MINISTRY OF FINANCE

REPUBLIC OF INDONESIA

POLITICAL ECONOMY OF APBN IN

OVERCOMING ECONOMIC DISPARITY

PROF. SUAHASIL NAZARA

Chairman of Fiscal Policy Agency
7 September 2017
O 1 POLITICAL ECONOMY OF APBN

U
1
2
POVERTY AND INEQUALITY
Economic Growth and Welfare Indicators (Poverty, Inequality,

T Unemployment Rate, HDI)

Strategic Issues

L 2 FISCAL FOR OVERCOMING INEQUALITY

3
APBN for Achieving welfare

I
Tax for Redistribution
Effectivity of Social Protection Programs
Refocusing Priority Budgets

N
Prudent Debt Management

3
E 4 FURTHER THOUGHTS

2
1 POLITICAL ECONOMY OF APBN

3
STRICTLY CONFIDENTIAL
 POLITICS AND ECONOMIC POLICY

Politics (institution and policy) influence Economic Performance

In the other hand

Economic Policy influences Political performance

Necessary factor for economic performance are political stability and

rule of law.
Nevertheless

Political success often based on sound economic policy (Inclusive,

sustainable, and Responsible)

Unlike (independent) monetary policy, Fiscal Policy is in the domain of

Executive Power. Current Government can decide the vision, objective
and technicalities of fiscal policy (Revenue, Spending, Financing).
4
 BUDGET IS A RESULT OF COLLABORATIONS

Parliamentary Process

Technocratic Politics Governance

Data analysis. Political promises

Economic Budget
Cabinet acceleration
modeling. meetings
Long-term growth Governance
Discussion with Accountability
strategy. Parliament
Revenue, Spending and transparency
Regional budget
and Financing development
Design.
5
BUDGET ROLE AS THE ANCHOR OF ECONOMIC DEVELOPMENT

STABLE AND SUPPORTIVE

MAINTAIN PEOPLE
ECONOMIC AND
PURCHASING POWER
BUSINESS CLIMATE

Provide incentive to strategic sectors.

REVENUE Adjust non-taxable income to be inline with current condition.

Infrastructure development
SPENDING Provide subsidy for poor and maintain people purchasing power
Long term investment through education and health.

Investment in SOEs to support priority programs.

FINANCING Bonds management to help deepen domestic financial market.
Credible and productive debt management.

6
 POVERTY AND INEQUALITY

2 Economic Growth and Welfare Indicators (Poverty, Inequality,

Unemployment Rate, HDI)
Strategic Issues

7
STRICTLY CONFIDENTIAL
 SOUND AND STABLE ECONOMIC GROWTH
GROWTH SNAPSHOT ON
YoY (%) Tahunan (%) SEMESTER 1 2017
5,17 5,18 Driven by domestic
5,12 5,0 5,0
5,05 demand
5,01 5,01 5,01
4,94
4,9 4,94
4,93 4,92

4,82
Households consumption
grew by 5,0%
4,77
4,74

Capital investment
grew by 5,1%
Positive international trade,
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 export grew by 5,8% &
2014
Sumber: BPS, diolah
2015 2016 2017
import grew by 2,8%

Government consumption
grew by 0,0 %
8
 IMPACT OF ECONOMIC GROWTH ON POVERTY AND INEQUALITY
Economic growth contributes
to poverty and inequality
reduction but not yet optimal.
Indonesian economy has
been steadily growing during
the last 10 years.
Average growth:
Poverty is decreasing yet the rate of
decrease has slowed down
Economic 2010-2012: Poverty0,116%
growth 1% 2013-2017: Poverty 0,049%
Inequality is increasing during 2008-2012
then relatively stagnant afterward about
0,40-0,41.
5,64%. In 2017, Gini ratio is declining to 0,393

Real Consumption Growth, 2011-2016

Source: TNP2K
Consumption of middle
4
Rata-rata income group grows
The growth of 3
National
nasional higher (nominal)
average
consumption of
1,34%
1,34%
the poor (low
Persen (%)

income group) is 1
very low 0
0 10 20 30 40 50 60 70 80 90
-1
Poor Near Poor Middle Rich
9
 LONG-TERM GROWTH STORY INTACT
Declining inequality, poverty, and unemployment ratio
Poverty Gini Ratio Unemployment Growth
32 13,3 14 0,42
0,414
Jumlah Penduduk Miskin (million

13,5 0,413 10,5

31 0,415 11
12,4 13

Tingkat Kemiskinan
30 0,41 0,406 10
12,5
11,7 11,5 12 0,405 0,402 9
29
people)

11,0 11,1 11,5 0,4 8

28 10,7 10,6 0,394
11 0,393 7
0,395
27 10,5
0,39 6 5,3
10
26 5
9,5 0,385
25 9 4
0,38

Feb-06

Feb-07

Feb-08

Feb-09

Feb-10

Feb-11

Feb-12

Feb-13

Feb-14

Feb-15

Feb-16

Feb-17
Agu-06

Agu-07

Agu-08

Agu-09

Agu-10

Agu-11

Agu-12

Agu-13

Agu-14

Agu-15

Agu-16
2010 2011 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017

Source: BPS

INDONESIAS POTENTIAL TO BECOME A DEVELOPED COUNTRY

DEMOGRAPHICS ECONOMY
INDONESIA
IN 2045

Population: 309mm 8th largest economy in the world

Working-Age Population: 52% Income per capita: US$29,300
Urban Population: 75% Structure of the economy shifting towards
Middle Class Population: 80% higher value-added industries
Share of economy from service sectors: 73%
10
 INEQUALITY
Economic growth has not been equitably enjoyed among income groups and regions
Saving Distribution by Segments as of October 2016 (%)

Consumption Distribution by Income Group (%) 0,25

46,45 46,89 64
44,79
98
36,11 35,89 36,09
14
19,10 17,67 17,02 Number of Account's Proportion Saving's Proportion
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
< Rp 100 million Rp 100 -200 million Rp 200 -500 million
40% terendah 40% menengah 20% tertinggi
Rp 500 -1 billion > Rp1 billion

Wiliamson Index 2011-2015 Source: LPS

0,84
0,78
0,81
0,76
Economic growth has been enjoyed more by the
0,61 richest 20%. The consumption of this group has been
0,53
0,52
increasing since 2007.
0,49
0,48 0,44 There is high disparity in asset ownership. The proportion
0,24 0,26 of account with saving above Rp 1 billion is only 0,25%
0,11 0,13 yet it dominates 64% of total savings in banking system.
Inequality in economic output (PDRB/kapita), in
2011 2012 2013 2014 2015
national level, tends to decrease from 0,81 (2011) to
Sumatera Jawa Balinustra Kalimantan Sulawesi Malpapua Nasional 0,78 (2015) but in Jawa, Balinustra, dan Sulawesi tends
Source: BKFs calculation
to increase.
Note : IW < 0,35 low inequality; 0,35 IW 0,5 middle inequality; IW > 0,5 high inequality 11
 55
60
65
70
75
80
85
2010
66,53
Aceh 70,0
Sumut 70,0

2011
67,09
Sumbar 70,7
Riau 71,2

67,7

2012
Jambi 69,6
Sumsel 68,2

2013
68,31

Bengkulu 69,3
Lampung 67,7
68,9

2014
Babel 69,6
Kepri 74,0 2015
69,55

DKI 79,6
Jabar
2016

70,1
70,18

Jateng 70,0
DIY 78,4
Jatim 69,7
Banten 71,0
HDI

Bali 73,7
NTB 65,8
NTT 63,1
Kalbar
70,18

65,9
Kalteng
70,9 year

69,1
Kalsel 69,1
Life expectancy at birth:

Kaltim 74,6
Kaltara 69,2
IN AREA OF HUMAN CAPITAL

Sulut 71,1
Sulteng 67,5
Sulsel 69,8
Sultra 69,3
Gorontalo 66,3
There is disparity between western and eastern part of Indonesia

Sulbar 63,6
Maluku 67,6
1996

Malut 66,6
7,95 year

Pabar
12,72 year

62,2
2008

Papua 58,1
Rp 10.420.000
Mean years of schooling

GNI per capita (adjusted)

Expected years of schooling

Indonesia
2016

70,2
12
 STRATEGIC ISSUES OF POVERTY AND INEQUALITY

SINERGY BETWEEN CENTRAL

LIMITED AND UNEQUAL AND LOCAL GOVERNMENT
POVERTY REDUCTION IS
DISTRIBUTION OF ACCESS
SLOWING DOWN The accuracy of targeting
Basic Services: education, Program implementation
Indicates chronic poverty
health, infrastructure Inter programs
accompanied by rising of
inequality Access to capital harmonization
Skill and job opportunity

NEED TO IMPROVE THE EFFECTIVITY OF POVERTY AND INEQUALITY REDUCTION PROGRAMS

Strengthening the data accuracy to have a better targeted program
Better distribution mechanism: faster, more efficient, inline with financial inclusion policy
Sinergy between relevant programs to improve effectivity
Optimize Transfer to Region (General and Special Allocation Fund, Village Fund) forreducing inequality
Social empowerment program to improve sustainable livelihood

13
 FISCAL FOR OVERCOMING DISPARITY

3
a. APBN for Achieving welfare
b. Tax for Redistribution
c. Effectivity of Social Protection Programs
d. Refocusing Priority Budgets
e. Prudent Debt Management

14
STRICTLY CONFIDENTIAL
a APBN for Achieving Welfare

15
STRICTLY CONFIDENTIAL
 BUDGET AS AN INSTRUMENT TO ACHIEVE WELFARE

POVERTY EQUALITY
HDI

WELFARE

SECURITY
EDUCATION

HEALTH

INFRASTRUCTURE

16
 CHALLENGES OF FISCAL MANAGEMENT
Promoting economic growth and reducing poverty, inequality and unemployment

REVENUE CENTRAL GOVERNMENT

Tax Reform EXPENDITURES
Custom & Excise Reform Efficiency & Simplification
Optimum Non Tax Fight Corruption
Increasing Tax Ratio Priority Based
Fiscal Incentive to improve Planning and Sinergy
investment climate Well targeted Subsidy

WELFARE

Fiscal Sustainability
&
FINANCING Sound Fiscal TRANSFER TO REGION
Prudent and wise
DAU-equaliser
Toward productivity
Special Allocation Fund for
Innovative and creative
Poverty Reduction
financing (LPDP/SWF,
Effective Fund
LMAN, PPP)
Accountable and Efficient
Risk control
Special Autonomy Fund

17
 FISCAL POLICY DIRECTIONS
Stimulating economy and achieving welfare

Sound &sustainable Strengthening key Sustainable

1 Budget 2 fiscal policy functions 3 Development 4 WELFARE

Revenue Allocative Economic

optimization function aspect Economic growth
Quality of Stabilization Social aspect Decreasing
spending function unemployment
Environment Poverty reduction
Sustainable Distributive aspect Decreasing inequality
Financing function Inclusion

o A sound budget serves as a basic foundation to achieve welfare

o By having a sound budget, the key fiscal policy functions would work optimally to boost
sustainable development
o Sustainable development will promote welfare
18
 2018 BUDGET
Deficit in 2018 lower than 2017
Central Government
2,19% GDP Expenditures

(2017 : 2,67% GDP) 1.443,3

Line Ministries 814,1
Non Line Ministries 629,2

Transfer to Region &

Village Fund

TAX REVENUE 761,1

1.609,4
EXPENDITURES
NON TAX REVENUE
REVENUE
267,9 2.204,4
1.878,4

Financing
Primary Balance

(78,4) Deficit 325,9

Decreasing from 2017: (144,3) (325,9) Debt Financing

Investment
399,2
(65,7) 19
shows that APBN is more sustainable
 STRATEGIC POLICIES OF 2018 BUDGET

FISCAL RISK MITIGATION EXPANSIVE, CLEAR DIRECTED,

Accumulated Budget Surplus AND WELL MEASURED
Fiscal Risk Contingency Fund for Deficit 2,19% GDP
BSF

QUALITY IMPROVEMENT OF PUBLIC CONSISTENTLY DEVELOPING

SERVICES INFRASTURCTURE : Rp409T
Better welfare for state apparatus RAPBN Road: 856 km
and retirees Railway: 639 km
Strengthening Bureaucracy Reform 2018 New airports: 15 location
Irrigation: 781 km
Electrification ratio: 95,15%
Housing: 7.062 unit

SOCIAL PROTECTION PROGRAMS

PKH: 10 million family (Rp17,3T);
JKN: 92,4 million family (Rp25,5T) HIGH QUALITY EDUCATION Rp440,9T
PIP:19,7 ,million student (Rp10,8T) PIP: 19,7 million student
BOS: 262,2 thousand schools
Bidik Misi:401,5 thousand student (Rp4,1T)
BETTER HEALTH SYSTEM: Rp110,2T School
Food Assistance &Subsidy :15,6 million (Rp13,4T) development/rehabilitation: 61,4
PBI JKN: 92,4 million people
Village Fund:74.958 Village(Rp60T) thousand
Health facilities: 49 hospitals
Child immunization (0-11 month):
92,5% 20
 STRATEGY TOWARD EQUALITY

1 2 4
Improving access to basic Strengthening tax function for
Improving access to capital
services income redistribution
Improving access to financial
Health and Education Tax base expansion
credit services (KUR, LPDB,
KUMKM) Implementing progressive tax
Increasing health and Capital Gain Tax
education facilities Unutilized asset tax
Improving the distribution
among between regions ACCELERATING POVERTY
Improving the effectivity of
ALLEVIATION AND
social assistance program
Sustainability of JKN (National INEQUALITY REDUCTION
Health Insurance Program) 5
Price stabilization
Infrastructure and Housing
3 Increasing access to job
opportunity Balancing supply and
Improving the distribution of demand
infrastructures among regions Improving infrastructure &
Improving vocational education
(DAU, DAK and Village Fund) logistic system
Skill and entrepreneurship training
Affordable housing (interest Well targeted subsidy
Link & match vocational with
subsidy, Down Payment subsidy)
industry
Expanding the use of technology

21
 ECONOMIC EQUALIZATION POLICY
Aims to strengthen the national economy based on democracy and market-based system

Announced in April 2017 embodies national economic transformation to successfully overcome the middle income trap and
achieve the status of a developed country in the long-term

THREE KEY PILLARS AND QUICK WIN PROGRAMS

The Ministry of Environment and Forestry (KLHK) will distribute access to social forest management covering an area of 211,522
Social Forestry ha for 48,911 families with total permits of 134
Initial focus will be on 11 s with a total area of 15.576 ha for 9,411 households

Agrarian Reform Transmigration land of 220,000 ha and 3,800 ha under the National Agrarian Operation Project (PRONA) is ready to be legalized
from a total of 4.5 million ha, while 23,000 ha of displaced land and 707,000 ha of forest disposal are also ready to be
and
Land

redistributed from a total of 4.5 million ha

Transmigration The Land Object of Agrarian Reform (TORA) will be expanded to several provinces, including Banten, West Java, Central Java,
Land Legalization Riau, West Kalimantan, West Sumatra, North Sumatra, and Maluku

Affordable Committed to housing development within urban areas that are well connected to the center of activity, economic resources
and public transportation for the urban poor
Housing for the Core housing policies, among others, include provision of land for affordable housing (land availability), implementation of
Urban Poor Housing Scheme for MBR (social housing), and the Housing Financing Scheme

Targeted
Oppor
-tunity

Focused on addressing issues related to the tax system, development of manufacturing and IT industries and retail sector
Development of Improve the competitiveness of the retail sector and strengthen synergies between traditional and modern retail
Key Sectors
Vocational and labor policies structured for capacity building of human resources, especially to align with industry needs and to
support government priority programs
Capital
Human

Vocational
Policy steps will be taken by the government to draft and improve on the road map for vocational education and training,
Training and through reclassification and prioritization of business fields and positions
Labour Markets Job matching program that will focus on strengthening vocational programs for industries 22
Vocational schemes in place for the automotive, tourism and transportation sectors
b Tax for Redistribution

23
STRICTLY CONFIDENTIAL
 TAX ROLE IN ECONOMY
Revenue and
Allocation
Redistribution Regulation

TAX ROLE Tax could change the income distribution Accelerate economic
Tax as source of fund for activities through
IN between parties in economy (capital owner,
State Budget incentive
workers, land owner)
ECONOMY
Tax revenue could Tax influences savings and investments to
influence resources boost productive economy that leads to job Influence consumption
allocation in economy. creation pattern for price stability

TAX AS SOURCE OF FUND IN STATE BUDGET TAX FOR INCOME REDISTRIBUTION

Despite the tax ratio tends to decrease, share of tax in
Budget is increasing
Tax revenue used to fund poverty and inequality
15%
reduction programs
160 0

11,2% 11,8% 11,9% 11,9% 11,4% 11,5% 13%

140 0

11,1% 10,7% 10,8%

120 0

11%
100 0

1472,7 9% Tax policy directly influence the pattern of income

7%
distribution (collect more from rich and otherwise)
1285,0
1240,4

800
1146,9
1077,3

5%
980,5

600
873,9

Progressive Income Tax

723,3

619,9

400

3%
200

1% Optimize VAT (neutral and sustainable)

-1% Optimize asset and capital tax
0

2009 2010 2011 2012 2013 2014 2015 2016 2017

Nominal (Rp Tn) % of GDP 24
 TAX REFORM IS CRUCIAL
Redemption Money Assets Declared

TAX AMNESTY 1,10 39,4

the first step of tax reform

% of GDP
0,62

% of GDP
0,58
With more than 965,900
taxpayers participating in 0,15 0,20 0,17 0,12
8,3
5,2
3,9 3,6
the program 0,04 0,04 2,1 0,3

Germany Belgium Italy Chile Indonesia India South Spain Australia India Spain Chile Indonesia Italy South Australia
NEXT STEPS (2004) (2004) (2009) (2015) (2016) (1997) Africa (2012) (2014) (1997) (2012) (2015) (2016) (2009) Africa (2014)

Regulation reform
Administration reform Source: Ministry of Finance
Note: Figures in IDR trillion
1. End of tax amnesty period III

TAX OPTIMALIZATION STRATEGY

Improving Tax Exploring potency of Extensification of New
Expanding Tax Base
Compliance sectoral taxes Excisable Goods

Strengthening Expanding excisable

database Increasing collection and objects to limit
Simple and convenient tax Designing selective closing the gap between consumption of certain
system and efficient tax potency and realization of goods to reduce
incentives and tax revenue externalities
exemptions 25
c Effectivity of Social Protection
Programs

26
STRICTLY CONFIDENTIAL
 SPENDING REFORM: REFOCUSING ON PRIORITIY SECTORS
Share of budget for infrastructure, education, and health has been increased. Nevertheless, the effectivity
and efficiency still need to be improved
Beginning of
Subsidy Reform
440,9 17,5%
416,6 426,7
408,5 Education
375,4 409,0
401,1
129,9%
345,3 350,3 Infrastructure
310,8 317,1
299,8
290,3 2018 : 2014

202,4

187,8 184,3 177,9 80,7%

137,8 Health
104,1 106,7 110,2

94,4 103,4
74,8 70,5%
61,0 77,3
41,5 48,2
Energy Subsidy
2012 2013 2014 2015 2016 2017 2018

27
 ACCELERATING POVERTY ALLEVIATION AND INEQUALITY REDUCTION
Through optimizing social assistance, subsidy, and Village Fund

POLICY DIRECTIONS
TOTAL (trillion rupiah)

292,8T
Improving targeting accuracy by using unified data
Sinergy between programs
Refinement of scheme and cashless distribution

Subsidy* Program Keluarga Program Contribution for Food Bidik Village

*exclude tax subsidy
Harapan Indonesia Pintar the poor in JKN Assistance Misi Fund

161,6 17,3 10,8 25,5 13,5 4,1 60,0

Contribution for the poor

Program Keluarga Harapan in JKN Program Indonesia Pintar
10 million family 19,7 million student
92,4 million people

Food Assistance and Subsidy Village Fund

Usaha Ekonomi Produktif
15,6 million family
106,7 thousand family 74.958 village
Expanding Non cash food
assistance
28
 ENCOURAGING BETTER TARGETED SUBSIDY
Better targeting, better mechanism, and synergy between programs

POLICY DIRECTIONS
TOTAL (trillion rupiah) Improving targeting accuracy of electricity subsidy (900VA)

172,4
Sinergy between subsidy and social assistance such as Rastra and Non Cash Food Assistance
(BPNT)
Improving data accuracy of subsidy and social assistance beneficiaries using unified data
Shifting seed subsidy into direct assistance for seed (BLBU) through social assistance

Energy Non energy

Subsidy
103,4 Subsidy 69,0
Fuel and LPG Subsidy
Food Subsidy
51,1 Enhancement distribution

7,3
mechanism to improve For 5,6 million targeted family
accuracy Sinergy with Non Cash Food
Closed subsidy for LPG 3 kg Assistance (BPNT)

Electricity Subsidy Fertilizer Subsidy

52,2 Targeted subsidy only for
household using 450 VA and
28,5 Refinement of beneficiaries data
using NIK and kartu tani
900 VA Volume 9,5 million ton

29
29
 BENEFIT INCIDENCE ANALYSIS
Lowest decile household received subsidy and social assistance about 35% of total consumption

Benefits by Market Income Decile: Absolute and Relative Terms

40% 12

10,1

Subsidy/Benefit Received by HH, Million IDR

35%
10

30%

8
% of HH Expenditure

25%

20% 5,2 6

4,1
15%
3,5 4
2,9
2,6
10% 2,1 2,3
1,8
1,4 2
5%

0% 0
1 2 3 4 5 6 7 8 9 10
Expenditure Decile

LPG Electricity Diesel Rastra PKH PIP Total Subsidy and Social Assistance (RHS)

Source: PKEM-BKF staff calculation using Susenas 2014-2015

30
 IMPACT ON POVERTY AND INEQUALITY
PKH (CCT) and Program Indonesia Pintar are most effective in reducing poverty and gini ratio

Concentration Curve Effectiveness in Reducing Poverty and Gini

100%

90%
Electricity Subsidy

80%
PKH
70%
Subsidy/Social Assistance

LPG Subsidy
60% Diesel Subsidy
Cum. Share of

Electricity Subsidy
Diesel Subsidy Effectiveness in reducing Gini (poin / tr Rp)
50%
Rastra
Rastra Effectiveness in reducing poverty (% / tr Rp)
PKH
40%
Indonesia Pintar
30% 45 degree line
LPG Subsidy
Disposable Income
20%

10% Indonesia Pintar

0% -0,020 0,000 0,020 0,040 0,060 0,080 0,100 0,120 0,140 0,160
0 1 2 3 4 5 6 7 8 9 10
Indeks Efektivitas
Disposable Income Decile

31
Source: PKEM-BKF staff calculation using Susenas 2014-2015
d Refocusing Priority Budgets

32
STRICTLY CONFIDENTIAL
 MAINTAIN 20% BUDGET ALLOCATION FOR EDUCATION
Equalizing access & quality of education, strengthening vocational and SWF for education
2018:
Target
440,9
(trillion rupiah)

2017:
Central Smart Indonesia Program
426,7 19,7 million
Government (Program Indonesia
3,3% Rp146,6T Pintar) student
2016:
416,6 2,4% Transfer to
2015: Region School Operational Assistance 56 million
408,5 Rp146,6T (Bantuan Operasional student
2,0% Sekolah/BOS)
2014:
SWF
375,4 8,8% Rp15T
8,6
Assistance for College 401,5 thousand
8,7% Student (Bidik Misi) college students

POLICY DIRECTIONS Development/

rehabilitation of school/ 61,2 thousand
1. Expanding access to education (particularly for the poor) and improving classroom
quality of education
2. Improving the quality of school facilities Teacher allowances
3. Synergizing between central and sub national government da Non PNS 213,7 thousand teachers
4. Strengthening vocational schools and synchronizing the curriculum of SMK ( PNS 257,2 thousand teachers
link nd match)
5. Synergizing programs to improve the access (BOS, PKH, PIP, Bidik Misi dan
DPPN) for sustainable education 33
 GOVERNMENT HAS BEEN ALLOCATING 5% FOR HEALTH BUDGET SINCE 2016
Expanding supply side, improving access and quality of health care and maintaining the sustainability of JKN
2018:
(trillion rupiah)
Target
110,2
2017:
Central
106,7 Government Jaminan Kesehatan
92,4 million people
Nasional (JKN)/ National
Rp80,7T
Health Insurance
3,3%
2016:
104,1
2015: Transfer to
2,5% Region Family planning (KB) 1,8 million people
74,8 Rp29,5T
39,2%
2014:
61,0 8,6
22,6% Immunization for baby 92,5%
0-11 month

26,3 %
49 hospitals/
High quality health
care facilities health facilities

POLICY DIRECTIONS
Certification of drugs and 74,0 thousand
1. Increasing and improving the uneven distribution of health facilities and
food
and health professionals
2. Strengthening promotive and preventive programs focused on NCDs and 52% HIV cases treated
programs for maternity through Gerakan Masyarakat Sehat (Germas) Malaria and HIV
treatment 95% Malaria cases treated
3. Improving the effectivity and sustainability of JKN
4. Strengthening local government role for supply side and improving the
quality of health care 34
 INFRASTRUCTURE BUDGETS TO ACCELERATE DEVELOPMENT
Focus on improving capacity, competitiveness, connectivity, and housing for low income group

RAPBN (trillion rupiah) 401,1 409,0

2018 256,1 269,1
145,5 155,9 154,7
Rp409,0T Government
KemenPUPR Kemenhub DAK (PMN)
(trillion rupiah) 106,9 48,2 28,0 6,1
2012 2013 2014 2015 2016 2017 2018
APBNP RAPBN

Road development and preservation

LRT Affordable housing for low
New road 856 km
23 kmsp income group
Toll 25 km
Vertical housing 7.062 unit
New airport
Bridge 8.761 m
Stimulus Assistance 180,0 thousand
15 location
unit

Pembangunan jalur KA Information and Technology

639 kmsp Integrated broadband
100 location
village
BTS in blank spot
380 location
Interim figures area, focus in
remote area
35
35
e Prudent Debt Management

36
STRICTLY CONFIDENTIAL
WITH RELATIVELY STABLE GROWTH, INDONESIA HAS BEEN ABLE TO MAINTAIN ITS
LOWER FISCAL DEFICIT
Average deficit and economic growth in a decade
%
10,0
9,0
GDP
Pertumbuhan
Growth PDB
8,0 7,4 Deficitsfiskal
Defisit

6,0 5,6
4,8

4,0
2,7
2,2 2,1 2,2 2,1
2,0 1,2 1,1 1,3
0,5
0,0
-0,7 -0,6
-2,0 -1,1
-1,6
-2,1
-2,7 -2,8
-4,0 -3,1 -3,1 -3,5 -3,3
-4,3
-6,0
-6,2 -6,4 -6,7
-8,0

Japan
China

Italy
Turkey

South Africa

Mexico
India
Argentina

United Kingdom

United States
Australia
Germany

Indonesia

Brazil
37
Source: World Economic Outlook IMF April 2017, CEIC, MoF Indonesia
MAINTAINING DEFICIT AND DEBT RATIO AT MANAGEABLE LEVELS

Deficits vs Debt ratio

Commitment to maintain debt to GDP at
2018
manageable levels (27 - 29% of GDP)
2.19 28,83

Ensuring debt to support

2.92
2017 28,97 productive activities

Innovative and creative financing to

2.49 2016 28,33 support infrastructure

Commitment on international
2.59 2015 27,45 institutions
Supporting the development of micro,
2014
2.14 24,68 small, medium enterprises (MSMEs);
housing programs; and educational
2013 24,84
allocations through SWF
2.22

-5 0 5 10 15 20 25 30 35

Debt to GDP (%) Deficits (%)

38
 DEBT OUTSTANDING POSITIONS
Debt ownerships dominated by domestic investors
DEBT POSITIONS (as of July 2017)
Domestic Bond In Trillion Rupiah
58,4%
Foreign Debt 729,6
Foreign
Rp 3.780 debt Domestic Debt 5,4
19,3%
Trillions Global Bond 838,9
Domestic Bond 2.206,1
Domestic debt
0,1%
Global bond
22,2%
KOMPOSISI UTANG
DEBT COMPOSITIONS
4.000
Triliun

3.500
Rupiah
Foreign currency
3.000

2.500 2.019
1.755
2.000
1.478
1.264
1.500 1.098
784 903 993
836
1.000 661 653 659 693 737
652 655 649
502 1.410 1.496
500 100 1.112 1.131
853 754 779 816 880
- 451 581 611 568 582 645 653 609 652
237 437
-
1998

2001

2004

2006

2009

2012

2015
1997

1999

2000

2002

2003

2005

2007

2008

2010

2011

2013

2014

2016
(500)
Source: Ministry of Finance 39
Valas Rupiah
 PORTFOLIO AND DEBT RISKS INDICATORS (2018-2021)

Foreign debt (%) Debt to GDP (%)

29.09 29.03
38.04
28.84

36.97
36.69
36.53 28.25

2018 2019 2020 2021 2018 2019 2020 2021

Average Time to Maturity (ATM) (years) Interest payment to GDP (%)

8.00
1.64
1.63
7.67
1.61
7.34
7.13 1.57

2018 2019 2020 2021 2018 2019 2020 2021

Sumber: Kementerian Keuangan 40
 LOW PUBLIC DEBT
Compared to developing and developed countries

Debt Ratio, 2016

300%

250% 239%

200%

150%

107%
100% 89%
78%
70% 68%
58%
51% 50% 46%
50% 42%
34% 29% 28%
17%

0%

Thailand
US

UK

Indonesia

Russia
Japan

S Africa

Philippines
Germany

Mexico
Brazil

China
India

Argentina

Turkey
41
Source: World Economic Outlook IMF, April 2017
 AND LOWER DEBT PER CAPITA
compared to other countries around the world

Indonesia
$1K

Compared to other emerging and

developed countries, Indonesia has
even lower debt per capita

Source: howmuch.net 42
4 FURTHER THOUGHTS

43
STRICTLY CONFIDENTIAL
COLLABORATION BETWEEN GOVERNMENT AND BUSINESS COMMUNITY
TOWARD EQUALITY IN ECONOMY

Maintaining investment climate

Government provides incentives to boost economic activities
Growing economy is expected to lead to job creation

Increasing access to basic services

Collaboration in infrastructure development
PPP (Public Private Partnership) schemes

Expanding partnership from infrastructures to other sectors

PPP for building hospitals and schools in the remote area

Synergy in developing new tourism area

Government builds the basic infrastructures (road, airport, electricity)
Private builds the hotels, shopping mall, tourist attractions

Business could invest in human capital development

Support the link and match programs with vocational
Hire high quality Bidik Misi graduated
Collaborate with LPDP to provide internship opportunity 44
KEMENTERIAN KEUANGAN

Thank You

45