Recent Economic Developments

February 2013

The Republic of Indonesia

1

Published by Investor Relations Unit – Republic of Indonesia

Contact: Bimo Epyanto (International Department - Bank Indonesia, Phone: +6221 381 8316)

Hendryati Meitaria (International Department - Bank Indonesia, Phone: +6221 381 8263)

Siska Indirawati (Fiscal Policy Office – Ministry of Finance, Phone: +6221 351 0580)

Singgih Gunarsa (Debt Management Office - Ministry of Finance, Phone: +6221 381 0175)

E-mail: contactIRU-DL@bi.go.id

ABOUT THE REPUBLIC OF INDONESIA INVESTOR RELATIONS UNIT

The Republic of Indonesia Investor Relations Unit (IRU) has been established as the join effort between the Coordinating Ministry of Economic Affairs,

Ministry of Finance and Bank Indonesia in 2005. The main objective of IRU is to actively communicating Indonesian economic policy and address

concerns of investors, especially financial market investors. IRU is expected to serve as a single point of contact for the financial market participants.

As an important part of it communication measures IRU maintains a website under Bank Indonesia website which is being administrated by the

International Department of Bank Indonesia. However, investor relations activities involve a coordinated efforts which are supported by all relevant

government agencies, namely Bank Indonesia, the Ministry of Finance, the Coordinating Ministry for Economic Affairs, Investment Coordinating Board,

Ministry of Trade, Ministry of Industry, State Ministry of State Owned Enterprises, Asset of State Management Company and the Central Bureau of

Statistics.

IRU also hold an investor conference call on a quarterly basis, answers questions through email, telephone and may arrange direct visit of

banks/financial institutions to Bank Indonesia and other relevant government offices.

About Investor Relations Unit (IRU)

Table of Content

Executive Summary

Preserved Macroeconomic Stability to Support Further Growth

2

Improved International Perception and Rising Investment

Prudent Fiscal Management

Improved Government Debt Position

3

Executive Summary

4

Executive Summary

• Indonesia’s economic growth remains robust in 2012 amidst the continuation of global economic slowdown. Contributed by buoyant consumption and

investment, economic growth in the Q4-2012 reached 6.11%, and charted 6.23% for the whole year of 2012.

• Investment realization in the 4th quarter (October - December 2012) and for the whole year 2012 keep increased for both Domestic Direct Investment (DDI)

and Foreign Direct Investment (FDI). Despite increasing in number of investments, the distribution of investment activities outside Java was also increased that

create more added values of domestic goods/services in order to accelerate the quality of national economic growth.

• Indonesia's external balances improved in Q4/2012. During the quarter, the balance of payments booked a US$3.2 billion surplus, higher than previous

quarter surplus of US$0.8 billion. The improvement in the balance of payments performance resulted from increase in the capital and financial account surplus

that surpassed mounting current account deficit. In response, international reserves at the end of December 2012 strengthened to US$112.8 billion, equivalent to

6.1 months of imports and government’s external debt services.

• Inflation in January 2013 remained subdued and arrive at 4.57%(yoy) which is within target range of 4.5%±1%. This inflation supported by the implementation

of monetary and macroprudential policy mix, as well as policy coordination with the Government through national inflation control team (TPI) and regional inflation

control team (TPID).

• On the fiscal front, Indonesia continues to perform prudent fiscal management in 2012 with strong commitment to fiscal consolidation, aiming on continue

declining in debt-to-GDP ratio, diversifying government debt profile, and reducing funding reliance on international capital market. 2012 budget deficit realization is

maintained at a safe level of 1.77% of GDP (unaudited).

• Financial system stability remained solid with intermediation function is improving within prudential manner as indicated by secure level of capital

adequacy ratio (CAR) is well above minimum level of 8% and gross non-performing loan (NPL) below 5%. In December 2012, credit growth charted 23.1% (yoy).

Considering the type of loan, investment loan recorded the highest growth of 27.4% (yoy), in line with the increased in investment.

• In the Board of Governors' Meeting convened on 12 February 2013, Bank Indonesia decided to hold the BI rate steady at 5.75% in which considered

consistent with low inflation forecast and contained within its target range of 4.5%±1% in 2013 and 2014. Bank Indonesia believes that the implementation of policy

mix together with strengthen coordination with the Government will be able to maintain macroeconomic stability and sustainable economic growth.

-

2

4

6

8

10

12

-

20

40

60

80

100

120

140

Jan

Fe

b

Mar

Apr

May

June

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Fe

b

Mar

Apr

May

June

July

Aug

Sep

Oct

Nov

Dec

Jan

2011 2012 2013

foreign exchange reserves (LHS)

month of import & government debt service (RHS)

Month

5.7% 5.5%

6.3% 6.0%

4.6%

6.1% 6.5%

6.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2005 2006 2007 2008 2009 2010 2011 2012

Executive Summary

5

GDP Growth Inflation

Foreign Exchange Reserves

Billion USD

* Bank Indonesia projection

Source: Bank Indonesia

Balance of Payments

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

2009 2010 2011 2012 2013

%

CPI (%, yoy) Core (%, yoy)

Volatile Food (%, yoy) Administered (%, yoy)

317.2

216.1176.1

409.2491

658.7 619.9723.3

873.91016.2

1193.0227

215.1

320.6227.2

268.9

331.5

341.1

332.2

0

200

400

600

800

1000

1200

1400

1600

1800

2006 2007 2008 2009 2010 2011 APBNP 2012 RAPBN 2013

PNBP

PENERIMAAN PERPAJAKAN

847,1

1357,4

APBN 2013

973,9

636,2706,1

992,2

1205,4

1525,2Tax Revenue

Non Tax Revenue

1530,0

1358,2

6

Executive Summary

-29.1 -49.8 -4.1 -88.6 -46.9 -84.4 -146 -153.3

-0.9%

-1.3%

-0.1%

-1.6%

-0.7%

-1.14%

-1.77% -1.65% -2.0%

-1.5%

-1.0%

-0.5%

0.0%

-180

-150

-120

-90

-60

-30

0

2006 2007 2008 2009 2010 20112012

(unaudited) 2013 Budget

Nominal Deficit (Rp Tn)

deficit of GDP (RHS)

Fiscal Revenues 2006 – 2013 (Rp Tn) Central Gov’t Expenditures 2006 – 2013 (Rp Tn)

Fiscal Deficit

7

Source: Ministry of Finance

Debt Composition

Table of Debt to GDP Ratio

Debt to GDP Ratio (% of GDP)

*: Realization December 2012 (unaudited)

**: Budget 2013

Executive Summary

35,2%33,1%

28,3%26,1%

24,3% 24,0% 23,1%

0%

10%

20%

30%

40%

2007 2008 2009 2010 2011 2012* 2013**

53% 48% 53% 54% 55% 56% 56%

47% 52% 47% 46% 45% 44% 44%

0%

20%

40%

60%

80%

100%

2007 2008 2009 2010 2011 2012 31-Dec-12

Domestic Debt Foreign Debt

2006 2007 2008 2009 2010 2011 2012

GDP 3.339.217,0 3.950.894,0 4.948.689,0 5.603.870,8 6.422.918,2 7.427.086,1 8.241.864,3

Debt Outstanding (billion IDR) 1.302.159,0 1.389.415,0 1.636.740,7 1.590.386,0 1.676.852,1 1.808.946,8 1.975.421,8

- Domestic Debt (Loan+Securities) 693.118,0 737.125,5 783.855,1 836.318,0 902.599,8 993.038,2 1.097.993,2

- Foreign Debt (Loan+Securities) 609.041,0 652.289,5 852.885,6 754.068,0 774.252,4 815.908,6 877.428,6

Debt to GDP Ratio 39,0% 35,2% 33,1% 28,4% 26,1% 24,4% 24,0%

- Domestic Debt to GDP Ratio 20,8% 18,7% 15,8% 14,9% 14,1% 13,4% 13,3%

- Foreign Debt to GDP Ratio 18,2% 16,5% 17,2% 13,5% 12,1% 11,0% 10,6%

End of Year

2013 Policy Summary

8

Government coordinates policy tools to maximize growth with macroeconomic management

Assuring the fulfillment of budget financing needs

Effective utilisation of foreign loans

Developing the domestic bond market

Main financing instruments:

Government debt securities: IDR denominated, global bonds,

samurai bonds, USD denominated in domestic market

Government Islamic securities: IDR denominated, global sukuk,

USD denominated in domestic market

Revenue and tax policy

Financing and debt management policy Expenditure policy

Monetary policy

Keep policy rate unchanged at 5.75% since March 2012, this level

considered to be consistent with inflation target

Maintain IDR exchange rate stability

Strengthen monetary policy by implementing monetary and

macroprudential policy mix

Deepening of the foreign exchange market

An Increase of non-taxable income threshold by 54%, from Rp15.8

million to Rp24.3 million.

Extend and widen tax base through tax extensification.

VAT tariff adjustment for a number of luxury goods.

Improve monitoring and service in custom & excise.

Excise tax extensification and intensification.

Fiscal incentives provision for strategic economic activities i.e.

Hybrid and low carbon emission motor vehicles.

Prioritize capital expenditure allocation to support infrastructure

development.

Reallocate consumptive spending to more productive activities.

Increase infrastructure spending to support energy and food

security, domestic connectivity, and tourism.

Redesign subsidy policy from price subsidy to targeted subsidy.

Improve budget disbursement

9

Improved International Perception

and Rising Investment

Improving International Perception: Acknowledged by Rating Agencies

10

Resilient economy, which impressively navigates through the global crisis and continued confidence in economic outlook, the Republic continued to

receive good reviews.

Fitch Ratings (November 21, 2012): affirmed Indonesia's sovereign credit rating at BBB- level with stable outlook. The key factors supporting the

decision of affirming Indonesia’s sovereign credit rating are the relatively high economic growth that is resilient to the declining global condition, high

investment rate, low and declining public debt ratios and the strong overall macroeconomic policy framework.

Japan Credit Rating Agency, Ltd (November 13, 2012): affirmed Indonesia’s foreign currency long-term senior debt at BBB- and local currency long

term senior debt BBB with stable outlook. JCR stated that key factors supporting the decision of affirmation the sovereign credit rating of Indonesia (1) the

country’s sustainable economic growth outlook underpinned by solid domestic demand, (2) low level of public debt burden brought by prudent fiscal

management, (3) reinforced resilience to external shocks by its accumulated foreign exchange reserves.

Rating and Investment Information, Inc (October 18, 2012): upgraded Sovereign Credit Rating of the Republic of Indonesia to BBB-/stable outlook.

R&I stated key factors supporting the decision of upgrading the sovereign credit rating of Indonesia:(1) Indonesian economic resilience in achieving high growth

amid the global economic downturn (2) conservative fiscal management (3) Government’s debt burden is kept low and (4 ) financial system has become more

stable.

S&P (April 23, 2012): affirmed Indonesia’s sovereign credit rating, at BB+ level for long-term and B level for short-term with positive outlook. S&P

stated that the rating on Indonesia balances institutional and economic constraints with a moderately strong fiscal, external, and monetary profile. The positive

outlook signals the potential for an upgrade if the country's growth prospects improve further and financial markets deepen with steadier policy implementation.

Moody’s Investors Service (January 18, 2012): upgraded Republic of Indonesia’s foreign and local-currency bond ratings to Baa3 with stable

outlook. Moody's stated the key factors supporting this action were (1) Moody’s anticipation that government financial metrics will remain in line with Baa peers

(2) The demonstrated resilience of Indonesia’s economic growth to large external shocks (3) The presence of policy buffers and tools that address financial

vulnerabilities and (4) A healthier banking system capable of withstanding stress.

11

Moody’s – 18 January 2012

“Indonesia’s cyclical resilience to large

external shocks points to sustainably high

trend growth over the medium term. A more

favorable assessment of Indonesia’s

economic strength is underpinned by gains in

investment spending, improved prospects for

infrastructure development following key

policy reforms, and a well‐managed financial

system.“ Ra

tin

g a

ge

nc

ies c

om

me

nts

Solid economic fundamentals supported the improvement of Indonesia’s sovereign credit rating since 2001

Ra

tin

g h

isto

ry

S&P – 23 April 2012

“The rating on Indonesia balances

institutional and economic constraints with a

moderately strong fiscal, external, and

monetary profile. The positive outlook

signals the potential for an upgrade if the

country's growth prospects improve further

and financial markets deepen with steadier

policy implementation.”

Fitch – 21 November 2012

“The key factors supporting the decision of

affirming Indonesia’s sovereign credit

rating are the relatively high economic

growth that is resilient to the declining

global condition, high investment rate, low

and declining public debt ratios and the

strong overall macroeconomic policy

framework.”

Baa3/ Stable BB+ / Positive BBB- / Stable

Sovereign Rating History

Positive Perceptions from International Institutions

12

McKinsey Report (The Archipelago Economy: Unleashing Indonesia’s Potential), September 2012

• Indonesia will be the 7th largest economy in the world in 2030, and additional 90 million Indonesians could join the global consuming class (individuals with

net income of more than US$ 3,600 per annum in PPP).

• Over the past decade, compared with any advanced countries in OECD and BRIC plus South Africa, Indonesia has had the lowest volatility in economic

growth, fallen debt to GDP ratio (5th lowest), and third strongest economic growth after China and India.

• To achieve growth target, Indonesia needs to push labor productivity, address social gap issue and manage increasing demand.

IMF (Article IV Consultation), September 2012

• Indonesian economic growth will remain solid, at 6 percent in 2012, but strong domestic demand may push inflation to 5 percent by end year.

• The main risks to the outlook stem from a sharper-than-envisaged slowdown in external demand and risk aversion spikes, stemming either from an

intensification of the Euro area crisis or a hard landing in China.

• Overall, though, the economy’s strong fundamentals and ample fiscal and reserve buffers should enable Indonesia to manage these risks.

• Fiscal reforms must become a priority by speed up budget implementation, and replace energy subsidies with direct cash assistance, to create infrastructure,

health and education improvement.

OECD Economic Survey Indonesia, September 2012

• The real GDP is projected to grow at 6,0% in 2012 and 6,2% in 2013, while the current account is projected to contract 0,8% in 2012 due to the imports

growth especially for capital goods.

• The main risks to the short-term outlook are external. Increased global risk aversion, could reverse the capital inflows of the past few years, endangering the

financing conditions for government and banks alike and cutting growth.

• The key challenges to achieving growth targets is raising infrastructure fund, social spending and tax revenue, also lowering energy subsidies. Further

institutional and policy reform would boost productivity growth and help the government reach its objective of becoming one of the 10 largest economies in

the world by 2025.

13

Preserved Macroeconomic Stability

Robust and Stable Economy Continues to Chart Strong Growth

14

Source: Bank Indonesia

• The Indonesia’s economic growth in the Q4-2012 reached 6.11% and charted 6.23% for the whole year of 2012, driven by buoyant domestic demand mainly

came from private consumptions and investment.

• On the production side, economic growth in Q4-2012 remained strong contributed by three main sectors – transportation & communication sector, trade hotel

& restaurant sector; and construction sector.

• Going forward, Indonesia’s economic growth in 2013 is expected to pick up will be supported by strong domestic demand and better exports performance, and

higher domestic economic activity related to the preparation of General Election.

Forecast of Economic Growth - Demand Side

Sector 2011 2012

2012 2013

2013* 2014* I II III IV I*

Private Consumption 4.7 4.9 5.2 5.6 5.4 5.3 5.6 5.8 - 6.3 7.0 - 7.5

Government Consumption 3.2 6.4 8.6 -2.8 -3.3 1.2 7.2 10.1 - 10.6 6.9 - 7.4

Gross Fixed Capital Formation 8.8 10.0 12.5 9.8 7.3 9.8 10.2 10.2 - 10.7 12.4 - 12.9

Exports of Goods and Services 13.6 8.2 2.6 -2.6 0.5 2.0 -0.6 3.2 - 3.7 6.9 - 7.4

Imports of Goods and Services 13.3 8.9 11.3 -0.2 6.8 6.6 3.7 4.9 - 5.4 8.4 - 8.9

GDP 6.5 6.3 6.4 6.2 6.1 6.2 6.2 6.3 - 6.8 6.7 - 7.2

Forecast of Economic Growth - Supply Side

S e c t o r 2011 2012

2012 2013

2013* 2014* I II III IV I*

Agriculture 3.4 4.3 4.0 5.3 2.0 4.0 3.8 3.7 - 4.2 3.6 - 4.1

Mining and Quarrying 1.4 2.5 3.3 -0.3 0.5 1.5 -0.8 0.7 - 1.2 1.3 - 1.8

Manufacturing 6.1 5.5 5.2 5.9 6.2 5.7 6.6 6.4 - 6.9 6.3 - 6.8

Electricity, Gas, and Water Supply 4.8 5.7 6.5 6.1 7.3 6.4 5.0 5.2 - 5.7 5.5 - 6.0

Construction 6.6 7.2 7.3 7.6 7.8 7.5 8.0 7.7 - 8.2 7.8 - 8.3

Trade, Hotels, and Restaurant 9.2 8.7 8.7 7.2 7.8 8.1 7.2 7.7 - 8.2 8.6 - 9.1

Transportation and Communication 10.7 10.0 9.9 10.4 9.6 10.0 10.5 10.2 - 10.7 10.4 - 10.9

Financial, Rental, and Business Services 6.8 6.4 7.1 7.5 7.7 7.1 7.2 7.1 - 7.6 7.3 - 7.8

Services 6.7 5.5 5.8 4.5 5.3 5.2 5.6 5.9 - 6.4 6.6 - 7.1

GDP 6.5 6.3 6.4 6.2 6.1 6.2 6.2 6.3 - 6.8 6.7 - 7.2

* Bank Indonesia Projection

Young and Dynamic Population

15 Source: BPS, Bappenas, UNPP, McKinsey

China

1.3 billion India

1.2 billion

US

310 million

Indonesia

242 million

1 2 3 4

Dependency Ratio Keeps Falling Until 2025 Fourth Largest Population in the World

Increasing Middle Income Class Population Rising GDP per capita (USD)

Notes: Based on purchasing power parity per capita GDP, * Estimate

• Rising young and dynamic population marked by decreasing dependency ratio that will continue on until 2025.

• Rising income per capita and growing ranks of the ‘middle income class.

• Labor force participation rate is nearly 70% and open unemployment rate only 6.3% (February 2012), -0.5% yoy.

16

Brazil

China

India

Indonesia

Russia

10

15

20

25

30

35

40

45

50

55

1990 1994 1998 2002 2006 2010

Direct investment growth (%, yoy) Investment of GDP (%)

Investment is Becoming the New Engine of Growth

Investment both by domestic and foreign direct investors continues on the expanding trend, supporting economic growth at a time of slowing down exports

-32.8

71.6

20.4

-14

54.2

20.5 24.6

-40

-20

0

20

40

60

80

2006 2007 2008 2009 2010 2011 2012

Strong investment underpinned by competitiveness and stability

17

Realized Foreign Direct Investment (USD billion) Realized Domestic Direct Investment (USD billion)

The investment realization on Quarter IV (October - December) of 2012 is Rp 83.3 trillion consisted of Rp 26.5 trillion of Domestic Direct Investment

(DDI) and Rp 56.8 trillion of Foreign Direct Investment (FDI). It increases 10.4% compared to the same period in 2011.

The cumulative of investment from January to December 2012 is Rp 313.2 trilion consisted of Rp 92.2 trilion of Domestic Direct Investment (DDI) and

Rp 221.0 trillion (US$ 24.6 billion) of Foreign Direct Investment (FDI). It increases 22.9% compared to the same period in 2011.

The distribution of project location from January to December 2012 outside of Java is Rp 137.6 trillion (43.9%). Compared to the same period in 2011 it

increases around 33.3%.

Source: BKPM Source: BKPM

6.0

10.3

14.9

10.8

16.2

19.5

24.6

2006 2007 2008 2009 2010 2011 2012

2.3

3.8

2.1

3.6

6.7

8.7

9.5

2006 2007 2008 2009 2010 2011 2012

Strong investment underpinned by competitiveness and stability

18 Source: BKPM

FDI Realization by Location Year of 2012 (USD Million) DDI Realization by Location Year of 2012 (USD Million)

FDI by Countries Year of 2012 (USD Million)

3729

13660

1127

3209

1507

99

1234 Sumatera

Java

Bali & Nusa Tenggara

Kalimantan

Sulawesi

Maluku

Papua

1474

5449

328

1731

507

33 10

Sumatera

Java

Bali & Nusa Tenggara

Kalimantan

Sulawesi

Maluku

Papua

530 (2.2%)

4,856 (19.8%)

2,457 (10.0%)

1,950 (7.9%)

647 (2.6%)

967 (3.9%)

934 (3.8%)

1,238 (5.0%)

856 (3.5%)

744 (3.0%)

1,059 (4.3%)

8,328 (33.9%)

Malaysia

Singapore

Japan

South Korea

Taiwan

Netherlands

United Kingdom

USA

British Virgin

Australia

Mauritius

Other Countries

19 Source: BKPM

FDI – By Sector (USD million)

Strong investment underpinned by competitiveness

and stability

0

5,000

10,000

15,000

20,000

25,000

2006 2007 2008 2009 2010 2011 2012

2,229 3,608 4,225

813

1,263 1,708

704 552

1,026

1,098

1,783

747 673

1,307

1,612

628 1,183

798

1,466

2,770

955

714

1,293 655

590

1,774

2,453

756 583

771

1,840

860

583 1,064

789

502

1,414

1,618

1,428

1,865

1,515

582 706

785

826

647

3,305

8,530

4,171

5,046

3,866

2,808

653

1,138

882

1,295

2,556

1,274

2,055

Mining Other primary sector Food industry

Paper and printing industry Chemical and pharmaceutical industry Metal machinery and electronic industry

Motor vehicle and other transport equipment industries Other secondary sector Electricity, gas and water supply

Trade and repair Transportation, storage and communications Other tertiary sector

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

Mar

May Ju

l

Sep

No

v

Jan

2009 2010 2011 2012 2013

%

CPI (%, yoy) Core (%, yoy) Volatile Food (%, yoy) Administered (%, yoy)

20

• Inflation in January 2013 remained subdued and arrive at target range of 4.5%±1%, that is 4.57%(yoy), 1.03% (ytd) and 1.03% (mtm).

• In addition to low inflation in volatile food and administered prices, core inflation was also contained driven by the implementation of monetary and macro

prudential policy mix directed toward managing the inflation pressures from the demand side, imported inflation as well as inflation expectation. And also

strengthen policy coordination with the Government through national inflation control team (TPI) and regional inflation control team (TPID).

• Going forward, inflation will remain contained within its target range of 4.5%±1% in 2013 and 2014.

The Inflation Remains Under Control

Inflation – by component

Source: Bank Indonesia

4.32%

7.48%

2.42%

4.57%

21

The balance of payments surplus increased from US$0.8 billion to US$3.2 billion in Q4/2012, primarily due to significant increase in the capital and financial

account surplus amidst a downward pressure in the current account. Accordingly, international reserves at the end of December 2012 strengthened to

US$112.8 billion, equivalent to 6.1 months of imports and servicing of official external debt.

Balance of Payments Q4/2012

Balance of Payments

Source: Bank Indonesia

22

The slow path of global economic recovery in contrast to

vibrant domestic demand led to a widened current account

deficit in Q4/2012. The current account in Q4/2012 posted a

deficit of US$7.8 billion (-3.6% of GDP), higher than US$5.3

billion deficit (-2.4% of GDP) in Q3/2012. This downward

performance was mainly on account of shrinkage in trade balance

surplus as non-oil and gas trade surplus decreased and oil and

gas trade deficit enlarged.

In other respects, preserved investor confidence, bolstered

by additional liquidity on global financial markets derived

from monetary expansion in advanced economies, enabled

the capital and financial account to chart another surplus. At

US$11.4 billion, this surplus was almost double the US$6.0 billion

surplus in the previous quarter. The increased surplus was made

up of higher foreign portfolio inflows for purchases of government

securities. Another source of capital inflows was the withdrawal of

offshore funds held by domestic banks in response to growing

domestic demand for foreign currencies. In addition, foreign direct

investment (FDI) inflows continued in nearly equal numbers

compare to the previous quarter.

Source: Bank Indonesia

Balance of Payments Q4/2012

February 2013

Q1 Q2 Q3 Q4 TOTAL Q1* Q2* Q3* Q4** TOTAL**

I. Current Account 2,947 273 766 -2,301 1,685 -3,105 -7,979 -5,336 -7,763 -24,183

A. Goods 1 9,264 9,223 9,700 6,596 34,783 3,810 818 3,198 591 8,417

- Exports 45,901 51,810 52,376 50,701 200,788 48,353 47,538 45,549 46,706 188,146

- Imports -36,637 -42,587 -42,676 -44,105 -166,005 -44,543 -46,720 -42,351 -46,115 -179,729

1. Non Oil & Gas 8,899 10,622 9,291 6,621 35,433 4,694 1,974 3,968 2,899 13,535

2. Oil -3,214 -5,751 -4,312 -4,249 -17,526 -5,278 -5,331 -4,213 -5,493 -20,315

3. Gas 3,579 4,352 4,721 4,224 16,876 4,394 4,176 3,443 3,185 15,197

B. Services -1,822 -3,133 -2,562 -3,115 -10,632 -2,075 -2,893 -2,480 -3,322 -10,770

C. Income -5,525 -6,776 -7,416 -6,959 -26,676 -5,898 -6,801 -6,915 -6,225 -25,839

D. Current transfers 1,029 960 1,045 1,176 4,211 1,058 898 861 1,193 4,009

II. Capital & Financial Account 4,835 11,626 -3,110 216 13,567 2,256 5,225 6,015 11,415 24,911

A. Capital Account 1 4 5 23 33 5 3 8 22 37

B. Financial Account 2 4,834 11,622 -3,115 193 13,534 2,250 5,222 6,007 11,393 24,873

1. Direct Investment 3,782 2,507 2,119 3,120 11,528 1,586 4,020 4,289 4,535 14,430

2. Portfolio Investment 2,920 5,213 -4,571 245 3,806 2,628 3,872 2,516 180 9,196

a. Assets -829 -508 91 57 -1,189 -457 -186 31 -4,852 -5,465

b. Liabilities 3,749 5,721 -4,662 188 4,996 3,085 4,058 2,485 5,032 14,661

1) Public sector 4,383 2,964 -4,270 -2,250 827 1,304 1,626 1,889 4,431 9,251

2) Private sector -634 2,757 -391 2,438 4,169 1,781 2,432 596 601 5,410

3. Other Investment -1,868 3,902 -663 -3,172 -1,801 -1,963 -2,670 -798 6,679 1,248

III. Total (I + II) 7,781 11,899 -2,344 -2,085 15,252 -850 -2,754 679 3,652 728

IV. Net Errors & Omissions -115 -23 -1,616 -1,641 -3,395 -184 -57 155 -476 -563

V. Overall Balance (III + IV) 7,666 11,876 -3,960 -3,726 11,857 -1,034 -2,811 834 3,176 165

Memorandum:

Reserve Asset Position 105,709 119,655 114,503 110,123 110,123 110,493 106,502 110,172 112,781 112,781

In Months of Imports & Official Debt Repayment 7.5 7.9 7.1 6.5 6.5 6.2 5.8 6.0 6.1 6.1

Current Account (% GDP) 1.49 0.13 0.34 -1.07 0.20 -1.42 -3.61 -2.38 -3.56 -2.75

Debt Service Ratio (%) 18.4 21.9 19.8 26.2 21.7 30.3 36.7 34.9 39.5 35.3

o/w. Government & Monetary Authority DSR (%) 2.1 4.0 2.0 4.0 3.0 2.1 4.2 2.1 4.4 3.2

I T E M S2011 2012

23

Trade Balance: Non-Oil & Gas

The non-oil & gas trade balance surplus diminished from US$4.0 billion in

Q3/2012 to US$2.9 billion. In spite of modest improvement in global demand

and slower domestic demand growth, the considerable gap between these two

sides made export gains were comparatively insignificant compared to the rise

in imports.

Non-oil & gas exports (f.o.b) growth remained in negative territory (-7.3%; y.o.y)

but at a slower pace than preceding quarter (-11,3%), buoyed by increase in

export volume and improvement in commodity prices.

Meanwhile, non-oil & gas import (c.i.f) growth remained positive (1.4%, y.o.y) in

line with robust domestic demand. Non-oil & gas imports grew faster as imports

of raw materials increased and imports of consumption goods decreased at

slower pace.

Source: Bank Indonesia

Balance of Payments Q4/2012: Current Account

Rising oil imports triggered a downward pressure on oil & gas trade balance.

The oil and gas trade deficit in Q4/2012 was US$2,3 billion, increased from a

USD$0.8 billion deficit in the previous quarter. As in the non-oil & gas case, higher

exports were also insufficient to offset the rise in imports driven by the growing

consumption of fuels for transportation.

Trade Balance: Oil & Gas

24

• The services account deficit in Q4/2012 increased to US$3.3 billion, mainly due to higher freight payments on imports and decrease in surplus of

travel services.

• The income account charted a smaller deficit in Q4/2012, mostly due to decrease in profit transfers of foreign direct investment companies,

especially those with export orientation.

• Meanwhile, current transfers posted a higher surplus on account of higher grants received by the Government and increase in net receipts of

remittances.

Services, Income, and Current Transfers

Source: Bank Indonesia

Balance of Payments Q4/2012: Current Account

25

The residents’ investment abroad (the financial account - assets) charted net

outflows of US$4.2 billion, primarily explained by increase in foreign debt securities

held by public sector (portfolio investment assets). Meanwhile, other investment

assets turned to a surplus mainly due to withdrawal of offshore funds held by

domestic banks in response to growing domestic demand for foreign currencies.

Financial Account: Assets

Source: Bank Indonesia

Balance of Payments Q4/2012: Capital & Financial Account

Financial Account Liabilities: Foreign Direct Investment (FDI)

In line with robust domestic investment growth, foreign direct investments

remained solid and structurally supported the capital and financial account.

Notwithstanding, net FDI inflows in Q4/2012 (US$5.8 billion) was slighlty smaller than

that in Q3/2012 (US$6.0 billion), due to higher repayments of inter-company loans of

FDI companies.

Manufacturing, mining, and other services including property sectors were the main

contributors to the FDI inlows. Meanwhile, investment from ASEAN region, Japan ,

Europe and USA dominated FDI inflows in Q4/2012.

26

Net inflows of foreign portfolio investments increased significantly and

posted a surplus of US$5.0 billion in Q4/2012. The increased surplus was made

up of higher foreign portfolio inflows for purchases of rupiah and foreign currency-

denominated government securities, supported by the remained solid domestic

economic fundamental and attractive investment returns compared to other

countries in the region.

Financial Account Liabilities: Foreign Portfolio Investment

Source: Bank Indonesia

Balance of Payments Q4/2012: Capital & Financial Account

Financial Account Liabilities: Foreign Other Investment

Foreign other investment in Q4/2012 registered a US$4.8 billion surplus,

flipped from a deficit of US$0.2 billion in previous period. This surplus was mainly

explained by increase in other liabilities of public sector and higher placement of

non-residents’ funds in domestic banks (vostro).

27

Exchange Rate

• On January 2013, Rupiah depreciated by 0.22% (mtm) to Rp9.654 per USD, with a contained volatility.

• In the future, Bank Indonesia will continue to maintain the stability of Rupiah exchange rate consistent with its economic fundamentals. Furthermore, Bank

Indonesia will support the formation of a reference to Rupiah exchange rate in the domestic spot market. This reference is expected to promote foreign exchange

market efficiency, deepening the domestic financial market.

Rupiah Exchange Rate Monthly Appre/Depr.

Source: Bank Indonesia Source: Bank Indonesia

Monetary Policy Stance

28

BI Rate

• In the Board of Governors' Meeting convened on 12 February 2013, Bank Indonesia decided to hold the BI rate steady at 5.75%.

• The current policy rate is considered consistent with inflation forecast, which is expected to remain low and contained within its target range of 4.5%±1% in 2013

and 2014.

• Going forward, Bank Indonesia remains vigilant on some risk factors from the global economy, and will strengthen policies to manage external balance to a

sustainable level while also providing support for economic growth.

Source: Bank Indonesia

6.50% 6.50% 6.50% 6.50% 6.75% 6.75% 6.75%

6.50%

6.00% 5.75% 5.75% 5.75% 5.75%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

Jan-10

Feb-10

Mar-10

Ap

r-10

May-10

Jun

-10

Jul-10

Au

g-10

Sep-10

Oct-10

No

v-10

Dec-1

0

Jan-11

Feb-11

Mar-11

Ap

r-11

May-1

1

Jun

-11

Jul-11

Au

g-11

Sep-11

Oct-11

No

v-11

Dec-1

1

Jan-12

Feb-12

Mar-12

Ap

r-12

May-1

2

Jun

-12

Jul-12

Au

g-12

Sep-12

Oct-12

No

v-12

Dec-1

2

Jan-13

BI Rate CPI Inflation

Sound Financial Sector

29

• Supported by various policies implemented by Bank Indonesia, banking industry has been more resilient, as indicated by secure level of CAR above the

minimum level of 8% (17.3% at the end of December 2012) and gross NPLs managed at comfortably safe level below 5% (1.9% at the end of December 2012).

• Further improvement in banking intermediation is also reflected in progressively improving credit growth, recorded in December 2012 at 23.1% (yoy), in which

investment credit, working capital credit, and consumption credit grew by 27.4% (yoy), 23.2% (yoy), and 19.9% (yoy), respectively.

Capital Adequacy Ratio (CAR) Comfortably High NPL (gross) Historically Low

Source: Bank Indonesia

Steady Loan Growth Steady Loan-to-Deposit Ratio

Min. CAR 8%

17

17

18

17.6

17.8

17.4

17

17.2

17.3

16.7

17.1

16.6

16.1

18.4

18.5

18.3

18

17.9

17.5

17.3

17.2

17.3

17.2

17.4

17.3

0

4

8

12

16

20

24

28

Dec-10

Jan-11

Feb-11

Mar-1

1

Ap

r-11

May-11

Jun

-11

Jul-11

Au

g-11

Sep-11

Oct-1

1

No

v-11

Dec-11

Jan-12

Feb-12

Mar-1

2

Ap

r-12

May-12

Jun

-12

Jul-12

Au

g-12

Sep-12

Oct-1

2

No

v-12

Dec-12

2.6

2.8

2.8

2.8

2.8

2.9

2.7

2.8

2.8

2.7

2.7

2.5

2.2

2.4

2.3

2.3

2.3

2.3

2.2

2.2

2.2

2.1

2.2

2.0

1.9

0

1

2

3

4

5

6

Dec-1

0

Jan-11

Feb-11

Mar-1

1

Ap

r-11

May-11

Jun

-11

Jul-11

Au

g-11

Sep-11

Oct-11

No

v-11

Dec-11

Jan-12

Feb-12

Mar-1

2

Ap

r-12

May-12

Jun

-12

Jul-12

Au

g-12

Sep-12

Oct-1

2

No

v-12

Dec-12

81.4

81.3

79.0

78.8

79.7

80.2

81.6

82.0

83.0

83.4

84.1

83.8

84.2

84.0

84.0

0

20

40

60

80

100

120

140

1,004 1,069 1,042 1,059 1,090 1,128 1,168 1,206 1,209 1,210 1,237 1,246 1,266 1,317

448 464 473 476 491 494 510 525 536 550 560 569 581 592 699 667 670 669 685 696 708 722 725 750 760 770 784 800

Working Capital loans Investment Loans Consumption LoansIDR Trilion

30

Prudent Fiscal Management

31

Summary of Macroeconomic Assumptions 2012-2013

Source: Ministry of Finance

Development Target

2011 2013

Realization Revised Budget Realization State Budget

Economic growth (%) 6.5 6.5 6.3* 6.8

Exchange rate (IDR/US$) 8779 9000 9384 9300

Inflation (%) 3.8 6.8 4.3 4.9

SBI/SPN 3 months (%) 4.8 5.0 3.2 5.0

ICP (US$/barrel) 111.5 105 112.7 100

Oil lifting (thousands barrel/day) 898 930 860 900

Gas lifting (thousands barrel oil equivalent/day) - - - 1360

2012

Items

*) up to Q3 realization

Indikator Revised Budget (APBN-P)2012

State Budget (APBN)2013

Economic Growth (%) 6.5 6.8 – 7.2

Unemployment Rate (%) 6.4 – 6.6 5.8 – 6.1

Poverty Rate (%) 10.5 – 11.5 9.5 – 10.5

32

Strengthening Domestic Economy for Social Welfare

Improvement and Extension

4 Pillars of Development

Pro Growth Pro Poor Pro Job Pro

Environment

Fiscal Policy Directions 2013

Encouraging Sustainable Economic Growth through Fiscal

Restructuring

Optimize

State Revenue

Control budget

deficit

Reduce Debt Ratio

to GDP

Improve spending

quality

2013 Government Work Plan (RKP) Theme

Fiscal Policy Direction

33

2012-2013 State Budget Summary

2013

Revised

Budget

(APBNP)

Realization

(unaudited)Percentage

State Budget

(APBN)

A. Total Revenues and Grants 1,358.2 1,335.7 98.3% 1,529.7

I. Domestic Revenue 1,357.4 1,331.7 98.1% 1,525.2

1 Tax Revenue 1,016.2 980.1 96.4% 1,193.0

Domestic Taxes 968.3 930.5 96.1% 1,134.3

i. Income Tax 513.7 464.7 90.5% 584.9

ii. Value Added Tax 336.1 337.6 100.5% 423.7

2 Non Tax Revenue 341.1 351.6 103.1% 332.2

Natural Resources 217.2 226.5 104.3% 197.2

i. Oil and Gas 198.3 205.8 103.8% 174.9

ii. Non Oil and Gas 18.8 20.6 109.3% 22.3

II. Grants 0.8 4.0 484.8% 4.5

B. Expenditures 1,548.3 1,481.7 95.7% 1,683.0

I Central Government Expenditures 1,069.5 1,001.3 93.6% 1,154.4

1 Personnel Expenditure 212.3 197.7 93.1% 241.1

2 Material Expenditure 162.0 129.8 80.1% 167.0

3 Capital Expenditure 176.1 139.7 79.3% 216.1

4 Interest Payments 117.8 100.5 85.3% 113.2

5 Subsidy 245.1 346.4 141.3% 317.2

a. Energy Subsidy 202.4 306.5 151.5% 274.7

b. Non Energy Subsidy 42.7 39.9 93.4% 42.5

6 Grants 1.8 0.1 5.6% 3.6

7 Social Assistance 86.0 75.3 87.6% 63.4

8 Other Expenditure 68.5 3.9 5.7% 20.0

II. Transfer to Region 478.8 480.4 100.3% 528.6

C. Primary Balance (72.3) (45.5) 62.9% (40.1)

D. Surplus/(Deficit) (190.1) (146.0) 76.8% (153.3)

% Deficit to GDP (2.23) (1.77) 79.4% (1.65)

E. 190.1 180.0 94.7% 153.3

I. Domestic Financing 194.5 199.2 102.4% 172.8

II. Foreign Financing (4.4) (19.1) 431.6% (19.5)

SURPLUS/(DEFICIT) FINANCING 0.0 34.0 - -

2012

Item

2012-2013 State Budget

Financing

34

2013 Fiscal expenditure policy highlights 2013 Fiscal revenue policy highlights

Broad yet fair taxation Efficient ‘quality’ spending

Central Gov’t Expenditures 2006 – 2013 (Rp Tn) Fiscal Revenues 2006 – 2013 (Rp Tn)

Source: Ministry of Finance

• Prioritize capital expenditure allocation to support infrastructure

development.

• Reallocate consumptive spending to more productive

activities.

• Increase infrastructure spending to support energy and food

security, domestic connectivity, and tourism.

• Redesign subsidy policy from price subsidy to targeted

subsidy.

• Improve budget disbursement

• An Increase of non-taxable income threshold by 54%, from

Rp15.8 million to Rp24.3 million.

• Extend and widen tax base through tax extensification.

• VAT tariff adjustment for a number of luxury goods.

• Improve monitoring and service in custom & excise.

• Excise tax extensification and intensification.

• Fiscal incentives provision for strategic economic activities i.e.

Hybrid and low carbon emission motor vehicles.

409.2491

658.7 619.9723.3

873.91016.2

1193.0227

215.1

320.6227.2

268.9

331.5

341.1

332.2

0

200

400

600

800

1000

1200

1400

1600

1800

2006 2007 2008 2009 2010 2011 APBNP 2012 RAPBN 2013

PNBP

PENERIMAAN PERPAJAKAN

847,1

1357,4

APBN 2013

973,9

636,2706,1

992,2

1205,4

1525,2Tax Revenue

Non Tax Revenue

1530,0

1358,2

317.2

216.1176.1

Revenue and expenditure policies

2013 Budget… … matches well balanced revenues with increasing capital spending

Source: Ministry of Finance

Infrastructure spending helps lower the unemployment rate

Increased allocation of central government expenditure towards more productive uses (2005-2013)

State budget directed to reduce poverty level

35

59.8 78.7

91.3 99.4

128.7

174.9

196.9

Aug-12: 6.14%

5.8%-6.1%

0

50

100

150

200

250

5%

7%

9%

11%

2007 2008 2009 2010 2011 2012 2013target

Infrastructure Spending (RHS)

Unemployment rate

Rp Tn

49.8

57.7

73.8 68.6 71.1

86.0

63.4

Sept-12: 11.66%

9.5-10.5%

0

20

40

60

80

6%

9%

12%

15%

18%

2007 2008 2009 2010 2011 2012 2013target

Social assistance (RHS) Poverty rateRp Tn

36

Indonesia Fiscal Deficit

-29.1 -49.8 -4.1 -88.6 -46.9 -84.4 -146 -153.3

-0.9%

-1.3%

-0.1%

-1.6%

-0.7%

-1.14%

-1.77%-1.65%

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

-180

-150

-120

-90

-60

-30

0

2006 2007 2008 2009 2010 20112012

(unaudited) 2013 Budget

Nominal Deficit (Rp Tn)

deficit of GDP (RHS)

7 years average=1.1

%

Favorable current macro conditions is supported by prudent

fiscal management..

• Continue reduction in Indonesia's debt to GDP ratio compared to other Asian economies, and Indonesia's low budget deficit compared to developing Asia and

developed economies are beneficial as buffers against potential vulnerabilities.

• In the last 7 years, Indonesia budget deficit averaged at 1.1 %.

-10

-8

-6

-4

-2

0

Ind

on

esia

Ph

ilip

pin

es

Vie

tnam

Bra

zil

Ita

ly

Fra

nce

Mala

ysia

Ind

ia

US

Jap

an

2011 Fiscal Balance (% of GDP)

37

Indonesia’s Fiscal Policy in Mitigating Global Crisis

Extremely prudent with fiscal deficits and debt ratios

among lowest in the world

Addresses growth and social needs through capital

spending and subsidies while lowering debt to GDP

Aims for quality spending with capital expenditures

increasing

Crisis mitigation measures in place

Coordination Forum for Financial System Stability

1

Crisis Management Protocol

Bond Stabilization Framework

Flexibility in State Budget Law for Crisis Mitigation Action

Deferred Drawdown Option

Chiang Mai Initiatives Multilateralization/CMI-M

2

3

4

5

6

Crisis Prevention & Mitigation:

38

Improved Government Debt Position

Budget Financing Realization, 2012-2013

2013

A. Domestic Financing 194.531,0 199.167,8 102,4 172.792,1

I. Domestic Bank Financing 60.561,6 62.581,5 103,3 14.306,6

1. Revenue Amortization of Subsidiary Loan Agreement 4.387,9 6.411,5 146,1 4.306,6

2. Financing Surplus 56.173,7 56.170,0 100,0 10.000,0

II. Non Bank Financing 133.969,4 136.586,3 102,0 158.485,5

1. Privatization (netto) 0,0 138,3 0,0 0,0

2. Asset Management 280,0 1.139,2 406,9 475,0

3. Government Securities (net) 159.596,7 159.704,3 100,1 180.439,9

4. Domestic Loan 991,2 1.467,2 148,0 500,0

- Domestic Loan Disbursement (gross) 1.132,5 1.537,8 135,8 750,0

- Domestic Installment Payment (141,3) (70,6) 50,0 (250,0)

5. Gov't Infrastructure Fund & GCP (19.265,1) (18.862,614) 97,9 (12.223,4)

a. Govt. Investment (3.299,6) (3.299,6) 100,0 (1.000,0)

b. Gov't Capital Participation (GCP) (8.922,1) (8.519,6) 95,5 (6.387,6)

c. Revolving Fund (7.043,4) (7.043,4) 100,0 (4.835,8)

6. National Education Development Fund (7.000,0) (7.000,0) 100,0 (5.000,0)

7. Guarantee Liabilities (633,3) - 0,0 (706,0)

8. PT. PLN's Borrowing 0,0 - 0,0 0,0

9. Reserve Fund 0,0 - 0,0 (5.000,0)

B. Foreign Financing (Nett) (4.425,7) (19.147,6) 432,6 (19.454,2)

I. Gross Drawing 53.731,1 34.170,9 63,6 45.919,1

1. Program Loan 15.603,9 15.003,5 96,2 6.510,0

2. Project Loan (Nett) 38.127,2 19.167,4 50,3 39.409,1

a. Central Government Project Loan 29.695,3 17.006,5 57,3 32.440,8

i. Line Ministries 27.977,0 17.006,5 60,8 29.217,9

ii. Non-Line Ministries 0,0 - 0,0 0,0

ii. On-granting 1.718,4 - 0,0 3.223,0

b. Proceed of Subsidiary Loan 8.431,8 2.160,9 25,6 6.968,3

II. Subsidiary Loan (8.431,8) (2.160,9) 25,6 (6.968,3)

III. Amortization (49.724,9) (51.157,6) 102,9 (58.405,0)

190.105,3 180.020,2 94,7 153.338,0

Budget Budget

T O T A L

Budget % to GDP

FINANCING, 2012-2013(billion of rupiah)

2012

Description

Domestic Market is Arising

The amount of incoming bids for long tenor bonds from local banks

remains high in recent auctions

Others* :

Domestic pension funds, insurance companies and mutual funds

Increasing demand in domestic primary market align with downward trend in

borrowing cost

24,60

53,98 48,73

95,57

189,46

136,18

198,23

315,91

393,41

430,59

62,79

11,71 23,57 22,54

39,30

70,78 66,06 79,20

101,90

138,85

152,77

27,45

11,92

10,42

13,97

10,14 10,01

11,86

10,04

7,57

5,96

5,30 5,22

0

3

6

9

12

15

-

100

200

300

400

500

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 as of February 19,

2013Total Incoming Bid Total Bid Accepted Yeild at Tenor 10 year

24%

14%19%

29%35%

24%

33%

24%

35% 37%

23% 22%

52%48% 51%

45% 45%

51% 51%

32%

41%

49%

59%

53%

24%

38%

30%26%

20%24%

16%

44%

24%

14%17%

25%

Ja

n-1

2

Fe

b-1

2

Ma

r-1

2

Ap

r-1

2

Ma

y-1

2

Ju

n-1

2

Ju

l-1

2

Au

g-1

2

Se

p-1

2

Oct-1

2

No

v-1

2

Ja

n-1

3

Foreign Local Bank & Central Bank Others*

Incoming Bid - Long Tenor (≥ 10 years)

2,00

4,00

6,00

8,00

10,00

12,00

14,00

16,00

18,00

20,00

22,00

Ap

r'0

8

Ju

l'0

8

Ok

t'0

8

Ja

n'0

9

Ap

r'0

9

Ju

l'0

9

Ok

t'0

9

Ja

n'1

0

Ap

r'1

0

Ju

l'1

0

Ok

t'1

0

Ja

n'1

1

Ap

r'1

1

Ju

l'1

1

Ok

t'1

1

Ja

n'1

2

Ap

r'1

2

Ju

l'1

2

Ok

t'1

2

Ja

n'1

3

5Y 10Y

15Y 20Y

Secondary Market Performance of Government Bonds

0

200

400

600

800

1000

1200

1400

Jan-0

8

Apr-

08

Jul-08

Oct-

08

Jan-0

9

Apr-

09

Jul-09

Oct-

09

Jan-1

0

Apr-

10

Jul-10

Oct-

10

Jan-1

1

Apr-

11

Jul-11

Oct-

11

Jan-1

2

Apr-

12

Jul-12

Oct-

12

Jan-1

3

Indonesia Turkey Brazil Mexico South Africa[In Percentage]

As of Feb 18, 2013

Global Financial

Crisis

Eurozone sovereign debt

crisis

Yield of Benchmark Series

Compare to the peers countries, Indonesia CDS 5Y and yield on benchmark yield are steadily decreased

INDO CDS 5Y to Peers Countries

Government Securities Realization

(Million IDR)

Budget 2013 Realization (ao Feb 18, 2013) % Realization

Government Securities Maturity 2013 85.620.835 16.371.112 19,12%

Government Securities Net 180.439.900 12.578.888 6,97%

Buyback 3.000.000 - 0,00%

Issuance Need 2012* 280.860.735 28.950.000 10,31%

Government Debt Securities (GDS) 27.450.000

Domestic GDS 27.450.000

- Coupon GDS 22.650.000

- Conventional T-Bills 4.800.000

- Retail Bonds

International Bonds -

- USD Global Bonds

- Samurai Bonds

Government Islamic Debt Securities 1.500.000

Domestic Government Islamic Debt Securities 1.500.000

- IFR/PBS (Islamic Fixed Rated Bond/Project Based Sukuk) 1.500.000

- Islamic T-Bills

- Retail Sukuk

- SDHI

International Sukuk

*Adjusted by changes in Cash Management & Debt Switch

Outstanding of Total Central Government Debt

43 Source: Ministry of Finance

[in percentage]

[USD billion]

61,10 58,90 63,74 68,91 68,59 63,09 62,02 62,25 66,69 65,02 68,10 68,40 63,53

68,35 63,5273,30

76,64 71,2970,51

82,34 85,26 82,78104,20

118,39130,97 140,75

-

50

100

150

200

250

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Dec 2012

Loan Government Securities

Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Dec 2012

Loan 47% 48% 47% 47% 49% 47% 43% 42% 45% 38% 37% 37% 31%

Government Securities 53% 52% 53% 53% 51% 53% 57% 58% 55% 62% 63% 63% 69%

020406080

100120140160

2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043

Domestic Foreignin Trillion IDR

0

50

100

150

200

2013 2015 2017 2019 2021 2023 2025 2027 2029 2031 2033 2035 2037 2039 2041 2043

Gov't Securities Loanin Trillion IDR

Total Debt Maturity Profile as of January 2013

44

Maturity Profile of Central Government by Instruments (in trillion IDR)

Maturity Profile of Central Government by Currencies (in trillion IDR)

Government Debt Securities Issuance Plan 2013

45 Source: Ministry of Finance

2012 -

Revised

Budget

(trillion IDR)

% of GDP

2013 -

Budget

(trillion IDR)

% of GDP

Total Revenue & Grants 1.358,2 15,9% 1.529,7 16,5%

of which Tax Revenue 1.016,2 11,9% 1.192,99 12,9%

Non Tax Revenue 341,14 4,0% 332,20 3,6%0,0% 0,0%

Expenditure 1.548,3 18,1% 1.683,0 18,2%

of which Interest payment 117,8 1,4% 113,2 1,2%0,0% 0,0%

Subsidy 245,1 2,9% 317,2 3,4%0,0% 0,0%

Primary Balance (72,3) -0,8% (40,1) -0,4%

Overall Balance (deficit) (190,1) -2,2% (153,3) -1,7%

Financing 190,1 2,2% 153,3 1,7%0,0% 0,0%

Non Debt (Net) 33,9 0,4% (8,1) -0,1%

Debt 156,2 1,8% 161,5 1,7%0,0% 0,0%

Govt Securities (Net) 159,6 1,9% 180,4 1,9%0,0% 0,0%

Domestic Official Borrowing 1,0 0,0% 0,5 0,0%

External Official Borrowing (Net) (4,4) -0,1% (19,5) -0,2%

Disbursement 53,7 0,6% 45,9 0,5%

Program Loan 15,6 0,2% 6,5 0,1%

Project Loan (Bruto) 38,1 0,4% 39,4 0,4%

On lending (8,4) -0,1% (7,0) -0,1%

Repayment (49,7) -0,6% (58,4) -0,6%

Assumptions:

GDP (trillion) 8.542,6 9.269,6

Growth (%) 6,5 6,8

Inflation (%) 6,8 4,9

3-months SPN (% avg) 5,0 5,0

Rp / USD (avg) 9.000,0 9.300,0

Oil Price (USD/barrel) 105,0 100,0

Oil Lifting (MBCD) 930,0 900,0

Item

IDR

(trillion)

$ USD

(billion)

IDR

(trillion)

$ USD

(billion)

Deficit (190,1) (19,64) (153,3) (15,84)

Amortization (158,8) (16,41) (159,5) (16,48)

External Loan (50) (5) (58) (6)

Govt Securities (incl Buyback) (109) (11) (100,9) (10)

Domestic Loan (0,14) (0,01) (0,25) (0,03)

Non Debt Financing Expenditures (26,62) (2,75) (22,93) (2,37)

Two Steps Loan (8,4) (0,87) (7,0) (0,72)

Financing Needs (384,0) (39,7) (342,8) (35,4)

Financing Sources 384,0 39,7 342,8 35,4

Non Debt (Gross) 60,6 6,26 15,2 1,57

Debt (Gross) 323,4 33,41 327,5 33,84

Govt Securities 268,5 27,7 280,9 29,0

Program Loan 15,6 1,6 6,5 0,7

Project Loan (Bruto) 38,1 3,9 39,4 4,1

Domestic Loan 1,1 0,1 0,8 0,1

Exchange Rate Assumption (IDR/USD 1) a.o February 18, 2013: 9.680IDR

2012 - Revised Budget 2013 - Budget

Jun-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 15-Feb-13

Total 224.422 240.977 250.326 269.845 270.522 273.198 276.990

>5 150.943 168.827 179.654 193.294 197.035 191.286 201.203

>2-5 38.632 44.898 39.567 43.760 44.626 45.520 46.645

>1-2 11.026 3.523 8.489 8.591 7.650 8.484 8.680

0-1 23.821 23.729 22.615 24.200 21.211 27.907 20.462

0

50.000

100.000

150.000

200.000

250.000

300.000[IDR billion]

Holders of Tradable Government Securities

46

Holders of Tradable Domestic Government Securities Foreign Ownership of Gov’t Domestic Debt Securities

Source: Ministry of Finance

Continued Increasing proportion of foreign ownership of Indonesian Government securities.

70,02%

16,66%

3,11%

10,22%

72,64%

16,84%

3.13% 7,39%

59,34%53,60%

43,72%33,88% 36,63% 36,53% 36,07%

24,30%29,74%

37,71%

35,59% 32,58% 30,49% 30,32%

16,36% 16,66%18,56%

30,53% 30,80% 32,98% 33,61%

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 15-Feb-13

Foreign Holders Domestic Non-Banks Domestic Banks

Profile of Government Debt Securities

47 Source: Ministry of Finance

- Since October 2006, Government and Central Bank committed to replace interest payment of Promissory Notes to Bank Indonesia (SU-002 & SU-004) with new bond (SU-007) and omitted indexation of SU-002 & SU-004

GOVERNMENT DEBT SECURITIES (GDS) Dec-09 Dec-10 Dec-11 Dec-12 Jan-13 18-Feb-13

1. Domestic Tradable GDS IDR 570.215 IDR 615.498 IDR 684.618 IDR 757.231 IDR 770.381 IDR 777.581

a. Zero Coupon IDR 33.386 IDR 32.307 IDR 32.412 IDR 24.083 IDR 22.533 IDR 21.783

1. Government Treasury Bills IDR 24.700 IDR 29.795 IDR 29.900 IDR 22.820 IDR 21.270 IDR 20.520

2. Zero Coupon Bond IDR 8.686 IDR 2.512 IDR 2.512 IDR 1.263 IDR 1.263 IDR 1.263

b. Government Domestic Bonds IDR 536.829 IDR 583.191 IDR 652.206 IDR 733.148 IDR 747.848 IDR 755.798

1. Fixed Rate *) +) IDR 393.543 IDR 440.396 IDR 517.142 IDR 610.393 IDR 625.093 IDR 633.043

2. Variable Rate *) IDR 143.286 IDR 142.795 IDR 135.063 IDR 122.755 IDR 122.755 IDR 122.755

2. Promissory Notes to Bank Indonesia **) ***) IDR 251.875 IDR 248.432 IDR 244.636 IDR 240.144 IDR 240.144 IDR 238.907

3. Total GDS (2+3) IDR 822.090 IDR 863.930 IDR 929.254 IDR 997.376 IDR 1.010.526 IDR 1.016.489

4. Total Government International Bonds *) USD 14.200 USD 16.200 USD 18.700 USD 22.950 USD 22.950 USD 22.950

35.000¥ 95.000¥ 95.000¥ 155.000¥ 155.000¥ 155.000¥

5. TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption)) IDR 959.130 IDR 1.020.062 IDR 1.109.922 IDR 1.236.658 IDR 1.249.643 IDR 1.254.582

GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS)

6. Domestic Tradable GIDS IDR 11.533 IDR 25.717 IDR 38.988 IDR 63.035 IDR 63.035 IDR 56.501

a. Fixed Rate *)++) IDR 11.533 IDR 25.717 IDR 37.668 IDR 62.840 IDR 62.840 IDR 55.606

b. Zero Coupon IDR 1.320 IDR 195 IDR 195 IDR 895

7. Domestic Non Tradable GIDS

IDR 2.686 IDR 12.783 IDR 23.783 IDR 35.783 IDR 35.783 IDR 35.783

8. Government International Islamic Bonds

1. Fixed Rate *) USD 650 USD 650 USD 1.650 USD 2.650 USD 2.650 USD 2.650

9. TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption)) IDR 17.643 IDR 31.561 IDR 53.950 IDR 88.660 IDR 88.734 IDR 82.153

10. TOTAL GOVERNMENT SECURITIES IDR 979.458 IDR 1.064.406 IDR 1.187.655 IDR 1.361.101 IDR 1.374.160 IDR 1.372.518

Notes:

- Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds)

- *) Tradable

- **) Non-Tradable

- +) Including ORI (IDR Billion)) IDR 40.149 IDR 40.672 IDR 51.672 IDR 42.451 IDR 42.451 IDR 42.451

- ++) Including Sukuk Ritel/SR (IDR Billion) IDR 5.556 IDR 13.590 IDR 20.931 IDR 28.989 IDR 28.989 IDR 20.955

- Exchange Rate Assumption (IDR/USD1) IDR 9.400 IDR 8.991 IDR 9.068 IDR 9.670 IDR 9.698 IDR 9.680

- Exchange Rate Assumption (IDR/JPY1) IDR 101,70 IDR 110,29 IDR 116,80 IDR 111,97 IDR 106,76 IDR 102,82

Debt Switch & Cash Buyback Program

48

• Debt Switch Program

• Buyback Program

[in billion IDR]

AuctionsDirect

Transactions

2003 2 - 8.127

2004 1 - 1.962

2005 4 - 5.158

2007 2 - 2.859

2008 3 - 2.375

2009 1 1 8.528

2010 10 3 3.201

2011 2 8 3.500

2012 - 6 1.138

GRAND TOTAL 36.848

Frequencies

YearVolume

(IDR billion)

Auction DateAuction

Frequency

Source Bonds Tenor

SeriesOffer Received Offer Awarded

2005 1 9 series 7.721 5.673

2006 12 7 s.d. 21 series 54.177 31.179

2007 9 12 s.d. 21 series 30.681 15.782

2008 2 21 s.d. 31 series 7.490 4.571

2009 6 24 s.d. 28 series 8.663 2.938

2010 6 11 s.d. 28 series 8.349 3.920

2011 4 22 s.d. 27 series 3.080 664

2012 4 10 s.d 20 series 23.126 11.859

2013 1 13 series 1.868 616

Total 145.155 77.202

Recent Global Bond Issuance

49 Source: Ministry of Finance

RI0422 RI0142 (Reopening) RIJPY1122

1 Rating (S&P|Moody's|Fitch) BB+ | Baa3 | BBB- BB+ | Baa3 | BBB-

2 Size USD 2.000.000.000 USD 500.000.000 JPY60 billion

3 Coupon 3.75% s.a. 5.25% s.a. 1.13% s.a.

4 Pricing date 17 April 2012 17 April 2012 06 Nopember 2012

5 Settlement Date 25 April 2012 25 April 2012 22 Nopember 2012

6 Maturity date 25 April 2022 17 Januari 2042 22 Nopember 2022

7 Yield when issued 0,0385 0,0495 0,0113

8 Price when issued 99,176% 104,636% 100%

9 Spread over US Treasury 184.8 bps 180.6 bps

10 US Treasury Yield 2% 3,13%

By Region By Investor Type

77,2%74,0%

0,3%

22,5% 26,0%

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

RIJPY1120 RIJPY1122

Insurance and Others

Asset Manager

Banks

66%

35%

17%

31%

17%34%

0%

20%

40%

60%

80%

100%

RI0422 RI0142

Asia Europe USA

45%29%

50%62%

5% 9%

0%

20%

40%

60%

80%

100%

RI0422 RI0142

Banks Asset managers Insurance and others

Maturity Profile of Tradable Government securities as of February 18, 2013

50 Source: Ministry of Finance

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 2031 2032 2033 2035 2036 2037 2038 2041 2042

TOTAL 63,46 74,69 77,12 51,66 49,63 72,89 56,41 69,00 60,08 91,56 37,60 18,01 28,02 19,61 44,25 35,42 25,68 27,10 42,80 22,55 15,49 4,11 28,32 35,05 13,55 33,78

SUKUK USD - 6,29 - - - 9,68 - - - 9,68 - - - - - - - - - - - - - - - -

SUKUK IDR 1,45 7,34 18,96 - 1,17 8,05 - 0,25 - 1,21 - - 1,55 - 2,85 - 2,18 - - - - 4,11 7,40 - - -

SUN JPY - - - - - - 3,60 6,17 - 6,17 - - - - - - - - - - - - - - - -

SUN USD - 22,26 9,68 8,71 9,68 18,39 19,36 19,36 24,20 19,36 - - - - - - - - - - 15,49 - 14,52 19,36 - 21,78

SUN IDR 62,02 38,79 48,48 42,95 38,77 36,78 33,45 43,22 35,88 55,14 37,60 18,01 26,47 19,61 41,40 35,42 23,50 27,10 42,80 22,55 - - 6,40 15,69 13,55 12,00

-

20,00

40,00

60,00

80,00

100,00

Daily Transaction & Offshore Ownership

51

Average Daily transaction Govt’ Bonds Net Buyer (Seller) Non Resident

Source: Ministry of Finance

[Trillion IDR]

3.307

5.899

4.235

3.420

4.963

7.671

9.389

8.259

10.912

6.971

5.767

6.566

8.794

9.711

13.324

10.458 9.907

12.074

9.927

6.657

7.672

-

80

160

240

320

400

480

560

640

720

-

2.000

4.000

6.000

8.000

10.000

12.000

14.000

20

06

20

07

20

08

20

09

20

10

20

11

20

12

Ja

n '1

2

Fe

b '1

2

Ma

r '12

Ap

r'12

Ma

y'1

2

Ju

n'1

2

Ju

l'12

Au

g'1

2

Se

p'1

2

Ok

t'12

No

v'1

2

De

s'1

2

Ja

n '1

3

15

Fe

b 2

01

3

Volume (billion rupiah) - LHS Frequency - RHS

4,56

8,06

13,11

(8,99)

(2,27)

4,15

(4,37)

(0,08)

10,13

(1,41)

7,83 9,35

19,52

0,68 2,68

3,79

(0,06)

(0,04)

(0,02)

0,00

0,02

0,04

0,06

0,08

0,10

(15,00)

(10,00)

(5,00)

0,00

5,00

10,00

15,00

20,00

25,00

De

c-1

0

De

c-1

1

Jan

-12

Fe

b-1

2

Ma

r-1

2

Ap

r-1

2

Ma

y-1

2

Jun

-12

Jul-

12

Au

g-1

2

Se

p-1

2

Oct-

12

No

v-1

2

De

c-1

2

Jan

-13

15

-Fe

b-1

3

Capital Inflows Capital Inflows of Average of Foreign Holder

Ownership of IDR Tradable Government Securities

52

Source: Ministry of Finance

Notes: - Foreign Holders (offshore) are non-resident Private Banking, Fund/Asset Mgmt, Securities Co, Insurance,

Pension Fund, etc - Others are Corporate, Foundations, etc. - Private Banks – Recap and Non Recap Banks include foreign banks branches and subsidiaries

Des-08

Banks 258,75 49,2% 254,36 43,72% 217,27 33,88% 265,03 36,63% 299,66 36,73% 307,46 36,89% 297,23 36,07%

Govt Institutions 23,01 4,4% 22,50 3,87% 17,42 2,72% 7,84 1,08% 3,07 0,37% 1,90 0,23% 3,87 0,47%

Non-Banks 243,93 46,4% 304,89 52,41% 406,53 63,40% 450,75 62,29% 517,53 63,09% 524,05 62,88% 523,04 63,47%

Mutual Funds 33,11 6,3% 45,22 7,77% 51,16 7,98% 47,22 6,53% 43,19 5,27% 43,78 5,25% 42,57 5,17%

Insurance Company 55,83 10,6% 72,58 12,48% 79,30 12,37% 93,09 12,86% 83,42 10,17% 85,72 10,29% 115,77 14,05%

Foreign Holders 87,61 16,7% 108,00 18,56% 195,76 30,53% 222,86 30,80% 270,52 32,98% 273,20 32,78% 276,99 33,61%

Insurance 0,03 0,0% 0,06 0,01% 1,35 0,21% 2,94 0,41% 3,59 0,44% 3,59 0,43% 3,59 0,44%

Pension Fund 0,17 0,0% 1,23 0,21% 2,31 0,36% 2,76 0,38% 4,40 0,54% 4,75 0,57% 4,74 0,58%

Corporate 0,69 0,1% 3,66 0,63% 5,71 0,89% 6,59 0,91% 10,78 1,31% 10,67 1,28% 10,98 1,33%

Fin. Institutions 83,38 15,9% 78,41 13,48% 126,69 19,76% 133,63 18,47% 159,09 19,39% 158,49 19,02% 160,34 19,46%

Individual 0,06 0,0% 0,06 0,01% 0,10 0,02% 0,09 0,01% 0,10 0,01% 0,09 0,01% 0,09 0,01%

Mutual Fund 0,49 0,1% 21,53 3,70% 53,53 8,35% 68,30 9,44% 70,09 8,55% 72,07 8,65% 73,20 8,88%

Securities 2,67 0,5% 2,65 0,45% 4,34 0,68% 4,88 0,67% 5,56 0,68% 5,07 0,61% 4,96 0,60%

Foundation 0,07 0,01% 0,06 0,01% 0,07 0,01% 0,06 0,01% 0,06 0,01%

Others 0,11 0,0% 0,39 0,07% 1,64 0,26% 3,60 0,50% 16,84 2,05% 18,40 2,21% 19,02 2,31%

Pension Fund 32,98 6,3% 37,50 6,45% 36,75 5,73% 34,39 4,75% 56,46 6,88% 57,31 6,88% 27,45 3,33%

Securities Company 0,53 0,1% 0,46 0,08% 0,13 0,02% 0,14 0,02% 0,30 0,04% 0,63 0,08% 0,60 0,07%

Individual 25,77 3,09% 22,19 2,69%

Others 33,87 6,4% 41,12 7,07% 43,43 6,77% 53,05 7,33% 63,64 7,76% 37,65 4,52% 37,47 4,55%

Total 525,69 100% 581,75 100% 641,21 100% 723,61 100% 820,27 100% 833,42 100% 824,13 100%

Dec-12Dec-09 Dec-10 Dec-11 15-Feb-13Jan-13

(IDR Trillion)