, this month’s core inflation is recorded lower than usual, namely 0.16% (mtm) or
4.77% (yoy). On the other hand, inflation of administered prices is recorded 0.20% (mtm) or 5.61% (yoy), primarily attributable
to cigarettes, airfare and toll road tariff.
• Based on the development of inflation until November 2015 and supported by strengthened policy coordination on the central
and regional levels to control inflation, Bank Indonesia is confident that price stability for 2015 is well attained as inflation stays
at the lower limit of the target 4±1%.
Disaggregation of Inflation
(%)
CPI (%, yoy)
Core (%, yoy)
Consensus Forecast on Inflation
Volatile Food (%, yoy)
Administered (%, yoy)
20
CF Sep 2015
(%)
8
7.17.1 7.17.1
CPI Nov-2015
15
mtm : 0.21%
7
yoy : 4.89%
6
ytd
: 2.37%
6.56.5
5
10
CF Dec 2015
4.94.7
5.1
4.5
4.8
4.3
4.8
4.4
4.74.8
Q4
Q1
Q2
Q3
Q4
5.6
5.0
5.5
5.0
Q1
Q2
4
5
5.61
4.84
4.77
3
4.89
1
2011
Source: BPS, Bank Indonesia
2012
2014
2015
Nov
Aug
May
Feb
Nov
Aug
May
Feb
Aug
2013
Nov
May
Feb
Nov
Aug
May
Feb
Nov
Aug
Feb
May
Nov
Aug
May
Feb
0
2
0
Q1
Q2
Q3
2015
Source: Consensus Forecast
2016
2017
19
Improvement in Trade Balance Contributes
to Smaller Current Account Deficit
Trade Balance November 2015
• Improvements in the non-oil and gas as well as oil and gas trade balances
contributed to the smaller current account deficit as imports decreased
significantly.
Billion USD
• This was in line with the considerably weak domestic demand and exports
due to lower commodity prices and dwindling global demand.
• From January to November 2015, non-oil trade balance recorded a surplus
of 13.28 billion US dollars, higher than the surplus occurring in the same
period last year which amounted to 10.10 billion US dollars.
• Meanwhile, oil and gas trade balance recorded a smaller deficit, from 12.66
billion US dollars in the same period a year earlier to just 5.47 billion US
dollars in 2015.
Non Oil & Gas
2011
Oil & Gas
2012
• Cumulatively, up to November 2015, the trade balance recorded a surplus of
7.81 billion US dollars, which is significantly better than the previous year’s
deficit of 2.56 billion US dollars for the same period.
Total
2013
2014
2015
Source: BPS, Bank Indonesia
International Reserves
• Indonesia’s official reserve assets position as of end November 2015 stood at
US$100.2 billion, decreased slightly from the reserve position at the end of
October 2015 which was registered at US$100.7 billion.
• The development was contributed by foreign exchange receipts, including
from oil and gas revenues and the withdrawal of government borrowing,
which are sufficient to cover the use of foreign exchange for Government
foreign debt payments and to stabilize Rupiah exchange in accordance with
its fundamentals.
• With these developments, official reserve assets at the end of November
2015 can adequately cover 7.1 months of imports or 6.9 months of imports
and servicing of Government external debt repayment, well above the
international standards of reserves adequacy at 3 months of imports.
Source: Bank Indonesia
20
Continued Pressure on Emerging Market’s Currency
Movement of Rupiah
•
•
•
Through to November 2015, the rupiah depreciated by an average of 11.05%
to a level of Rp13,351/USD. Rupiah depreciation was precipitated by a
number of external factors including uncertainty of the FFR hike, concerns
over fiscal negotiations in Greece and Yuan depreciation. On the home front,
factors included stronger demand for foreign currency for debt repayments
and seasonal dividend payments as well as concerns over domestic
economic moderation.
Nevertheless, the rupiah appreciated in October and November 2015 and
became more stable as positive sentiments abound, particularly regarding
EMs growth and domestic economic outlook as the Government introduced
a series of policy packages and Bank Indonesia unveiled a set of measures to
stabilize the currency.
Rupiah volatility in 2015 is lower than the average volatility of currencies in
the region.
IDR/USD
*data as of 15 Dec 2015
Source: Bank Indonesia
Nov 2015 vs Oct 2015
point-to-point
-1.07
IDR
BRL
1.69
0.79
-0.66
-0.32
THB
-1.50
KRW
MYR
-0.74
ZAR
-19.6
MYR
-15.5
-17.9
-19.4
-14.9
-13.7
-11.1
-10.5
-4.7
-8.3
-6.6
-5.8
-4.5
-5.4
KRW
INR
-4.61
-4.07
-4.64
-4.00
-19.1
-20.1
THB
-3.92
Source: Bank Indonesia
TRY
IDR
-2.10
-1.66
INR
-31.3
Point to Point
-28.2
EUR
0.97
-1.31
-0.76
-1.46
PHP
-6.00
2.88
0.08
TRY
EUR
Average
-0.30
BRL
ZAR
YTD 2015* vs 2014
Average
* data as of 30 Nov 2015
-2.00
0.00
2.00
%
4.00
PHP
-35.0
* data as of 30 Nov 2015
-30.0
Source: Bank Indonesia
-25.0
-5.3
-20.0
-15.0
-10.0
-2.1
-5.0
%
0.0
21
Monetary Policy Stance
• The BI Board of Governors agreed on 17th December 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility
rate at 5.50% and the Lending Facility rate at 8.00%.
• Bank Indonesia believes that rooms for monetary easing are open, on the back of preserved macroeconomic stability,
specifically end-2015 inflation that is projected to be below 3%, and current account deficit, projected at around 2% of GDP.
• In the short term, Bank Indonesia will monitor global financial market development post-Federal Funds Rate (FFR) hike as well
as conditions of the domestic economy.
• Additionally, Bank Indonesia will strengthen coordination with the Government to control inflation, stimulate growth and
accelerate structural reforms, thereby buoying economic growth while maintaining macroeconomic and financial system
stability.
BI Rate
Source: Bank Indonesia
22
Solid Financial System Stability
• Financial system stability remained solid, underpinned by a resilient
banking system and relatively stable financial markets. Banking industry
resilience endured, with credit, liquidity and market risks well mitigated.
• In October 2015, the Capital Adequacy Ratio (CAR) remained well above
the 8% minimum threshold at 20.8%, while non-performing loans (NPL)
were low and stable at 2.7% (gross) or 1.4% (net).
• In terms of the intermediation function, credit growth was recorded at
10.4% (yoy), lower than that posted in the same period last year, along with
the economic slowdown. Deposit growth was recorded at 9.0% (yoy) in
October 2015.
• Looking forward, credit growth is predicted to increase in the range of 1214% in 2016 in line with an increase in economic activity and the looser
macroprudential policy stance adopted by Bank Indonesia, accompanied by
the reduction to the primary reserve requirement.
Slowdown in Loan Growth
(YoY)
40%
5.0
Capital Adequacy Ratio (CAR) (RHS)
Working Capital loans
Investment Loans
Consumption Loans
35%
30%
25%
20%
15%
12.6
10.2
9.1
10.4
10%
5%
0%
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
2013
2014
2015
Source: Bank Indonesia
CAR Comfortably High, NPL Favorably Low
(%)
Total Growth
Loan-to-Deposit Ratio Well Maintained Within the Target Range
Gross Non-Performing Loan (NPL)
(%)
Loan-to-Deposit Ratio (%)
25
93
20.8
4.0
92
20
91
90
3.0
15
2.7%
2.0
10
1.0
5
0.0
0
89
88
88.6
87
86
85
84
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
2013
Source: Bank Indonesia
2014
2015
83
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
2013
Source: Bank Indonesia
2014
2015
23
Prudent Fiscal Management
24
Coordinated Short Run and Long Run Policies
Long Run Policies
Revenue Optimization
Budget
Quality of Spending
Reforms
New Challenges
Structural
Challenges
Sustainable
and Equitable
Economic
Growth
Sustainable Financing
Short Run Policies
Budget Optimization
Global Volatility
Fiscal
Stimulus
Maintain Purchasing Power
Fiscal Incentives for
Business Sector
Support
Navigation
Through
Global
Uncertainties
Other Policies
25
25
Three Key Pillars to a Sustainable and Equitable Growth
I. Higher spending
based revenues
II. Broaden tax coverage
III. Improve tax compliance
and prevent leakages
IV. Strengthen Taxation
institution
productivity
II. Enhanced subsidy
scheme
III. Empowerment of local
governments
Initiatives:
• Reinventing Policy
• e-Invoice
• Compliance Risk
Management
• Tax Amnesty
• Tax Administrative Reform
• Regulatory Reform
• Adjustment of non-taxable
income threshold
• Development of SemiAutonomous Tax Office
Initiatives:
• Improve Government
procurement regulation.
• Continue Fuel Subsidy
Reform (re-allocate energy
subsidy to productive
spending) and maintain
targeted subsidy scheme.
• Budgetary allocations for:
• Infrastructure Projects
• Social Welfare, and
• Cashless smart cards
• Village fund
Pillar III Sustainable Financing
I. Shift from commodity-
Pillar II Quality of Spending
Pillar I Revenue Optimization
Objective: Creating a sustainable and equitable economic growth for Indonesia
I. Secure budget financing
II. Effective utilization of
domestic and
international funding
sources
III. Financing schemes to
support infrastructure
development program
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
26
26
Reduction of Poverty Through Conditional Cash
Transfers
Current administration has a renewed focus on reducing poverty – this will be achieved via conditional cash transfers
Program Indonesia Sehat
(Healthy Indonesia Program) – Free health
insurance and medical benefits
Organizers
Service Coverage
Beneficiaries
Benefits
Social Security Agency
(BPJS)
Up to village level health
:
units (“Posyandu”)
Disadvantaged
communities who have had
: “BPJS PBI card” plus
groups with social welfare
issues (PMKS)
: Treatment and prevention
:
Program Indonesia Pintar
Program Keluarga Sejahtera
(Indonesian Smart Program) – Education
subsidies for the poor and families near the
poverty threshold
Beneficiaries : Less capable students, PMKS
school-age children, street
children, child labor in Indonesia
(Family Welfare Program) Bi-monthly credits
for eligible families to offset increasing costs of
living
Beneficiaries
: Underprivileged families
throughout Indonesia.
Extended to include
orphanage, nursing
homes, and other social
institutions
Distribution of
: Savings / savings in a post
Funds
office or a designated bank
may be withdrawn or be
kept
Benefits
: IDR200,000 / family / month
Distribution
of Funds
Benefits
: Savings / savings in a post
office or a designated bank may
be withdrawn or to
be kept
:  SD / MI amounting to
IDR225,000 / student /
semester
 SMP / MTs of IDR375.000 /
student / semester
 SMA / SMK IDR500,000 /
student / semester
 The government will distribute “Family Welfare Card”, “Indonesia Smart Card” and “Indonesia Health Card” to 15.5 million poor families which are 25% of
the population with the lowest socio-economic status
 For the first stage, Family Welfare Card and non-cash assistance through the Financial Services Digital, Indonesia Smart Card and Indonesia Healthy Card
will be distributed to 1 million of the 15.5 million families living in 19 districts / cities in 10 provinces across Indonesia
Budget Re-Allocation to Sustainable Economic Growth
Allocation of Energy Subsidy Spending to Education, Infrastructure and Regional Development for Sustainable Economic Growth
IDR Tn
900
800
700
600
2016 Budget Key Policies
2015 Budget
Energy Subsidy Spending: IDR 137.8 Tn
Infrastructure Spending: IDR 290.3 Tn
Central Government Expenditure: Continue budget efficiency
782.2
2016 Proposed Budget
Energy Subsidy Spending: IDR 121.0 Tn
Infrastructure Spending: IDR 313.5 Tn
Subsidy Policies
664.6
500
424.8
408.5
framework
•
Fuel Subsidy Policy: Continue “Fixed Subsidy” scheme to
Diesel and “Price Subsidy” for Kerosene and 3 kg LPG
•
Electricity Subsidy Policy: Switch to direct subsidy scheme
given to small households (450 VA and part of 900 VA)
•
Food Subsidy: Rice for targeted household (15.5 million
households)
•
Subsidy for Fertilizer: Production price close to economic price
targeted volume of 9.55 million ton, with retail price to be
adjusted to close price gap
•
Interest Subsidy for SME credit: For selected sectors such as
agriculture, fishery, manufacturing and trade and including for
migrant worker
400
300
290.3
313.5
200
100
137.8
121.0
0
2011
Education
2012
2013
Infrastructure
2014
2015
Regional
2016P
Energy
Regional Transfer Policy
2016 Budget Allocation Plan Compared to 2015 Revised Budget
Energy
Education
Infrastructure
Health
-47.6%
+27.5%
+76.2%
+75.4%
Source: Ministry of Finance
•
Formulate Transfer Fund nomenclature
•
Enhance Special Transfer Fund (DTK)
•
Optimize the implementation of reward and punishment to
regional Government
Village Fund Policy
•
Significantly Increase allocation compared to 2015
•
To support growth equality and empowerment in village area
28
28
Key Macroeconomic Assumptions
Assumptions:
2014
Realized
Revised
Budget
Latest
Realization
2016
Proposed
Budget
Growth (%)
5.0
5.7
4.71
5.3
Inflation (%)
8.4
5.0
11,878
12,500
3-month-SPN (Treasury Bills)
5.8
6.2
5.92
5.5
Indonesia Crude Price (ICP) (USD / bbl)
97.0
60.0
52.22
50.0
Oil Lifting (thousand bbl / day)
793.5
825
756.64
830
Gas Lifting (thousand bbl / day oil equivalent)
1,224
1,221
1,1754
1,155
Period
Exchange Rate (USD/IDR, Average)
2015 Budget Key Focus
•
•
•
2015
Quality of Spending
 Fuel subsidy savings of IDR 211.3 Tn
 Re-allocation of savings to basic
infrastructure (food security, connectivity
and maritime) and social welfare
 Additional allocation for village funds
 Capital injection to SOEs
Revenue Optimization
 Improving tax compliance rate, closing
tax leakage and expanding tax base
Financing Policy
 Lower fiscal deficit from 2.2% to 1.9%
YoY
6.832
YTD
2.242
EOP
13,5343
YTD
13,3033
4.7
13,900
2016 Budget Key Focus
•
•
•
•
General Revenue and Expenditure Policies
 Continue Tax Extensification and Intensification program and improve tax compliance
 Drive priority program to improve growth quality such as the 20% allocation for education, maintain 5% health
allocation and increase regional and village fund allocation
Subsidy Policies – More Targeted Program
 Targeted subsidy scheme and direct subsidy to small households
 Food & fertilizers subsidy and expand financing program for SMEs
Continue to drive key development projects:
 Develop infrastructure for Food Security and Connectivity
 Improve the service and sustainability of national health, labor insurance program and sustainable social
protection program
Financing Policies: Fiscal deficit at 2.1% and Debt/GDP at 26%
Notes: 1. As of 2nd Quarter 2015, 2. As of September 2015, 3. Up to 16 October 2015, 4. Average Dec 2014 – Aug 2015
Source: Ministry of Finance, Bappenas
29
Projection of Revised Budget 2015 Realization
and 2016’s Budget
Budget deficit expected to remain within safe and manageable threshold
2014
2015
Revised
Budget
1st
Semester
Realization
% of
Revised
Budget
Revised
Budget
2nd
Semester
Prognosis
% of
Revised
Budget
Outlook
Budget
1635.4
712.7
43.6%
1,761.6
697.4
39.6%
952.3
54.1%
1649.8
1822.5
I. Domestic revenue
1633.1
711.7
43.6%
1,758.3
697.2
39.7%
949.2
54.0%
1646.4
1820.5
1.Tax revenue
1246.1
537.5
43.3%
1,489.3
555.2
37.3%
811.8
54.5%
1367.0
1546.7
2.Non tax revenue
386.9
172.2
44.5%
269.1
142.0
52.8%
137.4
51.1%
279.4
273.8
2.3
1.0
42.8%
3.3
0.2
5.8%
3.1
94.2%
3.3
2.0
1876.9
759.9
40.5%
1,984.1
773.9
39.0%
1135.9
57.3%
1909.8
2095.7
I. Central gov. expenditure
1280.4
468.7
36.6%
1,319.5
436.1
33.1%
809.4
61.3%
1245.5
1325.6
1. Ministries/Agencies Spending
602.3
178.9
29.7%
795.5
208.5
26.2%
521.6
65.6%
730.1
784.1
2. Non-Ministries/Agencies Spending
678.1
289.8
42.7%
524.1
227.6
43.4%
287.9
54.9%
515.5
541.4
II. Transfer to region
596.5
291.2
48.8%
664.6
337.7
50.8%
326.5
49.1%
664.2
770.2
-106.0
17.9
-16.8%
-66.8
-2.2
3.3%
-100.4
150.4%
-102.6
-88.2
-241.5
-47.2
19.6%
-222.5
-76.4
34.4%
-183.6
82.5%
-260.0
-273.2
-2.4
-0.5
-
-1.9
-0.7
-
-1.6
-
-2.2
-2.15
E. Financing
241.5
138.8
57.5%
222.5
194.0
87.2%
66.0
29.7%
260.0
273.2
I. Domestic financing
254.9
162.2
63.6%
242.5
215.6
88.9%
28.1
11.6%
243.7
272.8
II. Foreign financing
Excess/Shortage Financing
-13.4
0.0
-23.4
91.6
174.0%
0.0%
-20.0
0.0
-21.6
117.6
10.8%
37.9
-117.6
-189.4%
163.0
-
0.4
Items (IDR tn)
A. State revenue and grants
II. Grants
B. State expenditure
C. Primary balance
(1)
D. Overall balance (A - B)
% deficit to GDP
1st
% of
Semester Revised
Projection Budget
2016
-
-
-
• The realization of income, expenditure, and financing in Semester II is expected to increase, an improvement from semester I;
• The financing gap will be covered with sources of financing that is considered safe, has low risk, and low cost
30
30
Strategic Policy of 2016 Budget in Summary
1
Controlled expansion
at 2.15% GDP Deficit
6
Subsidy to the right
recipient
2
Efficient bureucratic
system for Holiday
Allowance (THR) and
13th Salaty
7
Support the healthcare
social security program
3
5% Healthcare Budget
8
Fasten efforts to
reduce income gap
(expansion of PKH)
9
Support Fiscal
Desentralization
(Village Fund &
Reallocation of DK/TP)
4
Significant
infrastructure budget
5
20% Education
Budget
10
1 Million home
program
31
31
2016 Tax Revenue Strategy
Breakdown
1. Tax Revenue
a. Domestic Tax Revenue
2015
2016
Revised
Budget
Budget
1,489,255.5 1,546,664.6
757,230.1
629,835.3
715,788.6
49,534.8
41,441.5
576,469.2
571,732.7
26,689.9
19,408.0
145,739.9
146,439.9
11,729.5
11,766.8
49,256.9
40,087.1
1) Import Duty
37,203.9
37,203.9
2) Export Duty
12,053.0
2,883.2
- Non-Oil & Gas Income Tax
- Oil & Gas Income Tax
2) VAT
3) Land & Building Tax
4) Duties
5) Other Taxes
b. Tax from International Trade
TAX
CUSTOMS & DUTIES
1,439,998.6 1,506,577.5
679,370.1
1) Income Tax
INTENSIFIED EFFORTS TO EXPAND TAX REVENUES
General policies to achieve taxation target includes:
a. Optimize tax revenue by maintaining conducive investment
climate;
b. Maintain national economic stability and protect purchasing
power;
c. Improve national competitiveness and industry value-add; and
d. Control consumption of excisable goods.
 Optimize examination
Efforts
i.e. focus on primary
sectors in each regional
office, transfer pricing and
fraud
 Extend and Intensify
services to Tax Payers
i.e. data matching,
optimize IT system, e-tax
invoice, regulation Reform
 Improving audit
performance
Revise target of audit
object.
 Boost supervision,
action and
investigation efforts
 Increase operations to
monitor distribution of
excisable goods
 Year 2016 as the Year of
Law Enforcement
i.e. through active tax
billing, examination and
investigation
32
32
Government Expenditure 2016
• Government Expenditure consistently grow at 12% on average
• From 2015-2016 Regional Transfer and Village Funds (15.8%
yoy) grew significantly faster than Central Government
Spending (0.46% yoy)
Top 10 Ministries/Agencies
with the Highest Budget Allocation
Ministries/Agencies
Min. of Public Works and
Housing
Min. of Defence
National Police
Regional Transfer
Central Government Spending
Revised Budget
2015
Budget
2016
Budget
(Billion Rupiah)
104,1
99,5
73
Min. of Health
63,5
Min. of Religious Affairs
57,1
Min. of Basic Education
49,2
Min. of Transportation
48,5
Min. of Higher Education
and Research
40,6
Min. of Finance
39,3
Min. of Agriculture
31,5
Other Ministries
177,9
Total
33
784,1
33
Transfer to Region and Village Fund Policy
(IDR Trillion)
Description
A. Transfer to Region
1. Balancing Fund
a. General Transfer Fund
2016
Revised
Budget
Budget
643,8
521,8
463
1) Profit Sharing Fund
110,1
2) General Allocation Fund
352,9
b. Special Transfer Fund
58,8
1) Physical Purpose Allocation Fund
n/a
2) Non-physical Purpose Allocation Fund
n/a
2. Region Intensive Fund
3. Special Autonomy Region and DIY Fund
4. Other Transfer Fund
B. Village Fund
TOTAL
2015
n/a
17,6
104,4
20,8
664,6
• Increase the allocation to the Regional Transfer and the
Village Fund budget to closely match with Ministries and
Agencies spending
• Improve the quality of budgeting and Regional Revenue
723,2
Sharing Fund (Dana Bagi Hasil-DBH) distribution
700,4 • Reformulation of General Allocation Fund (Dana Alokasi
Umum-DAU) in order to improve the distribution of
491,5
financial capability among regions (as equalization grant)
106,1
• Reformulation and strengthening Special Allocation Fund
385,4
(Dana Alokasi Khusus-DAK) to support the implementation
and achievement of national priorities
208,9
85,5 • Reformulation of Regional Incentive Fund (Dana Insentif
Daerah-DID) to provide a greater appreciation for the area
123,5
that performs well in financial management, economy and
welfare areas
5
17,8 • Improving the management quality for Special Autonomy
Fund and Special Fund for Yogyakarta as a Special Region
n/a
• Improve the allocation of up to 6% in accordance Road
47
Map Village Fund from 2015 to 2019, to in compliance
with mandate from Government fullfil the mandate in Law
770,2
No.6/2014 on Villages
34
34
Financing Policy 2016
Description
I.
Domestic Financing
1. Domestic Banking
2. Domestic Non-Banking
II. Foreign Banking
1. Foreign Outstanding Loan (Gross)
a. Program Loan
b. Project-Based Loan
2. Standby Loan Agreement (SLA)
3. Foreign Debt Principal Repayment
TOTAL
2015
2016
Revised
Budget
Budget
242,5
272,8
4,8
5,5
237,7
267,3
-20,0
0,4
48,6
75,1
7,5
36,8
41,1
38,3
4,5
-5,9
64,2
-68,8
222,5
273,2
• Improve the quality of state investment plan to
increase SOEs’ value-add as agents of
development in infrastructure, food sufficiency
and maritime;
• Maintain Government debt ratio at a
sustainable level;
• Open access to development and investment
funding to the general public through Retail
Bond Issuance;
• Optimize Public Services Agency (BLU) funds to
finance development projects, including
expanding MSMEs’ access, affordable housing
and education;
• Prioritize Private Public Program (PPP) to
support infrastructure development;
• Extend loans to fasten infrastructure
development projects; and
• Support programs to increase access to
education and housing for low income
population.
35
Investment is Still Showing a Positive Development
…Direct investment needs to be further improved to help finance the current account deficit
Investment Climate Improvement:
Revision of Investment negative list
Land acquisition bill and revision of government regulation on
procurement
Special Economic Zone Fiscal Incentive
One Stop Services (OSS) center as an integrated services to provide
quick, simple, transparent, integrated license services
Special Economic Zone Fiscal Incentive
• Companies entitled for tax holiday or tax allowance
• Exemption for import duties, VAT and excise
Land Acquisition Bill
Provide certainty in Land Procuring for Public Infrastructure
Project. The law sets a finite deadline to resolve all legal issues
in the event of objections to any land acquisition for
infrastructure projects.
Revision of investment negative list
In the effort to increase investment in Indonesia and to execute
the ASEAN Economic Community (AEC), the Government of
Indonesia had done amendments to the provision list of
business fields closed and open with certain requirements in the
field of investment (Investment Negative List /DNI)
One Stop Service (OSS) by BKPM
Conducted by electronically integrated system on
investment information and licensing. Implementation
of OSS in BKPM comes with online tracking system.
National Single Window for Investment (NSWi) or the
Electronic Invesment Licensing Service System (SPIPISE)
was created to facilitate further OSS services. NSWi as
an electronic basis for investment so that investors can
obtain a variety of online licensing and non-licensing
service.
General Strategy for Debt Financing 2016
6. Active debt
management
and ALM
1. Manageable
Debt-to-GDP
ratio
2. Financial
inclusion &
market
deepening
DEBT
POLICY
IN 2016
BUDGET
5. Loan as an
alternative
instrument for
financing
4. Selective
external loan
(infrastructure
and energy
sector)
3. Debt
issuance for
productive
activity
37
Government Budget FY 2016
In trillion IDR, where applicable
Description
A. Total Revenue
I. Domestic Revenue
1. Taxation
2. Non-Taxation
II. Grant
2016 Budget
1,822.5
1,820.5
1,546.7
273.8
2.0
B. Government Spending
I. Central Government Spending
2,095.7
1,325.6
1. Ministerial Spending
784.1
2. Non-Ministerial Spending
541.4
II. Fund Transfer and Village Fund
C. Primary Balance
D. Deficit
E. Financing
(2.1%)
273.2
Domestic
a. Domestic Banks
b. Domestic Non-Banks
II.
(88.2)
(273.2)
Deficit to GDP
I.
770.2
272.8
5.5
267.3
1. Government Securities (net)
327.2
2. Capital Injection
(48.4)
Foreign
0.4
Surplus (Deficit) Funding
38
Government Securities Financing (Gross) 2015
Domestic Bonds
Indicative Target (IDR tn)
Instruments
Preliminary Budget
Government Securities (Net)
327,224
Redemption
187,202
Cash Management
15,000
Buyback
3,000
Weekly Auction:
Conventional securities:
23 x
Islamic securities:
23 x
Non-Auction:
Retail bonds:
Private Placement
Government Securities (Gross)
532,426
International Bonds Issuance (USD, EUR, JPY-denominated)
Composition
•
Domestic
76%
- Auction
66%
- Non-Auction
10%
International Bond
SR (Q1), SBR (Q2),
Sukuk Tabungan (Q3), and ORI (Q4)
Based on request
24%
•
Issuance of International Bonds as complement to avoid crowding
out in domestic market and provide benchmark for corporate
issuance, consists of USD, YEN or EURO global bonds.
Maximum issuance international bond 30% from target gross.
Issuance targets for GDS, Sukuk and ATM target
•
Government Debt Securities (SUN): 76 %;
•
Sukuk: 24%
•
ATM for Goverrnment Securities (SBN) by auction: 10-12 year.
39
Improved Government Debt Position
40
Secondary Market Performance of Central
Government Bonds
As of Nov 30, 2015
Yield of Benchmark Series
[In Percentage]
Global Financial
Crisis
Eurozone sovereign
debt crisis
41
Government Securities Realization
*(Million IDR)
Budget 2015*
Government Securities Net
Government Securities Maturing in 2015 and Buyback
Issuance Need 2015*
277.049.800
153.612.324
430.662.124
Revised Budget
Realization
(a.o.Nov 27, 2015)*
2015*
345.545.531
154.017.324
499.562.855
343.665.677
149.697.065
493.362.741
Government Debt Securities (GDS)
375.401.563
Domestic GDS
-Coupon GDS
-Conventional T-Bills
-Private Placement
-Retail Bonds
International Bonds
-USD GMTN
-Euro GMTN
288.832.874
195.010.000
50.300.000
16.084.119
27.438.755
86.568.689
50.372.939
18.473.050
-Samurai Bonds
11.054.200
-Domestic GDS
6.668.500
Government Islamic Debt Securities
Domestic Government Islamic Debt Securities
- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated Bond/Project Based
Sukuk)
- Retail Sukuk
- Private Placement
Global Sukuk
% Realization to
Revised Budget
2015
99,46%
97,19%
98,76%
117.961.178
91.539.178
59.990.000
21.965.035
9.584.143
26.422.000
* Based on projection of deficit 2,78%
*Adjusted by changes in Cash Management & Debt Switch
39
Outstanding of Total Central Government Debt
[USD billion]
250
Loan
Government Securities
200
150
118,39
140,75
130,97
136,27
155,23
160,5
162,9
168,3
104,20
100
85,26
82,78
62,25
66,69
65,02
68,65
2007
2008
2009
2010
50
68,51
63,76
58,28
54,18
53,23
51,98
53,90
2012
2013
2014
March-15
Jun-15
Nop-15
2011
[in percentage]
Year
Loan
Government Securities
Total Central Government
Debt
Source: Ministry of Finance
2007
2008
2009
2010
2011
2012
2013
2014
March-15
Jun-15
Nop-15
42%
58%
45%
55%
38%
62%
37%
63%
34%
66%
31%
69%
30%
70%
26%
74%
25%
75%
24%
76%
24%
76%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
100%
43
Total Debt Maturity Profile as of End of October, 2015
Maturity Profile of Central Government by Instruments (in trillion IDR)
Maturity Profile of Central Government by Currencies (in trillion IDR)
Source: Ministry of Finance
44
Holders of Tradable Central Government Securities
More Balance Ownership In Terms Of Holders And Tenors
Foreign Ownership of Gov’t Domestic Debt Securities by
Tenor
Holders of Tradable Gov’t Domestic Debt Securities
30,80%
32,98%
32,58%
30,49%
32,54%
33,76%
38,13%
39,63%
37,10%
38,15%
30,83%
33,16%
33,99%
33,06%
36,63%
36,53%
33,70%
31,04%
27,21%
28,91%
28,79%
Dec-11
Dec-12
Dec-13
Dec-14
Jun-15
Oct-15
Nov-15
Foreign Holders
Source: Ministry of Finance
Domestic Non-Banks
Domestic Banks
45
Profile of Central Government Debt Securities
GOVERNMENT DEBT SECURITIES (GDS)
Dec-12
1. Domestic Tradable GDS
a. Zero Coupon
1. Government Treasury Bills
2. Zero Coupon Bond
b. Government Domestic Bonds
1. Fixed Rate *) +)
2. Variable Rate *)
2. Promissory Notes to Bank Indonesia **) ***)
Dec-13
Dec-14
Nov-15
IDR 757.231
IDR 908.078
IDR 1.099.257
IDR 1.279.750
IDR 24.083
IDR 22.820
IDR 1.263
IDR 34.050
IDR 34.050
IDR -
IDR 39.950
IDR 39.950
IDR -
IDR 42.050
IDR 42.050
IDR -
IDR 733.148
IDR 610.393
IDR 122.755
IDR 874.028
IDR 751.273
IDR 122.755
IDR 1.059.307
IDR 945.964
IDR 113.344
IDR 1.237.700
IDR 1.140.956
IDR 96.743
IDR 240.144
IDR 234.870
IDR 229.054
IDR 223.864
3. SPNNT
IDR -
4 Retail Saving Bonds
5 Total GDS (1+2+3+4)
IDR 997.376
IDR 1.142.948
IDR 12.148
IDR 2.391
IDR 2.391
IDR 1.330.702
IDR 1.518.152
5. Total Government International Bonds *)
¥
6. TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption))
USD 22.950
155.000
USD 27.140
155.000
¥
¥
€
USD 29.190
155.000
1.000
¥
€
USD 32.690
255.000
2.250
IDR 997.376
IDR 1.142.948
IDR 1.361.994
IDR 2.032.270
a. Domestic Tradable GIDS
IDR 63.035
IDR 87.174
IDR 110.704
IDR 158.183
a. Fixed Rate *)++)
IDR 62.840
IDR 78.541
IDR 99.969
IDR 148.668
IDR 195
IDR 8.633
IDR 10.735
IDR 9.515
IDR 35.783
IDR 31.533
IDR 33.197
IDR 41.781
GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS)
b. Zero Coupon
b. Domestic Non Tradable GIDS
c. Government International Islamic Bonds
1. Fixed Rate *)
7. TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption))
8. TOTAL GOVERNMENT SECURITIES
USD 2.650
USD 4.150
USD 5.000
USD 7.000
IDR 88.660
IDR 137.758
IDR 172.904
IDR 296.844
IDR 1.121.819
IDR 1.312.239
IDR 1.568.095
IDR 2.329.114
Notes:
- Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds)
- *) Tradable
- **) Non-Tradable
- +) Including ORI (IDR Billion))
IDR 34.153
- ++) Including Sukuk Ritel/SR (IDR Billion)
IDR 28.989
- Exchange Rate Assumption (IDR/USD1)
IDR 9.670
- Exchange Rate Assumption (IDR/JPY 1)
IDR 111,97
- Exchange Rate Assumption (IDR/EUR1)
IDR
IDR
IDR
IDR
43.882
35.924
12.189
116,17
IDR
IDR
IDR
IDR
IDR
54.098
47.906
12.440
104,25
15.133
IDR
IDR
IDR
IDR
IDR
54.098
69.871
13.840
112,74
14.640
46
Source: Ministry of Finance
Debt Switch & Cash Buyback Program
Debt Switch Program
[in billion IDR]
Buyback Program
Source: Ministry of Finance
47
Maturity Profile of Tradable Central Government Securities
as of the end of November, 2015
[IDR Tn]
Maturity Profile of Tradable Government Securities as of November 30, 2015 (in trilion IDR)
200
180
160
trillion rupiah
140
120
100
80
60
40
20
0
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045
Total
2,72 185, 115, 162, 160, 111, 138, 124, 105, 208, 125, 56,0 47,7 53,1 99,1 29,1 41,8 47,0 52,5 97,5 27,8 23,0 44,1 50,9 8,36 16,7 23,7 54,3 43,0 43,9 27,6
SBSN
1,72 51,7 30,2 48,8 35,2 17,2 16,5 31,8 15,5 38,1 46,9 2,35 2,59 2,86 7,01 5,65 3,83 4,22 4,65 5,13 5,66 10,3 6,88 7,58 8,36 9,22 10,1 11,2 12,3
-
-
9,9
-
-
-
-
-
-
-
-
PBS
-
19,6
-
13,5
1,0
14,4
-
1,2
-
-
-
-
3,8
-
-
-
-
-
-
-
-
-
10,1
-
-
7,5
-
-
RIEUR
-
-
-
-
-
-
14,6
-
-
-
18,3
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,5
3,9
9,3
-
6,8
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
RIJPY
-
6,2
-
-
-
-
-
-
-
-
-
-
-
IB
-
12,5 28,2 26,3 27,7 27,7 34,6 27,7 34,6 27,7 27,7
-
-
-
-
-
-
-
-
-
22,1
-
ORI
-
20,2 21,2 27,4
-
VR
-
17,7 13,1 17,9 22,7 25,3
FR
-
22,4 22,6 26,3 70,1 17,9 73,1 56,6 55,4 143, 26,0 53,7 41,4 50,3 92,1 23,5 38,0 42,8 47,9 92,4
-
-
20,8 27,7
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
12,7
6,4
15,7
-
-
31,1 20,8 27,7 27,7
13,6 12,0
-
-
-
-
-
-
16,3
-
Source: Ministry of Finance
48
Daily Transaction & Offshore Ownership
as of the end of October, 2015
Average Daily Transaction Govt’ Bonds
Net Buyer (Seller) Non Resident
[IDR Tn]
Average daily trading [IDR Tn]
OUTRIGHT
REPO BANK
Capital Inflows [LHS]
REPO BI
30,00
50,00
0,1
40,00
17,69
25,00
6,48
23,98
20,00
10,94
8,80
0,68
0,72
0,83
12,33
10,90
9,37
8,89
8,21
7,52
9,07
0
-0,02
(3,90)
(10,00)
(2,30)
(7,96)
(20,00)
-0,04
-0,06
(19,84)
(19,98)
Nov-15
Sep-15
Jul-15
May-15
Mar-15
Jan-15
Nov-14
Sep-14
-0,08
Jul-14
Nop'15
Okt'15
Sep'15
Agust'15
Jul'15
Jun'15
Mei'15
Apr'15
Mar'15
Feb'15
Jan'15
2014
2013
2012
2011
2010
5,39
(30,00)
2009
6,31
0,52
May-14
6,39
4,10
(3,59)
Mar-14
5,88 5,73 5,31
7,91
9,18
6,84
8,38
(0,37)
(1,76)
Jan-14
4,39
10,9111,11
0,02
6,43
4,82
Nov-13
3,55 2,98
0,22
(0,88)
Sep-13
0,62
6,08
2,81
Jul-13
0,41 0,30
0,15
0,50
0,76
0,34 1,54
0,16 0,38 0,41
0,27
4,65
12,49
13,17
0,00
0,77
May-13
0,77
3,45
4,22
Mar-13
10,00
0,53
3,39
Jan-13
1,14 0,81
6,70
14,67
15,95
16,4915,77
16,10
8,44
0,04
21,34
10,13
2,68
4,84
20,15
17,97
10,00
15,00
2008
Triliun
7,45 7,19
0,06
23,04
30,00
12,87
20,00
0,08
39,48
15,61
12,57
5,00
capital inflows over foreign [RHS]
Source: Ministry of Finance
49
Ownership of IDR Tradable Central Government
Securities
(in trillion Rp)
Dec-10
`
Banks
Dec-11
Dec-12
Dec-13
Dec-14
217,27 33,88% 265,03 36,63% 299,66 36,73% 335,43 33,70%
Govt Institutions (Bank Indonesia*)
Non-Banks
Mutual Funds
Insurance Company
Foreign Holders
Securities Company
369,11
27,21%
3,44%
38,37
3,08%
80,58
5,94%
406,53 63,40% 450,75 62,29% 517,53 63,09% 615,38 61,83%
51,16 7,98% 47,22 6,53% 43,19 5,27% 42,50 4,27%
792,78 65,52%
45,79 3,78%
833,42
47,16
66,97%
3,79%
906,74
56,28
66,85%
4,15%
956,85 66,54%
59,47 4,14%
79,30 12,37% 93,09 12,86% 83,42 10,17% 129,55 13,02%
150,60 12,45%
149,95
12,05%
161,81
11,93%
170,86 11,88%
195,76 30,53% 222,86 30,80% 270,52 32,98% 323,83 32,54%
461,35 38,13%
500,83
40,25%
537,53
39,63%
548,52 38,15%
2,72%
7,84
1,08%
36,75
0,13
3,07
43,43
0,37% 44,44 4,47%
67,09
4,67%
6,10% 78,39 7,88%
103,42
8,55%
104,66
8,41%
102,34
7,54%
109,49
7,61%
5,73% 34,39
4,75% 56,46
6,88% 39,47 3,97%
43,30
3,58%
43,00
3,46%
46,32
3,42%
48,69
3,39%
0,02%
0,02%
0,04%
0,88 0,09%
0,81
0,07%
0,65
0,05%
0,74
0,05%
0,15
0,01%
32,48 3,26%
30,41
2,51%
28,35
2,28%
32,23
2,38%
52,40
3,64%
7,76% 46,68 4,69%
60,51
5,00%
63,49
5,10%
71,82
5,29%
76,76
5,34%
100% 1.437,93
100%
0,14
0,30
6,77% 53,05
7,33% 63,64
Total
641,21 100% 723,61 100% 820,27 100% 995,25
1) Including ownership of SBSN (government sukuk).
2) Foreign are consisted of Private Banking, Fund/Asset Management, Securities, Insurance, Pension Fund.
3) Others are consisted of Corporation, Individual, Foundation.
*) Since February 8th, 2008, repo transaction of Government Securities to Bank Indonesia was included.
**) Since November 21, 2014, foreign government(s) was included to the same category as foreign central bank(s).
Source: Ministry of Finance
41,63
413,99 28,79%
50,06
Individual
Others
Nov-15
29,95%
17,42
375,55 31,04%
Jun-15
372,66
Foreign Govt's&Central Banks**
Pension Fund
Jan-15
100% 1.209,96
100% 1.244,45
100% 1.356,43
50
Wide Range of Policy Reforms
to Boost Economic Growth
51
Economic Policy Package
To propel the real sector in order to provide the foundation for economic growth
ECONOMIC POLICY PACKAGE
9 SEPTEMBER 2015
Encourage the
competitiveness
of national
industry
Accelerate
the national
strategic
projects
Boost
investment in
the property
sector
through deregulation and debureaucratization as well as law
enforcement and business certainty
through simplification of permits,
land provision, accelerate the flow
of goods and services, as well as
break down barriers
encourage housing projects,
particularly for low-income
earners
• Amended 89 out of 134 regulations
• Drafting 2 Presidential Decree, 2
Presidential Instruction, 63 Minister
Regulation and 5 other regulations
52
Short Run Policy Package I, II, and III
…to navigate uncertain global environment and to stimulate domestic economic growth
Stimulus Package I: 9 Sep 2015
Cut Red Tapes
• Rewriting 89 out of 154 regulations
• Deregulation policies such as relaxing visa
requirements, gas price adjustment for certain
industries and enhancing cooperative function
• Simplification to obtain business licenses and
implementation of e-services
Accelerate Strategic National Projects
• Simplifying spatial license & land accommodation
• Accelerating goods & service procurement for the
government
• Discretion in legal issue barriers
• Strengthen the role of regional heads to accelerate
national strategic project completion
Boost Low Income Housing
• Promoting housing construction for low income
citizens
• Expanding opportunity for investments in property
sector
Source: Coordinating Ministry of Economic Affairs
Stimulus Package II: 29 Sep 2015
Simpler Permit Requirements
• Ease bureaucracy for investments via 3-hour permit
issuance program
• Faster process for tax allowance and holiday for
qualified investments to 25 days and 45 days,
respectively
• Streamline permit requirements in forestry sector
from 14 to 9
Tax Incentives
• Elimination of VAT for transport industries (train,
shipping and air transport inc. spare parts)
• Reducing tax rate on deposits from export
proceeds. 1-month deposit tax 10%, 3-month 7.5%, 6month 2.5% and more than 6-month 0%
Integrated Logistics Facilities
• Facility incentive on integrated logistic center
• Two facilities slated to be operational by end of 2015;
Cikarang (Manufacturing) and Merak (Fuels)
53
53
Short Run Policy Package I, II, and III
…to navigate uncertain global environment and to stimulate domestic economic growth
Stimulus Package III: 7 Oct 2015
Lower Fuel and Electricity Prices
• Lower retail fuel costs (jet fuel, LPG and retail fuel)
• Decrease gas price for factories and qualified
industries
• Lower industrial electricity prices
Land Permit Simplification
for Investment Activities
• 3-hour turnaround for land availability
• Faster approval time for building, leasehold, use
right and land permits
Broadening of
Small Business Credit Recipients
• Expanding criteria for allowed recipients to include
salaried workers
Source: Coordinating Ministry of Economic Affairs
Stimulus Package IV: 15 Oct 2015
Fair, Simplified and
Projectable Wage System
• Setting Provincial Minimum Wage regulation
• Formula for setting minimum wage to ensure
simplified, stable and projectable yearly wage
adjustments
Ease and Affordability of
Small Business Credit
• Government provides subsidy on small business
credit to stimulate credit growth in banking sector and
affordability to applicants
• Expanding criteria for small business credit to
include:
• Micro, Small and Medium enterprises in productive
sectors (farming, fishery, manufacturing, creative
business, trading and services)
• Overseas Indonesian workers with occupation in
formal sectors
• Family members of salaried workers
• Ex-Overseas Indonesian workers
• Overseas Indonesian workers with terminated
contract
54
54
Short Run Policy Package I, II, and III
…to navigate uncertain global environment and to stimulate domestic economic growth
Stimulus Package V: 23 Oct 2015
Lower Asset Revaluation Tax
• Revaluation tax originally set at 10%
• Under new incentive, tax rates are cut according to
periods, detailed below:
• Revaluation period until 31 Dec 2015: tax rate at 3%
• Revaluation period until 30 Jun 2016: tax rate at 4%
• Revaluation period until 31 Dec 2016: tax rate at 6%
Eliminating Double Taxation for REITs
• Eliminating double taxation system for Real Estate
Investment Trusts (REITs)
• Encourage Indonesian property and infrastructure
companies to issue REITs in Indonesia
Stimulus Package VI: 5 Nov 2015
Propel Rural Economies through Development
in Special Economic Zones (SEZs)
• Tax holiday (reduce income tax) and tax allowance (reduce
net income and accelerate depreciation.
• No charges on value-added tax and luxury goods tax
• Import duty tariff require Certificate of Origin
• Foreigners allowed to have property
• Reduce tax on development and amusement in tourist areas
• Establish wage boards and specialized tripartite agencies
• Grant 30 days visitor visa which are extendable for 5 times
• SEZ administrator able to provide land services
• SEZ administrator able to issue principles and business
permits
• Accelerating licensing process a max. of 3 hours
Sustainable and Equitable
Water Supply to the Community
• Drafting government regulations (RPP) on water resources
utilization
• Drafting RPP on water supply systems (SPAM)
• Ensure that private entities do not dominate the whole SPAM
subsystem
• Private water supplier to meet their needs on its own.
Simplifying Import Licensing for
Pharmaceutical Raw Materials
• Simplifying the licensing process to only 5.7 hours
• Target 100% paperless
Source: Coordinating Ministry of Economic Affairs
55
55
Short Run Policy Package I, II, and III
…to navigate uncertain global environment and to stimulate domestic economic growth
Stimulus Package VII: 4 Dec 2015
Acceleration of Land Certification Process
• Increasing numbers of certified surveyor, especially
from non-civil servant.
• Speed up the time needed to land registration
announcement, from 60-30 days to 14 days
• Shifting land registration process to electronic system
• Giving communal rights for indigeneous peoples and
people who lives in plantation/forest area
Tax Incentive for Labor Intensive Industry
• Releasing Government Regulation (PP) which
facilitate income tax (PPh) for the labor works in
labor intensive industry for 2 years
• Giving tax facilities for various footwear industries
throughout provinces in Indonesia
Source: Coordinating Ministry of Economic Affairs
Stimulus Package VIII: 21 Dec 2015
One Map Policy
• All government office will use only thematic map in
1:50.000 scale in order to accelerate the settlement of
land using problem and to solve the country’s borderline
problem
Refinery Construction
• New refinery will be constructed in Tuban and
Bontang, to support the existing refinery in Cilacap,
Balikpapan, Balongan and Dumai.
Incentive for Aircraft Maintenance
Companies
• 0% of import duty will be applied for 21 tariff post
regarding aircraft sparepart and maintenance
components
56
56
Short Run Policy Package Progress*
Package
Total Deregulation
Target
In Study Process
Implemented
Remarks
I
154
12
112
78 has been signed, 34 not yet
II
15
-
15
N/A
III
8
7
1
N/A
IV
10
2
8
N/A
V
5
2
8
N/A
VI
5
-
5
N/A
VII
N/A
N/A
N/A
N/A
Source: Coordinating Ministry of Economic Affairs
* as of 4 December 2015
57
Ministry of Finance Policy Package
…comprehensive approach across sectors
Stimulus to Enhance Household Purchasing Power
• Increase non-taxable income threshold to IDR 36.0 million (~USD 2,570) from IDR 24.3 million (~USD 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 (~USD 286 – 357 million) in additional income and provides additional 800 thousand – 1
million workforce across Indonesia
Stimulus to Increase Incentive for Businesses
Implemented
• 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 (~USD 714 thousand) for
apartments and IDR 20 billion (~USD 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)
Source: Ministry of Finance
On Pipeline
• 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
58
58
Monetary Policy Package: September I
9th September 2015
01
02
03
Strengthening
inflation control and
stimulating the real
sector from the
supply side.
Maintaining rupiah
exchange rate
stabilisation.
Strengthening liquidity
management Rupiah, through
Open Market Operations
(OMO), in order to divert the
daily liquidity to longer tenors
Changing the auction mechanism of
Reverse Repo (RR) SBN from variable
rate tender into fixed rate tender, adjust
the pricing of RR SBN, and extend the
tenor by issuing RR SBN 3 months
Strengthening coordination
amongst the National and
Regional Inflation Control
Teams to accelerate
implementation of the national
and regional inflation control
roadmap. There are currently
more than 430 regional inflation
control teams throughout
Indonesia, each having a
regional inflation roadmap.
Preserving foreign exchange
market confidence by
controlling currency volatility
Strengthening Regional
Economic and Financial
cooperation between Bank
Indonesia and the Government.
Maintaining market confidence
in tradeable government
securities (SBN) through
purchases on the secondary
market, while monitoring its
impact on SBN availability in
terms of inflow and money
market liquidity.
Changing the auction mechanism of
Certificates of Deposit of Bank
Indonesia (SDBI) from variable rate
tender into fixed rate tender, adjust the
pricing of SDBI, and issue SDBI with 6
months tenor
Reissue Bank Indonesia Certificates
(SBI) tenor of 9 months and 12 months
with a fixed rate tender auction
mechanism as well as pricing
adjustment
59
Monetary Policy Package: September I (continued)
9th September 2015
04
Strengthening foreign
exchange supply and
demand management
Adjust the frequency of
the auctions of Foreign
Exchange (FX) swap from
2 times/week to 1
time/week
Change the Foreign Currency
Term Deposit (TD) auction
mechanism from variable rate
tender into fixed rate tender,
pricing adjustment, and extend
the tenor of up to 3 months;
Lower the purchase limit of
foreign currency by verifying the
underlying documents from US$
100,000 to US$ 25,000 per
customer per month and requires
the use of Tax Identification
Number (NPWP)
05
Deepening the money market
Providing swap hedging facilities to
shore up investment infrastructure
and simultaneously strengthen
foreign exchange reserve assets.
Refining money market regulations
covering all components of market
development, including the
instruments, players and
infrastructure.
Expediting the bank foreign debt
approval process while adhering to
prudential principles
60
Monetary Policy Package: September II
30th 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.
61
Financial Sector Policy Packages to Boost Growth
As part of national efforts to reverse the recent economic slowdown, OJK has issued a series of financial
sector policies. Such measures are directed to, among others, to maintain the level of household/private
consumption and to support the Government’s infrastructure development.
July 2015



Banking sector: measure are focused on increasing bank
loans to MSMEs and housing financing
– Adjustment of risk weighting for certain types of
loans
– Relaxation of requirements for debt restructuring
Capital market sector: Measures are focused on
supporting financing for housing and infrastructure, as
well as developing SMEs through financing from the
capital market
– Development & expansion of investment
products
– Development of municipal bonds
– Unlocking opportunities for SMEs to go public
NBFI sector: Measures are focused on fostering the
growth of multifinance companies and microfinance
institutions
– Relaxation of regulations on NPF in multifinance
companies
– Development of microfinance institutions
– Establishment of a rating agency for MSMEs
October 2015
September 2015

 Encourage individual foreign
currency account opening
for foreign residents
– Opening an account up to
$50,000 only need to
present a passport
– Opening an account with
over than $50,000 will be
subject to simple customer
due diligence process passport
and
other
supporting documents





Relaxation of regulations on business
trust
Preparation of agricultural insurance
scheme
Revitalization
of
venture
capital,
especially to finance start-up businesses
Establishment of financing industry
consortium, especially to provide
financing for creative industry, exportoriented businesses, and MSMEs
Empowerment of the Indonesia Export
Financing Agency (LPEI)
Implementation of one-project concept
in assessing quality of loans
Source: Financial Service Authority (OJK)
62
62
Market’s Positive Signal to Policy Package
Market Participants began to welcome the Indonesian economic recovery efforts in addition to dynamic
external conditions
Rupiah Curr (Rp/1US$)
Composite Index BEI
Package III
Package II
Package I
Source: Bloomberg
Source: Bloomberg
Yuan devaluation
63
63
Initiatives to accelerate infrastructure development
through reforms (1/2)
INSTITUTIONAL
REFORMS
To ensure sound implementation, some institutional reforms and new institutions
have been established.
National Land Agency
(BPN) Reforms
Reform of National Land Agency (BPN), including establishment of special deputy for land acquisition acceleration
and dedicated team for priority infrastructure projects, development of SOPs for every BPN activities etc.
Increased Fiscal
Contribution by GoI
through PT SMI, PT IIF,
and IIGF
Establishment of PT SMI (Sarana Multi Infrastruktur), PT IIF (Indonesia Infrastructure Finance) to provide long-term
financing
The government is also in the process of establishing more institutions to further
accelerate infrastructure delivery
Establishment of
KPPIP
KPPIP (The Committee for Accelerated Infrastructure Delivery) is a central government body that will coordinate the
delivery of the government’s priority infrastructure projects, which consists of key government ministries related to
infrastructure delivery, such as the CMEA, MoF, BAPPENAS and the BPN.
KPPIP has established 22 priority projects for 2015 to be implemented.
Establishment of PPP
unit under MOF
PPP Unit under Ministry of Finance will facilitate project development of PPP projects, by providing facilities such as
Project Development Facilities (PDF), technical assistance, arrangement of guarantee with IIGF, and infrastructure
funding with PT SMI and PT IIF. PPP Unit will also help capacity development for PPP and promotion of PPP
projects
Minister has approved the establishment of PPP unit, and the funding arrangement with donor and regulatory
framework are under progress.
64
Initiatives to accelerate infrastructure development
through reforms (2/2)
REGULATORY
REFORMS
Law No. 2 /2012 regarding
Land Acquisition for
Public Interest
The new law will ease land acquisition bottlenecks and disputes for infrastructure projects such as road,
railway, station, port, airport, etc. The law regulates procedures of land acquisition, funding for land
acquisition land appraisal, amount and types of compensations, objections and dispute settlements. The new
President Reg. No. 30/2015 stipulates the role of private investors in contributing to land acquisition
process.
Presidential Regulation
(PR) no 38/2015 regarding
PPP
Government has revised the original regulation on PPP (Presidential Regulation no 67/2005) three times to
accommodate more concerns regarding PPP development in Indonesia. For example, the revision
accommodates foreign companies/investors in procurement of PPP projects, criteria and compensation for
unsolicited project proposal, the need for fiscal support from Ministry of Finance.
Presidential Regulation
(PR) no 39/2014 regarding
the New Negative List of
Investment
Government has revised the previous Negative list of investment to encourage more foreign businesses to
take part in infrastructure development. For example, in transport sector, foreign ownership of seaport facility
increased from 49% to 95% during PPP concession period. The government also allows 100% foreign
ownership of power plant >10MW during PPP concession period (previously 95%).
Minister of Energy & Mineral
Resources Reg. No. 3/2015
regarding Procedure for
Power Purchase
This regulation allows for power purchase from mine mouth coal power plant, coal power plants, gas/micro
gas power plants, and hydro power plants can be done with direct selection and direct appointment with the
purpose to accelerate procurement process.
New Law no 2 / 2012
One of the major reforms is the New Land Law No.2/2012:
BPN as central agency in implementation of
land acquisition
More detailed regulation on implementation of
land acquisition
Neutral decision making regarding community
rejection
Better Land Appraisal Team Appointment
Less bureaucratic land right revocation
process
Successful case of the
implementation of the New Law
• The best example of a successful
implementation of the law is the city of
Bojonegoro, where the civil society was
socialized early to the law and where
the land appraisal and compensation
amount were attractive.
• Outcome: the overall land
acquisition process for the Java
North Line Double Track Rail project
took less than 2 years.
65
22 Priority Projects Within the Pipeline
1. New oil refinery (Rp 75 140T)
2. Jakarta Sewerage System
Zona 1 (Rp 7T)
3. Airport Revitalization
(brownfield)
4. Kuala Tanjung Int. Hub.
Seaport (Rp 30T)
5. Bitung Int. Hub. Seaport
(Rp 34T)
6. Panimbang – Serang Toll
Road
7. Upgrading existing
refineries (Cilacap, Dumai,
Plaju, Balongan,
Balikpapan)
OBC
Develop
ment
12. HVDC (Rp 20T)
13. Indramayu Power Plant
(Rp 20T)
19. 4 sections of Trans
Sumatera toll road (Rp
30T)
14. Sumatera Transmission
(Rp 35T)
20.Makassar – Pare
Pare Railway (Rp 6,4T)
15. MRT Jakarta South North (Rp 25T)
21.Water to Energy –
Development of Hydro
Power Plants
Karangkates IV&V,
Kesamben, and Lodoyo
16. Sumsel 9, 10 Power
Plants
Ready for
PPP Tender
8. SHIA Express
Railway (Rp 24T)
9. West Semarang
Water Supply (Rp 765
M)
10. Balikpapan –
Samarinda Toll Road
(Rp 11,4T)
11. Manado – Bitung
Toll Road (Rp 4,3T)
17. Central and West Java
500 kV Transmission
Line
Permit and
Land
Acquisition
Financial
Close*
18. Sumsel 8 (One
package with Sumsel
8, 9, 10 with total
investment value of
Rp 54T)
22.NCICD Phase A (Rp
20T)
Construc
tion**
19. Batang Power
Plant/Central Java
Power Plant (Rp
40T), Target: October
2015
66
Mining Sector: Progress of Processing and Refinery
Facility (1/3)
1. Processing & refinery facility plan based on progress
No.
PROGRESS
(%)
1.
6 – 10
Total
Mining
Permit
(July 2015)
Total No.
of
Smelter
Environmental Impact
Analysis (AMDAL)
12
9
Progress Status
2.
11 - 30
Ground Breaking and
Initial Construction Plant
18
15
3.
31-50
Mid-Plant Construction
Phase
18
13
4.
51-80
Final Phase of
Construction
9
9
5.
81-100
On Commissioning /
Production Phase
28
25
Total
85
71
Note:
Total Mining Permit cooperating with smelter companies may change
2. Processing & refinery facility plan based on
commodities
No.
Commodities
Total
Mining
Permit
Total No. of
Facilities
1.
Nickel
42
35
2.
Bauxite
11
6
3.
Iron
8
8
4.
Mangan
3
3
5.
Zircon
13
11
6.
Lead and Zinc
4
4
7.
Kaolin and
Zeolite
4
4
Total
85
71
67
Mining Sector: Progress of Processing and Refinery
Facility (2/3)
Nickel Smelter (Operational)
Iron Smelter (Operational)
Company Name: Indoferro (Cilegon-Banten)
Company Name : Delta Prima Steel (Tanah
Laut-South Kalimantan)
Steel Smelter (Operational)
Company Name : Krakatau Posco (CilegonBanten)
Mangan Smelter (Operational)
Company Name : Indotama Ferro Alloy
(Purwakarta-West Java)
68
Mining Sector: Progress of Processing and Refinery
Facility (3/3)
Nickel Refining Facility (NPI) Still On Progress
Company Name: Bintang Delapan Group (Morowali-Central Sulawesi)
69
Energy Sector: 35,000 MW Program has been launched
Average economic growth of 6.7
requires 7,000 MW / year or
35,000 MW / 5 years
Cabinet Meeting
Progress of
35,000 MW
(Kepmen ESDM No. 0074/2015 on
RUPTL 2015-2024)
17 Dec ‘14
Jan ‘15
Cabinet Meeting
“There’s electricity crisis
in Indonesia, requires
construction of large
capacity plant "
4 May ‘15
Jan ‘15
16 Mar ‘15
Debottlenecking through regulation:
1. Regulation No.1/2015 concerning
electricity supply cooperation and
joint utilization of the electrical
network among license holders.
Launching
35.000 MW by
the President in
Goa Beach
Sanden DIY.
2. Regulation No.3/2015, concerning
Procedures of Purchasing Electrical
Power and benchmark prices for
Electrical Power through the Direct
Selection and Appointment.
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