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The Republic of Indonesia

Fiscal Policy Agency

Ministry of FinanceAugust, 2018

Economic Development, 2018 Budget, & 2019 Proposed Budget

Outline

1. Current Economic Development

2. The 2018 Budget Performance

3. Fiscal Policy and 2019 Proposed Budget

4. Policy for Sustainable Development

1. Current Economic Development

Global Economy Experiences Recovery Since 2017, but Risk is Still HighThe normalization of monetary policy adopted by the US carries the risk of reversing capital flows to the US and strengthening the dollar

• The global economy has improved with the US being one of the main motors

• Improved US economynormalization of monetary policy increases in on capital reversals to the US strengthening of the US dollar.

• Some risks and challenges for the global economy in the future:

• Financial market pressure due to US monetary normalization

• China moderation

• Protectionism

• US-China Trade War

• Geopolitical tension

• Climate change / extreme weather

3,9 3,9

2,42,2

4,95,1

5,3 5,3

0

1

2

3

4

5

6

7

2011 2012 2013 2014 2015 2016 2017 2018p 2019p

Projection of Global Growth(%, yoy)

Dunia Negara Maju

Negara Berkembang ASEAN-5

Global Developed countries

Developing countries

2,8

0

0,5

1

1,5

2

2,5

3

3,5

4

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3 Q1

2011 2012 2013 2014 2015 2016 2017 2018

Quarterly US Growth (% yoy)

88

89

90

91

92

93

94

95

96

Dec-17 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18

Dollar Index

Global Turmoil Affecting Domestic Economy, especially in Financial Market Volatility

Financial sector turmoil... … in the midst of high national production needs

11,35%

24,48%

-11

-6

-1

4

9

14

19

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

A S O N D

201

7-J F M A M J J A S O N D

201

8-J F M A M J J

Mil

iar

US

D

Pert

um

buhan

Total Export Import

Nilai Eks Eks ytd Impor ytd

Balance of Payment

• The balance of payments in Q2-2018 recorded a deficit of US $ 4.3 billion

• The capital and financial account (TMF) surplus in this period amounted to US $ 4.0 billion, while the current account deficit (TB) was US $ 8.0 billion (3.0% to GDP)

Exchange Rate Rupiah/US$as of 16 August 2018

Average Exchange Rate (ytd) Export ValueExport (ytd)

Import (ytd)

Bil

lio

n U

SD

Gro

wth

StocksGovtBonds

6FISCAL POLICY AGENCYMINISTRY OF FINANCE OF THE REPUBLIC OF INDONESIA

• Consumption and investmentremain the main engines ofgrowth

• Investment contribution increasesunderpinning more productiveeconomic activity

• International trade performance isrobust as export grew at 7.70%and import grew at 15.17%

Indonesia GDP Growth at 5.27% in Q2-2018Strong investment and stable consumption support growth

4,94

5,21

5,034,94

5,01 5,01 5,065,19

5,06

5,27

5,025,07

4,00

4,50

5,00

5,50

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2016 2017 2018

PDB (%,yoy) Tahunan (%)Quarterly Yearly

GDP Growth (%, YoY)

GDP Breakdown by Expenditure (%, YoY)

2016 2017 2018

Q1 Q2 Q3 Q4 Y Q1 Q2 Q3 Q4 Y Q1 Q2

Household Consumption 4.98 5.10 5.04 5.03 5.04 5.00 5.02 4.95 4.98 4.98 5.01 5.22

Government Consumption 3.43 6.21 (2.95) (4.03) (0.14) 2.69 (1.92) 3.48 3.81 2.14 2.74 5.26

Gross Fixed Capital Formation 4.67 4.18 4.24 4.79 4.47 4.77 5.34 7.08 7.27 6.15 7.95 5.87

Export (3.10) (1.50) (5.75) 4.15 (1.57) 8.41 2.80 17.01 8.50 9.09 6.09 7.70

Import (5.04) (3.47) (4.13) 2.72 (2.45) 4.81 0.20 15.46 11.81 8.06 12.66 15.17

GDP 4.94 5.21 5.03 4.94 5.03 5.01 5.01 5.06 5.19 5.07 5.06 5.27


Agriculture Sector performance grew better mainly supported by more conduciveweather, led to the food and vegetables crops increase. Meanwhile, plantation and fisherygrew relatively stable.

Mining sector grew positively backed by improving production activity of metalmineral and oil and gas mining that returned to positive growth, while coal mining had adeclining production.

Manufacture sector grew higher yet limited, there was a push to productionincrease to fulfill demand of Ramadan particularly in F&B industry, textile, footwear,rubber and transportation equipment; whereas on the other side other industries such aselectronic and chemical-pharmacy were relatively stagnant.

Tertiary sector remained demonstrating relativelyhigh growth even though some experienced adeceleration:

Transportation and Warehouse grew high in linewith high demand of transportation services in EidMubarak activities.

Trade showed growth improvement in line withretail and vehicle sales as well as export and importactivities.

Financial services slowed because of suboptimalcredit distribution.

7

GDP Growth by Sector(%, YoY)

2016 2017 2018

Q1 Q2 H1 Q3 Q4 Y Q1 Q2 H1 Q3 Q4 Y Q1 Q2 H1

Primary Sector 1,37 2,56 1,98 2,07 3,72 2,40 3,75 2,81 3,27 2,43 1,32 2,59 2,30 3,81 3,08

Agriculture, Forestry, and Fishery 1,47 3,48 2,53 3,18 5,53 3,36 7,15 3,23 5,07 2,77 2,24 3,81 3,29 4,76 4,05

Mining and Quarrying 1,22 1,04 1,13 0,17 1,35 0,95 -1,22 2,12 0,43 1,84 0,08 0,69 0,74 2,21 1,47

Secondary Sector 5,39 4,82 5,10 4,63 3,57 4,58 4,69 4,32 4,50 5,50 5,26 4,95 5,36 4,61 4,98

Manufacture 4,68 4,62 4,65 4,47 3,28 4,26 4,28 3,50 3,88 4,85 4,46 4,27 4,56 3,97 4,26

Electricity, Gas, and Water 7,35 6,09 6,70 4,69 3,11 5,26 1,80 -2,09 -0,18 4,88 2,50 1,76 3,33 7,29 5,30

Construction 6,76 5,12 5,93 4,95 4,21 5,22 5,96 6,94 6,45 6,98 7,23 6,79 7,35 5,73 6,53

Tertiary Sector 6,02 6,34 6,18 5,48 4,85 5,66 5,58 5,21 5,39 5,89 6,01 5,68 5,90 5,81 5,85

Trade and Retail 4,31 4,28 4,30 3,66 3,87 4,03 4,61 3,47 4,03 5,20 4,47 4,44 4,93 5,24 5,09

Transportation and Warehouse 7,42 6,52 6,96 8,18 7,64 7,45 8,06 8,80 8,44 8,88 8,21 8,49 8,59 8,59 8,59

Information and Communication 7,58 9,31 8,46 8,93 9,62 8,88 10,48 11,06 10,78 8,82 8,99 9,81 8,52 6,06 7,26

Financial Services and Insurance 9,32 13,60 11,44 9,04 4,18 8,90 5,99 5,94 5,97 6,16 3,85 5,48 4,33 3,02 3,67

Other Services 5,87 5,52 5,69 4,52 3,84 4,91 4,28 3,90 4,09 4,80 6,31 4,85 5,62 6,18 5,90

GDP 4,94 5,21 5,08 5,03 4,94 5,03 5,01 5,01 5,01 5,06 5,19 5,07 5,06 5,27 5,17

GDP Growth from Production SideLong holiday in June 2018 pushed demand in certain sectors: manufacturing industry, trade, and transportation


JAVA: 58.61% of GDP

SUMATERA: 21.54% of GDP

KALIMANTAN: 8.05% of GDPSULAWESI: 6.20% of GDP

PAPUA: 2.54% of GDP

BALI & NUSRA: 3.06% of GDP

2018:

5.69%

2018:

3.31% 2018:

6.75%

2018:

3.75%

2018:

18.18%

2018:

4.65%

2017:

4.14

2017:

5.69

2017:

4.97 2017:

6.93

2017:

4.40

2017:

2.93

Spatial Economic GrowthAll regions experienced positive economic growth in Q2 2018

National GDP Growth 5.27%

All regions experienced positive growth except for Kalimantan and Sulawesi

Java and Sumatera grew higher due to better improvement in secondary and tertiary sector

Eastern Regions of Indonesia experienced even higher growth due to bullish mining sector


-2%

2%

2%

4%

6%

7%

6%

7%

8%

17%

10%

17%

20%

57%

62%

-15% -5% 5% 15% 25% 35% 45% 55% 65%

Japan

Malaysia

Thailand

Singapore

EUR

China

Korea

Philippines

Indonesia

South Africa

India

Russia

Brazil

Turkey

Argentina

2018 (15 Agus) 2017

Depreciation

The Indonesian Rupiah Exchange RateStability remains preserved

The Rupiah exchange rate stabilization strategy needs to be supported by:

• Indonesia's strong economic fundamentals (controlled inflation, healthy fiscal deficits, and increased debt rating and Ease of Doing Business)

• The policy of stabilizing the Rupiah value is measured in accordance with the economic fundamentals of Bank Indonesia supported by strong foreign exchange reserves

• Strengthening policy coordination continues in order to improve macroeconomic stability, including coordination of supply of foreign exchange supply and needs among SOEs

2008 (15 August)

Volatility in global financial sector is stillrelatively high and could push further USDollar appreciation

The Government and Bank Indonesia areclosely watching the global developmentsand are continuing to optimize themonetary and macro prudential policymix, as well as strengthen policycoordination


Inflation Rate & Components (%)

Inflation Has Been More Benignand creates substantial foundation for robust consumption

• Inflation is more benignsupported by more stable foodinflation as supply sideimproves

• The administered priceinflation is the biggest sourceof pressure in 2017, thepressure is easing as tariffs areadjusted at the end of the firstsemester of 2017

• Manageable inflation in FestivePeriod for the last 3 years

• Good coordination among BI,central and local governmentto curb inflation

• Improving logistic, distribution,and coordination betweeninstitutions are some keyfactors to manage inflation

• Monitoring the prices andimproving some foodcommodities trading couldanticipate price game practices

Future Policies

CPI

5.92%5.36%

0.71%

3.07%

2.95% 2.87%

0.21%

8.70%

2.11%

3.02%

3.61%3.18%


CAD and the Related Policy to Control

• In Q2 2018 CAD widen to 3% of GDP

influenced by the high demand for non-oil

and gas imports along with the increase in

consumption and productive activities, the

increase in oil prices, and high international

trade activities.

• Despite the widening, the CAD in Q2 2018 is

still lower than the pressure period due to the

Taper Tantrum (-4.24% in 2013 and -4.26 in

2014).

• Indonesia's CAD widening can actually signal

a positive potential in the future, due to high

imports for productive activities such as

infrastructure development.

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

CAD (% thd PDB) -1.40 -3.5 -2.24 -3.46 -2.61 -4.24 -3.71 -2.05 -2.33 -4.26 -3.01 -2.71 -2.02 -1.96 -1.96 -2.2 -2.14 -2.41 -2.03 -0.75 -0.89 -1.86 -1.76 -2.34 -2.15 -3.0

Pertumbuhan PDB (%, yoy) 6.11 6.21 5.94 5.87 5.54 5.59 5.52 5.58 5.12 4.94 4.93 5.05 4.83 4.74 4.78 5.15 4.94 5.21 5.03 4.94 5.01 5.01 5.06 5.19 5.06 5.27

Inflasi akhir tahun(%, yoy) 4.3 8.38 8.36 3.35 3.02 3.61 3.18 (Juli)

20182012 2013 2014 2015 2016 2017

• The policies taken include:

• Encourage the use of biodiesel fuel with a

content of 20% from CPO (B20)

• Increase the use of local content

• Alternative domestic products on imported

consumption products

• Encourage the growth of the tourism sector

• Selectively postpone infrastructure projects

that are not growth sensitive

• The government continues to give priority to

efforts to improve the investment climate and

competitiveness for structural improvements

in current transactions and in order to

support growth

Inflation (%, yoy)

GDP Growth

CAD(% of GDP)


Direct Investment Realization

Q1-2018 Q2-2018 1st H-2018

Nominal (Rp Tn)

Growth (% yoy)

Nominal (Rp Tn)

Growth (% yoy)

Nominal (Rp Tn)

Growth (% yoy)

Domestic 76.4 11.0 80.6 32.1 157.0 21.0

Foreign 108.9 12.4 95.7 (12.9) 204.6 (1.1)

Total 185.3 11.8 176.3 3.2 361.6 7.4

FDI Share by Country of Origin Q2-2018

Direct Investment Grew by 3.2 Percent in Q2-2018Political climate factors and exchange rate volatility make investors take wait and see

29,2%

5,3%

9,4%

9,4%

14,4%

33,5%

Lainnya

Malaysia

HongKong

Tiongkok

Jepang

SingapuraSingapore

Japan

Others

China

Hong Kong

Direct Investment Share by Sectors Q2-2018

Mining, 16,0%

Transportation, Warehouse,

and Telecommunic

ation, 14,6%

Electricity, Gas, and

Water Supply, 11,8%

Crops and Plantation

, 9,8%

Housing, Estate, and Building,

8,9%

Others, 39,0%

Capital realization in the second quarter of2018 reached Rp.176.3 trillion or grewslowly to 3.2% (yoy).

• Domestic investment is still growingquite well, which is 32.1% higher thanthe same period the previous year.

• Foreign investment realization growthcontracted by 12.9%.

• Factors of exchange rate instability andthe domestic political climate ahead ofthe general elections made investorstake a wait and see attitude.

• Factors of global instability such as thetrade war between America and Chinaalso helped global investors tend tohold their investments.

• Investment in the mining sector isincreasing, mainly in smelterdevelopment projects.

Asian countries are still the biggestcontributor to foreign investment inIndonesia.

• One third of foreign investmentrealization comes from Singapore.

• There has been an increase ininvestment originating from China andMalaysia.

Malaysia

2. The 2018 Budget Performance


Economic Growth (%, yoy)

Oil Production (thousands of barrel/day)

ICP (US$/barel)

Inflation (%, yoy)

3-month Treasury Bill (%)

Exchange Rate (Rp/US$)

Gas Production (thousands of barrel/day)

5.4

3.5

5.2

13,400

48

800

1,200

5.17*

3.2

4.6

13,855

67

771**

1,146**

Indicators

5.2

4.3

5.2

13,400

48

815

1,150

APBN-P

5.01*

3.9

5.1

13,333

48

793

1,235

Realization until 31 July

2017 2018

Macroeconomic Assumptions 2017-2018

* Until the 1st half** Until June 2018

APBNRealization until 31 July


A. REVENUE 1,665.2 853.8 49.2 10.3 1,894.7 994.3 52.5 16.5 1,903.0

I. DOMESTIC REVENUE 1,655.5 852.9 49.2 10.4 1,893.5 991.0 52.3 16.2 1,897.6

1. Tax Revenue, of which: 1,343.6 680.7 46.2 10.3 1,618.1 780.1 48.2 14.6 1,548.5

a. Income Tax 646.9 367.6 46.9 11.0 855.1 420.6 49.2 14.4

b. VAT 480.7 228.7 48.1 11.6 541.8 261.3 48.2 14.3

c. Land and Building Tax 16.8 0.9 5.8 (18.1) 17.4 1.0 5.5 6.9

2. Non Tax Revenue 311.9 172.1 66.2 10.7 275.4 211.0 76.6 22.6 349.2

II. GRANT 9.7 0.9 28.3 (19.1) 1.2 3.3 273.1 273.1 5.4

B. EXPENDITURE 2,001.6 1,063.8 49.9 2.5 2,220.7 1,145.7 51.6 7.7 2,217.3

I. CENTRAL GOVT EXPENDITURE, of which: 1,259.6 604.7 44.2 3.3 1,454.5 697.0 47.9 15.3 1,453.6

1. Personel Spending 312.7 192.3 55.9 (4.9) 365.7 214.6 58.7 11.6

2. Capital Spending 204.2 58.4 26.0 14.4 203.9 54.1 26.6 (7.4)

3. Subsidy 166.4 67.8 40.2 (15.2) 156.2 91.3 58.4 34.5

4. Grant 5.4 2.0 37.0 847.8 1.5 0.0 2.4 (98.3)

5. Social Spending 55.3 32.0 54.3 14.4 81.3 56.2 69.2 75.8

II. TRANSFER TO REGION AND VILLAGE FUND 742.0 459.1 59.9 1.6 766.2 448.6 58.6 (2.3) 763.6

1. Transfer to Region 682.2 423.3 59.9 (0.2) 706.2 412.8 58.5 (2.5) 703.6

2. Village Fund 59.8 35.8 59.7 - 60.0 35.9 59.8 0.1 60.0

C. PRIMARY BALANCE (119.8) (79.1) 44.5 (49.0) (87.3) (4.9) 5.6 (93.8) (64.8)

D. BUDGET SURPLUS / (DEFICIT) (A-B) (336.4) (210.0) 52.9 (20.3) (325.9) (151.4) 46.4 (27.9) (314.2)

% Surplus / (Deficit) to GDP (2.48) (1.56) 53.4 (2.19) (1.02) 46.6 (34.6) (2.1)

E. BUDGET FINANCING, of which: 361.9 298.8 75.2 0.9 325.9 205.5 63.0 (31.2) 314.2

I. DEBT FINANCING 423.7 296.4 64.3 399.2 205.3 51.4 (30.7) 387.4

II. INVESTMENT FINANCING (59.8) (0.1) 0.2 (65.7) (1.6) 2.4 1,140.0

Outlook

2017 2018

31 Dec

Realizati

on

July

Realization

% Growth to

July 2017

BUDGET ITEMS%

Realization

to Budget

BudgetJuly

Realization

%

Realization

to Budget

% Growth to

July 2016

Healthy July 2018 Budget Realization

• Healthy budget:Robust tax growth and positive performance of VAT and Income Tax

• Central Government Expenditure grows robustly

• Deficit realization of 1.02% of GDP is much lower compared to July 2017 of 1.56%

• Primary balance surplus is significantly higher than last year, highlighting improving fiscal performance and sustainability that well

2018 Budget Realization


Budget Realization Update until 31 July 2018

(73,2)

(247,5)

(210,0)

(151,3)

92,9

38,3

88,7

55,3

15,0

(140,2)

(79,1)

(4,9)

(250,0)

(200,0)

(150,0)

(100,0)

(50,0)

0,0

50,0

100,0

150,0

(250,0)

(200,0)

(150,0)

(100,0)

(50,0)

0,0

50,0

100,0

150,0

2015 2016 2017 2018

Defisit Anggaran Silpa Keseimbangan primer (RHS)

0,63% PDB

1,82% PDB1,55% PDB

1,02% PDB

Primary balacce deficitdecreased compared tothe last 3 years

Realization of thebudget deficit is lowerthan in 2016-2017

SiLPA realization islower than the previousyear

Trillion Rupiah Trillion Rupiah

Realization of the APBN deficit and the primary balance deficit up to July 31, 2018, the lowest compared to the same period in 2016-2017

Budget Deficit SiLPA Primary Balance


Increased Economic Activity and Taxpayer Compliance Have a Positive Impact on Increasing Tax Revenue until July 2018…grows 14.6% (without TA 16.6%)

1,2

(2,1)

12,0

14,6

(4,0)

(2,0)

0,0

2,0

4,0

6,0

8,0

10,0

12,0

14,0

16,0

0,0

100,0

200,0

300,0

400,0

500,0

600,0

700,0

800,0

2015 2016 2017 2018

%Trillion Rupiah

PPh migas Pajak nonmigas Kepabeanan dan Cukai Pertumbuhan

621,1

780,1

680,7

607,9

Oil & gas

income tax

Non-oil & gas

income tax

Influencing factors are:

1.The increase in economic growth in Semester I 2018 was 5.17 percent compared to 5.01 percent in the same semester last year.

2.Rising oil prices (ICP) in the period of Jan-Jul 2018 USD67.2 per barrel compared to USD48.4 in the same period last year.

3.The improvement in world commodity prices, especially coal, although still limited, amounted to USD97.7 per ton in January-July 2018 compared to USD81.7 per ton in the same period last year.

4.Increased level of taxpayer compliance in paying tax.GrowthCustoms & excise


Customs and Excise Revenue Growth until July 2018 It is the highest in the last three years

-7,9

-14,9

8,7

16,4

(20,0)

(15,0)

(10,0)

(5,0)

0,0

5,0

10,0

15,0

20,0

0,0

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

90,0

100,0

2015 2016 2017 2018

persentriliun Rp

Cukai Bea Masuk Bea Keluar Pertumbuhan

86,2

92,9

79,873,4

increased export and import activity compared to the same period last year.

The recovering global trade is marked by improving commodity prices on the world market.

Improvement of customs and excise policies e.g. controlling the risky import / PIBT and controlling customs (eradicating illegal excise)

Trillion Rupiah %

Excise Import duty Export duty Growth


In the Last Three Years, the Absorption of Ministries/GovtInstitutions Expenditures until 31 July 2018 Continues to Increase…while the absorption rate of Non K / L Spending tends to be stable

32,8

39,7 41,2 44,4

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

50,0

-

100,0

200,0

300,0

400,0

500,0

600,0

700,0

800,0

900,0

2015 2016 2017 2018

Chart Title

APBN/P Realisasi s.d akhir Juli % penyerapan (RHS)

Triliun Rupiah %

50,2 47,7 48,5

52,9

-

10,0

20,0

30,0

40,0

50,0

60,0

-

100,0

200,0

300,0

400,0

500,0

600,0

700,0

2015 2016 2017 2018

Chart Title

APBN/P Realisasi s.d akhir Juli % penyerapan (RHS)

Triliun Rupiah %

Expenditure: K/L

Budget Realization until end of July % of Budget absorption (RHS) Budget Realization until end of July % of Budget absorption (RHS)

Expenditure: Non-K/L

Factors affecting the absorption rate of K / L expenditurt:

1. Continuation of the policy of accelerating the implementation of activities through early auction;

2. Acceleration of distribution of social assistance such as PBI, PKH, and Bidik Misi;

3. THR payment for civil servants conducted at the end of semester I 2018;

4. Implementation of several strategic agendas such as simultaneous local election and Asian Games preparation.

Trillion Rupiah Trillion Rupiah


Increased Absorptive Capacity in Non-Physical DAK and Village Funds Slowing absorption capacity on Physical DBH and DAK

52,8 53,6 49,7 43,2

48,0

49,2

52,1

48,5

45,0

46,0

47,0

48,0

49,0

50,0

51,0

52,0

53,0

-

10,0

20,0

30,0

40,0

50,0

60,0

2015 2016 2017 2018

Pe

rse

n

Triliu

n R

up

iah

Real 31 Juli % serap

235,3 256,4 266,8 267,3

66,7

66,5

66,9

66,6

66,3

66,4

66,5

66,6

66,7

66,8

66,9

67,0

210,0

220,0

230,0

240,0

250,0

260,0

270,0

2015 2016 2017 2018

Pe

rse

n

Trili

un

Ru

pia

hReal 31 Juli % serap

23,2 26,4 26,7 19,3

39,5

29,4

38,4

30,9

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

45,0

-

5,0

10,0

15,0

20,0

25,0

30,0

2015 2016 2017 2018

Pe

rse

n

Triliu

n R

up

iah


56,3 73,3 66,1 71,7

54,8

60,4

57,5 58,1

52,0

53,0

54,0

55,0

56,0

57,0

58,0

59,0

60,0

61,0

-

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

2015 2016 2017 2018

Pe

rse

n

Triliu

n R

up

iah


14,7 27,3 35,8 35,9

70,7

58,1 59,7 59,8

-

10,0

20,0

30,0

40,0

50,0

60,0

70,0

80,0

-

5,0

10,0

15,0

20,0

25,0

30,0

35,0

40,0

2015 2016 2017 2018

Pe

rse

n

Triliu

n R

up

iah


REVENUE SHARING REALIZATION GENERAL ALLOCATION FUND REALIZATION PHYSICAL DAK* REALIZATION

NON-PHISICAL DAK REALIZATION VILLAGE FUND REALIZATION

UNTIL 31 JULY 2018

% absorb % absorb % absorb

% absorb % absorb

Real 31 July Real 31 July Real 31 July

Real 31 July Real 31 July

Perc

ent

Perc

ent

Perc

ent

Perc

ent

Perc

ent

Trilli

on R

upia

h

Trilli

on R

upia

h

Trilli

on R

upia

h

Trilli

on R

upia

h

Trilli

on R

upia

h

*DAK: Specific Allocation Fund


Financing Plan For 2018

Creating prudent and sustainable fiscal management

Government Securities to Meet State Budget Financing

Domestic Government Securities

Issuance Targets for Government Securities

70% -75%

25% -30%

Government Debt Securities

Weekly Auction:

Conventional securities 24-25x

Islamic securities 24-25x

Non-Auction

Retail Bonds and Retail Sukuk

Private PlacementBased on

request

Target avg. tenor maturity for Government Securities Issuance

7-8 years

Instruments

Indicative Budget Target

IDR tn USD bn

Budget Deficit (2.19% of GDP) 325.9 24.3

Financing 399.2 29.8

Government Securities (Net) 406.4 30.3

Government Securities (Gross) 834.3 62.3

Composition

Domestic Government Securities 80 - 83%

International Government Securities 17 - 20%

International Government Securities

Avoid crowding out in domestic market

Provide benchmarks for corporate bonds

Diversify investor base

• USD

• Sukuk USD

• EUR

• JPY

Alternative of Issuance

Private

PlacementAuction

Book

Building

Government Securities Financing Realization

Budget 2018

Realization

(as of May,

2018)

% Realization

to Budget

2018

IDR tnUSD

bnIDR tn

USD

bn

Government securities (net) 406.4 30.3 190.8 14.2 46.9%

Government securities (gross) 834.3 62.3 434.9 32.5 52.1%

Government debt securities (GDS) 602.2 44.9 303.2 22.6 50.4%

- Domestic GDS 504.3 37.6 205.3 15.3

- International bonds 103.8 7.3 98.0 7.3

Government Sukuk 232.1 17.3 131.7 9.7 56.8%

- Domestic Government sukuk 190.7 14.2 85.7 6.7

- Global Sukuk 41.4 3.0 41.4 3.0

3. Fiscal Policy and 2019 Proposed Budget


Description (% GDP)Budget

20182019** 2020 2021 2022

Revenue & Grants 12.76 12.7 – 13.5 12.7 – 13.9 13.5 – 14.0 13.6 – 14.4

Tax Ratio* 11.6 11.4 – 11.9 11.4 – 12.5 11.6 – 13.0 11.8 – 13.6

Total Spending 14.95 14.2 – 15.4 14.3 – 15.6 15.0 – 15.7 15.1 – 16.0

Capital Expenditure 1.4 1.5 - 1.7 1.8 – 2.3 2.2 – 2.7 2.3 – 3.0

Primary Balance (0.59) 0.05 -(0.30) 0.05 – 0.01 0.10 – 0.01 0.1 – 0.05

Budget Deficit (2.19) (1.6) - (1.9) (1.6) - (1.7) (1.5) - (1.7) (1.5) - (1.6)

Debt Ratio 29.07 28.8 – 29.2 28.50 - 28.61 27.81 – 28.30 26.25 – 27.87

Strengthening quality of spending by increasing productive

avenues

Enlarging fiscal space through revenue increase

Efficiencies in non-priority spending

Developing creative and innovative financing

Manageable deficit and debt level

Positive primary balance in 2020

*Including revenue from oil &gas and general mining

** submitted to parliament for discussion

Medium Term Fiscal FramewokFocusing on quality and productive spending, expanding fiscal space and sustainability


Indicators

2017 2018 2019

Realization OutlookProposed Budget

Economic Growth5.1 5.2 5.3

(%, yoy)

Inflation3.6 3.5 3.5

(%, yoy)

Exchange Rate 13,384 13,973 14,400

(Average IDR/US$)

3-Month Treasury Bill 5.0 5.0 5.3

(%)

ICP51 70 70

(US$/barrel)

Oil Production (thousands ofbarrel/day) 804 775 750

Gas Production

1.142 1.116 1.250(millions of barrels/day)

Macroeconomic Indicators that Form the Basis for Calculating the 2019 Budget Draft

Focus of the 2019 Proposed Budget

• Efficiency and quality of prioritizedspending increasing human capital,

social protection, competitiveness,investment and infrastructure

• Realistic revenue mobilization taxes

for competitiveness & investment

• Fiscal health productive, efficient,

and sustainable

Considering the latest developments in economic condition, outlook and future prospect


2019 Proposed Budget2019

Proposed Budget

the budget deficit in 2019 is directed towards further decline

primary balance is getting closer to positive

Budget Financing

Debt financingInvestment

financing

State

Revenue State

Expenditure

TaxationNon-Tax

Central

Government

Expenditure

Transfer to

Region &

Village FundGrant

Trillion rupiah


State Budget is Directed towards Declining Deficit and Positive Primary Balance

(52,8)

(98,6) (93,3)

(142,5)(125,6) (124,4)

(64,8)

(21,7)

(0,64)

(1,09)

(0,92)

(1,23)(1,01)

(0,92)

(0,44)

(0,13)

(1,40)

(1,20)

(1,00)

(0,80)

(0,60)

(0,40)

(0,20)

-

(160,0)

(140,0)

(120,0)

(100,0)

(80,0)

(60,0)

(40,0)

(20,0)

-

2012 2013 2014 2015 2016 2017

Outlook

2018

RAPBN

2019

Keseimbangan primer (RHS)

Defisit Keseimbangan Primer terhadap PDB (%)

(153,3)(211,7)

(226,7)

(298,5) (308,3)(341,0)

(314,2)(297,2)

(1,86)

(2,33)

(2,25)

(2,59)(2,49) (2,51)

(2,12)

(1,84)

(3,00)

(2,50)

(2,00)

(1,50)

(1,00)

(0,50)

-

(400,0)

(350,0)

(300,0)

(250,0)

(200,0)

(150,0)

(100,0)

(50,0)

-

2012 2013 2014 2015 2016 2017

Outlook

2018

RAPBN

2019

Defisit Anggaran Defisit terhadap PDB (%) - RHS

Triliun Rp

persen Triliun Rp persenBudget decifit is reduced under 2% of GDP, for the first

time since 2013Primary balance gets near to Rp0 consistently going

down since 2015

Budget Deficit

Deficit to GDP (RHS)

Primary balance (RHS)

Primary balance deficit to GDP (%)

Budget Draft 2019

2019 Proposed Budget

Rp Tn2019

Proposed Budget


Balancing between Physical and Human Capital Development, Central and Regional Development, as well as Progressive Taxes

Taxes Become an Incentive to Maintain the Purchasing Power of Society &

Stimulus for Economy

• Increase of non–taxable income•2013: 24.3 millionsRupiah•2016: 54.0 millionsRupiah

Tax Incentives for the business on a targeted basis (tax holiday / allowance)

Pioneer industriesconsider investment value, export orientation, and job

creation

Specific Criteria, e.g.:

Strengthening and Balancing of Physical and Human Capital Development

Education Budget

2015 : Rp390.1 T 2019 : Rp487.9 T

Health Budget2015 : Rp65.9 T 2019 : Rp122.0 T

Infrastructure Budget

2015 : Rp256.1 T 2019 : Rp420.5 T• Deduction ofincome tax rate forSMEs to 0.5%

Strengthening the balance of development between central and the regions

Central Govt (Line Ministries)

2015: Rp732.1 T 2019 : Rp840.3 T

Transfer to region & village fund

2015 : Rp623.1 T 2019 : Rp832.3 T

almost equal

Social Protection Budget

2015 : Rp249.4 T 2019 : Rp381.0 T


Taxation Revenues is the Main Source to Finance the State Expenditures

74,0% 82,3% 82,6% 80,6%81,4%

83,1%

25,7% 17,0% 16,8%18,7%

18,3%

16,9%

1.550,5 1.508,0 1.555,9 1.666,4

1.903,0

2.142,5

0,0

500,0

1.000,0

1.500,0

2.000,0

2.500,0

2014 2015 2016 2017 outlook2018

RAPBN2019

Penerimaan perpajakan PNBP Hibah

140,8

223,2255,7

380,9403,0

429,1387,4

359,3

31,7

58,5

14,6

49,0

5,8

6,5 (9,7)

(7,3)

-20,0

0,0

20,0

40,0

60,0

80,0

0,0

100,0

200,0

300,0

400,0

500,0

2012 2013 2014 2015 2016 2017 outlook

2018

RAPBN

2019Pembiayaan Utang Growth (RHS)

Taxation contributions continue toincrease -->83.1% (2014: 74.0%)

Debt financing is decreasing

Taxation revenue Non-taxrevenue

Grant

Debt financing Growth (RHS)


The 2019 Proposed Budget to Promote Investment and Competitiveness through Human Capital Development

1. Increasing investment in educationto improve the quality of humanresources by strengthening PIP, BOS,scholarships, vocations, andaccelerating school renovations.

2. Strengthening social protectionprograms through JKN expansion, aswell as increasing the amount of PKHbenefits.

3. Maintaining the continuity ofinfrastructure development forequitable development.

4. Strengthening bureaucratic reformby facilitating public services andinvestment.

5. Successful implementation of ademocratic agenda.

Focus1. Strengthening budget planning

supported by comprehensive andcoordinated monitoring andevaluation

2. Efficiency through savings andappropriate procurement ofmotor vehicles, buildings, andofficial travel

3. More accountable management(since 2016, LKPP received thetitle of WTP)

The Focus of 2019 Expenditure Better Spending Quality Supported by Accountability Improvement


Government expenditure in 2019 is focused on supporting increased competitiveness, exports and investment, followed by strengthening value for money

PKH (Family Hope Program) 10 millions

beneficiary families

BPNT (Noncash food assistance 15.6 million

familes

Health budget, mostly:

Health protection of 96.8 people

(Contribution Aid Recipients/ PBI JKN)

Human capital

development

Roads

2,007 km

Irrigation162

thousands

Welfare of public officers and

retirees

Housing/flats

10,742 units

Electrification ratio

99.9 %

Bureaucrecy reforms for public service

improvement

Democracy agenda

Presidential election &

legilative 2019

Election security2019

Infrastructure

CompletionSocial Protection Democracy

Agenda

Effective &

efficientbureaucracy

Uncertainty

Anticipation

Education budget, mostly:

20.1 millions students under KIP (Indonesian Smart

Card)

471.8 thousands university students under scholarship

Bidik misi

Vocational study

Education infrastructure

Mitigating disaster risk, environmental

conservation, economicstability, security

Interest subsidy: Micro and small

credits Housing

Dams

48 unit

Train Railway415.2 km

Health Rp 122 T

Education Rp487.9 T Infrastructure Rp420.5 T Social protection

Rp381.0 T

Election Rp 24.8 T

Defence Rp220.5 T Budget Rp368.6 T Budget Rp38.6 T


The Education Budget is maintained at 20% of the Budget, directed to improve access, distribution and quality of education

141.9 158.0

Transfer to Local

Government

FInancing

248.2 309.9

- 20.0

Central government

2019

Ministry of education

Ministry of Religious Affairs

Ministry of Research

Ministry of Housing & Public

Works

36.0

51.940.2

6.6

DAU

DAK Physical

DAK Non-physical

168.6

18.7117.7

Trilion Rupiah

Quality Improvement:

Improving teacher quality through inter-regional

teacher certification and redistribution

Increasing the effectiveness of BOS (School Operations

Aid)

Transfer of BOS from Ministry of Education and Culture

to DAK (2016)BOS based on performance (2019)

Access Improvement:

The Smart Indonesia Program of 19-20 million students /

year was followed by an increase in target accuracy

Acceleration of the construction of school and university

facilities (part of which is carried out by the Ministry of

Public Works and DAK supervised by the Ministry of

Public Works) Expansion of the affirmation / Bidik Misi

scholarship program (2015: 269 thousands) (2019: 417

thousands)

Strengthening LPDP in the form of SWF as the Education

endowment manager starting in 2017 and 27 thousand

scholarships has been distributed.

Synergy Strengthening:

Budget Synergy between KL and DAK

Enforcement fulfills the education budget by the

Regional Government

Link and match vocational education

2015

56.845.330.7

-

135.09.4

97.4

Some improvements are made

353,4 390,1 370,9 406,1 434,6487,9

6,310,4

-4,9

9,5 7,012,3

0

400

800

2014 2015 2016 2017 Outlook 2018 RAPBN 2019

Anggaran Pendidikan Pertumbuhan (%)Education budget Growth (%)


5% Health Budget to improve access and quality of health services, as well as strengthening the handling of stunting

88.2

Local government 33.7

Ministry of HealthBPOMBKKBNHealth Insurance for Civil Servant

58.72.03.85.8

DAK PhysicalBOK and BOKB

20.312.2

2019

Trilion Rupiah

Quality Improvement

Improving the quality and availability of health workers

Increased effectiveness of BOK and BOKB*)

Transfer of BOK and BOKB from Ministry of Health to DAK

(2016)

Strengthening promotive and preventive programs

Encouraging a healthy lifestyle through Germas

Improved nutrition for pregnant, lactating and toddlers and

immunization

Access Improvement

Expansion of Contribution Aid Recipients in the framework of

National Health Insurance (2015: 86.4 million people; 2019:

96.8 million people) followed by an increase in target

accuracy

Improving services at first-level health facilities

Synergy Strengthening

Budget Synergy between Line Ministries and DAK

Enforcement fulfills the health budget by the Regional

Government Encouraging PPP to build hospitals in the

regions

Strengthening stunting handling efforts

54.6

45.91.02.2

4.4

6.3

5.2-

2015

Some improvements are made

59,765,9

91,4 92,4

107,4

122

29,6

10,4

38,7

1,1

16,2 13,6

-60

-40

-20

0

20

40

60

0

20

40

60

80

100

120

140

2014 2015 2016 2017 Outlook 2018 RAPBN 2019

Anggaran kesehatan Pertumbuhan (%)

Central government

Growth (%)Health budget

*)

BOK: Health Operations Aid

BOKB: Family Planning Operations Aid


173.8

Local government

Financing

201.7

45.0

Central government

Strengthening infrastructure development through creative financing breakthroughs to accelerate infrastructure completion

20152019

Ministry of Housing & Public Works*

Ministry of Transportation*108.2

38.1

DAK 39.1

DAU and DBH non earmark** 129.1

**) 25% is for infrastructure

Village Fund 29.2

17.8LMAN 22.0

PMN

*) Personnel expenditure is excluded

Trilion Rupiah

Trillion Rupiah

183.0

39.1

34.1

107.4

44.4

8.3

28.8

-

27.7

-

Increasing the effectiveness of infrastructure budget allocations and improving the execution of infrastructure projects

Focus on connectivity infrastructure, and increasing production capacity e.g.: roads, airports, ports, energy and electricity, dam irrigation and ponds

Optimizing the role of LGs, through transfers to regions:

DAK for infrastructure such as roads, irrigation, sanitation and housing. 25% DTU for infrastructure (since 2017)

Village funds to support infrastructure (since 2015). Optimizing the role of BUMN and Private

Government Investment (including PMN) to support infrastructure: LMAN for land provision (starting in 2016), PMN for assignment of infrastructure development

SOE and private empowerment through PPP schemes, such as VGF (starting in 2015), PDF, guarantees, and APU PPP (starting 2019).Increasing cross-sectoral coordination including with the Regional Government

Encouraging development commitments as well as maintaining infrastructure, especially in ministries / agencies related to infrastructure

Policy

157,4

256,1 269,1

379,4 410,4420,5

62,8

5,1

41

8,2 2,4

-100

-65

-30

5

40

0

100

200

300

400

500

600

700

800

2014 2015 2016 2017 APBN 2018 RAPBN

2019

Anggaran Infrastruktur Pertumbuhan (%)Infrastructure budget Growth (%)


Road (km)(development / reconstruction / widening)

Infrastructure Budget is directed to support the achievement of various targets related to connectivity, housing, and water resources infrastructure

Connectivity Infrastructure

2,007.0

Bridge (m)(development and rehabilitation)

27,067

Railway (km’sp)(development and completion)

2019: 415.20

New Airport (location)

2019: 4

Infrastructure Development Indicators:

Ease of Doing Business Ranking

2019: toward 402015: 114

Percentage of household living in decent housing

2019: 50.02016: 43.8

Percentage of good road conditions

2019: 942015: 92

KPR Sejahtera/ FLPP (thousand units)

LMAN (project) PT. Hutama Karya (km)

2019: 16

2018: 23

2019: 253

2017: 199

Highway (financing)

Ministry of Public Works and Housing’s Output in 2019:• Development and renovation of 54,000 classrooms• Development and renovation of 45 colleges

2019:

*) preliminary number

2017:

2,528.7

19,875

2017: 269.98

2017: 3

2019: 48

Dam (units)

2019: 162.0

Irrigation system (thousand ha)(development and rehabilitation)

2017: 36

2018: 194.7

Housing infrastructure for low income people

2019: 7,512

Flats(units)

2019: 84.0

2016: 7,740 2018: 42.0

2016:

2019:

Water resources infrastructure

Target and achievement*)


Engagement of Private and SOEs Roles in Supporting Infrastructure Development through PPP AP in 2019 is optimized up to Rp9.38 T

Ministry For Public Works

and Human Settlements

(4 projects)

Ministry of Environment and

Forestry (2 projects)Ministry of Transportation (4 projects)

Preservation of East Roads of Trans

Riau and South Sumatera

Preservation of Trans Papua

Roads (Wamena-Mamugu)

Bridge Replacement in main

Trans Java Island

Preservation of

Roads and Bridges

in the middle and

west of Sumatera Island

Development of

Sumatera Regional

Integrated B3 Waste

Treatment Center

Development of Sulawesi

Regional Integrated B3 Waste

Treatment Center

Development and Operation of

Bau-Bau Port

Development and Operation of Gorontalo

Anggrek Port

Development of Railways

(Makassar-Pare Pare)Development of Proving

Ground BPLSKB Bekasi


Acceleration of Poverty Alleviation that Already Achieved Single Digit Level in 2018 (9.82%) to 8.5% – 9.5% in 2019

Allocation of Social Protection Programs

249,4 259,7 273,3 287,0

381,0

-41,9

4,2 5,2 5,0

31,9

-50-40-30-20-10010203040

0

100

200

300

400

500

2015 2016 2017 2018ABPN

2019RAPBN

Alokasi (LHS) Pertumbuhan (RHS)

Promoting the development of micro, and Small and Medium Enterprises (SMEs)• Special tax incentives in the form of final income tax

rates of MSMEs at 0.5%, • Business credit facilities through the provision of

interest subsidies to 11.8 million of old debtors and 4 million of new debtors,

• Revolving fund distribution to increase access and strengthen capital for MSMEs, including micro businesses of Islamic boarding school (Pesantren).

Poverty Level (%)

10,09,5

9,5

8,5

11,0 11,110,7

10,1

8

9

10

11

12

2014 2015 2016 2017 2018proyeksi

2019

(%)Rp Trillion

Policy

Providing social protection guarantees especially for the 40% population with the lowest income

Increasing Contribution Aid Recipients (PBI JKN) to 96.8 million people

Strengthening the Family Hope Program (PKH) through increasing the amount of benefits 100% conditional with target of 10 million beneficiary families.

The target of Non-Cash Food Aid is gradually increased to 15.6 million beneficiary families.

Strengthening Agrarian Reform and Social Forestry Reform for structuring productive assets and to support farmers and small people

Allocation (LHS) Growth (RHS)

2018

projection


Social Protection for Improving Welfare of the Most Vulnerable Population

1,2

15,6 15,6

2017 2018ABPN

2019RAPBN

Beneficiary Family of Food Assistance (million)

0,30,8

1,4

2017 2018ABPN

2019RAPBN

Debtor of Financing Credit for Ultra Micro

(Accumulation, million )

269,2 331,8 364,4 401,7 471,8

2015 2016 2017 2018APBN

2019RAPBN

Beneficiary students of Bidikmisi (thousand)

Food Assistance:• Change of distribution

mechanism to non-cash food assistance (BPNT) for:⁻ Guarantee accuracy of target,

time, as well as quantity; and⁻ Give flexibility for

beneficiaries to choose the type of food that they need.

• Expansion of the BPNT beneficiary family from 1.2 million (2017), to 10 million (2018) and planned to 15.6 million (2019)

Ultra Micro Credit:• Increase the target of

beneficiary of micro credit from 0.3 million debtor to 1.4 million (cumulative)

• Expand debtor segment to micro business of Islamic boarding schools (pesantren)

Bidikmisi:• Increase the number of

beneficiary students from 269.2 thousand (2015) to 471.8 thousand students (2019)

Indonesia Smart Card (PIP):Supporting to achieve net enrollmenttarget (APM)Family Hope Program (PKH)a. Target Expanding from 3.5 million

(2015) to 10 million of BeneficiaryFamily.

b. 2019 : Increasing the aid amountfrom average of Rp1.7 million toaround two folds.

c. Considered most effective inalleviating poverty and inequality.

20,5 20,7 19,9 19,6 20,1

3,5

6,0 6,2

10,0 10,0

2015 2016 2017 2018APBN

2019RAPBN

Beneficiary of PIP and PKH (million)

PIP (Siswa) PKH (KPM)

86,4

91,192,1 92,4

96,8

2015 2016 2017 2018APBN

2019RAPBN

Beneficiary of PBI(million people)

PBI (Jiwa)

Contribution Aid Recipients of National Health Insurance (PBI JKN) a. 2015-2019 : Expanding PBI

coverage from 86.4 millionpeople (2015) to 96.8 million(2019) Supporting UHC

b. 2016 : Adjusting the aid fromRp19,225,- to Rp23,000,- perperson per month

PIP (Students) PKH (Family)


Democracy Indicator

Voter Participation Level 77.5

Indonesia Democracy Index

a. Improving quality of democracy institutions

b. Ensuring political rights and civilian freedom

c. Manifesting neutral bureaucracy

d. Executing stages of election safely

20192018

Policy direction

Activities related to 2019 general election

KPU Carrying out stages of 2019 election (infrastructure, voting

process, recapitulation, education of election)

Bawaslu Supervising the election stages and institution

development

MPR / DPD / DPR 5 years assembly, inauguration, and

accommodation of new parliament members

MK Handling election dispute

Kemenkominfo/RRI/TVRI Dissemination of information of the election

Kemhan/Polri Securing the election

7574.6

75.1 (2014)

24.816.0

20192018Budget Allocation

(trillion rupiah)

The Government supports 2019 General Election as a part of national democracy agenda


186,0 174,2 166,4

228,1 220,9

-

50,0

100,0

150,0

200,0

250,0

2015 2016 2017 2018 Outlook RAPBN 2019

Subsidy

Subsidi Energi Subsidi Non Energi

3,2%

37,1%

4,5%6,3%

Non EnergyEnergy

Subsidy Policy is directed to be better targeted and toward non-cash distributionThrough various policies in energy and non-energy subsidy

(trillionrupiah)

EnergySubsidy

Fuel and LPG Subsidy

Electricity Subsidy

100.1

156.5163.5

• Distribution improvement for better target accuracy

• Diesel Rp2,000/liter

• Volume:- Diesel 14.5 million KL- Kerosene 610 thousand KL

- LPG 6.978 million Kg

56.5

• Targeted subsidy for customer of 450 VA and 900 VA

• Increasing Electrification Ratio

• Increasing the use renewable energy

220.9228.1

2019

2018

Non-energySubsidy

Fertilizer

29.5

PSO• Public Service Obligation

• LKBN Antara, PT Pelni, PT KAI

• Subsidy to LRT Jabodebek in accelerating “KA

Ringan” program

64.364.7

• Improving beneficiary data with citizen’s main identification number

(NIK)

• volume of fertilizer: 9.55 million ton

6.8

among

others:

Interest Subsidy Program

16.7

• KUR distribution target of Rp120 T with 7%

interest is dedicated to micro and SMEs as

well as Indonesian migrant workers for

financing in productive sector

• Credit subsidy to housing for low income

people for 100 thousands unit

(Trilion Rp)


Transfer to Regions

759.3 703.6

Revenue Sharing Fund

General Allocation Fund

Physical Specific Allocation Fund

Non-physical Specific Allocation Fund

104.0 95.9

414.9 401.5

77.2 59.3

131.2 117.4

• Min 50% revenue from Tobacco Excise for supporting National Health Insurance Program (JKN)

• Reforestation fund can be used to prevent forest fire and social forest• Sharing the burden if commodity price and subsidy raise• Settling the underpayment of revenue sharing fund in fourth quarter• 25% Revenue Sharing Fund for infrastructure spending

Transfer to Regions and Village Funddirected to strengthen fiscal decentralization implementation and the achievement of Nawacita (The Nine Priorities)

• Reducing horizontal fiscal imbalance• Final for certainty to regions;• Affirmation increase to archipelagic area;• Taking into account base salary hike of 5%, 13th salary and Lebaran

bonus, as well as civil servants formation in the regions;• 25% General Allocation Fund for infrastructure spending.

• Improving performance quality (BOS Kinerja)• Increasing unit cost of BOS for vocational education• Affirmation for underdeveloped, outer, and transmigration area

• Pursuing the lag in public service infrastructure;• Money follows program;• Increasing the allocation for infrastructure in education;• Proposal from regions in line with national priorities; and• Addition of subcomponent of Sport Hall and local library

2019: 73.0 2018: 60.02015 : 20.8

Regional Incentive Fund 10.0 8,5

• Triggers improvement in financial accountability performance, public administration service, basic public service, and people’s welfare.

• Promoting investment climate improvement in regions (ease of doing business category)

• Improving the environment quality (waste management category)

Special Autonomy, DTI*, Privilege Fund for DIY 22.1 21.1

• Education, health, and infrastructure in Papua and West Papua• Funding education, social and health in Aceh; • Funding the privilege matters of DIY Province

• Formula and affirmation for acceleration of poverty alleviation• Continue the scheme of cash labor intensive (cash for work)• Increasing the portion of people empowerment• Strengthening village’s human resources capacity and village

assistants

Triliun Rupiah

Village Fund

Average per Village

2019: Rp973.9 million2018: Rp800.5 million2015: Rp280.0 million

832.3763.6 2018

2019

*)DTI: Additional Infrastructure Fund for Papua

4. Policy for Sustainable Development

42

186,0 174,2 166,4

228,1 220,9

-

50,0

100,0

150,0

200,0

250,0

2015 2016 2017 2018 Outlook RAPBN 2019

Subsidy

Subsidi Energi Subsidi Non Energi

3,2%

37,1%

4,5%6,3%

Non EnergyEnergy

Subsidy Policy is directed to be better targeted and toward

non-cash distributionThrough various policies in energy and non-energy subsidy

(trillionrupiah)

EnergySubsidy

Fuel and LPG Subsidy

Electricity Subsidy

100.1

156.5163.5

• Distribution improvement for better target accuracy

• Diesel Rp2,000/liter

• Volume:- Diesel 14.5 million KL- Kerosene 610 thousand KL

- LPG 6.978 million Kg

56.5

• Targeted subsidy for customer of 450 VA and 900 VA

• Increasing Electrification Ratio

• Increasing the use renewable energy

220.9228.1

2019

2018

Non-energySubsidy

Fertilizer

29.5

PSO• Public Service Obligation

• LKBN Antara, PT Pelni, PT KAI

• Subsidy to LRT Jabodebek in accelerating “KA

Ringan” program

64.364.7

• Improving beneficiary data with citizen’s main identification number

(NIK)

• volume of fertilizer: 9.55 million ton

6.8

among

others:

Interest Subsidy Program

16.7

• KUR distribution target of Rp120 T with 7%

interest is dedicated to micro and SMEs as

well as Indonesian migrant workers for

financing in productive sector

• Credit subsidy to housing for low income

people for 100 thousands unit

(Trilion Rp)


Government Commits to Qualified and Sustainable DevelopmentImproving economic competitiveness and productivity while maintaining stability

Facilitating Investment and Export

1. Sectoral Tax Incentivesa. Exemption of import duty of

machines and capital goodsb. Incentives on

exemption/repaymentc. Incentives on import duty borne

by the government (BMDTP) forcertain industries

d. Tax allowance/holidaye. Income tax deductionf. Accelerating tax restitution

2. Spatial Tax Incentivesa. Special Economic Zones (12 SEZ)b. Industrial area/bonded area

(1396 KB)c. Bonded Logistics Center (60

PLB/81 locations)d. Free Trade Zone (4 KPBPB)

Maintaining Stability in the Midst of Global Turmoil

1. Strengthening monetary andfiscal policy mix andcoordination

2. Boosting the consumption of20% of CPO (B20) biodiesel

3. Increasing local content ofinfrastructure projects,especially electric generator

4. Selective import

5. Extensification of productsimposed by increased importincome tax

1. Acceleration completion ofinfrastructure

2. Simplifying licensing

3. Implementing OnlineSubmission System

4. Efficiency of dwelling time

5. Promoting upstream industry

6. Improving tax holiday upto 20 years

7. Preparing additionalincentive to support humanresources developmentthrough vocational trainingand R&D

8. Fostering tourism sector

Improving Competitiveness and Productivity


Structural Reforms to Support Economic Fundamental …to boost FDI, consumption, and export

Economic policy packages to create conducive investment climate and resolvesupply side issues

FDI relaxation to encourage more investment to boost productivity and createjobs

Infrastructure acceleration to improve connectivity and unleash economicpotential across nation

Tax Incentive for several sectors to advance the sectors and tax incentive forseveral zones to reduce disparities among regions and bolster regionaleconomic growth

Launching of Online Single Submission to simplified investment


Tax Reform has been Implemented since 2015 …through policy strengthening and organizational improvement

2015

2016

2017

20182019

Income Tax Relief onAsset Revaluation

Tax Amnesty• Uang tebusan mencapai 1% PDB

• Reducing MSMEs tax to 0.5% • Accelerating restitution• Increasing tax amnesty

compliance• Compliance Risk Management

(roll-out)

• AEoI implementation• Targeted incentives• Compliance Risk

Management (full)• IT enhancement

Human ResourcesOrganization RegulationIT and Database Business Process

Tax Reform

Increasing Non-taxableIncome

• From Rp24.3 milliom(2013) to Rp54 miilion

• Confirmation on taxpayer status


Tax Incentives to Boost Export and Investment

• Tax deductions to support the

development of certain

sectors (pioneers),

• Tax allowances to support

additional investment,

• Tax reduction to support R &

D and vocational activities.

Tax Incentive Policy

,

Tax Incentives

Tax Allowance

for Investment

Provision of Import Duty

Facilities

Special Zone

Income Tax Deduction for Pioneer

Industry

Export Facilities


Describtion PMK 103/2015 PMK 35/2018

Subject New Tax Payers New Investments

DeductionPercentage

10-100% 100%(single rate)

Duration

5-15 years

Can be extetended to 20 years with Minister (MoF) discretion

Transition Unregulated 50% in 2 years

Industry Scope8 Scopes on Pioneer

Industries17 Scopes of Pioneer Industries

Tax Holiday Facilities (Revised Regulation)Changing of mindset to support investment through attractive incentives and simplified procedure on CIT

OLD NEW

Duration (Years)

Investment plan (Billion IDR)

5 500bn to < 1tn

7 1tn to < 5tn

10 5tn to < 15

15 15tn to < 30tn

20 Minimum 30tn


Deduction of Income Tax Rates for SMEs

1% 0,5%

Benefits

• Encouraging community participation in formal economic activities

• Providing equality

• Ease in carrying out tax obligations

• Providing opportunities to contribute to the country

• Knowledge of tax benefits

Tax Subjects

• Personal (7 years period)

• Corporate

• Limited liability company (3 years)

• CV, firm, & cooperative, (4 years)

Tax Objects

• Income from business

• Annual turnover is not more than 4,8 billion Rupiah

• Total turnover is calculated from all outlets

Rate


Taxation policies also contribute to improving the investment climate and ease of doing business

One indicator that is increasing is"The level of ease in paying taxes”

7 indicators of improvement :1. Easier to start business2. Easier to get electricity3. Easier to register property4. Improving the sharing of credit

information5. Strengthening minority investor

protections6. Easier to pay taxes7. Easier to trade across border

Improved Time to Comply and PostFiling Index through:• Improvement of business processes and

supporting infrastructure in the field ofregistration (through online singlesubmission / OSS, payment, reportingand restitution

• Improved quality of inspection• Acceleration of completion of restitution

78

68

100

113

125

72

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

20

17

20

18

Vietnam

INDONESIATiongkok

India

Philippines

Brazil

Went up 19 Rankings

2018:#722017: #912016:#1062015:#114

In the EODB 2018 report, Indonesia rose 19 ranks,

from 91 to 72


2015:

65.9

2016:

92.3

2017:

104.9

2014:

59.7

2018:

111.0

2016:

370.42014:

353.4

2015:

390.12017:

419.8

2018:

444.1

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om

Education Allocation (20% of Spending)

Health Allocation (5% of Spending)

Infrastructure Allocation (more than 18% of Spending in the last two years)

2014:

154.7

2015:

256.1

2016:

269.12017 :

400.9

2018:

410.4

Focuses: improving supply side, better access, service quality,

promoting preventive action, and maintain JKN sustainability.

Policies direction

• Improving distribution of health facilities and health personnel

• Strengthening promotive and preventive programs

• Improving the effectiveness and sustainability of the national health

insurance program

• Increasing the role of local government for supply side as well as service

side

Focus on improving access, distribution, and quality of

education

Policies direction

• Improving access, distribution, and quality of education

• Improving school facilities and infrastructure

• Synergy between Central and Local Government

• Strengthening vocational education and link and match curriculum

• Widening access (BOS, PKH, PIP, Bidik Misi and DPPN) for sustainable

education

Infrastructure acceleration to tackle regional and global

challenges

Target : • Road: 856 km

• Railway:639 km’sp

• New airports in 15 locations

• Irigation:781 km

• Electrification ratio: 95.15%;

• Housing: 7062 unit

Allocating More on Productive SpendingsCommitted to strengthen human capital through infrastructure, education and health spending


AIRPORTTRAINS

ROADS

OTHERS

144226

HOUSING OIL &GAS

TELCO &IT

280 987

• Allocating more money does not necessarily mean an increase in infrastructure quality. The capacity and quality of spending relation does not align perfectly.

• For infrastructure spending, Indonesia should invite more private capital (through PPP). Infrastructure funding gap, is expected to be potentially fulfilled by either SOE & Private Sector

Ab

ove

th

e l

ine

Tax Allowance, Tax Holiday, Fiscal Incentives

STATE REVENUE

STATE EXPENDITURE

Line Ministries(Ministry of Public Works, Ministry of Transportation, Ministry of Energy, etc)

Non Line Ministries(o/w. VGF, PDF, grants, PSO)

Transfer to the Regions & Village Fund(o/w. DAU (25%), Physical DAK, Village Fund)

Be

low

th

e l

ine FINANCING

Revolving Fund (o/w. FLPP), Project based bonds (e.g. SUKUK), Capital injection in PT SMI & PT IIF (financing) as well as PT IIGF (guarantee), Subsidiary Loan Agreement, Guarantee, Investment (capital injection) in SOE, Capital injection in BLU LMAN for land clearing

No StatusTotal

projectsSector

1. Financial Close 7 Electricity , water and sanitation, toll road,

telecommunication

2. PPP agreement 8 Toll road

3. On transaction 3 Water supply and toll road

4. FBC (under project

development fund)

6 Transport, health facility, toll road, water supply

Update on PPP Projects

Area of infrastructure financing alternative

Infrastructure Needs by Sector 2015 - 2019 (in trillions Rupiah)

Strategy to Improve Infrastructure

Developing new ways to attract infrastructure investment

Collaboration among state budget, SOE budget and private sector

1.000 591 733 328 507

ELECTRICITY PORT


Solid Policy Coordination in Managing Financial Markets Volatility

First Line of Defense

State Budget

Buyback fund at DG of Budget Financing and Risk Management

Investment fund at Public Service Agency (BLU) (min. level Aware)

State Owned Enterprises (SOE)’s

Budget

Related SOEs (min. level Aware)

Social SecurityAdministrating Agency

(BPJS)’s Budget

BPJS (min. level Aware)

Second Line of Defense

State Budget

State General Treasury Account (Rekening KUN) (min. level Alert)

Accumulated cash surplus (SAL) (min. Level Crisis)

Gov’t Securities Crisis Management Protocol (CMP)

Indicators:

- Yield of benchmark series;- Exchange rate;- Jakarta Composite Index;- Foreign ownership in government securities

Policies to address the crisis at every level :

- Repurchase the government securities at secondary market- Postpone or stop the issuance

The enactment of Law No. 9/2016 regarding Prevention and Mitigation of Financial System Crises as a legal foundation for the government to serves at the time of financial crisis in the form of Financial System Stability Committee (KSSK)

KSSK members: the Ministry of Finance, Bank Indonesia, the Financial Services Authority, and the Deposit Insurance Corporation

Most important provisions stipulated in the Law:

• Financial system stability monitoring and maintenance by KSSK members based on crisis management protocol of each member;

• Prevention of financial system crisis, including the mitigation of systemically important bank’s liquidity and solvency problems;

• Recovery Plan for Systemically Important Banks;

• Bank Restructuring Program

Gov’t Securities CMP Level

NORMAL AWARE ALERT CRISIS

Bond Stabilization Framework

Thank You

Fiscal Policy Agency

Ministry of Finance

The Republic of Indonesia

Websitewww.kemenkeu.go.id

www.fiskal.kemenkeu.go.id/iru

[email protected]

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