about the republic of indonesia investor relations unit may 20… · the bi board of governors...
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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]
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.
About Investor Relations Unit (IRU)
1
Table of Content
Executive Summary
Preserved Macroeconomic Stability
Improved International Perception and Rising Investment
Prudent Fiscal Management
Government Debt Performance
2
Executive Summary
3
Executive Summary
Growth slowed in Q1/2015 but is predicted to improve in subsequent periods. Growth moderated to 4.7% (yoy) in Q1/2015 from 5.0% (yoy) on
weak domestic demand, particularly government consumption and construction investment. Unrealised spending at several government ministries
and new agencies along with limited capital spending related to the implementation of government infrastructure projects undermined government
consumption and construction investment.
The Indonesia Balance of Payments (BoP) recorded a surplus in Q1/2015, primarily buoyed by a declining current account deficit. The current
account deficit was US$3.8 billion (1.8% of GDP) in the first quarter, shrinking from US$5.7 billion (2.6% of GDP) in the preceding period and compared
to US$4.1 billion (1.9% of GDP) during the same period of 2014. Meanwhile, the trade balance of Indonesia strengthened in April 2015 with a surplus
of US$0.45 billion, supported by a larger non-oil and gas trade surplus. On the other hand, the capital and financial account surplus was maintained in
the first quarter of 2015 amidst uncertainty in the global financial market.
The rupiah depreciated as the US dollar gained on nearly all currencies. The rupiah depreciated an average of 4.4% (qtq) to a level of Rp12,807
per USD in Q1/2015. Nonetheless, the rupiah rebounded in April 2015 on a USD correction along with a sound domestic risk profile. Consequently, the
rupiah strengthened by an average of 0.95% (mtm) to Rp12,944 per USD.
Inflation was controlled in April 2015, thereby supporting the inflation target of 4±1% in 2015. CPI inflation was recorded at 0.36% (mtm) or
6.79% (yoy) in April 2015, increasing from 0.17% (mtm) and 6.38% (yoy) in the previous period. Escalating inflationary pressures originated from
administered prices, while core inflation and volatile foods were managed well.
Financial system stability remained solid, supported by a resilient banking system and stable financial market performance. The banking
sector remained resilient, with credit, market and liquidity risks well mitigated and the support of a sound capital base. The Capital Adequacy Ratio
(CAR) was 20.7% in March 2015, well in excess of the 8% minimum. In addition, non-performing loans (NPL) remained low and stable at 2.0% (gross).
The BI Board of Governors decided on 19th May 2015 to hold the BI Rate at 7.50%, while setting the Deposit Facility and Lending Facility
rates at 5.50% and 8.00% respectively. The decision is in line with the tight bias monetary policy to keep inflation in its target of 4±1% in 2015 and
2016 as well as to manage the current account deficit at around 2.5-3% of GDP in the medium term.
Bank Indonesia remains strongly committed to strengthening its monetary and macroprudential policy mix, as well as stepping-up
coordination with the government to curb inflation and current account deficit, while encouraging speedy structural reforms.
On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal consolidation. Recent
reform policy represents an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. 2015 revised
budget deficit is projected at a safe level of 1.91% of GDP.4
Executive Summary
GDP Growth Inflation
Foreign Exchange ReservesBalance of Payments
5
* Preliminary Figures
5.7 5.5
6.3 6.0
4.6
6.1 6.5
6.0 5.6
5.0 4.7
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014* Q12015**
(%)
110.90
6.7
-
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
- 10 20 30 40 50 60 70 80 90
100 110 120 130
Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gSe
pO
ctN
ov
Dec Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gSe
pO
ctN
ov
Dec Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gSe
pO
ctN
ov
Dec Jan
Feb
Mar
Ap
rM
ay Jun
Jul
Au
gSe
pO
ctN
ov
Dec Jan
Feb
Mar
Ap
r
2011 2012 2013 2014 2015
foreign exchange reserves (LHS)
month of import & government debt service (RHS)MonthBillion
0
20
40
60
80
100
120
140
-15
-10
-5
0
5
10
15
20
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
Q2
Q3
Q4
Q1
*
Q2
*
Q3
*
Q4
*
Q1
**
2010 2011 2012 2013 2014 2015
Tho
usa
nd
s
Current Account Capital & Financial Account Overall Balance Reserve Assets
billion USD billion USD
6
Source: Ministry of Finance
Debt Composition
Table of Debt to GDP Ratio
Central Government Debt to GDP Ratio (% of GDP)
Executive Summary
Note:
Using GDP at Current Market Prices [2010 Version]
*) Preliminary Figures
24.5%23.1% 23.0%
24.9% 24.7%
0%
5%
10%
15%
20%
25%
30%
2010 2011 2012 2013 2014*
53.7% 54.9% 55.5% 53.2% 56.7% 56.9%
46.3% 45.1% 44.5% 46.8% 43.3% 43.1%
0%
20%
40%
60%
80%
100%
120%
2010 2011 2012 2013 2014*) Apr-15
Domestic Debt Foreign Debt
2015 Policy Summary
Government coordinates policy tools to stabilize growth with macroeconomic management
Capital 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
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.
Revenue and tax policy
Financing and debt management policyExpenditure policy
Monetary policy mix
Bold and pre-emptive policy through regulation of BI Policy Rate,
responsively adjusting to current macroeconomic condition.
Exchange rate flexibility to facilitate external adjustments.
Financial market deepening and capital flows management.
Accommodative measures of macroprudential policy.
Policy coordination with the government and financial stability
forum.
Central bank cooperations, including second line of defences.
7
Improvement of tax revenue administration.
Improvement of regulations related to tax revenues, especially
income tax, VAT, and VAT – Luxury Goods.
Increase law enforcement conducted through intensification and
improved examination of the taxpayer and certain business sectors.
Extending additional new tax subject and VAT Activities related to
‘Build Your Own’.
Optimization of customs and excise policy implementation as it has
been presented in the State Budget 2015.
Optimization of oil & gas lifting and cost recovery, as well as the
improvement of the system and administration of non-tax state
revenues.
Increasing infrastructure spending to support growing economy.
Reduction of poverty through conditional cash transfers.
Increase the effectiveness of targeted subsidies.
Support the accelerated achievement of minimum essential force in
national defense
Support the management of natural resources in improving food,
water, and energy security.
Expanding access and quality of education.
Improve the implementation quality of the National Social Security
System in terms of health and employment.
Minimizing the impact of uncertainty through the support of fiscal
risk reserves.
Improved International Perception
and Rising Investment
8
Ma
r-9
9
De
c-9
9
Se
p-0
0
Ju
n-0
1
Ma
r-0
2
De
c-0
2
Au
g-0
3
Ma
y-0
4
Fe
b-0
5
No
v-0
5
Au
g-0
6
Ma
y-0
7
Ja
n-0
8
Oct-
08
Ju
l-0
9
Ap
r-1
0
Ja
n-1
1
Oct-
11
Ju
l-1
2
Ma
r-1
3
De
c-1
3
Fitch
Ma
r-9
9
De
c-9
9
Se
p-0
0
Ju
n-0
1
Ma
r-0
2
De
c-0
2
Au
g-0
3
Ma
y-0
4
Fe
b-0
5
No
v-0
5
Au
g-0
6
Ma
y-0
7
Ja
n-0
8
Oct-
08
Ju
l-0
9
Ap
r-1
0
Ja
n-1
1
Oct-
11
Ju
l-1
2
Ma
r-1
3
De
c-1
3
S&P
Ma
r-9
9
De
c-9
9
Se
p-0
0
Ju
n-0
1
Ma
r-0
2
De
c-0
2
Au
g-0
3
Ma
y-0
4
Fe
b-0
5
No
v-0
5
Au
g-0
6
Ma
y-0
7
Ja
n-0
8
Oct-
08
Ju
l-0
9
Ap
r-1
0
Ja
n-1
1
Oct-
11
Ju
l-1
2
Ma
r-1
3
De
c-1
3
Moody's
Mo
od
y’s
Dec 2011 (affirmed Nov 2014)
“The authorities' explicit and consistent preference for stability over
economic growth since the "taper tantrum“ related market pressures in the
summer of 2013 has strengthened their macro-economic policy track record.
Real GDP growth continues to be high compared with peers. Fitch expects
real GDP growth to bottom out at 5.1% in 2014, before gradually picking up
to 5.4% in 2015 and 5.9% in 2016. This compares favorably with the 'BBB'
category median of 3.0%. Moreover, GDP growth is much less volatile in
Indonesia compared with peers.”
Jan 2012 (affirmed Dec 2013)
“Indonesia's rating is based on the country's resilient growth, low debt
burden, favorable maturity profile, and high debt affordability. Indonesia has
demonstrated resilience to large external shocks [with] sustainably high
trend growth over the medium term. Prudent fiscal management has
contained budget deficits and steadily reduced the government's debt
burden over the past decade.”
21 May 2015
“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.
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.”
BBB- / Stable
Baa3 / Stable
BB+ / Positive
Source: Moody’s, S&P, Fitch
Improving International Perception: Acknowledged by Rating Agencies
S&
PFi
tch
Investment gradeBaa3
B3
B2
B1
Ba3
Ba2
Ba1
CCC+
CCC
Positive Outlook
Negative Outlook
Stable Outlook
Positive Watch
B-
B
B+
BB-
BB
BB+
BBB-
CCC+
CCC
B-
B
B+
BB-
BB
BB+
BBB-
Caa1
Caa2
Investment grade
Investment grade
9
International institutions outlook shows some optimism though there is still downside risk for Indonesia in 2015 …
10
`
IMF Staff Visit
(December 2014)World Bank IEQ
(December 2014)
“Sound macroeconomic
management has bolstered
policy credibility and external
resiliency in Indonesia.”
• GDP growth is projected to be
sustained at 5.1 percent in 2015
- Recovery in investment
demand
- More buoyant manufacture
exports
• Inflation is expected to return
to 2015 target band (4.0 ±1
percent) by the end of next
year.
• Current account deficit is
projected to decline to around
2¾ percent of GDP in 2015,
supported by rising
manufacture exports as well as
a lower oil import bill.
Risk
• Global headwinds from
weakening commodity prices
and tightening financial
conditions.
• Slowdown in emerging market
trading partners and surges in
global financial market
volatility.
“The World Bank projects a
moderate near-term growth
outlook for Indonesia of 5.1-
5.5 %”
• Fuel subsidies adjustment in
November 2014 suggests the
new government’s commitment
and willingness to address many
of Indonesia’s long-standing
structural priorities.
• The growth in economic activity
was moderate in the third
quarter of 2014 due to weaker
investment and exports while
private consumption has
continued to support growth.
• The Rupiah has depreciated
further against the US dollar
since July, but strengthened in
real effective terms through
October.
Risk
• Slower projected global recovery
could weaken commodity price
trajectory in the next few years.
• Several implementation
challenges faced by the new
government, including a
complex domestic political
environment.
Asian Development
Outlook
(December 2014)
“GDP growth decelerated
further to 5.0% in the third
quarter of 2014”
• Private consumption remained
robust as expected, however
gross fixed investment and net
exports contributed less to GDP
growth than in the second
quarter.
• Investment recovery following
the elections has been slower
than anticipated, and recovery
in export markets remains
uncertain.
• The effect of higher
administered prices on inflation
is expected to be short-lived,
and the rate should taper
toward the end of 2015.
Risk
• Downside risks to this outlook
center on further deterioration
of export performance and
changes in market sentiment
that cause capital outflows
OECD
Economic
Forecast
(November
2014)
“Growth is projected to
remain moderate through
2015 before picking up
somewhat in 2016…”
• …due largely to an
acceleration in investment
and firming consumption.
• Economic growth has
continued to slow as
investment and exports
have softened, although
household consumption is
holding up.
• The current account has
widened again, and the
rupiah has depreciated as a
result.
• The recent second round
of cuts in fuel subsidies lift
headline inflation, but core
measures should remain
well anchored,
Risk
• Risks to the outlook are
mainly on the external side.
10
Preserved Macroeconomic Stability
11
Domestic Economic Adjustment Continues
• Economic growth during the first quarter of 2015 is recorded 4.71% (yoy) which slows down compared to the previous quarter at 5.02% (yoy) which primarily results from
weakening performance of several domestic demand components such as non-profit institution consumption, government consumption, and investment in construction sector.
• The weakening government consumption occurs owing to poor expenditures, particularly pertaining to the recently ratified 2015 Amended State Budget and unrealized
expenditures of ten new ministries and institutions. Declining consumption growth of non-profit institutions is especially due to lower expenditures in this period than those in
the same period last year with general election expenditures (base effects).
• In construction investment, attenuation results from the wait-and-see behavior of the private sector and pending government projects.
• On the external side, export performance also decreases parallel with the weakening demand and declining prices of the world’s commodities. In the meantime, imports also
quite sharply decrease in line with the weakening domestic demand development.
• Bank Indonesia estimates economic growth will start to increase during the second quarter of 2015. Government spending is estimated to increase from the second quarter of
2015 onward, to serve as a stimulus to economic growth. Investment growth is estimated to increase during the second quarter of 2015 through the next quarters along with the
increasing government capital expenditures in infrastructure projects. This is parallel with the monitoring of construction phase progress of various infrastructure projects.
However, there are risks that economic growth in 2015 may go to the lower limit of 5.4%-5.8%. Such growth level achievement will be affected by the extent and speed in
realizing infrastructure projects planned by the Government, in addition to strong consumption and gradually improving exports.
12
Economic Growth - Expenditure Side
S e c t o r 20122013
20132014
20142015
I II III IV I II III IV I
Household Consumption 5.5 5.5 5.2 5.4 5.4 5.4 5.4 5.1 5.1 5.0 5.1 5.0
Gross Fixed Capital Formation 6.7 6.5 6.4 6.7 12.8 8.2 23.7 22.8 5.6 (-0.2) 12.4 4.4
Government Consumption 4.5 3.0 3.2 12.4 7.9 6.9 6.1 (-1.5) 1.3 2.8 2.0 2.2
Exports of Goods and Services 1.6 3.5 2.1 1.3 9.4 4.2 3.2 1.4 4.9 (-4.5) 1.0 (-0.5)
Imports of Goods and Services 8.0 2.9 0.9 4.9 (-0.9) 1.9 5.0 0.4 0.3 3.2 2.2 (-2.2)
GDP 6.0 5.6 5.6 5.5 5.6 5.6 5.1 5.0 4.9 5.0 5.0 4.7
Economic Growth - Supply Side
S e c t o r 20122013
20132014
20142015
I II III IV I II III IV I
Agriculture, Forestry, and Fisheries 4.6 4.2 4.6 3.5 4.6 4.2 5.3 5.0 3.6 2.8 4.2 3.8
Mining and Quarrying 3.0 0.9 0.7 2.7 2.7 1.7 (-2.0) 1.1 0.8 2.2 0.5 (-2.3)
Manufacturing 5.6 4.7 5.4 3.7 4.2 4.5 4.5 4.8 5.0 4.2 4.6 3.9
Electricity and Gas 10.1 9.8 4.7 2.4 4.4 5.2 3.3 6.5 6.0 6.5 5.6 1.6
Water Supply, Waste Management and Recycling 3.3 3.5 3.6 4.7 4.5 4.1 3.6 3.2 2.8 2.7 3.0 2.3
Construction 6.6 5.4 6.3 6.5 6.2 6.1 7.2 6.5 6.5 7.7 7.0 6.0
Wholesale and Retail Trade; Automotives 5.4 3.0 4.8 4.9 6.1 4.7 6.1 5.1 4.8 3.5 4.8 3.7
Transportation and Warehousing 7.1 7.4 8.9 8.3 8.9 8.4 8.4 8.5 8.0 7.1 8.0 6.4
Provision of Accommodation and Food &
Beverage6.6 7.0 7.0 6.9 6.3 6.8 6.5 6.4 5.9 4.9 5.9 3.6
Information and Communication 12.3 10.6 11.4 10.1 9.5 10.4 9.8 10.5 9.8 10.0 10.0 10.5
Financial Services and Insurance 9.5 13.2 11.0 9.2 3.5 9.1 3.2 4.9 1.5 10.2 4.9 7.6
Real Estate 7.4 8.9 7.7 5.4 4.3 6.5 4.7 4.9 5.1 5.3 5.0 5.3
Business Services 7.4 7.8 7.6 8.2 8.0 7.9 10.3 10.0 9.3 9.7 9.8 7.4
Administration, Defence, and Social Security 2.1 1.6 (-2.1) 6.4 3.8 2.4 2.9 (-2.5) 2.6 6.9 2.5 4.7
Education Services 8.2 11.7 3.2 8.6 9.4 8.2 5.2 5.4 7.3 7.1 6.3 5.9
Health Services and Social Activities 8.0 6.9 5.2 8.3 10.7 7.8 7.7 8.5 9.9 6.1 8.0 7.3
Other Services 5.8 5.6 5.6 6.2 8.2 6.4 8.4 9.5 9.5 8.4 8.9 8.0
GDP 6.0 5.6 5.6 5.5 5.6 5.6 5.1 5.0 4.9 5.0 5.0 4.7
13
The largest economy in
South-East Asia
A large, culturally diverse, young
and vibrant workforce
Large consumer base with fast
growing spending power
Increase in infrastructure
investment to improve overall
efficiency
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
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
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
(USD tn)
Nominal GDP – Strong Growth to
ContinueMiddle Class Households Annual Budgeted Capital Spending
(IDR tn)
145.1
172.4
145.8
176.1
2012 2013Realized
2014Realized*
2015Budget
21,980
39,340
60,740
2007 2012 2017E
(‘000)
Demographic Dividend – Young
Population
0.43
0.88
1.14
2007 2012 2017E
Male Female
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
Conducive Environment Underpinning Growth Fundamentals
13
Globally Competitive and a Top Investment Destination
14
Source: Global Competitiveness Index 2014-2015, WEF
(1) Countries with sovereign ratings in the Eaa1-Baa1 category and population larger than 40 million
(2) Rank among 144 countries
Indonesia’s stage of development is categorized as efficiency-driven with a strong and well balanced performance across all 12 pillars of competitiveness
Source: The Economist – Asia Economic Outlook Survey 2015
Indonesia is in the Top 40 of the Global Competitiveness Index (“GCI”)
JBIC: Amongst ASEAN countries, Indonesia is the most preferred place for business investment
The Economist January 2015: Indonesia has taken over India in #2 Investment Destination in Asia since 2014
Source: Japan Bank for International Cooperation (“JBIC”) FY2014 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies
(1) Total number of companies that responded was 499
Rank(1)
Country 2008(2)
2014(2)
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
Score Score Score Score Score Score Score Score Score Score Score Score
1 Spain 29 35 3.8 6.0 3.8 6.3 5.2 4.3 3.9 3.8 5.4 5.4 4.4 3.7
2 Thailand 34 31 3.7 4.6 6.0 5.8 4.6 4.7 4.2 4.6 3.9 5.1 4.4 3.3
3 Indonesia 55 34 4.1 4.4 5.5 5.7 4.5 4.5 3.8 4.5 3.6 5.3 4.5 3.9
4 Turkey 63 45 3.9 4.6 4.8 5.8 4.7 4.6 3.5 4.2 4.3 5.3 4.3 3.4
5 Italy 49 49 3.4 5.4 4.1 6.4 4.8 4.3 3.3 3.3 4.8 5.6 4.8 3.7
6 South Africa 45 56 4.5 4.3 4.5 4.0 4.0 4.7 3.8 5.4 3.9 4.9 4.5 3.6
7 Mexico 60 61 3.4 4.2 5.0 5.7 4.0 4.2 3.7 4.1 3.6 5.6 4.1 3.3
8 Brazil 64 57 3.5 4.0 4.5 5.7 4.9 3.8 3.8 4.3 4.2 5.7 4.3 3.3
9 Philippines 71 52 3.9 3.5 5.8 5.4 4.4 4.3 4.0 4.4 3.8 4.7 4.3 3.5
18.3
24.3
29.6
30.3
31.3
32.2
33.3
36.2
41.2
41.3
42.1
57.9
59.9
71
0 10 20 30 40 50 60 70 80
Taiwan
Japan
Myanmar
South Korea
Hong Kong
Australia
Philippines
Thailand
Singapore
Vietnam
Malaysia
India
Indonesia
China
% of surveyed who plan to invest in each country
Rank
2013 2014 Country / Region No. of Companies(1) Percentage Share (%)
2 1 India 229 45.9
1 2 Indonesia 228 45.7
4 3 China 218 43.7
3 4 Thailand 176 35.3
5 5 Vietnam 155 31.1
7 6 Mexico 101 20.2
6 7 Brazil 83 16.6
10 8 USA 66 13.2
9 9 Russia 60 12.0
8 10 Myanmar 55 11.0
Strong Investment Underpinned by Competitivenessand Stability
Investment Realization Progress Q1-2015
Investment Realization in Quarter I 2015 is Rp 124.6 T, an increase around 16.9% from the same period in previous year (Rp 106.6 T) and an
increase about 3.5% from Quarter IV 2014 (Rp 120.4 T). The value of investment is based on investment realization report by the DDI and FDI
companies (Oil and Gas, Banking, Non-Bank Financial Institution, Insurance, Leasing and SMEs are excluded).
Source: BKPM
Source: BKPM
*) Investment Target 2015 Strategic Planning BKPM 2015 - 2019
**) Against target 2015
FDI by Sectors (Millions USD)
Foreign Direct Investment realization in Quarter I 2015 based on sectors (five leading sectors) were: Mining (US$ 1.14 billion); Metal, Machinery,
and Electronic Industry (US$ 0.77 billion); Food Crops and Plantation (US$ 0.60 billion); Transport Equipment and Other Transport Industry (US$
0.58 billion); and Food Industry (US$ 0.53 billion).
15
QI-2014 QII-2014QIII-
2014
QIV-
2014Q1-2015
2014
Target*
Achieve
ment**
DDI 34.6 38.2 41.6 41.7 42.5 175.8 24.2%
FDI 72.0 78.0 78.3 78.7 82.1 343.7 23.9%
TOTAL 106.6 116.2 119.9 120.4 124.6 519.5 24.0%
0.0
100.0
200.0
300.0
400.0
500.0
600.0
Tri
llio
n R
p
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015
1,376 1,242 1,442756
1,6461,094 1,053 872 1,136
319 404 310
623
590
611 507 619644
406 542 539631
7781,287
482 593534
579 180338
71
515
133 37105
1,228
545788
581
511
468
999345
486
1,042
684
907
694
399
460684
929765
866
1,006
919
941
606
422 574
460582
431
502
925
512
685
560 559
505395
1,465257
172 255
564442
216
130
156 105161
189221
297
52
76075
563
2141,436 1,154
197283
316 706 513
474
496
711 762
1,442 896
Other Tertiary Sector Transportation, Warehouse, and Telecommunication
Trade and Reparation Electricity, Gas, and Water Supply
Other Secondary Sector Transport Equip. and Other Transport Industry
Metal, Machinery, and Electronic Industry Chemical and Pharmaceutical Industry
Paper and Printing Industry Food Industry
Other Primary Sector Mining
16
Java is Still the Main Investment Destination
Realized Foreign Direct Investment (Jan – Mar 2015)
Realized Domestic Direct Investment (Jan – Mar 2015)
Source: BKPM
Source: BKPM
DDI and FDI by Economic Corridor Q1-2015 (Million USD)
Source: BKPM
Based on Economic Corridor in Quarter I 2015 period, the highest
realization of DDI and FDI was located in Java Corridor.
1658
5516
194
1619
513
351 Sumatera
Java
Bali & Nusa Tenggara
Kalimantan
Sulawesi
Maluku & Papua
979
3,341
185
1,206
507346
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
Sumatera Java Bali & Nusa
Tenggara
Kalimantan Sulawesi Maluku &
Papua
Million USD
8,779
28,140
124
5,347
75 590
5,000
10,000
15,000
20,000
25,000
30,000
Sumatera Java Bali & Nusa
Tenggara
Kalimantan Sulawesi Maluku &
Papua
Billion Rp
Inflation Remains Under Control
Disaggregation of Inflation
Source: BPS, Bank Indonesia
• Monthly consumer price inflation in April 2015 was 0.36% (mtm) or 6.79% (yoy), which is in line with Bank Indonesia’s previous projection. Inflation in
April primarily stemmed from rising administered prices, while core inflation and volatile foods remained relatively unaffected. Consequently, Bank
Indonesia perceives the current inflation trend as congruent to achieving the inflation target of 4±1% in 2015.
• Administered prices edged up 1.88% (mtm) from 0.83% (mtm) in the previous month due to higher Premium petrol and diesel prices in late March,
intra-city transportation fares as well as household fuels. Meanwhile, annual administered prices inflation was 13.26% (yoy).
• Volatile foods experienced deflation of 0.91% (mtm) in the reporting period, exceeding the 0.83% (mtm) recorded in March, as the country entered the
harvesting season. The largest contributors to deflation were rice and various chilli varieties, which was noted in a number of areas, including Java, Bali,
Sumatra and Sulawesi. Annually, volatile food inflation was 6.25% (yoy).
• Core inflation was well mitigated at just 0.24% (mtm) or 5.04% (yoy), representing a slight deceleration since the beginning of the year in line with
moderating domestic demand and anchored inflation expectations.
• Bank Indonesia will continue to closely monitor an array of risk factors that could influence inflation, particularly the international oil price,
administered prices and the impact of rupiah depreciation. Furthermore, Bank Indonesia will continue to strengthen policy coordination with the
government at the central and local levels in order to control inflation within its target corridor.
Consensus Forecast
Source: Consensus Forecast17
18
• Improvement in the current account and surplus in the capital and financial account
paved the way for an overall balance of payments (BOP) surplus in the Q1/2015.
Indonesia’s BOP in Q1/2015 registered a surplus of US$1.3 billion, supported by the capital
and financial account surplus of US$5.9 billion, which exceeded the current account deficit of
US$3.8 billion. With this development, official reserve assets at the end of March 2015 stood
at US$111.6 billion. The amount of reserves was sufficient to finance 6.6 months of imports
and government foreign debt payments and was above the international standard of
adequacy.
• The current account (CA) performance improved in Q1/2015, primarily buoyed by lower
oil and gas deficit. The CA deficit fell from US$5.7 billion (2.6% of GDP) in Q4/2014 to US$3.8
billion (1.8% of GDP) in Q1/2015. The deficit was also lower than that in the same quarter in
2014 amounted to US$4.1 billion (1.9% of GDP). The improvement in the CA was mainly
attributed to the narrowing of the oil and gas trade deficit , while the non-oil and gas trade
surplus lessened.
• Improvement in the CA deficit was also supported by reduced deficit in trade in services and
primary income account.
• Capital and financial account remained surplus amid growing uncertainty in the global
financial markets. The capital and financial account yielded US$5.9 billion surplus in
Q1/2015, mainly supported by foreign capital inflows in the form of portfolio and direct
investment. Nevertheless, the capital and financial account surplus in Q1/2015 was lower than
US$8.9 billion surplus in the previous period, primarily due to increased placements of private
sector in deposits abroad and lower withdrawal of private sector foreign loans.
Balance of Payments Recorded a Surplus in Q1-2015
Balance of Payments
Current Account
Capital & Financial Account
• Goods trade surplus increased from US$2.4 billion in Q4/2014 to US$3.1 billion In Q1/2015, supported
by narrowed oil & gas trade deficit amid lower non-oil & gas trade surplus.
• The non-oil and gas surplus swelled from US$130 billion in the preceding month to US$1.33 billion in
April 2015 due to a steeper decline in non-oil and gas imports than exports. Non-oil and gas exports
contracted 0.17% (mtm) to US$11.63 billion, primarily attributable to mineral fuels, electrical
machinery/equipment as well as jewellery/gems. Further declines were stifled by export gains
affecting several commodities, such as animal and vegetable fats and oils, rubber and rubber
derivatives as well as footwear. The export decline was also accompanied by an import decline of
0.46% (mtm) to US$10.29 billion, predominantly affecting mechanical machinery/equipment, motor
vehicles and auto components as well as fertilizer.
Balance of Payments Q1-2015: Current Account
• The oil and gas trade deficit increased to US$0.88 billion from US$0.28 billion in the previous
month. A decline in oil and gas exports, coupled with an increase in oil and gas imports, enlarged
the corresponding deficit. Oil and gas exports decelerated on the previous period in line with fewer
exports of crude oil and gas. Meanwhile, oil and gas imports increased due to imports of oil
derivatives and gas.
Trade Balance: Non-Oil & Gas
Trade Balance: Oil & Gas
• In Q1/2015, services account deficit amounted to US$1.9 billion, lower than the previous
quarter deficit of US$2.6 billion. The decline in the services account deficit was mainly due to lower
freight payments following subdued imports and the increase in travel services surplus following a
lower spending of resident travelers during their visit abroad.
• In the same period, the primary income account deficit decreased to US$6.5 billion from the
previous quarter deficit of US$7.0 billion. Following its seasonal pattern, decreased deficit was
attributed to lower external debt interest payments, attributable direct investment income, and
dividend payments.
• Meanwhile, secondary income in Q1/2015 recorded a surplus of US$1.4 billion, relatively similar
to the previous quarter mainly supported by receipts of personal transfers.
Current Account - Services, Primary Income, and Secondary Income
20
Balance of Payments Q1-2015: Capital & Financial Account
Financial Account: Assets
Financial Account Liabilities: Direct Investment
• On the assets side, Indonesia’s financial account charted a net outflow of
US$7.3 billion in Q1/2015, in contrast with net inflow of US$1.2 billion in
Q4/2014, primarily due to placement of private sector in deposits abroad.
• Direct investment inflows (liability side) in Q1/2015 recorded a surplus of US$5.3 billion. The surplus of direct investment reflects investor confidence in
Indonesia’s economic fundamentals and positive prospects for future economic growth. However, these inflows was lower than that in the previous quarter (US$5,9
billion) in line with slowing economic growth (-0.2%; qtq).
• On directional basis, Foreign Direct Investment (FDI) during Q1/2015 decreased to US$3,7 billion from US$5,1 billion in Q4/2014. By sector, agriculture,
fishery & forestry, manufacturing, and mining & quarrying were the three main sectors attracting FDI inflows during Q1/2015. While based on the country of origin,
the inflows of FDI were dominated by countries in the ASEAN region amounted to US$2.7 billion (71.6% of total FDI), followed by Japan and Emerging Markets of
Asia (incl. China).
21
Balance of Payments Q1-2015: Capital & Financial Account
Financial Account Liabilities: Portfolio Investment
Financial Account Liabilities: Foreign Other Investment
• In the portfolio investment, albeit a net foreign sales on rupiah denominated securities in March 2015 as uncertainty in global financial market
intensified, accumulative foreign portfolio inflows in Q1/2015 reached US$8.4 billion, far greater than inflows in Q4/2014 amounted to
US$62 million. The rapid inflows in Q1/2015 was not only derived from the issuance of global bonds by the Government, but also stem from
robust foreign investor buying into rupiah-denominated government securities and domestic stock in the period of January-February 2015.
• Other investment liabilities in Q1/2015 was recorded US$0.3
billion deficit, in contrast with the surplus of US$1.8 billion in the
previous quarter. This deficit was mainly influenced by lower net
withdrawal of private sectors’ foreign loans. Meanwhile, the public
sector experienced a lower deficit compared to previous period
following the debt repayment schedule.
Continued Pressure on Emerging Market’s Currency
• The rupiah depreciated as the US dollar gained on nearly all currencies. The rupiah depreciated an average of 4.4% (qtq) to a level of Rp12,807 per USD inQ1/2015.
• Broad US dollar appreciation was backed by US economic momentum and quantitative easing by the European Central Bank (ECB).
• Nonetheless, the rupiah rebounded in April 2015 on a USD correction along with a sound domestic risk profile. Consequently, the rupiah strengthened by an averageof 0.95% (mtm) to Rp12,944 per USD.
Movement of Rupiah
International Reserves
22
• Indonesia’s official reserve asset position as of end April 2015 stood at US$110.9billion, lower than the end of March 2015 level registered at US$111.6 billion.
• The increase in Government external debt payments and the use of foreign exchangeto stabilize rupiah exchange rate in accordance with the fundamental lessen theofficial reserve asset.
• Official reserve assets at the end of April 2015 can adequately cover 6.9 months ofimports or 6.7 months of imports and servicing of Government external debtrepayment, well above the international standards of reserves adequacy at 3 monthsof imports.
Monetary Policy Stance
BI Rate
Source: Bank Indonesia
• The BI Board of Governors decided on 19th May 2015 to hold the BI Rate at 7.50%, while setting the Deposit Facility and Lending Facility rates at
5.50% and 8.00% respectively. The decision is in line with the tight bias monetary policy to keep inflation in its target of 4±1% in 2015 and 2016 as well
as to manage the current account deficit at around 2.5-3% of GDP in the medium term.
• To keep the economic growth momentum, Bank Indonesia has loosened macroprudential policy by revising the LDR-RR regulation, LTV policy
for mortgage loans as well as down payments on automotive loans.
• Furthermore, Bank Indonesia will also continue to strengthen coordination with the Government not only in terms of controlling inflation and
managing the current account deficit, but also by accelerating fiscal stimulus to boost economic growth.
• To that end, Bank Indonesia supports government-led structural reforms to expedite infrastructure projects as well as continue various structural
policies, therefore fostering economic agents’ optimism in the improving domestic economic outlook.
23
6.50
6.75
6.50
6.00
5.75
6.00
6.50
7.00
7.25
7.50
7.75
7.50
5.00
5.50
6.00
6.50
7.00
7.50
8.00
1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5 6 7 8 9 101112 1 2 3 4 5
2010 2011 2012 2013 2014 2015
(%)(%)
Solid Financial System Stability
• The banking sector remained resilient, with credit, market and liquidity risks
well mitigated and the support of a sound capital base.
• The Capital Adequacy Ratio (CAR) was 20.7% in March 2015, well in excess
of the 8% minimum.
• Non-performing loans (NPL) remained low and stable at 2.0% (gross). As
reflected by a 16,0% (yoy) increase in deposit growth in March 2015, higher
than that of the previous month (15,2%, yoy), liquidity is sufficient. On the
other hand, credit growth on March 2015 decreased to 11,3% (yoy), lower
than the previous month’s growth (12,2, yoy).
• Moving ahead, Bank Indonesia is confident that credit growth will increase,
reaching the range of 15%-17%, supported by a sufficient liquidity in the
banking industry, an improvement in economic activities along with
government expansion, and a loosened macroprudential policy trough.
Bank Indonesia will soon revise the LDR-RR policy and, along with the
Indonesia Financial Services Authority revise the mortgage loan LTV, and
down payment on automotive loans.
CAR Comfortably High, NPL Favorably Low
Slowdown in Loan Growth
Loan-to-Deposit Ratio Well Maintained Within the Target Range
24
Prudent Fiscal Management
25
Improving Budget Structure
Manageable Fiscal Deficit
Quality of Spending
Sustainable Revenue Source
• Develop effective taxation policy and
tax administration
• Focus not only on the corporate but
also on personal income tax &
improve value added tax system.
• Provide fiscal incentive for
investment with better targeted
system
• Change subsidy paradigm
Shift from price (commodity) subsidy to
targeted subsidy system
• Reallocate budget to productive
spending, such as infrastructure and
direct assistance.
• Prioritize basic infrastructure to support
food security, agriculture and fisheries
sectors as well as job creation.
• Provide a greater room on our fiscal to anticipate the
uncertainty coming from global economic development.
• Encourage private
sector to help
infrastructure
development, among
other through PPP
scheme
Better fiscal profile through improved budget structure
26
Macroeconomic Stability
Strengthen Budget
Structure
Real Sector and Investment
Support
Focus on stabilization over growth in the
short term
Main focus to improve current account
profile
Better fiscal profile
through larger fiscal space
Sustainable revenue
source
Quality of spending –
more productive
expenditure
Manageable fiscal deficit
Provide better targeted
incentives for investment
Provide tax incentives for
manufacturing
industries, esp.
downstream sectors and
higher value added
industries
Provide incentive for
infrastructure
investment, including
PPP financing and
optimization of SOEs as
development agents
Establish One Stop
Service (OSS) Center at
BKPM Office as an
integrated services to
provide quick, simple,
transparent, integrated
license services
Focus of Fiscal Policy
27
Reduction of Poverty Through Conditional Cash Transfers
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
Program Indonesia Sehat
(Healthy Indonesia Program) – Free health
insurance and medical benefits
Organizers :Social Security Agency
(BPJS)
Service Coverage :Up to village level health
units (“Posyandu”)
Beneficiaries :
Disadvantaged
communities who have had
“BPJS PBI card” plus
groups with social welfare
issues (PMKS)
Benefits : Treatment and prevention
Program Indonesia Pintar
(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
Distribution
of Funds
: Savings / savings in a post
office or a designated bank may
be withdrawn or to
be kept
Benefits : SD / MI amounting to
IDR225,000 / student /
semester
SMP / MTs of IDR375.000 /
student / semester
SMA / SMK IDR500,000 /
student / semester
Program Keluarga Sejahtera
(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
Funds
: Savings / savings in a post
office or a designated bank
may be withdrawn or be
kept
Benefits : IDR200,000 / family / month
Current administration has a renewed focus on reducing poverty – this will be achieved via conditional cash transfers
28
26
6.9
31
0.8
34
5.3
37
5.5
40
9.1
40
8.5
11
4.2 1
45
.5
15
5.9 17
7.9
19
1.3
29
0.3
41
.0
46
.6
52
.7 67
.5
71
.1
77
.4
57
.7
64
.1
64
.6
68
.2 86
.1
11
9.8
25
5.6
30
6.5
31
0
35
0.3
34
4.7
13
7.8
0
100
200
300
400
500
APBN APBNP
2011 2012 2013 2014 2015
Education Infrastructure Health Food Security Energy Subsidy
IDR trillion
Infrastructure Plan 2015–20192Budget for Priority Programs1
Notes:
1. Source: Ministry of Finance
2. Source: Bappenas
New Roads 2,650 km
Highway 1,000 km
Road Maintenance 46,770 km
Bus Corridors 2
New Sea Ports 24
Sea Port Development 59
Pioneer Cargo Ships
Railway Lines 2,159 km
Intra City Rail Lines 1,099 km
New Airports 15
Airport Infrastructure
Development
Airplanes
20
Spending Allocations Towards Infrastructure Expenditure
Fuel subsidy savings reallocated towards infrastructure projects – roads, railways, sea ports and airports prioritized
Notable
increase in
budget size for
infrastructure
development
29
30
Description
2014 Realization 2015 Initial Budget 2015 Revised Budget
Revised Budget Realization up to
Dec 31
(in IDR tn)
% of the
Revised
Budget
Budget
% of GDP
Budget Budget
% of GDP
Budget
(in IDR tn) (in IDR tn) (in USD bn) (in IDR tn) (in USD bn)
A.Total Revenue 1,635.40 1,537.20 94 1,793.60 15.3 143.5 1,761.60 15.1 140.9
Key Components
1. Taxation 1,246.10 1,143.30 91.7 1,380.00 11.8 110.4 1489.3 12.7 119.1
i. Oil and Gas 83.90 87.40 104.2 88.70 0.8 7.1 49.5 0.4 4.0
ii. Non Oil and Gas 988.50 894.50 90.5 1,113.00 9.5 89.0 1,244.70 10.6 99.6
iii. Customs and Excise 173.70 161.30 92.8 178.30 1.5 14.3 195 1.7 15.6
2. Non-Taxation 386.9 390.7 101 410.3 3.5 32.8 269.1 2.3 21.5
i. Natural Resources 241.1 242.9 100.8 254.3 2.2 20.3 118.9 1.0 9.5
ii. SOE Revenue Sharing 40 40.3 100.8 44 0.4 3.5 37 0.3 3.0
iii. Other Non Tax Revenue 85 85.4 100.5 89.8 0.8 7.2 90.1 0.8 7.2
iv. Public Service Agencies 20.9 22.1 105.9 22.2 0.2 1.8 23.1 0.2 1.8
B. Total Expenditure 1,876.90 1,764.60 94 2,039.50 17.4 163.2 1,985.70 17.0 158.9
Key Components
1. Capital Expenditure 160.8 145.8 90.7 174.7 1.5 14.0 275.8 2.4 22.1
2. Subsidy Expenditure 403 392.9 97.5 414.7 3.5 33.2 212.1 1.8 17.0
3. Interest Payments 135.4 133.4 98.5 152 1.3 12.2 155.7 1.3 12.5
4. Balancing fund 491.9 477 97 516.4 4.4 41.3 521.8 4.5 41.7
5. Village fund - - - 9.1 0.1 0.7 20.8 0.2 1.7
C. Primary Balance -106 -94 88.7 -93.9 -0.8 -7.5 -66.8 -0.6 -5.3
D. Deficit -241.5 -227.4 94.2 -245.9 -2.1 -19.7 -222.5 -1.9 -17.8
E. Financing 241.5 246.4 102 245.9 2.1 19.7 222.5 1.9 17.8
I.Domestic 254.9 261.7 102.7 269.7 2.3 21.6 242.5 2.1 19.4
II.Foreign -13.4 -15.4 114.9 -23.8 -0.2 -1.9 -20 -0.2 -1.6
I-Account
Assumptions 2014 2015
Period Budget Realized Initial Budget Revised Budget
Growth (%) 5.5 5.1 5.8 5.7
Inflation (%) (YoY) 5.3 8.4 4.4 5.0
3-month SPN 6.0 5.8 6.0 6.2
IDR/USD Average 11,600 11,878 11,900 12,500
Indonesia Crude Price (ICP) (USD/bbl) 105.0 97.0 110.0 60.0
Lifting
Oil Lifting (thousand bbl / day) 808 794 900 825
Gas Lifting (thousand bbl / day) 1,224 1,224 1,248 1,221
Oil & Gas Lifting (thousand bbl / day oil equivalent) 2,042 2,018 2,148 2,046
Source: Ministry of Finance.
2015 GDP = IDR11,700.8tn, 1 USD=12,500
SPN: “Surat Perbendaharaan Negara” or Treasury bills.
Economic growth
Lower global growth outlook leads to slower domestic
growth, mainly due to exports and capital flows
Impact of government’s effort in easing Current
Account pressure and maintaining stability
Inflation rate in a downward trend
Fiscal, Monetary, and Real Sector policies coordination
among Government and Central Bank to reduce
inflationary pressures and maintain a conducive
macroeconomic condition
The increase of agriculture productivity will allow food
supply sufficiency and avoid commodity and food
price fluctuations
Exchange rate and interest rate revised according to the
global and domestic financial market
Liquidity tightening and tapering policy in US
Capital outflow from EM to US economy
Competition and liquidity tightening resulted in the
hike in interest rates, even within domestic Indonesian
economy
Oil and gas lifting revised down due to technical issues and
production delays in Cepu and other new oil blocks
Macroeconomic
Assumptions2014
2014
Revised
Budget
2015
Budget
2015
Revised
Budget
Growth (%) 6.0 5.5 5.8 5.8
Inflation (%) 5.5 5.3 4.4 5.0
Exchange Rate (IDR/US$) 10,500 11,600 11,900 12,200
Interest Rate (3 month
Govt Bond, %)5.5 6.0 6.0 6.2
ICP (US$/barrel) 105.0 105.0 105.0 70.0
Oil and Gas Lifting
a. Oil lifting (Mil bbl/day) 0.870 0.818 0.900 0.849
b. Gas lifting (Mil bbl/day
eopd)1.240 1.224 1.248 1.177
Macroeconomic Assumptions Require Adjustments to Reflect Recent Economic Developments
31
Budget Assumptions
31
General Strategy for Debt Financing 2015
1. Optimizes Governments securities (SBN) issuance from domestic sources to fulfill
Budget need and uses foreign debts as complimentary;
2. Determines debt instrument by taken into account of market need in regard to market
development and portfolio management;
3. Issues Retail Bond for instrument diversification and financial inclusion;
4. Optimizes foreign and domestic loan instrument to fulfill Budget need on capital
expenditure;
5. Conducts active portfolio management of Government securities through, among
others, debt buyback and debt switch, in order to promote market liquidity and stability;
6. Strengthens the function of Investor Relations Unit, among others, through the
proactive dissemination of information, rapid and effective responses, and effective
communication with investors and other stakeholders.
32
Government Budget FY 2015
33
In billion IDR
Financing sources Revised Budget
2015 come from debt financing
(85.78% from Government Securities,
9.62% from Loan) and the rest 4.61%
from non debt financing.
In the Revised Budget 2015 (APBN-P
2015), deficit is narrowing from 2.21%
to 1.91% of GDP
To maintain resilience and fiscal
sustainability
Despite lower budget deficit, net debt
in 2015 is higher
Government injects equity to SOE’s to
increase their capacity to support the
achievement of the national priority
agenda
Stand-by loans are in place to
anticipate adverse situations.
Government Securities Financing (Gross) 2015
34
Domestic:
Auction:
conventional securities: 23 x
Islamic securities: 22 x
Non-Auction:
retail bonds: ORI + Sukuk Retail.
International Bonds:
Issuance of International Bonds as
complement to avoid crowding out in
domestic market and provide
benchmark for corporate issuance,
consist of USD, YEN or EURO global
bonds
Maximum issuance international bond
22.6% from target gross
Issuance targets for GDS,
Sukuk and ATM target:
– GDS (SUN): 79.9%
– Sukuk: 20.1%
– ATM for auctions: 8.2 year
Front Loading strategy:
• in the first semester is
targeted at 63%.
• for domestic issuance is also
targeted at first semester at
59%
FR 69 – 5 Y
FR 70 – 10 Y
FR 71 – 15 Y
FR 68 – 20 Y
Benchmark Series for 2014 & 2015
Improved Government Debt Position
35
36
Global Financial Crisis
Eurozone sovereign
debt crisis
Secondary Market Performance of Central Government Bonds
Yield of Benchmark Series
[In Percentage] As of April 30, 2015
7.64 (5Y), 7.80 (10Y), 8.02 (15Y), 8.05(20Y)
Government Securities Realization
*Adjusted by changes in Cash Management & Debt Switch
*(Million IDR)
Budget 2015*Revised Budget
2015*
Realization
(ao April 30,
2015)*
% Realization to
Revised Budget
2015
Government Securities Net 277.049.800 297.698.382 145.083.746 48,74%
Government Securities Maturing in 2015 153.612.324 154.487.324 53.238.289 34,46%
-Buyback 3.000.000 3.000.000 - 0,00%
Issuance Need 2015* 430.662.124 452.185.706 198.322.035 43,86%
Government Debt Securities (GDS) 150.932.000
Domestic GDS 100.560.000
-Coupon GDS 72.360.000
-Conventional T-Bills 25.200.000
-Private Placement 3.000.000
-Retail Bonds -
International Bonds 50.372.000
-USD GMTN 50.372.000
-Euro GMTN -
-Samurai Bonds -
Government Islamic Debt Securities 47.390.035
Domestic Government Islamic Debt Securities 47.390.035
- IFR/PBS/T-Bills Sukuk (Islamic Fixed Rated
Bond/Project Based Sukuk) 22.725.000
- Retail Sukuk 21.965.035
- Private Placement 2.700.000
Global Sukuk -
37
Outstanding of Total Central Government Debt
38Source: Ministry of Finance
[USD billion]
68,91 68,59 63,09 62,02 62,25 66,69 65,02 68,65 68,51 63,76 58,28 54,18 53,30
76,64 71,2970,51
82,34 85,26 82,78104,20
118,39130,97 140,75
136,27155,23 161,70
-
50
100
150
200
250
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Apr-15
Loan Government Securities
[in percentage]
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Apr-15
Loan 47% 49% 47% 43% 42% 45% 38% 37% 37% 31% 30% 26% 25%
Government Securities 53% 51% 53% 57% 58% 55% 62% 63% 63% 69% 70% 74% 75%
Total Debt Maturity Profile as of End of April, 2015
39
Maturity Profile of Central Government by Instruments (in trillion IDR)
Maturity Profile of Central Government by Currencies (in trillion IDR)
020406080
100120140160180200220240
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
-206
0
Foreign Domestic
020406080
100120140160180200220240
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
-206
0
Gov't Securities Loan
Holders of Tradable Central Government Securities
40
Holders of Tradable Gov’t Domestic Debt Securities Foreign Ownership of Gov’t Domestic Debt Securities by
Tenor
Source: Ministry of Finance
More Balance Ownership In Terms Of Holders And Tenors
10% 12% 8% 5% 6% 7% 7% 7% 6% 6% 5% 5% 5% 5% 5% 5% 5% 5%
5%8%
3% 5% 5% 4% 5% 3% 3% 3% 4% 4% 4% 4% 4% 3% 3% 3%
18%17%
16% 13% 11% 15% 15% 15% 16% 15% 15% 15% 16% 15% 14% 14% 13% 13%
21%
25%
28% 32% 38% 34% 33% 33% 33% 34% 34% 34% 33% 34% 34% 35% 35% 35%
46% 38% 45% 44% 41% 40% 41% 41% 42% 43% 42% 43% 42% 43% 43% 44% 44% 44%
30,53% 30,80%
32,98%
32,54%33,64%
34,59%
35,72%
35,66%
36,33%
36,81%
37,30% 37,80%39,41%
38,13%40,25%40,03%
38,61%
38,61%
0,00%
10,00%
20,00%
30,00%
40,00%
50,00%
0%
20%
40%
60%
80%
100%
Dec-10Dec-11Dec-12Dec-13 Mar-14
Apr-14 May-14
June 14
July 14 Aug 14 Sep-14 Oct-14 Nov-14
Dec-14 Jan-15 Feb-15 Mar-15
29-Apr-15
>10 >5-10 >2-5 >1-2 0-1 % Foreign Ownership to Total (RHS)
33,88% 36,63% 36,53% 33,70% 31,04% 29,43% 26,75% 27,04%
35,59% 32,58% 30,49% 33,76%30,83% 30,53% 34,63% 34,44%
30,53% 30,80% 32,98%32,54% 38,13% 40,03% 38,61% 38,51%
Dec-10 Dec-11 Dec-12 Dec-13 Dec-14 Feb-15 Mar-15 Apr-15
Foreign Holders Domestic Non-Banks Domestic Banks
Profile of Central Government Debt Securities
41Source: Ministry of Finance
GOVERNMENT DEBT SECURITIES (GDS) Dec-12 Dec-13 Dec-14 Jan-15 Apr-15
1. Domestic Tradable GDS IDR 757.231 IDR 908.078 IDR 1.099.257 IDR 1.125.557 IDR 1.172.153
a. Zero Coupon IDR 24.083 IDR 34.050 IDR 39.950 IDR 41.950 IDR 46.650
1. Government Treasury Bills IDR 22.820 IDR 34.050 IDR 39.950 IDR 41.950 IDR 46.650
2. Zero Coupon Bond IDR 1.263 IDR - IDR - IDR - IDR -
b. Government Domestic Bonds IDR 733.148 IDR 874.028 IDR 1.059.307 IDR 1.083.607 IDR 1.125.503
1. Fixed Rate *) +) IDR 610.393 IDR 751.273 IDR 945.964 IDR 970.264 IDR 1.021.324
2. Variable Rate *) IDR 122.755 IDR 122.755 IDR 113.344 IDR 113.344 IDR 104.180
2. Promissory Notes to Bank Indonesia **) ***) IDR 240.144 IDR 234.870 IDR 229.054 IDR 227.942 IDR 227.090
3. SPNNT IDR - IDR - IDR -
4 Retail Saving Bonds IDR 2.391 IDR 2.391 IDR 2.391
5 Total GDS (1+2+3+4) IDR 997.376 IDR 1.142.948 IDR 1.330.702 IDR 1.355.890 IDR 1.401.634
5. Total Government International Bonds *) USD 22.950 USD 27.140 USD 29.190 USD 33.190 USD 32.190
155.000¥ 155.000¥ 155.000¥ 155.000¥ 155.000¥
1.000€ 1.000€ 1.000€
6. TOTAL GOV'T DEBT SECURITIES (3+(4*Exchange Rate Assumption)) IDR 1.219.302 IDR 1.473.757 IDR 1.725.118 IDR 1.805.804 IDR 1.849.334
GOVERNMENT ISLAMIC DEBT SECURITIES (GIDS)
a. Domestic Tradable GIDS IDR 63.035 IDR 87.174 IDR 110.704 IDR 118.894 IDR 147.359
a. Fixed Rate *)++) IDR 62.840 IDR 78.541 IDR 99.969 IDR 108.034 IDR 143.359
b. Zero Coupon IDR 195 IDR 8.633 IDR 10.735 IDR 10.860 IDR 4.000
b. Domestic Non Tradable GIDS
IDR 35.783 IDR 31.533 IDR 33.197 IDR 33.197 IDR 33.197
c. Government International Islamic Bonds
1. Fixed Rate *) USD 2.650 USD 4.150 USD 5.000 USD 5.000 USD 5.000
7. TOTAL GOV'T DEBT SECURITIES (6+(8*Exchange Rate Assumption)) IDR 88.660 IDR 137.758 IDR 172.904 IDR 182.019 IDR 212.044
8. TOTAL GOVERNMENT SECURITIES IDR 1.343.746 IDR 1.643.048 IDR 1.931.218 IDR 2.021.020 IDR 2.094.575
Notes:
- Nominal in billion rupiah (domestic bonds), million USD & million JPY (international bonds)
- *) Tradable
- **) Non-Tradable
- +) Including ORI (IDR Billion)) IDR 34.153 IDR 43.882 IDR 54.098 IDR 54.098 IDR 54.098
- ++) Including Sukuk Ritel/SR (IDR Billion) IDR 28.989 IDR 35.924 IDR 47.906 IDR 47.906 IDR 69.871
- Exchange Rate Assumption (IDR/USD1) IDR 9.670 IDR 12.189 IDR 12.440 IDR 12.625 IDR 12.937
- Exchange Rate Assumption (IDR/JPY1) IDR 111,97 IDR 116,17 IDR 104,25 IDR 106,99 IDR 108,88
- Exchange Rate Assumption (IDR/EUR1) IDR 15.133 IDR 14.307 IDR 14.381
- Since October 2006, government and the 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
Debt Switch & Cash Buyback Program
42
Debt Switch Program
Buyback Program
[in billion IDR]
Auction DateAuction
Frequency
Source Bonds Tenor
SeriesOffer Received Offer Awarded
2005 1 9 series 7,721 5,673
2006 12 7 up to 21 series 54,177 31,179
2007 9 12 up to 21 series 30,681 15,782
2008 2 21 up to 31 series 7,490 4,571
2009 6 24 up to 28 series 8,663 2,938
2010 6 11 up to 28 series 8,349 3,920
2011 4 22 up to 27 series 3,080 664
2012 4 10 up to 20 series 23,126 11,859
2013 5 7 up to 13 series 7,222 1,976
2014 4 9 up to 12 series 10,591 5,944
2015 - - - -
Total 161,100 84,506
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
2013 - 5 1,551
2014 - 3 1,351
2015 - - -
GRAND TOTAL 39,750
Frequencies
YearVolume
(IDR billion)
Maturity Profile of Tradable Central Government Securities as of the end of April, 2015
43
Source: Ministry of Finance
[IDR Trillion]
Daily Transaction & Offshore Ownership
44
Average Daily transaction Govt’ Bonds Net Buyer (Seller) Non Resident
Source: Ministry of Finance
[Trillion IDR]
as of April 30, 2015
Average daily trading (IDR Trilion)
3,55 2,98 4,39
5,88 5,73 5,31 7,91
10,91 11,11 9,18
6,39 0,41
0,15
0,22
0,16 0,38 0,41
0,76
1,14 0,81
0,77
0,62
0,27 0,30
0,34 1,54
3,45
6,70
8,80
7,45 7,19
4,84
4,65
-
5,00
10,00
15,00
20,00
25,00
Trili
un
OUTRIGHT REPO BANK REPO BI
9,35
19,52
0,68 2,68
8,44
(0,88)
17,97
4,22
(19,98)
2,81
(1,76)
10,13
23,98
6,08
(0,37)
4,82
16,49 15,77 16,10
20,15
6,43
14,67 15,95
13,17 12,49
21,34
(19,84)
39,48
6,84
(3,59)
0,52
-0,08
-0,06
-0,04
-0,02
0
0,02
0,04
0,06
0,08
0,1
(30,00)
(20,00)
(10,00)
0,00
10,00
20,00
30,00
40,00
50,00
Oct-1
2
De
c-1
2
Fe
b-1
3
Ap
r-1
3
Ju
n-1
3
Au
g-1
3
Oct-1
3
De
c-1
3
Fe
b-1
4
Ap
r-1
4
Ju
n-1
4
Au
g-1
4
Oct-1
4
De
c-1
4
Fe
b-1
5
Ap
r-1
5
Capital Inflows capital inflows over foreign
Ownership of IDR Tradable Central Government Securities
45
Source: Ministry of Finance
In the end of January 2015, foreign investor ownership record the highest percentage, showing their
increasing appetite on the Indonesia’s government securities.
Ownership of IDR Tradable Government Securities (in Trillion IDR)
`
Banks 217,27 33,88% 265,03 36,63% 299,66 36,73% 335,43 33,70% 375,55 31,04% 372,66 29,95% 373,22 29,43% 349,26 26,75% 372,38 28,17% 356,85 27,04%
Govt Institutions (Bank Indonesia*) 17,42 2,72% 7,84 1,08% 3,07 0,37% 44,44 4,47% 41,63 3,44% 38,37 3,08% 53,03 4,18% 85,40 6,54% 80,16 6,06% 91,58 6,94%
Non-Banks 406,53 63,40% 450,75 62,29% 517,53 63,09% 615,38 61,83% 792,78 65,52% 833,42 66,97% 841,85 66,39% 870,83 66,71% 869,26 65,76% 871,08 66,02%
Mutual Funds 51,16 7,98% 47,22 6,53% 43,19 5,27% 42,50 4,27% 45,79 3,78% 47,16 3,79% 47,23 3,72% 50,19 3,84% 54,60 4,13% 53,37 4,04%
Insurance Company 79,30 12,37% 93,09 12,86% 83,42 10,17% 129,55 13,02% 150,60 12,45% 149,95 12,05% 150,21 11,84% 155,54 11,91% 158,06 11,96% 160,03 12,13%
Foreign Holders 195,76 30,53% 222,86 30,80% 270,52 32,98% 323,83 32,54% 461,35 38,13% 500,83 40,25% 507,67 40,03% 504,08 38,61% 506,85 38,35% 508,18 38,51%
Foreign Govt's&Central Banks** 50,06 6,10% 78,39 7,88% 103,42 8,55% 104,66 8,41% 106,17 8,37% 101,41 7,77% 102,39 7,75% 102,16 7,74%
Pension Fund 36,75 5,73% 34,39 4,75% 56,46 6,88% 39,47 3,97% 43,30 3,58% 43,00 3,46% 43,77 3,45% 44,73 3,43% 44,55 3,37% 45,20 3,43%
Securities Company 0,13 0,02% 0,14 0,02% 0,30 0,04% 0,88 0,09% 0,81 0,07% 0,65 0,05% 0,66 0,05% 0,63 0,05% 0,88 0,07% 0,66 0,05%
Individual 32,48 3,26% 30,41 2,51% 28,35 2,28% 26,39 2,08% 47,63 3,65% 35,04 2,65% 33,15 2,51%
Others 43,43 6,77% 53,05 7,33% 63,64 7,76% 46,68 4,69% 60,51 5,00% 63,49 5,10% 65,93 5,20% 68,03 5,21% 69,27 5,24% 70,49 5,34%
Total 641,21 100% 723,61 100% 820,27 100% 995,25 100% 1.209,96 100% 1.244,45 100% 1.268,11 100% 1.305,49 100% 1.321,80 100% 1.319,51 100%
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.
Apr-15Feb-15Jan-15 Mar-15Dec-10 Dec-13Dec-11 Dec-12 Dec-14 20-Apr-15