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2. 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: 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 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

3. Table of Content Executive Summary Preserved Macroeconomic Stability Improved International Perception and Rising Investment Prudent Fiscal Management Government Debt Performance 2 Wide Range of Policy Reforms to Boost Economic Growth

4. Executive Summary 3

5.  The economy of Indonesia slowed in 2015 in line with weaker global growth. Domestic economic growth was projected at 4.8% annually, down from the 5.0% (yoy) achieved in 2014. The slowdown was prompted by sluggish exports on the back of weaker global demand and lower commodity prices. In 2016, economic growth in Indonesia is projected in the range of 5.2-5.6% (yoy), bolstered by fiscal stimuli, primarily in the form of infrastructure projects, and tenacious consumption.  The 2015 current account was expected improve from the previous year at around 2% of GDP. Improvements in the non-oil and gas as well as oil and gas trade balances contributed to the smaller current account deficit as imports decreased significantly. This was in line with the considerably weak domestic demand and exports due to lower commodity prices and dwindling global demand.  Depreciatory pressures on the exchange rate have escalated in 2015, triggered by uncertainties in the FFR hike and Yuan depreciation. Through to November 2015, the rupiah depreciated by an average of 11.05% to a level of Rp13,351 per USD. Rupiah depreciation was precipitated by a number of externalities, including uncertainty surrounding the timing and magnitude of the FFR hike, concerns over fiscal negotiations in Greece and Yuan depreciation against a backdrop of economic moderation in China.  Inflation in 2015 was projected below 3%. Low inflation was supported by volatile foods, deflation of administered prices and controlled core inflation. In November 2015, Consumer Price Index (CPI) data recorded inflation of 0.21% (mtm), affecting all components. Consequently, CPI inflation from January-November 2015 was recorded at 2.37% (ytd) or 4.89% (yoy) on an annualised basis. Inflation in 2016 was predicted to remain within the target corridor of 4±1%.  Financial system stability remained solid, underpinned by a resilient banking system and relatively stable financial markets. Banking industry resilience endured, with credit, liquidity and market risks well mitigated. In October 2015, the Capital Adequacy Ratio (CAR) remained well above the 8% minimum threshold at 20.8%, while non-performing loans (NPL) were low and stable at 2.7% (gross) or 1.4% (net).  The BI Board of Governors agreed on 17th December 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility rate at 5.50% and the Lending Facility rate at 8.00%. Bank Indonesia believes that rooms for monetary easing are open, on the back of preserved macroeconomic stability, specifically end-2015 inflation that is projected to be below 3%, and current account deficit, projected at around 2% of GDP. However, with the lingering uncertainty in the global financial market, Bank Indonesia will remain vigilant in easing its monetary policy.  On the fiscal front, Indonesia will continue its prudent fiscal management in 2015 with strong commitment to fiscal consolidation. Recent policy reforms represent an essential step and integral part of structural reforms to strengthen economic fundamentals in Indonesia. The budget deficit for 2015 will be maintained below the threshold of 3.0% of GDP. 4

6. Executive Summary GDP Growth Inflation Fiscal Balance Balance of Payments 5 * Preliminary Figures (%) billion USD Source: BPS, Bank Indonesia Source: Bank Indonesia Source: BPS

7. 6 Source: Ministry of Finance Debt Composition Table of Debt to GDP Ratio Central Government Debt to GDP Ratio (% of GDP) Note: Using GDP at Current Market Prices [2010 Version] *) Preliminary Figures Executive Summary

8. 2015 Policy Summary Government’s coordinated policy tools to promote growth through 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. Quality of Spending Financing and Debt Management PolicyState Revenues Optimization Monetary Policy Mix Bold and pre-emptive policy through BI Policy Rate, responsively adjusting to current macroeconomic condition. Exchange rate flexibility to facilitate external adjustments. 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 Fuel subsidy savings of IDR 211.3 trillion. Reallocation of savings towards basic infrastructure (food security, connectivity and maritime) and social welfare. Infrastructure expenditure is higher than energy subsidy. Food security spending larger than energy subsidy. Additional allocation for village funds. Cashless smart cards system for better targeted subsidy. Capital injection to SOEs. Strategies: Improving compliance rate. Closing tax leakage (especially VAT Refund). Expanding tax base (Mapping Tax Payer). Manageable Fiscal Deficit Fiscal deficit to be maintained below 3% of GDP Spacious fiscal room for maneuver to anticipate global uncertainty.

9. Improved International Perception and Rising Investment 8

10. Moody’s Jan 2015 “Indonesia’s Baa3 government bond rating is supported by narrow fiscal deficits, low government debt ratios, the large size of the Indonesian economy and its healthy GDP growth prospects. The stable outlook on the rating is supported by our expectation of continued policy efforts to maintain the macro-economic balance in the face of lower prices for Indonesia’s commodity exports and possible global financial volatility in 2015.” 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.” Baa3 / Stable BB+ / Positive Source: Moody’s, S&P, Fitch Improving International Perception: Acknowledged by Rating Agencies S&P Fitch Investment grade Positive Outlook Negative Outlook Stable Outlook Positive Watch Investment grade 9 Dec 2011 (affirmed Nov 2015) “The recent wave of reform initiatives by the government is likely to improve the business sentiment. The series of packages contain a number of measures with the potential in the longer run to significantly change the business environment, which can currently be characterised as difficult. The reform agenda may signal a structural change from a more nationalistic approach to economic policy of the recent past. Fitch expects annual real GDP growth to pick up to 5.3% in 2016 and 5.5% in 2017 from 4.8% in 2015..” BBB- / Stable

11. International institutions outlook shows some optimism though there is still downside risk for Indonesia in 2015 10 ` IMF Staff 2015 Article IV Mission to Indonesia (December 2015) World Bank IEQ (December 2015) “Medium-term prospects are favorable, supported by an inclusive growth-enhancing policy agenda that also places emphasis on stability” Economic growth has stabilized and is projected to reach 4.7% this year. A moderate acceleration to around 5% is forecast in 2016. Inflation has fallen sharply and is projected to reach 3% at end- 2015. Next year, it is expected to remain within the official band (3– 5%). CAD will narrow significantly in 2015, to an estimated 2% of GDP, and is projected to increase moderately in 2016. Risk Downside risk are mainly from external factors incl. more volatile global financial conditions, a deeper-than-expected slowdown in emerging market trading partners, and further declines in commodity prices. Domestic risks could arise from slower-than-expected progress on implementation of key structural reforms, tax revenue and infrastructure spending. “The government is responding and demonstrating intent to implement reforms. For example, it increased capital spending by an estimated 49.8% (yoy) in real terms in the third quarter.” GDP growth is expected to bottom out at 4.7% in 2015, picking up to 5.3% in 2016. Increased public sector spending has helped support growth, with the GDP growing at 4.7% yoy in the third quarter, the same pace as in Q1 and Q2 2015. The Dana Desa, or Village Fund, is set to increase substantially next year, potentially contributing to public infrastructure spending Risk If revenue collection remains weak in 2016, the ongoing public infrastructure spending momentum and its growth impulse may be at risk. Asian Development Outlook (March 2015) “Policy reform to improve the investment climate is expected to spur economic recovery this year and next” GDP growth is forecast to recover to 5.5% this year and 6.0% in 2016 Inflation is projected to subside to average 5.5% in 2015 and 4.0% in 2016 Exports are expected to rise slightly this year—by 1.2% in US dollar terms—before trending higher in 2016. The trade surplus is projected to rise this year and the current account deficit to narrow gradually over the next 2 years. Inflows of direct and portfolio investment should keep the balance of payments in surplus. Risk Downside domestic risks to the outlook are shortfalls in government revenue and slowing momentum on reform. External risks would be posed by unexpected weakness in the growth of major trading partners and disruption to capital flows to emerging markets triggered by the expected rise in US interest rates. OECD Economic Forecast (June 2015) “…activity is projected to pick up later in 2015 and strengthen further in 2016…” …as public spending gathers pace, confidence recovers and the expansionary impact of the depreciation of the rupiah takes hold. Inflation is now moderating, in large part because of the fall in energy prices. Official interest rates are assumed to remain unchanged through 2015 and then fall slightly in 2016. The abolition of fuel subsidies has provided the necessary fiscal space for increased public infrastructure investment. Risk The exchange rate may remain fragile as the external imbalance persists

12. Preserved Macroeconomic Stability 11

13. The Economy Slowed in 2015, Expected to Pick Up in 2016 12 In line with weaker global growth, the economy of Indonesia also slowed in 2015. Accordingly, domestic economic growth was projected at 4.8% annually, down from the 5.0% (yoy) achieved in 2014. The slowdown was prompted by sluggish exports on the back of weaker global demand and lower commodity prices. Such conditions were more pronounced in regions reliant on natural resources. In line with the continuously weak export, limited investment growth was also recorded. Construction growth bucked the downward trend due to the realisation of government infrastructure projects, while non- construction growth was limited. Notwithstanding, robust household and government consumption supported economic growth. In 2016, economic growth in Indonesia is projected in the range of 5.2-5.6% (yoy), bolstered by fiscal stimuli, primarily in the form of infrastructure projects, and tenacious consumption. Meanwhile, investment is expected to increase in line with solid macroeconomic stability and the implementation of government policy packages designed to attract investment. In addition, government measures to boost public purchasing power coupled with effective fiscal stimuli will play a key role in terms of catalysing economic growth in 2016. Economic Growth - Expenditure Side S e c t o r2013 2014 2015 IIIIIIIVIIIIII Household Consumption5.4 5.1 5.05.15.0 NPI Serving Household Consumption Expenditure8.223.722.85.6(-0.2)12.4(-8.3)(-7.9)6.4 Gross Fixed Capital Formation5.34.73.73.94.34.14.43.74.6 Government Consumption6.96.1(-1.5)1.32.82.02.72.16.6 Exports of Goods and Services4.23.21.44.9(-4.5)1.0(-1.0)(-0.1)(-0.7) Imports of Goods and Services1.95.00.40.33.22.2(-2.4)(-7.0)(-6.1) GDP5.65.15.04.95.0 4.7 Economic Growth - Supply Side S e c t o r2013 2014 2015 IIIIIIIVIIIIII Agriculture, Forestry, and Fisheries4.25.35.03.62.84.24.06.83.2 Mining and Quarrying1.7(-2.0)1.10.82.20.5(-1.5)(-6.2)(-5.6) Manufacturing4.5 4.85.04.24.64.04.3 Electricity and Gas5.23.36.56.06.55.61.70.80.6 Water Supply, Waste Management and Recycling4.13.63.22.82.73.02.96.07.6 Construction6.17.26.5 7.77.06.05.46.8 Wholesale and Retail Trade; Automotives4.76.15.14.83.54.84.01.81.5 Transportation and Warehousing8.4 8.58.07.18.06.36.57.1 Provision of Accommodation and Food & Beverage6.86.56.45.94.95.93.63.94.5 Information and Communication10.49.810.59.810.0 10.19.810.8 Financial Services and Insurance9.13.24.91.510.24.97.62.510.4 Real Estate6.54.74.95.15.35.05.35.04.8 Business Services7.910.310.09.39.79.87.47.6 Administration, Defence, and Social Security2.42.9(-2.5)2.66.92.54.76.61.2 Education Services8.25.25.47.37.16.35.812.28.3 Health Services and Social Activities7.87.78.59.96.18.07.38.26.5 Other Services6.48.49.5 8.48.98.08.18.2 GDP5.65.15.04.95.0 4.7 Economic Growth Source: BPS, Bank Indonesia

14. Signs of Growth Pick-Up: Investment and Consumption Rebound Indication of an improvement is reflected in the increase of motorcycle and car sales Cement sales increase significantly GFCF: Building (RHS) Car Sales Motorcycle Sales Cement Sales Source: CEIC Gaikindo, Astra  Non-building investment is expected remain limited due to lower revenues from commodity exports and weak business sentiments.  On the other hand, building investment surged as government infrastructure projects realization improved in the second half of 2015. The increase in building investment is reflected in the rising cement sales.  Government consumption in 2015 is expected to be higher than the previous year driven by increased goods consumption.  Robust household consumptions owed to the “smoothing behaviour” of consumers as indicated by the increased use of savings and credit card.  Strong household consumption is also reflected in the improving trend of motor vehicle sales.

15. Spatial GDP Growth Sumatera GDP Growth 2014: 4.7% 2015Q1: 3.5% 2015Q2: 2.9% 2015Q3: 3.0% Java GDP Growth 2014: 5.6% 2015Q1: 5.2% 2015Q2: 5.1% 2015Q3: 5.2% Kalimantan GDP Growth 2014: 3.2% 2015Q1: 1.1% 2015Q2: 1.5% 2015Q3: -0.41% Sulawesi GDP Growth 2014: 6.9% 2015Q1: 7.3% 2015Q2: 8.6% 2015Q3: 8.2% Maluku & Papua GDP Growth 2014: 4.3% 2015Q1: 3.7% 2015Q2: 10.2% 2015Q3: 2.28% Bali & Nusa Tenggara GDP Growth 2014: 5.9% 2015Q1: 8.9% 2015Q2: 8.9% 2015Q3: 11.8% Spatial GDP Growth Contribution Java: 58.3% Main Contributors to GDP Growth Shifting from Commodity-based economy  In 3 rd Quarter 2015, Indonesia booked 4.73% GDP growth (yoy), slight increase from 4.67% in 2 nd Quarter 2015.  Majority of the growth was driven from Java island, contributed 58.3% of Indonesia’s GDP growth and at 5.2% (yoy).  Growth in Java is higher than resource-rich regions such as Sumatra and Kalimantan, given its high industrialization and larger consumption base  Indonesia continues to drive growth in resource-based industrialization to shift from commodity-based economy 2015Q3 GDP Growth: 4.73% Source: Bank Indonesia Source: BPS Sumatera: 22.4% Source: BPS Maluku & Papua: 2.2% Sulawesi: 6.1% Kalimantan: 8.0% Bali & Nusa Tenggara: 3.1% 6.6 5.0 -6.1 -0.7 4.6 (%) Strong and Stable GDP Performance 14

16. 15 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 7 th 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 4 th 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 Continue Middle Class HouseholdsAnnual Budgeted Capital Spending (IDR tn) (‘000) CAGR: 12.3% CAGR: 9.1% Demographic Dividend – Young Population 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

17. Globally Competitive and a Top Investment Destination 16 Source: Global Competitiveness Index 2015-2016, WEF  Countries with sovereign ratings in the Baa1-Baa3 category and population larger than 40 million  Rank among 134 countries  Rank among 140 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, January 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: 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 20132014Country / RegionNo. 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

18. Strong Investment Underpinned by Competitiveness and Stability Investment Realization Progress Q3-2015  Investment Realization in Quarter III 2015 is Rp140.3 T, increases around 3.8% from Quarter II 2015 (Rp 135.1 T) or increases around 17.0% from Quarter III 2014 (Rp 119.9 T). The value of investment is based on investment realization report from DDI and FDI companies (Oil and Gas, Banking, Non-Bank Financial Institution, Insurance, Leasing and Home Industry are excluded).  Investment realization in January – September 2015 is Rp400.0 T, increases around 16.7% from that in January – September 2014 (Rp 342.7 T).  Foreign Direct Investment realization in Quarter III 2015 based on sectors (five leading sectors) are: Electricity, Gas, and Water Supply (US$ 1064.94 million); Mining (US$ 907.74 million); Real Estates, Industrial Estates, and Office Building (US$ 820.08 million); Metal, Machinery, and Electronic Industry (US$ 723.92 million); and Chemical and Pharmaceutical Industry (US$ 578.24 million). Source: BKPM *) 2015 Investment Target, BKPM’s Strategic Planning 2015-2019 **) Achievements January-September 2015 towards 2015 target FDI by Sectors (Millions USD) 17

19. 18 Java is Still the Main Investment Destination Realized Foreign Direct Investment (Jan – Sep 2015) Realized Domestic Direct Investment (Jan – Sep 2015) Source: BKPM DDI and FDI by Economic Corridor Q3-2015 (Million USD) Source: BKPM Based on Economic Corridor, in January – September 2015 period the highest realization of DDI and FDI is located in Java Corridor. The further ranks of realization of the DDI is in Sumatera, Kalimantan, Sulawesi, Bali and Nusa Tenggara, also Maluku and Papua Corridor. The further ranks of realization of the FDI is also in Kalimantan, Sumatera, Sulawesi, Bali and Nusa Tenggara, as well as Maluku and Papua Corridor.

20. Inflation Remains Under Control Disaggregation of Inflation Source: BPS, Bank Indonesia Consumer Price Index (CPI) of November 2015 shows inflation of 0.21% (mtm), with all components contribute to this month’s inflation. Therefore, CPI inflation from January to 2015 (year to date/ytd) is recorded 2.37% (ytd), reaching 4.89% (yoy). Inflation of volatile food is recorded 0.35% (mtm) or 4.84% (yoy). Such inflation primarily comes from rice, purebred chicken meat and purebred chicken eggs. Meanwhile, this month’s core inflation is recorded lower than usual, namely 0.16% (mtm) or 4.77% (yoy). On the other hand, inflation of administered prices is recorded 0.20% (mtm) or 5.61% (yoy), primarily attributable to cigarettes, airfare and toll road tariff. Based on the development of inflation until November 2015 and supported by strengthened policy coordination on the central and regional levels to control inflation, Bank Indonesia is confident that price stability for 2015 is well attained as inflation stays at the lower limit of the target 4±1%. Consensus Forecast on Inflation Source: Consensus Forecast 19 CPI Nov-2015 mtm : 0.21% yoy : 4.89% ytd : 2.37% (%)

21. Improvement in Trade Balance Contributes to Smaller Current Account Deficit Improvements in the non-oil and gas as well as oil and gas trade balances contributed to the smaller current account deficit as imports decreased significantly. This was in line with the considerably weak domestic demand and exports due to lower commodity prices and dwindling global demand. From January to November 2015, non-oil trade balance recorded a surplus of 13.28 billion US dollars, higher than the surplus occurring in the same period last year which amounted to 10.10 billion US dollars. Meanwhile, oil and gas trade balance recorded a smaller deficit, from 12.66 billion US dollars in the same period a year earlier to just 5.47 billion US dollars in 2015. Cumulatively, up to November 2015, the trade balance recorded a surplus of 7.81 billion US dollars, which is significantly better than the previous year’s deficit of 2.56 billion US dollars for the same period. Trade Balance November 2015 20 International Reserves Indonesia’s official reserve assets position as of end November 2015 stood at US$100.2 billion, decreased slightly from the reserve position at the end of October 2015 which was registered at US$100.7 billion. The development was contributed by foreign exchange receipts, including from oil and gas revenues and the withdrawal of government borrowing, which are sufficient to cover the use of foreign exchange for Government foreign debt payments and to stabilize Rupiah exchange in accordance with its fundamentals. With these developments, official reserve assets at the end of November 2015 can adequately cover 7.1 months of imports or 6.9 months of imports and servicing of Government external debt repayment, well above the international standards of reserves adequacy at 3 months of imports. Billion USD Source: BPS, Bank Indonesia Source: Bank Indonesia 20112012201320142015 Non Oil & Gas Oil & Gas Total

22. Continued Pressure on Emerging Market’s Currency Movement of Rupiah Through to November 2015, the rupiah depreciated by an average of 11.05% to a level of Rp13,351/USD. Rupiah depreciation was precipitated by a number of external factors including uncertainty of the FFR hike, concerns over fiscal negotiations in Greece and Yuan depreciation. On the home front, factors included stronger demand for foreign currency for debt repayments and seasonal dividend payments as well as concerns over domestic economic moderation. Nevertheless, the rupiah appreciated in October and November 2015 and became more stable as positive sentiments abound, particularly regarding EMs growth and domestic economic outlook as the Government introduced a series of policy packages and Bank Indonesia unveiled a set of measures to stabilize the currency. Rupiah volatility in 2015 is lower than the average volatility of currencies in the region. 21 Source: Bank Indonesia IDR/USD *data as of 15 Dec 2015 Source: Bank Indonesia

23. Monetary Policy Stance BI Rate Source: Bank Indonesia The BI Board of Governors agreed on 17th December 2015 to hold the BI Rate at 7.50%, while maintaining the Deposit Facility rate at 5.50% and the Lending Facility rate at 8.00%. Bank Indonesia believes that rooms for monetary easing are open, on the back of preserved macroeconomic stability, specifically end-2015 inflation that is projected to be below 3%, and current account deficit, projected at around 2% of GDP. In the short term, Bank Indonesia will monitor global financial market development post-Federal Funds Rate (FFR) hike as well as conditions of the domestic economy. Additionally, Bank Indonesia will strengthen coordination with the Government to control inflation, stimulate growth and accelerate structural reforms, thereby buoying economic growth while maintaining macroeconomic and financial system stability. 22

24. Solid Financial System Stability Financial system stability remained solid, underpinned by a resilient banking system and relatively stable financial markets. Banking industry resilience endured, with credit, liquidity and market risks well mitigated. In October 2015, the Capital Adequacy Ratio (CAR) remained well above the 8% minimum threshold at 20.8%, while non-performing loans (NPL) were low and stable at 2.7% (gross) or 1.4% (net). In terms of the intermediation function, credit growth was recorded at 10.4% (yoy), lower than that posted in the same period last year, along with the economic slowdown. Deposit growth was recorded at 9.0% (yoy) in October 2015. Looking forward, credit growth is predicted to increase in the range of 12- 14% in 2016 in line with an increase in economic activity and the looser macroprudential policy stance adopted by Bank Indonesia, accompanied by the reduction to the primary reserve requirement. CAR Comfortably High, NPL Favorably Low Slowdown in Loan Growth Loan-to-Deposit Ratio Well Maintained Within the Target Range 23 (YoY) 9.1 10.2 10.4 12.6 Source: Bank Indonesia Loan-to-Deposit Ratio (%) Source: Bank Indonesia 2.7% (%)

25. Prudent Fiscal Management 24

26. 25 Fiscal Stimulus Budget Optimization Long Run Policies Budget Reforms New Challenges Structural Challenges Global Volatility Sustainable and Equitable Economic Growth Support Navigation Through Global Uncertainties Revenue Optimization Quality of Spending Sustainable Financing Maintain Purchasing Power Fiscal Incentives for Business Sector Other Policies Short Run Policies Coordinated Short Run and Long Run Policies 25

27. 26 Three Key Pillars to a Sustainable and Equitable Growth Objective: Creating a sustainable and equitable economic growth for Indonesia Pillar I Revenue Optimization Pillar II Quality of Spending Pillar III Sustainable Financing I. Shift from commodity- based revenues II. Broaden tax coverage III. Improve tax compliance and prevent leakages IV. Strengthen Taxation institution I. Higher spending productivity II. Enhanced subsidy scheme III. Empowerment of local governments I. Secure budget financing II. Effective utilization of domestic and international funding sources III. Financing schemes to support infrastructure development program Initiatives: Reinventing Policy e-Invoice Compliance Risk Management Tax Amnesty Tax Administrative Reform Regulatory Reform Adjustment of non-taxable income threshold Development of Semi- Autonomous Tax Office Initiatives: Improve Government procurement regulation. Continue Fuel Subsidy Reform (re-allocate energy subsidy to productive spending) and maintain targeted subsidy scheme. Budgetary allocations for: Infrastructure Projects Social Welfare, and Cashless smart cards Village fund Initiatives: Maintain manageable budget deficit; Improve bilateral and multilateral financing sources, including BSA and DDOs Increase financing instruments. Increase capital injection to SOEs to include SOEs in infrastructure development Source: Ministry of Finance 26

28. 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

29. 28 Allocation of Energy Subsidy Spending to Education, Infrastructure and Regional Development for Sustainable Economic Growth IDR Tn 2015 Budget Energy Subsidy Spending: IDR 137.8 Tn Infrastructure Spending: IDR 290.3 Tn 2016 Proposed Budget Energy Subsidy Spending: IDR 121.0 Tn Infrastructure Spending: IDR 313.5 Tn Source: Ministry of Finance Central Government Expenditure: Continue budget efficiency framework Subsidy Policies Fuel Subsidy Policy: Continue “Fixed Subsidy” scheme to Diesel and “Price Subsidy” for Kerosene and 3 kg LPG Electricity Subsidy Policy: Switch to direct subsidy scheme given to small households (450 VA and part of 900 VA) Food Subsidy: Rice for targeted household (15.5 million households) Subsidy for Fertilizer: Production price close to economic price targeted volume of 9.55 million ton, with retail price to be adjusted to close price gap Interest Subsidy for SME credit: For selected sectors such as agriculture, fishery, manufacturing and trade and including for migrant worker Regional Transfer Policy Formulate Transfer Fund nomenclature Enhance Special Transfer Fund (DTK) Optimize the implementation of reward and punishment to regional Government Village Fund Policy Significantly Increase allocation compared to 2015 To support growth equality and empowerment in village area 2016 Budget Key Policies Energy -47.6% Education +27.5% Infrastructure +76.2% Health +75.4% 2016 Budget Allocation Plan Compared to 2015 Revised Budget Budget Re-Allocation to Sustainable Economic Growth 28

30. 29 Assumptions: Period 20142015 2016 Proposed Budget Realized Revised Budget Latest Realization Growth (%)5.05.74.7 1 5.3 Inflation (%)8.45.0 YoY6.83 2 4.7 YTD2.24 2 Exchange Rate (USD/IDR, Average)11,87812,500 EOP13,534 3 13,900 YTD13,303 3 3-month-SPN (Treasury Bills)5.86.25.9 2 5.5 Indonesia Crude Price (ICP) (USD / bbl)97.060.052.2 2 50.0 Oil Lifting (thousand bbl / day)793.5825756.6 4 830 Gas Lifting (thousand bbl / day oil equivalent)1,2241,2211,175 4 1,155 2015 Budget Key Focus 2016 Budget Key Focus Quality of Spending  Fuel subsidy savings of IDR 211.3 Tn  Re-allocation of savings to basic infrastructure (food security, connectivity and maritime) and social welfare  Additional allocation for village funds  Capital injection to SOEs Revenue Optimization  Improving tax compliance rate, closing tax leakage and expanding tax base Financing Policy  Lower fiscal deficit from 2.2% to 1.9% General Revenue and Expenditure Policies  Continue Tax Extensification and Intensification program and improve tax compliance  Drive priority program to improve growth quality such as the 20% allocation for education, maintain 5% health allocation and increase regional and village fund allocation Subsidy Policies – More Targeted Program  Targeted subsidy scheme and direct subsidy to small households  Food & fertilizers subsidy and expand financing program for SMEs Continue to drive key development projects:  Develop infrastructure for Food Security and Connectivity  Improve the service and sustainability of national health, labor insurance program and sustainable social protection program Financing Policies: Fiscal deficit at 2.1% and Debt/GDP at 26% Notes: 1. As of 2 nd Quarter 2015, 2. As of September 2015, 3. Up to 16 October 2015, 4. Average Dec 2014 – Aug 2015 Key Macroeconomic Assumptions Source: Ministry of Finance, Bappenas

31. 30 The realization of income, expenditure, and financing in Semester II is expected to increase, an improvement from semester I; The financing gap will be covered with sources of financing that is considered safe, has low risk, and low cost Items (IDR tn) 201420152016 Revised Budget 1st Semester Realization % of Revised Budget Revised Budget 1st Semester Projection % of Revised Budget 2nd Semester Prognosis % of Revised Budget OutlookBudget A. State revenue and grants1635.4712.743.6%1,761.6697.439.6%952.354.1%1649.8 1822.5 I. Domestic revenue1633.1711.743.6%1,758.3697.239.7%949.254.0%1646.4 1820.5 1.Tax revenue1246.1537.543.3%1,489.3555.237.3%811.854.5%1367.0 1546.7 2.Non tax revenue386.9172.244.5%269.1142.052.8%137.451.1%279.4 273.8 II. Grants2.31.042.8%3.30.25.8%3.194.2%3.3 2.0 B. State expenditure1876.9759.940.5%1,984.1773.939.0%1135.957.3%1909.8 2095.7 I. Central gov. expenditure1280.4468.736.6%1,319.5436.133.1%809.461.3%1245.5 1325.6 1. Ministries/Agencies Spending602.3178.929.7%795.5208.526.2%521.665.6%730.1 784.1 2. Non-Ministries/Agencies Spending678.1289.842.7%524.1227.643.4%287.954.9%515.5 541.4 II. Transfer to region596.5291.248.8%664.6337.750.8%326.549.1%664.2 770.2 C. Primary balance (1) -106.017.9-16.8%-66.8-2.23.3%-100.4150.4%-102.6 -88.2 D. Overall balance (A - B)-241.5-47.219.6%-222.5-76.434.4%-183.682.5%-260.0 -273.2 % deficit to GDP-2.4-0.5- -1.9-0.7- -1.6- -2.2 -2.15 E. Financing241.5138.857.5%222.5194.087.2%66.029.7%260.0 273.2 I. Domestic financing254.9162.263.6%242.5215.688.9%28.111.6%243.7 272.8 II. Foreign financing-13.4-23.4174.0%-20.0-21.610.8%37.9-189.4%163.0 0.4 Excess/Shortage Financing0.091.60.0%0.0117.6 - -117.6 - - - Budget deficit expected to remain within safe and manageable threshold 30 Projection of Revised Budget 2015 Realization and 2016’s Budget

32. 31 Strategic Policy of 2016 Budget in Summary Controlled expansion at 2.15% GDP Deficit 1 1 Efficient bureucratic system for Holiday Allowance (THR) and 13 th Salaty 2 2 5% Healthcare Budget 3 3 Significant infrastructure budget 4 4 Subsidy to the right recipient 6 6 Support the healthcare social security program 7 7 Fasten efforts to reduce income gap (expansion of PKH) 8 8 Support Fiscal Desentralization (Village Fund & Reallocation of DK/TP) 9 9 1 Million home program 10 20% Education Budget 5 5

33. 32 General policies to achieve taxation target includes: a.Optimize tax revenue by maintaining conducive investment climate; b.Maintain national economic stability and protect purchasing power; c.Improve national competitiveness and industry value-add; and d.Control consumption of excisable goods. TAXCUSTOMS & DUTIES INTENSIFIED EFFORTS TO EXPAND TAX REVENUES Breakdown 20152016 Revised Budget Budget 1. Tax Revenue 1,489,255.5 1,546,664.6 a. Domestic Tax Revenue 1,439,998.6 1,506,577.5 1) Income Tax 679,370.1 757,230.1 - Non-Oil & Gas Income Tax 629,835.3 715,788.6 - Oil & Gas Income Tax 49,534.8 41,441.5 2) VAT 576,469.2 571,732.7 3) Land & Building Tax 26,689.9 19,408.0 4) Duties 145,739.9 146,439.9 5) Other Taxes 11,729.5 11,766.8 b. Tax from International Trade 49,256.9 40,087.1 1) Import Duty 37,203.9 2) Export Duty 12,053.0 2,883.2 2016 Tax Revenue Strategy  Optimize examination Efforts i.e. focus on primary sectors in each regional office, transfer pricing and fraud  Extend and Intensify services to Tax Payers i.e. data matching, optimize IT system, e-tax invoice, regulation Reform  Year 2016 as the Year of Law Enforcement i.e. through active tax billing, examination and investigation  Improving audit performance Revise target of audit object.  Boost supervision, action and investigation efforts  Increase operations to monitor distribution of excisable goods

34. 33 Government Expenditure consistently grow at 12% on average From 2015-2016 Regional Transfer and Village Funds (15.8% yoy) grew significantly faster than Central Government Spending (0.46% yoy) Ministries/Agencies Budget (Billion Rupiah) Min. of Public Works and Housing 104,1 Min. of Defence99,5 National Police73 Min. of Health63,5 Min. of Religious Affairs57,1 Min. of Basic Education49,2 Min. of Transportation48,5 Min. of Higher Education and Research 40,6 Min. of Finance39,3 Min. of Agriculture31,5 Other Ministries177,9 Total784,1 Top 10 Ministries/Agencies with the Highest Budget Allocation Government Expenditure 2016 Regional Transfer Central Government Spending Revised Budget 2015 Budget 2016

35. 34 Increase the allocation to the Regional Transfer and the Village Fund budget to closely match with Ministries and Agencies spending Improve the quality of budgeting and Regional Revenue Sharing Fund (Dana Bagi Hasil-DBH) distribution Reformulation of General Allocation Fund (Dana Alokasi Umum-DAU) in order to improve the distribution of financial capability among regions (as equalization grant) Reformulation and strengthening Special Allocation Fund (Dana Alokasi Khusus-DAK) to support the implementation and achievement of national priorities Reformulation of Regional Incentive Fund (Dana Insentif Daerah-DID) to provide a greater appreciation for the area that performs well in financial management, economy and welfare areas Improving the management quality for Special Autonomy Fund and Special Fund for Yogyakarta as a Special Region Improve the allocation of up to 6% in accordance Road Map Village Fund from 2015 to 2019, to in compliance with mandate from Government fullfil the mandate in Law No.6/2014 on Villages 34 Transfer to Region and Village Fund Policy Description 20152016 Revised Budget Budget A. Transfer to Region643,8723,2 1.Balancing Fund521,8700,4 a. General Transfer Fund463491,5 1) Profit Sharing Fund110,1106,1 2) General Allocation Fund352,9385,4 b. Special Transfer Fund58,8208,9 1) Physical Purpose Allocation Fundn/a85,5 2) Non-physical Purpose Allocation Fundn/a123,5 2.Region Intensive Fundn/a5 3.Special Autonomy Region and DIY Fund17,617,8 4.Other Transfer Fund104,4n/a B.Village Fund20,847 TOTAL664,6770,2 (IDR Trillion)

36. 35 Improve the quality of state investment plan to increase SOEs’ value-add as agents of development in infrastructure, food sufficiency and maritime; Maintain Government debt ratio at a sustainable level; Open access to development and investment funding to the general public through Retail Bond Issuance; Optimize Public Services Agency (BLU) funds to finance development projects, including expanding MSMEs’ access, affordable housing and education; Prioritize Private Public Program (PPP) to support infrastructure development; Extend loans to fasten infrastructure development projects; and Support programs to increase access to education and housing for low income population. Description 20152016 Revised Budget Budget I.Domestic Financing 242,5 272,8 1.Domestic Banking 4,8 5,5 2.Domestic Non-Banking 237,7 267,3 II.Foreign Banking-20,0 0,4 1.Foreign Outstanding Loan (Gross) 48,6 75,1 a. Program Loan 7,5 36,8 b. Project-Based Loan 41,1 38,3 2.Standby Loan Agreement (SLA) 4,5-5,9 3.Foreign Debt Principal Repayment 64,2-68,8 TOTAL 222,5 273,2 Financing Policy 2016

37. Investment Climate Improvement: One Stop Service (OSS) by BKPM Conducted by electronically integrated system on investment information and licensing. Implementation of OSS in BKPM comes with online tracking system. National Single Window for Investment (NSWi) or the Electronic Invesment Licensing Service System (SPIPISE) was created to facilitate further OSS services. NSWi as an electronic basis for investment so that investors can obtain a variety of online licensing and non-licensing service. Land Acquisition Bill Provide certainty in Land Procuring for Public Infrastructure Project. The law sets a finite deadline to resolve all legal issues in the event of objections to any land acquisition for infrastructure projects. Special Economic Zone Fiscal Incentive Companies entitled for tax holiday or tax allowance Exemption for import duties, VAT and excise Revision of investment negative list In the effort to increase investment in Indonesia and to execute the ASEAN Economic Community (AEC), the Government of Indonesia had done amendments to the provision list of business fields closed and open with certain requirements in the field of investment (Investment Negative List /DNI) Revision of Investment negative list One Stop Services (OSS) center as an integrated services to provide quick, simple, transparent, integrated license services Land acquisition bill and revision of government regulation on procurement Special Economic Zone Fiscal Incentive …Direct investment needs to be further improved to help finance the current account deficit Investment is Still Showing a Positive Development

38. General Strategy for Debt Financing 2016 37 DEBT POLICY IN 2016 BUDGET 1. Manageable Debt-to-GDP ratio 2. Financial inclusion & market deepening 3. Debt issuance for productive activity 4. Selective external loan (infrastructure and energy sector) 5. Loan as an alternative instrument for financing 6. Active debt management and ALM

39. Government Budget FY 2016 38 In trillion IDR, where applicable

40. Government Securities Financing (Gross) 2015 39 Domestic Bonds International Bonds Issuance (USD, EUR, JPY-denominated) Weekly Auction: Conventional securities:23 x Islamic securities:23 x Non-Auction: Retail bonds: SR (Q1), SBR (Q2), Sukuk Tabungan (Q3), and ORI (Q4) Private PlacementBased on request Issuance of International Bonds as complement to avoid crowding out in domestic market and provide benchmark for corporate issuance, consists of USD, YEN or EURO global bonds. Maximum issuance international bond 30% from target gross. Issuance targets for GDS, Sukuk and ATM target Government Debt Securities (SUN): 76 %; Sukuk: 24% ATM for Goverrnment Securities (SBN) by auction: 10-12 year. Instruments Indicative Target (IDR tn) Preliminary Budget Government Securities (Net)327,224 Redemption187,202 Cash Management15,000 Buyback3,000 Government Securities (Gross)532,426 Composition Domestic76% - Auction66% - Non-Auction10% International Bond24%

41. Improved Government Debt Position 40

42. 41 Global Financial Crisis Eurozone sovereign debt crisis Yield of Benchmark Series [In Percentage] As of Nov 30, 2015 Secondary Market Performance of Central Government Bonds

43. *Adjusted by changes in Cash Management & Debt Switch Government Securities Realization 39 * Based on projection of deficit 2,78%

44. 43 Source: Ministry of Finance [USD billion] Outstanding of Total Central Government Debt

45. Total Debt Maturity Profile as of End of October, 2015 44 Maturity Profile of Central Government by Currencies (in trillion IDR) Maturity Profile of Central Government by Instruments (in trillion IDR) Source: Ministry of Finance

46. 45 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 Holders of Tradable Central Government Securities

47. 46 Source: Ministry of Finance Profile of Central Government Debt Securities

48. 47 Debt Switch Program Buyback Program [in billion IDR] Debt Switch & Cash Buyback Program Source: Ministry of Finance

49. Maturity Profile of Tradable Central Government Securities as of the end of November, 2015 48 Source: Ministry of Finance [IDR Tn]

50. Daily Transaction & Offshore Ownership 49 Average Daily Transaction Govt’ Bonds Net Buyer (Seller) Non Resident Source: Ministry of Finance [IDR Tn] as of the end of October, 2015 Average daily trading [IDR Tn]

51. 50 Source: Ministry of Finance (in trillion Rp) Ownership of IDR Tradable Central Government Securities

52. Wide Range of Policy Reforms to Boost Economic Growth 51

53. 52 ECONOMIC POLICY PACKAGE 9 SEPTEMBER 2015 To propel the real sector in order to provide the foundation for economic growth Encourage the competitiveness of national industry through deregulation and de- bureaucratization as well as law enforcement and business certainty Accelerate the national strategic projects through simplification of permits, land provision, accelerate the flow of goods and services, as well as break down barriers Boost investment in the property sector encourage housing projects, particularly for low-income earners Amended 89 out of 134 regulations Drafting 2 Presidential Decree, 2 Presidential Instruction, 63 Minister Regulation and 5 other regulations Economic Policy Package

54. 53 Short Run Policy Package I, II, and III …to navigate uncertain global environment and to stimulate domestic economic growth Stimulus Package I: 9 Sep 2015 Cut Red Tapes Accelerate Strategic National Projects Boost Low Income Housing Rewriting 89 out of 154 regulations Deregulation policies such as relaxing visa requirements, gas price adjustment for certain industries and enhancing cooperative function Simplification to obtain business licenses and implementation of e-services Simplifying spatial license & land accommodation Accelerating goods & service procurement for the government Discretion in legal issue barriers Strengthen the role of regional heads to accelerate national strategic project completion Promoting housing construction for low income citizens Expanding opportunity for investments in property sector Stimulus Package II: 29 Sep 2015 Simpler Permit Requirements Tax Incentives Integrated Logistics Facilities Ease bureaucracy for investments via 3-hour permit issuance program Faster process for tax allowance and holiday for qualified investments to 25 days and 45 days, respectively Streamline permit requirements in forestry sector from 14 to 9 Elimination of VAT for transport industries (train, shipping and air transport inc. spare parts) Reducing tax rate on deposits from export proceeds. 1-month deposit tax 10%, 3-month 7.5%, 6- month 2.5% and more than 6-month 0% Facility incentive on integrated logistic center Two facilities slated to be operational by end of 2015; Cikarang (Manufacturing) and Merak (Fuels) 53 Source: Coordinating Ministry of Economic Affairs

55. 54 Short Run Policy Package I, II, and III …to navigate uncertain global environment and to stimulate domestic economic growth 54 Source: Coordinating Ministry of Economic Affairs Stimulus Package III: 7 Oct 2015 Lower Fuel and Electricity Prices Lower retail fuel costs (jet fuel, LPG and retail fuel) Decrease gas price for factories and qualified industries Lower industrial electricity prices 3-hour turnaround for land availability Faster approval time for building, leasehold, use right and land permits Land Permit Simplification for Investment Activities Broadening of Small Business Credit Recipients Expanding criteria for allowed recipients to include salaried workers Stimulus Package IV: 15 Oct 2015 Fair, Simplified and Projectable Wage System Setting Provincial Minimum Wage regulation Formula for setting minimum wage to ensure simplified, stable and projectable yearly wage adjustments Government provides subsidy on small business credit to stimulate credit growth in banking sector and affordability to applicants Expanding criteria for small business credit to include: Micro, Small and Medium enterprises in productive sectors (farming, fishery, manufacturing, creative business, trading and services) Overseas Indonesian workers with occupation in formal sectors Family members of salaried workers Ex-Overseas Indonesian workers Overseas Indonesian workers with terminated contract Ease and Affordability of Small Business Credit

56. 55 Short Run Policy Package I, II, and III …to navigate uncertain global environment and to stimulate domestic economic growth 55 Source: Coordinating Ministry of Economic Affairs Lower Asset Revaluation Tax Revaluation tax originally set at 10% Under new incentive, tax rates are cut according to periods, detailed below: Revaluation period until 31 Dec 2015: tax rate at 3% Revaluation period until 30 Jun 2016: tax rate at 4% Revaluation period until 31 Dec 2016: tax rate at 6% Eliminating double taxation system for Real Estate Investment Trusts (REITs) Encourage Indonesian property and infrastructure companies to issue REITs in Indonesia Eliminating Double Taxation for REITs Propel Rural Economies through Development in Special Economic Zones (SEZs) Tax holiday (reduce income tax) and tax allowance (reduce net income and accelerate depreciation. No charges on value-added tax and luxury goods tax Import duty tariff require Certificate of Origin Foreigners allowed to have property Reduce tax on development and amusement in tourist areas Establish wage boards and specialized tripartite agencies Grant 30 days visitor visa which are extendable for 5 times SEZ administrator able to provide land services SEZ administrator able to issue principles and business permits Accelerating licensing process a max. of 3 hours Drafting government regulations (RPP) on water resources utilization Drafting RPP on water supply systems (SPAM) Ensure that private entities do not dominate the whole SPAM subsystem Private water supplier to meet their needs on its own. Sustainable and Equitable Water Supply to the Community Simplifying Import Licensing for Pharmaceutical Raw Materials Simplifying the licensing process to only 5.7 hours Target 100% paperless Stimulus Package VI: 5 Nov 2015 Stimulus Package V: 23 Oct 2015

57. 56 Short Run Policy Package I, II, and III …to navigate uncertain global environment and to stimulate domestic economic growth 56 Source: Coordinating Ministry of Economic Affairs Stimulus Package VII: 4 Dec 2015 Acceleration of Land Certification Process Increasing numbers of certified surveyor, especially from non-civil servant. Speed up the time needed to land registration announcement, from 60-30 days to 14 days Shifting land registration process to electronic system Giving communal rights for indigeneous peoples and people who lives in plantation/forest area Releasing Government Regulation (PP) which facilitate income tax (PPh) for the labor works in labor intensive industry for 2 years Giving tax facilities for various footwear industries throughout provinces in Indonesia Tax Incentive for Labor Intensive Industry Stimulus Package VIII: 21 Dec 2015 One Map Policy All government office will use only thematic map in 1:50.000 scale in order to accelerate the settlement of land using problem and to solve the country’s borderline problem New refinery will be constructed in Tuban and Bontang, to support the existing refinery in Cilacap, Balikpapan, Balongan and Dumai. Refinery Construction Incentive for Aircraft Maintenance Companies 0% of import duty will be applied for 21 tariff post regarding aircraft sparepart and maintenance components

58. 57 Short Run Policy Package Progress* Package Total Deregulation Target In Study Process Implemented Remarks I154 12 112 78 has been signed, 34 not yet II15 - N/A III8 7 1 N/A IV10 2 8 N/A V5 2 8 VI5 - 5 N/A VIIN/A * as of 4December 2015 Source: Coordinating Ministry of Economic Affairs

59. 58 Stimulus to Enhance Household Purchasing Power Increase non-taxable income threshold to IDR 36.0 million (~USD 2,570) from IDR 24.3 million (~USD 1,671) Increase distribution of rice for low income household by two months, to 14 months Faster turnaround for drawdown and realization of village fund budget Provision of official guidance on realization of village fund on labor intensive sectors and projects Slated to provide IDR 4-5 Tn (~USD 286 – 357 million) in additional income and provides additional 800 thousand – 1 million workforce across Indonesia Source: Ministry of Finance Stimulus to Increase Incentive for Businesses Revision of Tax Allowance and Tax Holiday policies Levy of luxury tax (for houses, vehicles, airplanes and firearms) to provide competitive advantage on domestic industries Support small business through interest rate subsidies in small business credit (KUR). lowered to 12%, less than general SMEs credit rate Implementation of 4:1 Debt-Equity ratio for tax purposes to encourage capital inflow and improvements in capital structure Construction of integrated logistic centers, in Cikarang (Manufacturing) and Merak (Fuels) Higher threshold for property luxury tax to IDR 10 billion (~USD 714 thousand) for apartments and IDR 20 billion (~USD 1.4 million) for landed houses Support export financing for domestic industries through Indonesia Exim Bank via government capital allocation and National Interest Account Lower tax on asset revaluation. 3% tax before Dec 31st Remove double taxation for Real estate investment trusts (REITs) Lower tax on dollar deposit interest, especially for exporters Elimination of VAT levy on certain transportation industries (trains, river shipping and airplanes, including spare parts) Implemented Taxation Administrative and Regulatory Reform, including amendment of Income Tax Law, VAT Law, General Tax Administration Law and regulation regarding Tax Amnesty Develop more Special Industrial Zones outside Java with special incentives (tax allowance, tax holiday and elimination of customs fee) Support economic activities in Special Economic Zones via longer tax holiday up to 25 years Revision on Ease of Import for Export Destination (KITE) regulations by providing free import fee facilities and more efficient administration process On Pipeline Ministry of Finance Policy Package …comprehensive approach across sectors

60. 59 Strengthening coordination amongst the National and Regional Inflation Control Teams to accelerate implementation of the national and regional inflation control roadmap. There are currently more than 430 regional inflation control teams throughout Indonesia, each having a regional inflation roadmap. Strengthening Regional Economic and Financial cooperation between Bank Indonesia and the Government. 01 Strengthening inflation control and stimulating the real sector from the supply side. 02 Maintaining rupiah exchange rate stabilisation. 03 Strengthening liquidity management Rupiah, through Open Market Operations (OMO), in order to divert the daily liquidity to longer tenors Changing the auction mechanism of Reverse Repo (RR) SBN from variable rate tender into fixed rate tender, adjust the pricing of RR SBN, and extend the tenor by issuing RR SBN 3 months Changing the auction mechanism of Certificates of Deposit of Bank Indonesia (SDBI) from variable rate tender into fixed rate tender, adjust the pricing of SDBI, and issue SDBI with 6 months tenor Reissue Bank Indonesia Certificates (SBI) tenor of 9 months and 12 months with a fixed rate tender auction mechanism as well as pricing adjustment Preserving foreign exchange market confidence by controlling currency volatility Maintaining market confidence in tradeable government securities (SBN) through purchases on the secondary market, while monitoring its impact on SBN availability in terms of inflow and money market liquidity. Monetary Policy Package: September I 9 th September 2015

61. 60 04 Strengthening foreign exchange supply and demand management Adjust the frequency of the auctions of Foreign Exchange (FX) swap from 2 times/week to 1 time/week Change the Foreign Currency Term Deposit (TD) auction mechanism from variable rate tender into fixed rate tender, pricing adjustment, and extend the tenor of up to 3 months; Lower the purchase limit of foreign currency by verifying the underlying documents from US$ 100,000 to US$ 25,000 per customer per month and requires the use of Tax Identification Number (NPWP) 05 Deepening the money market Providing swap hedging facilities to shore up investment infrastructure and simultaneously strengthen foreign exchange reserve assets. Refining money market regulations covering all components of market development, including the instruments, players and infrastructure. Expediting the bank foreign debt approval process while adhering to prudential principles Monetary Policy Package: September I (continued) 9 th September 2015

62. 61 Maintaining Rupiah Exchange Rate Stability The presence of Bank Indonesia in the domestic foreign exchange market to stabilise the rupiah exchange rate was strengthened through intervention in the forward market. In addition to intervention in the spot market, Bank Indonesia also intervenes in the forward market to help balance supply and demand. Maintaining balance in the forward market is important to alleviate pressures in the spot market. Strengthening Rupiah Liquidity Management Bank Indonesia reinforced rupiah liquidity management by releasing three-month Bank Indonesia Certificates of Deposit (SDBI) along with two-week reverse repo tradable government securities (SBN). The release of such open market operation instruments will absorb liquidity, prompting a shift towards longer tenor instruments, which should reduce the risk of excessive use of rupiah liquidity that could intensify pressures on the rupiah exchange rate. Strengthening Foreign Exchange Supply and Demand Management Policy to manage supply and demand on the forward market was strengthened. The policy aims to encourage forward selling transactions of foreign currencies/rupiah and clarify underlying forward buys of foreign currencies/rupiah by raising the forward selling threshold that requires an underlying document from US$1 million to US$5 million per transaction per customer and broaden the scope of underlying assets for forward sells to include domestic and offshore foreign currency term deposits. Foreign currency Bank Indonesia securities (SBBI) were also issued to back financial market deepening efforts, especially on the foreign exchange market. The holding period of Bank Indonesia Certificates (SBI) was reduced from 1 month to 1 week in order to attract foreign capital inflows. Incentive was provided in the form of a reduction in the interest tax paid on term deposits for exporters depositing their FX earnings at banks in Indonesia or converting the proceeds into rupiah as requested by the government. The policy is expected to keep FX earnings in the country for longer. BI ensured greater transparency and information availability when using FX by strengthening the FX flow report (LLD). In this case, LLD participants are obliged to report their use of FX through supplementary supporting documentation for transactions of a certain value. The regulation is pursuant to Act No. 24 of 1999 concerning the Flow FX and the Exchange Rate System, where Bank Indonesia is authorised to request information and data regarding the flow of FX from residents. Monetary Policy Package: September II 30 th September 2015

63. 62 As part of national efforts to reverse the recent economic slowdown, OJK has issued a series of financial sector policies. Such measures are directed to, among others, to maintain the level of household/private consumption and to support the Government’s infrastructure development.  Banking sector: measure are focused on increasing bank loans to MSMEs and housing financing –Adjustment of risk weighting for certain types of loans –Relaxation of requirements for debt restructuring  Capital market sector: Measures are focused on supporting financing for housing and infrastructure, as well as developing SMEs through financing from the capital market –Development & expansion of investment products –Development of municipal bonds –Unlocking opportunities for SMEs to go public  NBFI sector: Measures are focused on fostering the growth of multifinance companies and microfinance institutions –Relaxation of regulations on NPF in multifinance companies –Development of microfinance institutions –Establishment of a rating agency for MSMEs  Relaxation of regulations on business trust  Preparation of agricultural insurance scheme  Revitalization of venture capital, especially to finance start-up businesses  Establishment of financing industry consortium, especially to provide financing for creative industry, export- oriented businesses, and MSMEs  Empowerment of the Indonesia Export Financing Agency (LPEI)  Implementation of one-project concept in assessing quality of loans July 2015October 2015  Encourage individual foreign currency account opening for foreign residents –Opening an account up to $50,000 only need to present a passport –Opening an account with over than $50,000 will be subject to simple customer due diligence process - passport and other supporting documents September 2015 Financial Sector Policy Packages to Boost Growth Source: Financial Service Authority (OJK)

64. 63 Yuan devaluation Package I Package II Package III Rupiah Curr (Rp/1US$) Source: Bloomberg Composite Index BEI Source: Bloomberg Market Participants began to welcome the Indonesian economic recovery efforts in addition to dynamic external conditions Market’s Positive Signal to Policy Package 63

65. 64 PPP Unit under Ministry of Finance will facilitate project development of PPP projects, by providing facilities such as Project Development Facilities (PDF), technical assistance, arrangement of guarantee with IIGF, and infrastructure funding with PT SMI and PT IIF. PPP Unit will also help capacity development for PPP and promotion of PPP projects Minister has approved the establishment of PPP unit, and the funding arrangement with donor and regulatory framework are under progress. KPPIP (The Committee for Accelerated Infrastructure Delivery) is a central government body that will coordinate the delivery of the government’s priority infrastructure projects, which consists of key government ministries related to infrastructure delivery, such as the CMEA, MoF, BAPPENAS and the BPN. KPPIP has established 22 priority projects for 2015 to be implemented. Establishment of PT SMI (Sarana Multi Infrastruktur), PT IIF (Indonesia Infrastructure Finance) to provide long-term financing Reform of National Land Agency (BPN), including establishment of special deputy for land acquisition acceleration and dedicated team for priority infrastructure projects, development of SOPs for every BPN activities etc. To ensure sound implementation, some institutional reforms and new institutions have been established. National Land Agency (BPN) Reforms Establishment of PPP unit under MOF Increased Fiscal Contribution by GoI through PT SMI, PT IIF, and IIGF Establishment of KPPIP The government is also in the process of establishing more institutions to further accelerate infrastructure delivery INSTITUTIONAL REFORMS Initiatives to accelerate infrastructure development through reforms (1/2)

66. 65 The best example of a successful implementation of the law is the city of Bojonegoro, where the civil society was socialized early to the law and where the land appraisal and compensation amount were attractive. Outcome: the overall land acquisition process for the Java North Line Double Track Rail project took less than 2 years. Neutral decision making regarding community rejection BPN as central agency in implementation of land acquisition More detailed regulation on implementation of land acquisition One of the major reforms is the New Land Law No.2/2012: Law No. 2 /2012 regarding Land Acquisition for Public Interest Presidential Regulation (PR) no 38/2015 regarding PPP Presidential Regulation (PR) no 39/2014 regarding the New Negative List of Investment The new law will ease land acquisition bottlenecks and disputes for infrastructure projects such as road, railway, station, port, airport, etc. The law regulates procedures of land acquisition, funding for land acquisition land appraisal, amount and types of compensations, objections and dispute settlements. The new President Reg. No. 30/2015 stipulates the role of private investors in contributing to land acquisition process. Government has revised the original regulation on PPP (Presidential Regulation no 67/2005) three times to accommodate more concerns regarding PPP development in Indonesia. For example, the revision accommodates foreign companies/investors in procurement of PPP projects, criteria and compensation for unsolicited project proposal, the need for fiscal support from Ministry of Finance. Government has revised the previous Negative list of investment to encourage more foreign businesses to take part in infrastructure development. For example, in transport sector, foreign ownership of seaport facility increased from 49% to 95% during PPP concession period. The government also allows 100% foreign ownership of power plant >10MW during PPP concession period (previously 95%). Better Land Appraisal Team Appointment Less bureaucratic land right revocation process Successful case of the implementation of the New Law New Law no 2 / 2012 REGULATORY REFORMS Minister of Energy & Mineral Resources Reg. No. 3/2015 regarding Procedure for Power Purchase This regulation allows for power purchase from mine mouth coal power plant, coal power plants, gas/micro gas power plants, and hydro power plants can be done with direct selection and direct appointment with the purpose to accelerate procurement process. Initiatives to accelerate infrastructure development through reforms (2/2)

67. 66 8.SHIA Express Railway (Rp 24T) 9.West Semarang Water Supply (Rp 765 M) 10.Balikpapan – Samarinda Toll Road (Rp 11,4T) 11. Manado – Bitung Toll Road (Rp 4,3T) OBC Develop ment Ready for PPP Tender Permit and Land Acquisition Financial Close* Construc tion** 1.New oil refinery (Rp 75 - 140T) 2.Jakarta Sewerage System Zona 1 (Rp 7T) 3.Airport Revitalization (brownfield) 4.Kuala Tanjung Int. Hub. Seaport (Rp 30T) 5.Bitung Int. Hub. Seaport (Rp 34T) 6.Panimbang – Serang Toll Road 7.Upgrading existing refineries (Cilacap, Dumai, Plaju, Balongan, Balikpapan) 12.HVDC (Rp 20T) 13.Indramayu Power Plant (Rp 20T) 14.Sumatera Transmission (Rp 35T) 15.MRT Jakarta South - North (Rp 25T) 16.Sumsel 9, 10 Power Plants 17.Central and West Java 500 kV Transmission Line 19. 4 sections of Trans Sumatera toll road (Rp 30T) 20.Makassar – Pare Pare Railway (Rp 6,4T) 21.Water to Energy – Development of Hydro Power Plants Karangkates IV&V, Kesamben, and Lodoyo 22.NCICD Phase A (Rp 20T) 18.Sumsel 8 (One package with Sumsel 8, 9, 10 with total investment value of Rp 54T) 19.Batang Power Plant/Central Java Power Plant (Rp 40T), Target: October 2015 22 Priority Projects Within the Pipeline

68. 67 1. Processing & refinery facility plan based on progress 2. Processing & refinery facility plan based on commodities Note: Total Mining Permit cooperating with smelter companies may change Mining Sector: Progress of Processing and Refinery Facility (1/3)

69. 68 Nickel Smelter (Operational) Company Name: Indoferro (Cilegon-Banten) Iron Smelter (Operational) Company Name : Delta Prima Steel (Tanah Laut-South Kalimantan) Steel Smelter (Operational) Company Name : Krakatau Posco (Cilegon- Banten) Company Name : Indotama Ferro Alloy (Purwakarta-West Java) Mangan Smelter (Operational) Mining Sector: Progress of Processing and Refinery Facility (2/3)

70. 69 Nickel Refining Facility (NPI) Still On Progress Company Name: Bintang Delapan Group (Morowali-Central Sulawesi) Mining Sector: Progress of Processing and Refinery Facility (3/3)

71. 70 Cabinet Meeting Progress of 35,000 MW Cabinet Meeting Progress of 35,000 MW Debottlenecking through regulation: 1.Regulation No.1/2015 concerning electricity supply cooperation and joint utilization of the electrical network among license holders. 2.Regulation No.3/2015, concerning Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection and Appointment. Debottlenecking through regulation: 1.Regulation No.1/2015 concerning electricity supply cooperation and joint utilization of the electrical network among license holders. 2.Regulation No.3/2015, concerning Procedures of Purchasing Electrical Power and benchmark prices for Electrical Power through the Direct Selection and Appointment. Cabinet Meeting “There’s electricity crisis in Indonesia, requires construction of large capacity plant " Cabinet Meeting “There’s electricity crisis in Indonesia, requires construction of large capacity plant " 17 Dec ‘14 16 Mar ‘15 4 May ‘15 Jan ‘15 Launching 35.000 MW by the President in Goa Beach Sanden DIY. Average economic growth of 6.7 requires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024) Average economic growth of 6.7 requires 7,000 MW / year or 35,000 MW / 5 years (Kepmen ESDM No. 0074/2015 on RUPTL 2015-2024) Jan ‘15 Energy Sector: 35,000 MW Program has been launched