List of Contents .................................................................................................

List of Tables ....................................................................................................

List of Graphs ...................................................................................................

List of Boxes .......................................................................................................

List of Charts......................................................................................................

CHAPTER 1 INTRODUCTION

1.1 General ..............................................................................................

1.2 Basic Assumptions for the Macroeconomics 2013 ..............................

1.3 Fiscal Policy Highligths.....................................................................

1.4 APBN 2013 Posture Summaries.......................................................

1.5 Brief Description of Chapters ...........................................................

CHAPTER 2 BASIC ASSUMPTIONS OFMACROECONOMICS

2.1 General .......................................................................................

2.2 The Economic Trend 2007-2011 and Realization Projection 2012

2.2.1 Global and Regional Economy .......................................................

2.2.2 National Economy ................................................................................

2.2.3 Economic Projection in 2012............................................................

2.2.3.1 Global and Regional Economy .......................................................

2.2.3.2 National Economy ...........................................................................

2.3 Challenges and Targets of Macroeconomic Policies in 2013 ..........

2.3.1 Global and Regional Economic Challenges ....................................

2.3.2 Domestic Economic Challenges ......................................................

2.3.3 Macroeconomic Policy Targets in 2013 ..........................................

2.3.3.1 Economic Growth ............................................................................

2.3.3.2 Rupiah Exchange Rate .....................................................................

2.3.3.3 Inflation ............................................................................................

LIST OF CONTENTS

1

1v

v111

xv1

xv11

1-1

1-3

1-5

1-7

1-8

2-1

2-2

2-2

2-3

2-11

2-11

2-14

2-24

2-24

2-25

2-26

2-26

2-33

2-33

List of Contents

ii

Page

2.3.3.4 3-Month SPN Rate............................................................................

2.3.3.5 Indonesian Crude Oil Price (ICP) ......................................................

2.3.3.6 Oil and Gas Lifting ...........................................................................

CHAPTER 3 REVENUES AND GRANTS

3.1 General .................................................................................................

3.2 Revenues Trend in 2007-2011 and the Estimated Revenue in 2012

3.2.1 Domestic Revenue ............................................................................

3.2.1.1 Tax Revenues ....................................................................................

3.3 Challenges and Opportunities of Goverment Revenue Policies .......

3.4 Target Goverment Revenues in 2012 ...............................................

3.4.1 Domestic Revenue .............................................................................

3.4.2 Grant Proceeds .................................................................................

CHAPTER 4 CENTRAL GOVERNMENT EXPENDITUREBUDGET

4.1 General ...............................................................................................

4.2 The Trends of Policy and Implementation of Budget Allocation forCentral Goverment Expenditures, 2007-2012 ...............................

4.2.1 The Trend of Central Goverment Expenditure Budget Allocationby Functions .....................................................................................

4.2.2 The Trend of Budget Implementation of Central GovermentExpenditures by Organizations ........................................................

4.2.3 The Trends of Budget Implementation for Central GovermentExpenditures by Types .....................................................................

4.2.4 The Highlights of Goverment Work Plan 2013 ..............................

4.4 Policies and Central Goverment Expenditure Budget in APBN 2013

4.4.1 Budget of Central Goverment Expenditure by Functions..............

4.4.2 Budget of Central Goverment Expenditure by Organizations.......

4.4.2.1 Ministries/ Agencies Budget Section (BA K/L) ................................

4.4.3 Central Goverment Expenditure Budget by Types...........................

List of Contents

2-34

2-34

2-34

3-1

3-1

3-2

3-3

3-24

3-25

3-26

3-36

4-1

4-4

4-6

4-18

4-34

4-49

4-58

4-60

4-69

4-69

4-85

iii

Page

CHAPTER 5 FISCAL DECENTRALIZATION POLICY

5.1 General ..............................................................................................

5.2 Fiscal Decentralization Implementation Trend 2007-2012 ............

5.2.1 The Implementation of Transfer to Regions Policy .........................

5.2.2 The Implementation of Transfer to Regions Budget ......................

5.2.3 The Implementation of Regional Taxes and Service Charges ........

5.2.3.1 Supervision and Revocation .................................................................

5.2.3.2 The Transfer of BPHTB and PBB-P2 into Regional Taxes .............

5.2.3.2.1The Implementation of BPHTB Transfer ........................................

5.2.3.2.2The Implementation of PBB-P2 Transfer ........................................

5.2.4 The Implementation of Loans and Grants to Regions ...................

5.2.4.1 Regional Loans ..................................................................................

5.2.4.2 Grants to Regions .............................................................................

5.3 Problems and Challenges around Fiscal DecentralizationImplementation.................................................................................

5.3.1 APBD Implementation .....................................................................

5.3.2 Enchanced Quality in Regional Financial Management ................

5.3.3 Implications to Regional Economic Development ..........................

5.4 Budget of Transfer to Region in 2013 ..............................................

5.4.1 Budget Policy for Transfer to Regions in APBN 2013 ....................

5.4.1.1 Fiscal Balance ...................................................................................

5.4.1.1.1 Revenue Sharing ..............................................................................

5.4.1.12 General Allocation Fund (DAU) ......................................................

5.4.1.1.3Special Allocation Fund (DAK) ........................................................

5.4.1.2 Special Autonomy and Adjustment Fund .......................................

5.4.1.2.1Special Autonomy Fund ..................................................................

5.4.1.2.2Adjustment Fund .............................................................................

5.4.2 Grant to Regions Policy ...................................................................

5-1

5-3

5-3

5-6

5-11

5-12

5-13

5-14

5-15

5-17

5-17

5-18

5-20

5-20

5-22

5-23

5-28

5-28

5-28

5-28

5-31

5-32

5-40

5-40

5-40

5-43

List of Contents

iv

Page

CHAPTER 6 BUDGET FINANCING AND FISCAL RISK

6.1 General ...............................................................................................

6.2 Budget Deficit and Financing Trend from 2007-2012 .....................

6.2.1 Budget Deficit .....................................................................................

6.2.2 Budget Financing ..............................................................................

6.2.2.1 Non-Loan Financing ........................................................................

6.2.2.1.1 Domestic Banks ................................................................................

6.2.2.1.2 Domestic Non-Banks .......................................................................

6.2.2.2 Loan Based Financing ......................................................................

6.2.2.2.1Goverment Bond (SBN) ...................................................................

6.2.2.2.2Foreign Loans ...................................................................................

6.2.2.2.3Domestic Loan ..................................................................................

6.2.2.3 The Trend of Goverment Debt Portofolio ........................................

6.3 Budget Financing Plan for 2013 ......................................................

6.3.1 Non-Loan Financing ........................................................................

6.3.1.1 Domestic Banking ............................................................................

6.3.1.1.1 The Installment of SLA Payment ....................................................

6.3.1.1.2 Budget Surplus ..................................................................................

6.3.1.2 Domestic Non-Banking ....................................................................

6.3.1.2.1 Asset Management Proceeds (HPA) ................................................

6.3.1.2.2Goverment Investment Fund ..........................................................

6.3.1.2.3National Education Development Fund ..........................................

6.3.1.2.4Guarantee Obligations .....................................................................

6.3.1.2.5Financing Reserve for the Takeover of PT Inalum ........................

6.3.2 Loan Financing .................................................................................

6.3.2.1 General Debt Management Strategies .............................................

6.3.2.2 Economic Condition and FinancialMarket Projection in 2013 .......

6-1

6-2

6-2

6-2

6-4

6-5

6-5

6-14

6-15

6-19

6-21

6-22

6-23

6-24

6-25

6-25

6-25

6-26

6-26

6-26

6-35

6-35

6-36

6-37

6-37

6-38

v

Page

6.3.2.3 The Latest Issues of Debt Management ..........................................

6.3.2.3.1Loan Financing Flexibility ...............................................................

6.3.2.3.2The Roles of Standby Loans in Securing APBN Financing ............

6.3.2.3.3 Maintaining and Improving Investment Grade Status .................

6.3.2.4 Loan Financing Policy in 2013 ........................................................

6.3.2.4.1Goverment Bond (SBN) (Net) .........................................................

6.3.2.4.2Foreign Loans (Net) ..........................................................................

6.3.2.4.3Domestic Loans (Net) .......................................................................

6.4 Fiscal Risk .........................................................................................

6.4.1 Macroeconomics Risks .....................................................................

6.4.1.1 APBN 2013 Deficit Sensitivity to Macroeconomic Assumption

Changes .............................................................................................

6.4.1.2 Fiskal Risk Sensitivity to SOEs againts the Changes of

Macroeconomic Variable ..................................................................

6.4.2 Central Goverment’s Debt Risks ......................................................

6.4.3 Conigency Obligation of the Central Goverment ...........................

6.4.3.1 Goverment’s Supports and/or Guanrantees to Infrastructure

Development Projects........................................................................

6.4.3.1.1The 10,000 MW Power Generation Development Acceleration

Project Stage I ....................................................................................

6.4.3.1.2The 10,000 MW Power Generation Development Acceleration

Project stage II ..................................................................................

6.4.3.1.3Toll Road Development Project ........................................................

6.4.3.1.4Water Supply Provision Acceleration ...............................................

6.4.3.1.5Public Private Partnership Project Through Infrastructure

Guarantee Agency ............................................................................

6.4.3.1.6Goverment Support for Model PPP Project of Soekarno Hatta

Airport Railways Track Construction ..............................................

6-39

6-39

6-40

6-41

6-43

6-45

6-47

6-49

6-51

6-51

6-51

6-53

6-58

6-61

6-61

6-62

6-64

6-64

6-64

6-65

6-66

vi

Page

6.4.3.1.7 The Provision of Infrastructure Guarantee Facility through

PT Penjaminan Infrastructure Indonesia (Persero) ......................

6.4.3.2 Social Security ..................................................................................

6.4.3.3 Obligation of Maintaining Minimum Capital of Certain

Finance Institutions .........................................................................

6.4.3.4 Legal Claims to the Goverment ......................................................

6.4.3.5 Membership in International Financial Organizations

Institutions (LKI) and Others .........................................................

6.4.3.6 Natural Disaster ...............................................................................

6.4.4 Mandatory Spending .......................................................................

CHAPTER 7 APBN MEDIUM-TERM BUDGET PROJECTION

7.1 General ..............................................................................................

7.2 Medium-Term APBN Projection .....................................................

7.2.1 Basic Macroeconomics .....................................................................

7.2.2 Goverment Revenue Projection .......................................................

7.2.3 Goverment Expenditure Projection .................................................

7.2.4 Budget Financing Projection ............................................................

7.3 Medium-Term Expenditure .............................................................

6-66

6- 68

6-69

6-71

6-72

6-72

6-74

7-1

7-2

7-4

7-8

7-11

7-14

7-15

vii

Page

Table 2.1 GDP Distribution and Contribution to Economic Growth,

2010-2011 .............................................................................

Table 2.2 Economic Growth by Sectors...............................................

Table 2.3 The Economic Growths of Countries Around The World2011-2012 .............................................................................

Table 2.4 Global Commodity Price Fluctuation .................................

Table 2.5 Balance of Payment, 2007-2011 .........................................

Table 2.6 Economic Growth by Use, 2012-2013 ..................................

Table 2.7 Economic Growth by Sectors, 2012–2013 ..........................

Table 3.1 Goverment Revenue Trend, 2007-2012 ..............................

Table 3.2 Oil and Gas PPh Revenue Trend, 2007-2012 .....................

Table 3.3 Oil and Gas PPh Revenue Trend, 2007-2012 ........................

Table 3.4 PPN and PPnBM Revenue Trend ........................................

Table 3.5 PBB and BPHTB Revenue Trend, 2007-2012 .....................

Table 3.6 Excise Revenue Realization Trend, 2007-2012...................

Table 3.7 Tabacco Product Excise Tariff Policy Trend, 2007-2012 ......

Table 3.8 Other Tax Revenue, 2007-2012 ...........................................

Table 3.9 Export Tax Tariff for Coconut Oil, CPO and The DerivativeProducts ................................................................................

Table 3.10 PNBP Trend For The Largest K/L, 2007-2012 ......................

Table 3.11 Goverment Revenue, 2012-2013 .........................................

Table 4.1 Central Goverment Expenditure by Function,2007-2012 ..

Table 4.2 Central Goverment Expenditure Trend, 2007-2012...........

Table 4.3 Personel Expenditure Policy Trend, 2007-2012 ..................

Table 4.4 Loan Interest Expenditure Trend, 2007-2012 ....................

Table 4.5 The Trend of Subsidies for Certain Fuel and 3-kg Gas, 2007-2012 .......................................................................................

Table 4.6 The Trend of Retail Price of Subsidy Price, 2006-2012 .......

Table 4.7 Electricity Subsidy Trend, 2007-2012 .................................

2-4

2-6

2-12

2-14

2-20

2-27

2-32

3-3

3-7

3-8

3-9

3-10

3-10

3-11

3-12

3-14

3-20

3-25

4-6

4-35

4-36

4-38

4-22

4-42

4-42

LIST OF TABLES

List of Tables

viii

PageTable 4.8 Subsidy Trend, 2007-2012 ....................................................

Table 4.9 Priority Programs of Social aid Expenditure, 2007-2012 .......

Table 4.10 Some Strategic Development Targets 2013 ...........................

Table 4.11 Central Goverment Expenditure By Function, 2012-2013....

Table 4.12 Expenditure Budget For Ministries/ Agencies, 2012-2013 .....

Table 4.13 Central Goverment Expenditure Trend, 2012-2013 ...........

Table 4.14 Loan Interst Payment, 2012-2013 .......................................

Table 4.15 Subsidy For Certain Fuel and 3-KG Gas ..............................

Table 4.16 Electricity Subsidy,2012-2013 ..............................................

Table 4. 17 Food Subsidy, 2012-2013 ......................................................

Table 4.18 Fertilizer Subsidy, 2012-2013 ...............................................

Table 4.19 Seed Subsidy, 2012-2013 .......................................................

Table 4.20 PSO Subsidy,2012-2013 ........................................................

Table 4.21 Program Credit Interst Subsidy, 2012-2013 ........................

Table 4.22 Tax Subsidy (DTP), 2012-2013 .............................................

Table 5.1 Revisions To Adjustment Fund, 2007-2012 ........................

Table 5.2 Transfer to Regions Trend, 2007-2012 ................................

Table 5.3 The Readiness of Regions in Collecting BPHTB .......................

Table 5.4 The Readiness of Regions in Collecting PBB-P2 .................

Table 5.5 Grants to Regions, 2010-2012 ...................................................

Table 5.6 Provincial APBD by Type of Expenditure,2007-2012 .........

Table 5.7 District/ City APBD by Type of Expenditure, 2007-2012........

Table 5.8 Provincial APBD Ratio, 2007-2012 ......................................

Table 5.9 District/ City APBD by Type of Expenditure, 2007-2012........

Table 5.10 Investment Realization Trend in Indonesia, 2007-2012 ....

Table 5.11 Williamson Index for GRDP, 2007-2012 ...........................

Table 5.12 APBD per Capita to People Welfare Ratio, 2009-2011 .......

Table 5.13 Annual Inflation Rate in 66 Cities, 2008-2011 ...................

Table 5.14 Transfer to Regions,2012-2013 .............................................

4-45

4-48

4-57

4-61

4-82

4-85

4-91

4-93

4-94

4-94

4-95

4-95

4-96

4-964-97

5-5

5-6

5-14

5-17

5-19

5-21

5-21

5-22

5-22

5-24

5-255-265-275-44

List of Tables

ix

Page

Table 6.1 Budget Deficit and Financing Trend, 2007-2012 .................

Table 6.2 Non-Loan Based Financing Trend, 2007-2012 ..................

Table 6.3 PT PPA Managed Asset Trend, 2007-2012 .........................

Table 6.4 The Goverment Security Fund Allocation Trend, 2008-2012

Table 6.5 Loan Based Financing Trend, 2007-2012 ...........................

Table 6.6 SBN Issuance Realization Trend, 2007-2012 .....................

Table 6.7 Tradble SBN Ownership Trend, 2007-2012 ........................

Table 6.8 Outstanding Goverment Loan Trend by Currency, 2007-2012 ......................................................................................

Table 6.9 Outstanding Government Loan Trend By Instruments,2007-2012....................................

Table 6.10 Budget Financing, 2012-2013..................................................

Table 6.11 Non-Loan Based Financing, 2012-2013..................................

Table 6.12 Government Investment Fund, 2012-2013............................

Table 6.13 PMN To SOE, 2012-2013..........................................................

Table 6.14 PMN To Organization/LKI, 2012-2013..................................

Table 6.15 Other PMN.............................................................................

Table 6.16 Revolving Fund.........................................................................

Table 6.17 Government Guarantee Obligation, 2012-2013.................

Table 6.18 Standby Loan Plan....................................................................

Table 6.19 Efforts To Promote Credit Rating.............................................

Table 6.20 Loan Financing, 2012-2013......................................................

Table 6.21 Subsidiary Loan Agreement, 2012-2013..............................

Table 6.22 Macroeconomic Assumption And Realization

Trend, 2007-2012.................................................................

Table 6.23 Deficit Sensitivity of APBN 2013 To The ChangingMacroeconomic Assumptions ...................................

Table 6.24 Aggregate SOE Fiscal Risk Scenario Analysis FiscalTransaction Position With SOE, 2013-2015........................

6-4

6-4

6-18

6-13

6-14

6-18

6-18

6-22

6-23

6-23

6-25

6-26

6-27

6-29

6-32

6-33

6-36

6-41

6-43

6-44

6-49

6-52

6-53

6-56

List of Tables

x

Page

List of Tables

Table 6.25 Stress Test For The Changing Exchange Rate, Oil Price, And Interest RateAnd Economic Growth To SOE Fiscal Risks, 2013-2015.................................

Table 6.26 Loan Portfolio Risk Indicator Trend, 2007-2012.............................................

Table 6.27 Financing Acquired For Power Generation, 2007-2012..................................

Table 6.28 List Of Secured Projects.....................................................................................

Table 6.29 State Capital Participation And Contribution To InternatioanlOrganizations/Agencies And Other Institusion in 2013.................................

Table 7.1 APBN 2013 and Baseline Estimates For 2014-2016.....................................

Table 7.2 Mid-term Basic Macroeconomic Assumption, 2014-2016.............................

Table 7.3 (Baseline) K/L Budget Allocation List, 2014-2016...........................................

Table 7.4 Baseline Budget Allocation List, 2014-2016.....................................................

6-57

6-59

6-63

6-64

6-72

7-4

7-7

7-20

7-21

xi

Page

List of Graphs

Graph 2.1 European Economic Growth , 2007-2011.............................

Graph 2.2 Global Trade Volume Growth Trend, 2007-2011...................

Graph 2.3 Indonesian Economic Growth, 2007-2011............................

Graph 2.4 Economic Growth by Expenditure, 2007-2011......................

Graph 2.5 Rupiah Exchange Rate Tremd To USD, 2007-2011..............

Graph 2.6 Inflation Trend, 2007-2011.............

Graph 2.7 3-Month SPN Rate Trend 2011.....................

Graph 2.8 International Crude Oil Production, Consumption AndPrice, 2007-2011........................................................................

Graph 2.9 Indonesia Oil Lifting, 2007-2011.............................................

Grap2.10 Purchasing......................................................................

Graph 2.11 International Trade Indicator..............................

Graph 2.12 Global Trade Volume Trend......................................

Graph 2.13 Export-Import Growths Of The Developed And DevelopedAnd Developing Countries.......................................

Graph 2.14 Commmodity Price Index And Global Infkation Trend

Graph 2.15 Rupiah Exchange Rate Trend To USD, 2012

Graph 2.16 Inflation Trend, 2011-2012

Graph 2.17 Inflation Trend By Components, 2011-2012

Graph 2.18 Global Crude Oil, Production, Consumption And PriceTrend, 2012

Graph 2.19 Indonesian Oil Lifting Trend 2012.......................

Graph 2.20 Economic Growt And Global Trade Volume Trend

Graph 2.21 Indoneseian Econoomic Growth, 2010-2013

Graph 3.1 TaxRevenue Trend, 2007-2012

Graph 3.2 Deomestic Tax Revenue Trend, 2007-2012..................

Graph 3.3 Average Contribution Of Demestic Tax Revenue, 2006-2011

Graph 3.4 VAT And PPnBM Revenue Trend, 2007-2012

2-2

2-2

2.-3

2-3

2-7

2-8

2-9

2-10

2-11

2-13

2-13

2-13

2-142-20

2-21

2-21

2-232-23

2-20

2-27

3-3

2-63-6

3-8

LIST OF GRAPHICS

xii

Page

Graph 3.5 Import Tax And Dutiable Import Revenue Trend 2007-2012

Graph 3.6 International CPO Price And Export Tax Trends, 2007-2012

Graph 3.7 Oil And Gas Revenue Trend, 2007-2012

Graph 3.8 Non Oil And Gas Revenue, 2007-2012

Graph 3.9 SOE Accounting Performance 2007-2012

Graph 3.10 SOE Contribution To APBN

Graph 3.11 Non Oil And Gas Revenue, 2007-2011

Graph 3.12 Other Non Tax Revenue Trend, 2007-2012

Graph 3.13 PNBP Trend Og Kemenkominfo, 2007-2012

Graph 3.14 PNBP Trend Of Kemendikbud, 2007-2012

Graph 3.15 PNBP Of Trend Kemenkes, 2007-2012

Graph 3.16 PNBP Trend Of Polri, 2007-2012

Graph 3.17 PNBP Trend Of Kemenkumham, 2007-2012

Graph 3.18 PNBP Trend Of BPN, 2007-2012

Graph 3.19 PNBP Trend Of Kemenhub, 2007-2012

Graph 3.20 BLU Revenue Trend, 2007-2012

Graph 3.21 Grant Revenue Trend, 2007-2012

Graph 3.22 PPh Non Oeil ANd Gas Revenue , 2007-2012

Graph 3.23 VAT And LST Revenue, 2012-2013

Graph 3.24 Land And Building Tax Revenue, 2012-2013

Graph 3.25 Excise Revenue, 2012-2013

Graph 3.26 Other Tax Revenue, 2012-2013

Graph 3.27 Import Tax Revenue, 2012-2013

Graph 3.28 Export Tax Revenue, 2012-2013

Graph 3.29 Oil And Gas PNBP Revenue, 2012-2013

Graph 3.30 Non Oil And Gas Revenue, 2012-2013

Graph 3.31 Government Portion From SOE Profits, 2012-2013

Graph 3.32 Non Income Tax Of Kemenkominfo, 2012-2013

Graph 3.33 PNBP Of Kemendikbud, 2012-2013

3-13

3-13

3-173-173-18

3-19

3-19

3-20

3-21

3-21

3-21

3-22

3-22

3-23

3-23

3-23

3-24

3-28

3-293-29

3-30

3-30

3-30

3-30

3-31

3-31

3-33

3-33

3-34II-31

List of Graphs

xiii

Page

Graph 3.34 PNBP Of Kemenkes, 2012-2013

Graph 3.35 PNBP Of Polri, 2012-2013

Graph 3.36 Non Income Tax Of Kemenkumham, 2012-2013

Graph 3.37 PNBP Of BPN, 2012-2013

Graph 3.38 Non Income Tax Of Kemenhub, 2012-2013

Graph 3.39 General Services Agency Revenue, 2012-2013

Graph 3.40 Grant Revenue, 2012-2013

Graph 4.1 Central Government Expenditure Trend By Function,2007-2012

Graph 4.2 Public Service Function Expenditure, 2007-2012

Graph 4.3 Defence Function Expenditure, 2007-2012

Graph 4.4 Law And Order Function Expenditure, 2007-2012

Graph 4.5 Economic Function Expenditure, 2007-2012

Graph 4.6 Environment Function Expenditure, 2007-2012

Graph 4.7 Housing And Public Facility Function Expenditure,

2007-2012

Graph 4.8 Health Function Expenditure, 2007-2012

Graph 4.9 Tourism And Culturee Function Expenditure, 2007-2012

Graph 4.10 Religion Function Expenditure, 2007-2012

Graph 4.11 Education Function Expenditure, 2007-2012

Graph 4.12 Sosical Protection Function Expenditure, 2007-2012

Graph 4.13 K/L Expenditure Trend, 2007-2012

Graph 4.14 K/L Expenditure Absorption, 2007-2012

Graph 4.15 The Expenditure Trend Of The Ministry Of Education

And Culture

Graph 4.16 The Expenditure Trend Of The Ministry Of Public Works

Graph 4.17 The Expenditure Trend Of The Ministry Of Defence

Graph 4.18 Expenditure Trend Of National Police

Graph 4.19 Expenditure Trend Of The Ministry Of Religions

3-34

3-34

3-35

3-35

3-36

3-36

3-36

4-6

4-7

4-8

4-9

4-11

4-12

4-13

4-14

4-15

4-16

4-17

4-17

4-18

4-18

4-20

4-21

4-22

4-23

4-24

List of Graphs

xiv

Page

List of Graphs

Graph 4.20 Expenditure Trend Of The Ministry Of Transportation

Graph 4.21 Expenditure Trend Of The Ministry Of Health

Graph 4.22 Expenditure Trend Of The Ministry Of Agriculture

Graph 4.23 Expenditure Trend Of The Ministry Of Finance

Graph 4.24 Expenditure Trend Of The Ministry Of Home Affair

Graph 4.25 Central Government Expenditure Trends By Types,

2007-2012

Graph 4.26 Personnel Expenditure Trends By Types,

2007-2012

Graph 4.27 Take Home Pay Trend Of The Lowest Rank Of Public

Civil Servant 2007-2012

Graph 4.28 Material Expenditure, 2007-2012

Graph 4.29 Capital Expenditure Trend, 2007-2012

Graph 4.30 Weight Average Yield Trend Of 3-Month SPN Bids,

2011-2012

Graph 4.31 Amortization Composition Trend, 2007-2012

Graph 4.32 Subsidy Trend, 2007-2012

Graph 4.33 BPP And Power Sold Trend, 2007-2012

Graph 4.34 Non Energy Subsidy Trend, 2007-2012

Graph 4.35 Social Aids Trend, 2007-2012

Graph 4.36 Other Expenditure Trend, 2007-2012

Graph 4.37 Development Target And Realization Trend, 2010-2013

Graph 4.38 K/L expenditure Budget Trend, 2007-2013

Graph 4.39 Top 10 K/L With Larget Budget Allocation, 2011-2013

Graph 4.40 Top 10 K/L With Larget Budget Allocation, 2013

Graph 4.41 Central Government Expenditure Composition

By Economic Classification, 2013

Graph 4.42 Central Government Expenditure Composition

By Mandotory/Non Mandotory Spending, 2013

4-25

4-26

4-27

4-29

4-30

4-34

4-35

4-35

4-36

4-37

4-39

4-39

4-40

4-43

4-44

4-46

4-49

4-50

4-69

4-69

4-69

4-86

4-86

xv

Page

List of Graphs

Graph 5.1 Transfer To Regions Tremd (Fiscal Balance, Special

Autonomy, and Adjustment Fund), 2007-2012

Graph 5.2 DAU Fund Distribuition To Provinces Throughout

Indonesia, 2011-2011

Graph 5.3 Tax Revenue Distribution Map Per Province In Indonesia

2011-2011

Graph 5.4 Natural Resources Revenue Distribution Map Per

Province In Indonesia, 2011-2011

Graph 5.5 DAK Fund Distribution To Provinces Throughout

Indonesia, 2011-2012

Graph 5.6 Transfer To Region Trend (Special Autonomy Fund,

Adjustment Fund) 2007-2012

Graph 5.7 National Fiscal Dependency Ratio, 2007-2012

Graph 5.8 Economic Growth, 2010

Graph 5.9 Economic Growth, 2011

Graph 6.1 Budget Deficit Trend, 2007-2012

Graph 6.2 Budget Financing Trend, 2007-2012

Graph 6.3 Domestic Banking Financing Trend, 2007-2012

Graph 6.4 SOE Privatization Proceeds Trend, 2007-2012

Graph 6.5 Asset Management Proceed Trend, 2007-2012

Graph 6.6 Government Investment Fund PMN Trend, 2007-2012

Graph 6.8 SBN Issuance Trend, 2007-2012

Graph 6.9 The Trend Of Net SBN Issuance And Outstanding

Domestic SBN, 2007-2012

Graph 6.10 The Trend Of Foreign Currency SBN Issuance And

Outstanding Foreign Currency SBN, 2007-2012

Graph 6.11 Foreign Loan Drawing Trend, 2007-2012

Graph 6.12 SLA Drawing Trend, 2009-2012

Graph 6.13 Domestic Loan Drawing Trend 2010-2012

5-7

5-7

5-8

5-9

5-10

5-11

5-20

5-25

5-25

6-2

6-3

6-5

6-6

6-8

6-9

6-15

6-16

6-16

6-20

6-21

6-21

xvi

Page

List of Graphs

Graph 6.14 Government Loan To GDP Trend 2010-2012

Graph 6.15 Indonesia Rating Trend, 1997-2012

Graph 6.16 The Trend Of Government Revenue From SOE,

2007-2012

Graph 6.17 The Trend Of Government Expenditure To SOE,

2007-2012

Graph 6.18 Net SOE Loan Trend, 2007-2012

Graph 6.19 SOE Capital Expenditure And Long Term Loans Trend,

2007-2012

Graph 6.20 Analysis Of Aggragate SOE’S Fiscal Risk Scenario

Graph 6.21 The Trend Of Pension Benefit Payment For Civil

Public Servants, 2007-2013

Graph 6.22 The Trend Of Capital And Capital Ratio Of Bank Indonesia,

2007-2013

Graph 6.23 The Trend Of Secured Saving Fund Capital And Guarantee

Claim Reserve, 2007-2013

Graph 6.24 The Trend Of Export Financing Activities And LPEI Capital

Position, 2007-2013

Graph 6.25 Natural Disaster Contigency Fund Trend, 2007-2012

Graph 6.26 The Trend Of Mandatory Spending, 2007-2012

Graph 6.27 The Trend Of Binding and Non-Binding Spending

Composition, 2007-2012

Graph 7.1 Tax Revenue And Protection, 2007-2016

Graph 7.2 PNBP Trend And Projection, 2006-2016

Graph 7.3 Grant Revenue Trend And Projection, 2006-2016

Graph 7.4 Central Government Expenditure Trend And Projection,

2006-2016

Graph 7.5 Transfer To Regions Trend And Projection, 2007-2016

Graph 7.6 Budget Financing Trend And Projection, 2007-2016

6-22

6-42

6-54

6-54

6-54

6-54

6-55

6-68

6-69

6-70

6-71

6-73

6-74

6-75

7-9

7-9

7-10

7-12

7-14

7-14

xvii

Page

List of Graphs

Graph 7.6 Budget Financing Trend And Projection, 2007-2016

Graph 7.7 Debt Ratio To GDP, 2007-2016

7-14

7-15

xviii

Page

List of Boxes

LIST OF BOXES

Box 2.1 Manpower And Poverty

Box 3.1 Tax Ratio

Box 3.2 Export Tax For Mineral Ores

Box 4.1 Infrastructure Budget In APBN

Box 4.2 Capital Expenditure And Government InvestmentExpenditure

Box 6.1 Government Guarantee For Acceleration Of PowerGeneration Development Program Using RenewableEnergy, Coals And Gas

Box 6.2 The Conversion of Non-Tradable State Securities toTradable SBN (Government Bonds)

Box 6.3 State Sukuk Instrutment Development For Activity/ProjectFinancing

Box 6.4 Maximum Limit of SBSN Emission for Project Financing

Box 6.5 Maximum Limit of Foreign Loans

Box 6.6 Potential Financing With Domestic Loans

Box 6.7 Fiscal Risks of Some Large SOEs

Box 6.8 Public Private Oartnership in Infrastructure Provision

2-35

3-43-15

4-89

4-102

6-37

6-44

6-45

6-46

6-47

6-50

6-57

6-66

xix

Page

List of Matrix

LIST OF MATRIX

Matrix 4.1 Summary of Programs, Performance Indicators andOutcame of Ministries/Agencies Fiscal Year 2013 4-106

Chapter IIntroduction

1-1Financial Notes and Indonesian Budget 2013

CHAPTER 1INTRODUCTION

1.1 GeneralAs a reflection of constitutional obligation, the Government has been required to prepareand propose Draft Law on State Budget (RUU APBN) including its Financial Notes to theHouse of Representatives (DPR). This mandate is prescribed in article 23 paragraph (1) of1945 Constitution as subsequently amended into article 23 paragraph (1), paragraph (2) andparagraph (3) of the fourth Amendment of 1945 Constitution, which reads as: "(1) theGovernment Revenue and Expenditure Budget (APBN) as the reflection of state financialmanagement shall be enacted on yearly basis under a law and shall be exercised in transparentand accountable fashion solely in the pursuit of people's welfare; (2) Draft State Budget(RUU APBN) must be proposed by the President for joint discussion with House ofRepresentatives (DPR) with due attention to the recommendations of Regional RepresentativeCouncil (DPD); (3) in the event that the House of Representatives (DPR) rejects the DraftState Budget proposed by the President, the Government shall use the last year's state budget".The preparation of this Draft State Budget 2013 (RAPBN 2013) is to comply with mandateof article 23 of the said fourth Amendment to 1945 Constitution.

In addition, the preparation of RAPBN 2013 has also referred to provisions as spelled out inLaw Number 17 of 2003 concerning State Finance. Moreover, this RAPBN 2013 is formulatedwith reference to the National Medium-Term Development Plan (RPJM) for 2010 - 2014,Government Work Plan (RKP) 2013 and Macro Economic Framework as well as FiscalPolicy Highlights 2013 that had been mutually agreed during preliminary discussion of theGovernment and House of Representatives of the Republic of Indonesia (DPR RI) from 29May 2012 to 3 July 2012. The process and mechanism for the preparation, formulation anddiscussion of RAPBN 2013 are also in observance to the Law Number 27 of 2009 concerningMPR (People's Consultative Assembly), DPR (the House of Representatives), DPD (RegionalRepresentative Council), and DPRD (Regional House of Representatives).

This State Budget (APBN) 2013 has special nuisance if compared with the previous years.The design of the last round of economic policies and development in National Medium-Term Development Plan (RPJMN) for period 2010-2014 is getting more visible. Fundrequirements for the preparation of general election to be held in 2014 have been earmarkedin RAPBN 2013. On the other side, public demands and expectations on successfuldevelopment and the associated results are started to be realized, perceived and enjoyed bymore social components with broader outreach and targets. Under this circumstance, theroles and contribution of APBN as reflected in activity and program allocations exclusivelyaiming to augment the welfare of people are much more crucial than ever before. The key ishow to manage the limited resources in a manner that can satisfy a wide variety of needswith high quality results. Under such demanding conditions capability of observing, analyzing,assessing and responding economic progress both at global and domestic level on top of thepresently encountered problems and challenges become primary elements in APBN 2013preparation. All of these, in turn, will be conclusive to the qualities of policies, program plans

Chapter I

1-2 Financial Notes and Indonesian Budget 2013

Introduction

and budget allocations, and the outputs expected from the implementation of RAPBN 2013.Nevertheless, sound macroeconomic conditions and positive responses of people are alsoequally paramount.

From global perspective, uncertain economic conditions in Europe; political tension in someregions around the world, such as in Middle East; climate change and natural disaster; andthe trend of soaring prices of commodities and oil in global markets remain major obstaclesthat may hamper domestic economic growth in 2013. However, the reviving global anddomestic economic performance toward positive trend has buoyed up the optimism to stepforward in maximizing all potentials and opportunities of this Country to boost the well-being of Indonesian people. Besides, it is deemed necessary to take anticipative and responsivepolicies through sound and prudent fiscal management in order to maintain nationaleconomic stability.

From internal wise, the challenges to be dealt with will concern initiatives of how to accelerateand enhance the distribution of development and its results to augment the prosperity ofpeople. Poverty alleviation and unemployment rate reduction remain the main problemsthat must be ironed out. In this respect, since 2011 the Government has prepared two majordevelopment strategies as key policies, i.e. Master Plan for the Acceleration and Expansion ofIndonesia's Economic Development (MP3EI) and Master Plan for Poverty AlleviationAcceleration and Expansion (MP3KI). It is expected that these two strategies will be synergicin the implementation. The launching of MP3KI program in tandem with MP3EI programis to develop strong synergy in the pursuit of: (a) high, inclusive, equitable and sustainablegrowth; (b) economic development equitably distributed throughout the Country;(c) employment generation; and (d) poverty alleviation.

Without vilifying RPJMN, MP3EI program will serve as an umbrella for all infrastructuredevelopment in Indonesia. It is a breakthrough. The development of main corridors as drivingmotors and supports of economic activities in the surroundings and domestic connectivityimprovement are expected capable of integrating markets around the Country that willembrace overall villages. With the adoption of such strategies, the results of developmentand [economic] growth can be further optimized. Likewise, their impacts to employmentgeneration will improve and be more equitably distributed to regions throughout Indonesia.In this context, MP3KI program is to accelerate poverty alleviation programs. This programis focused on the provision of basic needs and income generation with integrated and synergicpoverty alleviation programs subject to the local conditions of the regions concerned.

These two initiatives, i.e. MP3EI and MP3KI alongside the latest global and domestic economicperformance trends and their prospects in future as well as problems and challenges that arelikely to encounter in 2013 have been referred to in working out the Government Work Plan(RKP) 2013, and this RPK 2013 has been thereafter used as reference in RAPBN 2013preparation.

In view of vision RPJMN 2010-2014, i.e. "To Realize Prosperous, Democratic and JustIndonesia", the existing potentials and the current and future challenges and problems thetheme of RKP 2013 is as follows: "Reinforcing Domestic Economy for People's WelfareAugmentation and Expansion". To support the realization of such theme, RKP 2013 set 11national priorities and other 3 priorities consisting of: (1) Bureaucracy and Governance

Chapter IIntroduction

1-3Financial Notes and Indonesian Budget 2013

Reform; (2) Education; (3) Health; (4) Poverty Alleviation; (5) Food Resilience; (6)Infrastructure; (7) Investment Climate and Business Climate; (8) Energy; (9) Environmentand Disaster Management; (10) the Development of Underdeveloped Regions, the Frontiers,Outer Regions and Conflict-Torn Regions; (11) Culture, Creativity, Technology Innovation;(12) Other Politics, Law and Security Affairs; (13) Other Economic Affairs; and (14) OtherPeople Welfare Affairs.

The preparation and determination of priority programs and activities in 2013 have takevarious aspects into consideration inclusive of: (1) inter-regional linkage in terms of social,economy, culture, and politics as reflection of archipelago concept within Unitary State ofRepublic of Indonesia; (2) development performance and strategic issues of each region; (3)development objectives and goals of individual region according to the objectives and goalsof RPJPN 2005-2025 and RPJMN 2010-2014; (4) spatial planning of island areas andoptimum spatial use; (5) MP3EI implementation; and (6) poverty alleviation accelerationprogram, to wit, (a) household-based social assistance program (Cluster 1), (b) communityempowerment programs (Cluster 2), (c) micro and small scale enterprises empowermentprograms (Cluster 3), and (d) pro-people programs (Cluster 4).

With reference to theme of RKP 2013 and the existing resources capacity, the focus of 11national priority activities and other 3 priorities in RKP will be stressed on the managementof several strategic issues including 4 (four) major aspects, i.e.: (1) competitivenessimprovement; (2) economic resilience reinforcement; (3) people's welfare augmentationand expansion; and (4) social-political stability strengthening. The strategic issues relatingto competitiveness improvement include: (a) improving investment and business climate(ease of doing business); (b) accelerating infrastructure development for domesticconnectivity; (c) intensifying industrial development in various economic corridors; and (d)generating employment opportunities, especially for young workforce. As to strategic issuesrelevant to economic resilience reinforcement, they are inclusive of: (a) reinforcing foodresilience toward 10 million tons rice surplus by 2014; and (b) increasing electrification ratioand energy conversion. Meanwhile, issues concerning people's welfare augmentation andexpansion are (a) developing human resources; and (b) accelerating poverty alleviation bysynergizing Cluster 1 through Cluster 4. Strategic issues for social and political stabilitystrengthening concern, among other things, (a) anticipation for the preparation of 2014general election; (b) bureaucracy performance improvement and corruption eradication;and (c) reaching minimum essential force (MEF). These strategic issues are then reflected infiscal policy directions and APBN 2013 posture.

1.2 Basic Assumptions for the Macroeconomics 2013Basic assumptions underlying the macroeconomics cover variables expected to havesignificant influence over APBN posture. While the said assumptions are just predictions tocalculate APBN posture, under certain conditions they turn into targets that must be realized.In this respect, maintaining stable macroeconomic is a must to safeguard the implementationof APBN.

The said basic macroeconomic assumptions for 2013 are prepared in view of the latestdevelopment and its prospect in future. With relatively promising economic performance for

Chapter I

1-4 Financial Notes and Indonesian Budget 2013

Introduction

the last five years, Indonesia's macroeconomic prospect is relatively sound with potentialupward trend in future. Thanks to gross domestic product (GDP) that increases 5.9 percentper year on the average from 2007-2011, the national economy is expected to grow in excessof 6 percent in 2012 and 2013. The inflation rate is curbed at moderate level consistent withthe target inflation set by Bank Indonesia. Interest rate is to steadily decrease. Rupiahexchange rate is relatively stable despite weakening trend since 2011 as a result of globaleconomic crisis.

Other variables adopted as basic macroeconomic assumptions in 2013 include oil and gascalculation, either in terms of revenues or expenditures. These variables are Indonesian CrudePrice (ICP), oil lifting and gas lifting. Variable of gas lifting is just adopted as basic assumptionin this RAPBN 2013 to enhance transparency in natural gas revenue calculation. TheIndonesian Crude Price (ICP) is considerably dependent on external factors, which are verydifficult to predict. Oil lifting and gas lifting are actually dominated by internal factors.However, this issue is very complicated in the planning since the realization of oil lifting isalways lower than the target, particularly for the last few years.

Upon attentive examination of the foregoing facts, the basic assumptions underlying thenational macroeconomy for the preparation of this APBN 2013 posture will be as follows:

1. The economic growth is expected to chalk up 6.8 percent. In terms of expenditures, this2013 economic growth will be primarily attributed to public and government consumptions,and the accumulation of gross fixed capital (PMTB)/investment. From production wise,agriculture sector, processing sector, construction sector, trade, hotel and restaurant sectoralong with transportation and communication sector will be the main driving sectors forthe said economic growth.

2. Inflation rate is predicted controllable at 4.9 percent range. It can be realized with smoothsupplies and distribution of goods and services, better fiscal, monetary and real sectorpolicy coordination coupled with higher awareness of the regional governments incontrolling inflation.

3. Average rupiah exchange rate to US dollar in 2013 is set at Rp.9.300/US$. The pressureagainst rupiah exchange rate is predicted to come from the deminishing surplus ofIndonesian balance of trade and economic slowdowns in China, India, and Brazil thatmay deteriorate the attractiveness of investments in emerging market countries andpotential to spark fligth to quality.

4. The 3-month SPN rate (State Treasury Bill) in 2013 is projected to range at 5.0 percent.Some factors that have been taken under consideration are inclusive of controllableinflation rate, exchange rate and capital inflows to Indonesia.

5. The Indonesian Crude Price (ICP) in international markets is expected to reach US$100per barel. This expectation is fortified with oil demand growth projection and lower oilsupply growths of non-OPEC countries.

6. Oil lifting and gas lifting of Indonesia in 2013 is forecasted at 2,260 thousand barrel of oilequivalent per day consisting of oil lifting of 900 thousand barrels per day and naturalgas lifting 1,360 thousand barrel of oil equivalent per day. Starting from APBN 2013, gas

Chapter IIntroduction

1-5Financial Notes and Indonesian Budget 2013

lifting assumption is merged with oil lifting assumption for the harmonization withalternative energy intensification program and more rational calculation of governmentrevenues and expenditures. The latter is more obvious due to the facts of more naturalgas reserves found during oil and gas exploration in the recent years.

The trend of realized basic macroeconomic assumptions from 2007 to 2011 and their projectionin 2012 - 2-13 is presented in Table 1.1.

1.3 Fiscal Policy HighlightsFiscal policy as the main policy of the Government implemented through APBN plays crucialand strategic roles to the national economy, especially in the pursuit of development targets.The said roles relate to three primary functions of the Government, i.e. allocation function,distribution function, and stabilization function. APBN must be designed in a manner thatcan support such functions with ultimate goals of accelerating high and quality economicgrowths. Allocation function concerns the Government's interventions in economic resourcesallocation. Distribution function deals with the distribution of goods that have been producedby the communities, and stabilitation function is how to maintain the stability of andaccelerate economic performance at full employment level and relatively stable prices.

Of these three functions, stabilization function is aimed at minimizing the volatility orfluctuation of the economy. It is the essence of APBN policy. From this stabilization role,fiscal policy has been regarded as an effective tool to simplify business cycle. The history offiscal policies in Indonesia showed that during economic crisis in 1997/1998 and crisis 2009,expansive fiscal policy with fiscal stimulus allocation in 2009 was able to reinforce theIndonesian economy against crisis impacts, and even recorded distinctive positive growthamid the faltering global economic growth. The economic stability was well maintained andsound fiscal conditions were established. Of course, it is not only due to appropriate fiscalpolicy, but also the synergy of monetary policy and other policies.

Eclipsed under relatively unrecovered global economy and in view of potential revenue sourcesand budget requirements in future, fiscal policy in 2013 is predicted to remain of expansivecharacter, in which the Government expenditures will outnumber the revenues. This approachis necessary notably to stimulate economic growth. In future it is expected that the economicgrowth will accelerate toward higher growth coupled with the optimism of the Government

2007 2008 2009 2010 2011 2013

Real. Real. Real. Real. Real. APBNP Outlook *) APBN

1. Economic Growth (%) 6,3 6,0 4,6 6,2 6,5 6,5 6,3 6,8

2. Inflation (%) 6,6 11,1 2,8 7,0 3,8 6,8 4,8 4,9

3. Exchange Rate (Rp/US$) 9.140 9.691 10.408 9.087 8.779 9.000 9.250 9.300

4. 3-Month SPN Rate (%) 8,0 9,3 7,5 6,6 4,8 5,0 3,9 5,0

5. ICP (US$/barrel) 72,3 97,0 61,6 79,4 111,5 105,0 110,0 100,0

6. Oil Lifting (thousand barrel/day) 904,0 871,0 944,0 953,9 898,5 930,0 900,0 900,0

7. Gas Lifting (mboepd) - - - - - - - 1.360,0

*) A ccor din g to t h e ou t look in A PBN 2 01 2 im plem en ta tion repor t sem est er I

Sou rce: t h e Min istr y of Fin an ce

Economic Indicators2012

BASIC MACROECONOMIC ASSUMPTION, 2007–2013TABLE 1.1

Chapter I

1-6 Financial Notes and Indonesian Budget 2013

Introduction

about the bolstering economic conditions in future. The challenges that must be coped withare to foster more quality economic growth, i.e. capable of complying with these threerequirements: (a) generate employment and reduce unemployment and poverty; (b)supported with equality dimension; and (c) the structure proportionally reinforced withvarious supporting sectors, either in terms of aggregate demands or aggregate supplies. In2013, with the anticipated economic growth at 6.8 percent it is expected that such growthcan reduce unemployment rate and poverty rate to 5.8 - 6.1 percent and 9.5 - 10.5 percentrespectively.

Consistent with the development theme for 2013: "Reinforcing Domestic Economic for PeopleWelfare Augmentation and Expansion", the fiscal policy in 2013 will be established as follows:"to boost Sustainable Economic Growth with Fiscal Restructuring". The substance of thistheme is focused on the importance of building sound fiscal condition to reach sustainableeconomic growth. Four (4) strategies to maintain the economic sustainability are inclusiveof: (a) optimizing Government revenues while maintaining business climate conducive forinvestments, business world expansion and environment preservation; (b) enhancing thequality of Government expenditures with efficiency for un-productive expenditures andincreasing infrastructure revenues to expedite the growth; (c) maintaining budget deficit atsafe limit (below 3 percent of GDP); and (d) decreasing debt ratio to GDP at controllablerate.

Generally speaking, fiscal policy in 2013 remains expansive in order to maintain growthmomentum while curbing the deficit at tolerable threshold. This policy will be exercisedwith: (1) Government revenue policy; (2) Government expenditure policy; and (3) financingpolicy.

The Government revenue policy in 2013 will be directed to optimize the revenue from taxand non-tax (PNBP) sector. In the former, some significant policies and steps to take in 2013are: (1) to continue basic taxation policies that have been introduced in 2012; (2) to intensifytax potential exploration; and (3) to improve supervision and services in customs and excisesector. The highlights of PNBP policy in 2013 include: (1) increase non tax revenue fromboth oil and gas and non-oil and gas sectors; (2) enhance the performance of state-ownedenterprises (SOEs) with greater dividend contributions; and (3) to continue inventory,intensification of K/L (Ministries/Agencies) Non-Tax Revenue (PNBP). This PNBPoptimalization will be carried out along with revenue optimalization from Public ServiceAgencies (BLU).

From the Government expenditure side, the essense of expenditure strategies in 2013 bothfor ministries/agencies (K/L) or non K/L will remain focused on 4 (four) pillars: (1) maintainhigh level economic growth (pro-growth), (2) increase productivity for employment expansion(pro-job); (3) improve and maintain poverty alleviation program (pro-poor); and (4) supporteco-development (pro-environment). These development priorities are expected capable ofreinforcing the domestic economy for people welfare augmentation and expansion asprescribed in the foregoing national development theme for 2013.

In the mean time, to enhance the quality of Government expenditures, in 2013 theGovernment will increase the allocation of expenditure budget to stimulate economic growthat higher level. In this context, the Government plans to rise electricity tariff rate and reallocatethe saved electricity subsidy to infrastructure budget.

Chapter IIntroduction

1-7Financial Notes and Indonesian Budget 2013

General policies from financing aspect to be taken by the Government in 2013 are: to spendbudget surplus (SAL) for the anticipation of SBN (Government Bond) market crisis andfinance budget deficit; (2) to direct the spending of Government investment fund especiallyfor infrastructure development, and build investment capacity of the Government, notablyfor the takeover of PT Inalum; (3) to allocate the State Capital Participation (PMN) to fortifythe security capacity of people entrepreneurship credit program (KUR), initial capitals forSocial Security Agency (BPSJ), SOE restructuring and revitalization, and to meet theobligations of Indonesia as the member of international organizations/institutions and ofASEAN Infrastructure Fund; (4) to maintain net negative policy of foreign loans; (5) toachieve debt ratio to GDR at 21 - 23 percent by end of 2013; and (6) to improve the flexibilityof loan financing with relatively low-cost and controllable risk debt instruments

From the above mentioned measures, it is expected that APBN be managed in efficient andproductive fashion and in turn provide optimum contribution for fiscal sustainability andrise the competitiveness of domestic economy and ultimately support national developmentwith end of view of augmenting the prosperity of all Indonesian people.

1.4 APBN 2013 Posture SummariesRAPBN 2013 posture is prepared based on public economic principles aimed to optimizerevenue sources while introducing efficiency and effectiveness in expenditures and budgetfinancing allocation. Aside from basic macroeconomic assumptions, the amounts set in APBN2013 posture also take good governance practices, policies to be taken in future and APBNrealization trends of previous years under consideration.

During 2007 - 2011, APBN realization recorded fluctuated budget deficits following therealization of revenue and expenditure during the said periods. In 2007 - 2011 the realizationsof revenues and grants ranged from 15.1 to 19.8 percent of GDP with realized expenditurefor the same period at 16.2 to 19.9 percent range, and deficit realization at 0.1 percent to 1.6percent of GDP.

In APBNP 2012 the Government revenues are expected to reach Rp.1,358.2 trillion withRp.1,548.3 trillion of expenditures and as such the deficit is predicted to record Rp.190.1trillion (2.23 percent) of GDP.

The expansive budget policy taken by the Government until the enactment of APBNP 2012will be maintained in 2013. Based on the directions and strategies of fiscal policy, APBN 2013posture will have figures as highlighted below:

a. The Government revenues are planned to reach Rp.1,529.7 trillion composing of taxrevenues Rp.1,193.0 trillion, PNBP (non-tax) revenue Rp.332.2 trillion and grants Rp.4.5trillion.

b. The Government expenditures are predicted to amount Rp.1,683.0 trillion consisting ofCentral Government Expenditures Rp.1,154.0 trillion and Transfer to Regions Rp.528.6trillion.

c. Budget deficit is set at Rp.153.3 trillion (1.65 percent) of GDP.

d. Budget financing for APBN 2013 is from domestic financing sources Rp.172.8 trillionand foreign financing (net) Rp.19.5 trillion.

Chapter I

1-8 Financial Notes and Indonesian Budget 2013

Introduction

The summary of RAPBN 2013 posture is presented in Table 1.2.

1.5 Brief Description of ChaptersThis Financial Note and APBN 2013 composes of 7 (seven) chapters initiated with Chapter 1- Introduction - detailing the general description including short notes to RKP (theGovernment Work Plan) and legal basis underlying the preparation of APBN 2013, basicassumptions of macroeconomics, fiscal policy highlights, summary of APBN 2013 posture,and brief description of Chapters.

Chapter 2 of Basic Assumptions of Macroeconomics points out the economic trends from2007 to 2011 and economic projection for 2012 as basis in forecasting the economic prospectsin 2013, challenges and targets of macroeconomic policy in 2013, and closed with basicassumptions of macroeconomics for APBN 2013.

Chapter 3 deals with the Government Revenues. This chapter discusses the trends of revenuerealizations from 2007 - 2011 and revenue estimates in 2012; challenges and opportunitiesof Government revenues; and targets of Government revenues in 2013, which includedomestic revenues and grants.

Chapter 4 of Central Government Expenditures concerns the progress of policy andimplementation of Central Government Expenditure Budget in 2007 - 2012; RKP (theGovernment Work Plan) highlights for 2013; and central government expenditure policyand budget in RAPBN 2013 by functions, organizations and types.

2007 2008 2009 2010 2011 2013

Real. Real. Real. Real. Real. APBNP Outlook *) APBN

A.   GOVERNMENT REVENUE 707.8 981.6 848.8 995.3 1,210.6 1,358.2 1,372.4 1,529.7

I. Domest ic Revenue 706.1 979.3 847.1 992.2 1,205.3 1,357.4 1,366.4 1,525.2

1 . Tas Rev enue 491 .0 658.7 61 9.9 7 23 .3 87 3 .9 1 ,01 6.2 1 ,021 .8 1 ,1 93 .0

2 . Non Tax Rev enue 21 5.1 3 20.6 227 .2 268.9 33 1 .5 3 41 .1 3 44.6 3 3 2.2

II. Grant Revenue 1.7 2.3 1.7 3.0 5.3 0.8 6.0 4.5 B.   GOVERNMENT EXPENDITURE 757.6 985.7 937.4 1,042.1 1,295.0 1,548.3 1,551.5 1,683.0

I. Central Government Expendit ure 504.6 693.4 628.8 697.4 883.7 1,069.5 1,068.8 1,154.4

1 . Ministries/Agencies (K/L) 225.0 259.7 307 .0 3 32.9 41 7 .6 547 .9 507 .5 594.6

2 . Non K/L 27 9.6 43 3.7 321 .8 3 64.5 466.1 521 .6 561 .3 559.8

II. Transfer t o Regions 253.3 292.4 308.6 344.7 411.3 478.8 482.7 528.6

1 . Fiscal Balance 244.0 27 8.7 287 .3 3 1 6.7 3 47 .2 408.4 41 2.3 444.8

2 . Special Fund and Adjustment Fund 9.3 1 3.7 21 .3 28.0 64.1 7 0.4 7 0.4 83 .8

C.   PRIMARY BALANCE 30.0 84.3 5.2 41.5 8.9 (72.3) (67.2) (40.1) D.   BUDGET SURPLUS/(DEFICIT)  (49.8) (4.1) (88.6) (46.8) (84.4) (190.1) (179.1) (153.3) % deficit to GDP (1.26) (0.08) (1.58) (0.73) (1.14) (2.23) (2.16) (1.65) E.   FINANCING 42.5 84.1 112.6 91.6 130.9 190.1 185.8 153.3

I. Domestic Financing 69.0 102.5 128.1 96.1 148.7 194.5 194.9 172.8

1 . Domestic Banking 1 1 .1 1 6.2 41 .1 22 .2 48.9 60.6 60.6 1 4 .3

2 . Dom estic Non-Banking 57 .9 86.3 87 .1 7 3 .9 99.8 1 3 4.0 1 3 4.4 1 58.5

II. Foreign Financing (Netto) (26.6) (18.4) (15.5) (4.6) (17.8) (4.4) (9.1) (19.5)

1 . Foreign Loan Draw ing (Gross) 34.1 50.2 58.7 54.8 3 3 .7 53 .7 49.5 45.9

2 . SLA (2.7 ) (5.2) (6 .2) (8.7 ) (4 .2) (8.4) (8.1 ) (7 .0)

3 . Amortization (57 .9) (63.4) (68.0) (50.6) (47 .3 ) (49.7 ) (50.5) (58.4)

Financing Surplus (Deficit) (7.4) 80.0 24.0 44.7 46.5 0.0 6.7 0.0

*) A ccor din g to ou tlook in A PBN 2 0 1 2 Im plem en ta tion Repor t Sem est er I Sour ce: th e Min istr y of Fin an ce

TABLE 1.2APBN TREND, 2007 - 2013

(trillion rupiah)

DESCRIPTION2012

Chapter IIntroduction

1-9Financial Notes and Indonesian Budget 2013

Chapter 5 concerning Fiscal Decentralization Policy details the progress of policy andimplementation of fiscal decentralization in 2007 - 2012; problems and challenges in fiscaldecentralization; and transfer to regions policy and budgeting in 2013.

Chapter 6 of Deficit, Budget Financing and Fiscal Risk concerns the trends of budget deficitand financing in 2007 - 2012, and budget financing plan in 2013 covering non-loan andloan financing sources. This chapter also underlines fiscal risks.

Chapter 7 of Medium-Term APBN Projection discusses the projections of basic assumptionsof macroeconomics, the Government revenues, the Government expenditures, and budgetfinancing in medium-term wise (2014-2016), and medium-term expenditure framework.

Chapter 2Macroeconomic Trend and Fiscal Policy Highlights 2013

2-1Financial Notes and Indonesian Budget 2013

CHAPTER 2

BASIC ASSUMPTIONS OF MACROECONOMICS

2.1 GeneralGlobal economic recovery trend after financial crisis and global recession since 2008 remainsan issue garnering great attention from various parties around the world. However until themid of 2012 such recovery phase fails to proceed as expected. It is mainly attributed toprolonged fiscal crisis and debt settlements in Europe, which are unfortunately predicted stilla grave challenge that must be coped with in this 2013. The exceeding debts have impededstimulus efforts required by these western countries. Besides, investments and capital flowshave been aggravated by lower credit rating of some European countries in 2012.

Under such circumstance, more attention must be given to the fickle prices of global energycommodities. This is particularly evident from the wildly fluctuating prices of crude oil ininternational markets for the last few years. For example, the crude oil price at global levelhas skyrocketed in the last two years. While it is then to drop, the price, which easily fluctuateswill disrupt economic stability and incite negative sentiment in many countries.

This condition also has influence over the Indonesian economy, despite insignificant impactsaccording to the data. It is indicated with the capability of Indonesian economy to record 4.6percent growth in 2009. The key lied on the anticipative policies against crisis impacts adoptedin the time. Likewise, in 2012, the Government has prepared a number of measures forcritical management protocol. The Government is optimistic that amid uncertain globaleconomic growth the national economic performace in 2012 and 2013 can reach growth ofmore than 6.0 percent. The challenge to deal with in future concerns of how to record morequality economic growth, i.e. capable of reducing poverty rate and unemployment rate infaster and synergic manner for more equally distributed development outcomes.

Apart from impacts to economic growth, global economic trends and international commodityprices in 2012 can affect the performance of balance of payment in the same year, which isprojected to record deficit in current transactions, even though such deficit can be coveredfrom capital and financial transaction surplus. In 2013, the balance of payment is expectedto book relatively high surplus from capital and financial transaction surplus and enormousforeign capital inflows. Nevertheless, the current transactions are predicted to make deficitas a result of strong domestic demands, in which the import will outnumber the export.

The immediate impact of the foregoing situation is more obvious to rupiah exchange rate,which remains under pressure in 2012 and 2013. As to inflation rate and interest rate, theycan be controlled at lower level. Thus, in general the macroeconomic conditions in futureare relatively promising.

The above trends have been applied as basis in preparing and setting macroeconomic targets.These targets constitute basic assumptions as references in calculating APBN posture. Theyconsist of economic growth, inflation, exchange rate, interest rate, oil price and oil lifting.Since 2013, these basic assumptions have been added with gas lifting due to the fact of theincreasingly gas production and upward contribution of oil and gas sector.

Chapter 2

2-2 Financial Notes and Indonesian Budget 2013

Macroeconomic Trend and Fiscal Policy Highlights 2013

2.2 The Economic Trend 2007 – 2011 and RealizationProjection 2012

2.2.1 Global and Regional EconomyGlobal economy during 2007 – 2011 shows ups and downs phenomenon as experienced insome developed countries and global markets. In period 2008-2009, subprime mortgagecrisis in US financial market not only exerted great pressure to real sector but also spread toother countries, particularly in European region. The crisis then turned into global crisis thatmay lead to global economic contraction. The economic growth at global level in 2007 reached5.4 percent, and started to constantly slow down in 2008, until recorded a dismal negative0.6 percent in 2009. Thanks to varying responsive policies either taken individually orcollectively in many regions, the global economy was recovering in 2010 and chalked up 5.3percent growth.

In the following years, the global economy again faces new challenges as a result of exceedingdebts of European countries. Stimulus policy package launched as a response to crisis in2009 was not followed with prudent fiscal management. In 2011, new pressure started toexert from the consequences of enormous debts that must be complied with by the majorityof European countries. Their liquidities and financial sectors had to shoulder unbearablepressure. This calamity further spread to real sector and incited economic crisis in Europeanregions.

In the same time, the leading countries in the world were entangled with their domesticeconomic challenges. US stimulus policy package was not sufficient to encourage decentgrowth. Meanwhile, Japan suffered economic contraction. This country, which in 2011 wasravaged by tsunami, was also disrupted with nuclear reactor leak crippling its productionand trading activities.

The crumpling economy of developed countries brought adverse implications to the developingcountries. The export volumes of the latter had drastically dropped since they more destinedtheir exports to these troubled rich countries. The faltering economy of developed countrieshas decreased export demands on various products from developing countries. Thisphenomenon becomes new pressure to the national economy of developing countries, notablythose considerably dependent on exports such as China, India and Singapore.

7,22,4

-11,7

14,3

6,37,9

2,9

-10,5

12,9

5,9

-15

-10

-5

0

5

10

15

20

2007 2008 2009 2010 2011

%, yoy

Source: World Economic Outlook - IMF, July 2012

GoodsGoods and services

GRAPH 2.2GLOBAL TRADE VOLUME GROWTH TREND

2007 - 2011

5,4

2,8

-0,6

5,33,9

2,80,0

-3,6

3,2 1,6

8,7

6,0

2,8

7,5

6,2

-6

-4

-2

0

2

4

6

8

10

2007 2008 2009 2010 2011

%, yoy

GlobalDev'ed CountriesDev'ing Countries

Source: World Economic Outlook - IMF, Juli 2012

GRAPH 2.1GLOBAL ECONOMIC GROWTH

2007-2011

Chapter 2Macroeconomic Trend and Fiscal Policy Highlights 2013

2-3Financial Notes and Indonesian Budget 2013

These insistent pressure and challenges have slowed down the global economic growth. Afterrecovery in 2010, the global economy started to falter again with lowly 3.9 percent growth.The similar diminishing pattern is also found in trade volume growth, which in 2011 justrecorded 5.9 percent, half of 2010 performance (see Graph 2.1. and Graph 2.2.).

2.2.2 National Economy

Economic GrowthThe national economy is relatively strongenough to face the occuring global crisis.It can be seen from high economic growthof Indonesia in 2011. While the othercountries either suffer economic slowdownor even negative growth. For the last fiveyears (2007-2011), the Indonesianeconomy managed to constantly grow at5.9 percent (yoy) on the average. Thispercentage is higher than the average rateof previous five year period (2002-2006),which only reached 5.1 percent (yoy). In2007, the national economy of Indonesiagrew by 6.3 percent (yoy). However, in 2008 this growth was a little bit decreasing as aresult of global crisis. Even though, in this difficult condition Indonesia recorded a distinctiveeconomic growth of 6.0 percent (yoy). This economic downward continued until 2009 whenthe national economi was to grow by 4.6 percent (yoy). The economic recovery was juststarted in 2010 when the national economy was to grow by 6.2 percent (yoy). In 2011 thenational economy starts to revive with a growth of 6.5 percent (yoy) amid glooming globalcrisis in Europe (see Graph 2.3).

Indonesia’s economy in 2011 recordedfavorable growth at 6.5 percen (yoy). Debtcrisis in USA and Europe exertedinsignificant impacts to national economy.Domestic demands remained high to holdexternal slowdown. The sources ofeconomic growth in 2011 came from grossfixed capital formation (PMTB), whichgrew by 4.7 percent (yoy), andgovernment consumption which raised by3.2 percent (yoy). As to export-import, itexperienced a downturn if compared withlast year’s realization, i.e. 13.6 percent and13.3 percent (yoy) respectively. (Graph 2.4). From sector wise, the economic growth in2011 was attributable to processing industry sector, which recorded relatively high growth,i.e. 6.2 percent (yoy), and trade, hotel and restaurant sector for its 9.2 percent (yoy)contribution.

-20

-15

-10

-5

0

5

10

15

20

25

2007 2008 2009 2010 2011

persen

Source: Central Bureau of Statistics

Domes. Consump Gov. Consum PMTB Export Import

GRAPH 2.4 ECONOMIC GROWTH BY EXPENDITURE ,

2007 – 2011 (%, YOY)

6,3 6,0

4,6

6,2 6,5

0

1

2

3

4

5

6

7

2007 2008 2009 2010 2011

persen

Source: Central Bureau of Statistics

GRAPH 2.3 INDONESIAN ECONOMIC GROWTH,

2007 - 2011 (%, YOY)

Chapter 2

2-4 Financial Notes and Indonesian Budget 2013

Macroeconomic Trend and Fiscal Policy Highlights 2013

In 2011, public consumption was to rise 4.7 percent (yoy) same as realization in 2010. Asfrom the first quarter to the final quarter 2011, this public consumption showed upwardtrends. It indicated better purchasing power of people along 2011 coupled with low inflationin the year. Public consumption growth was due to food and non-food consumptions,recording 3.8 percent (yoy) and 5.5 percent (yoy) respectively. This kind of consumptionwas the largest contribution to economic growth or GDP, i.e. 54.6 percent.

Significant increase was recorded in government consumption in 2011 with 3.2 percent (yoy),which was higher than 2010’s realization reaching 0.3 percent (yoy) only. This governmentconsumption was from material and personnel expenditures recording 3.6 percent (yoy)and 5.4 percent (yoy) respectively. Higher personnel expenditure came from remunerationto some ministries/agenciess. Despite significant increase, the contribution of governmentconsumption to economic growth was relatively small, i.e. only 9.0 percent to total GDP.

Investment expenditure (gross fixed capital formation/PMTB) in 2011 shows a little bit highergrowth than in 2010, i.e. from 8.5 percent (yoy) to 8.8 percent (yoy). This better performancewas driven by more investments in import machines and equipment. Domestic consumptiongrowth had increased demands on new machines to assure production capacity in future.With regard to high investments on import transport modes, it was due to the purchase ofsome aircrafts to respond the reviving economic activities, from which more intensive inter-region transporation was generated. Investments on construction was slightly to decreasebecause of relatively stagnant growth in this sector. Despite relatively small contribution toGDP if compared with public consumption’s investment expenditure this sector gave highcontribution to economic growth.

2010 2011 2010 2011Public Consumption 56,6 54,6 2,7 2,7Government Consumption 9,0 9,0 0,0 0,3PMTB 32,1 32,0 2,0 2,1Export 24,6 26,3 6,5 6,3Import 22,9 24,9 5,6 4,8

SectorAgriculture 15,3 14,7 0,4 0,4Mining 11,2 11,9 0,3 0,1Industry 24,8 24,3 1,2 1,6Electricity, Gas and Water Supply 0,8 0,7 0,0 0,0Construction 10,3 10,2 0,4 0,4Trade, Hotel and Restaurant 13,7 13,8 1,5 1,6Transportation and Communication 6,6 6,6 1,2 1,0Finance, Real Estate & Corporate Services 7,2 7,2 0,5 0,7Services 10,2 10,5 0,6 0,6

Source: the Ministry of Finance

TABLE 2.1GDP DISTRIBUTION AND CONTRIBUTION TO ECONOMIC GROWTH

2010 - 2011

ExpenditureDistribution (%) Contribution (%)

Chapter 2Macroeconomic Trend and Fiscal Policy Highlights 2013

2-5Financial Notes and Indonesian Budget 2013

At variance with other components, export and import growth for goods and services in2011 indicated a downturn if compared with realization in 2010. Global economic pressurehad decreased Indonesia’s export performance i.e. from 15.3 percent (yoy) in 2010 to 13.6percent (yoy) in 2011. Accordingly import growth had been also dropped from 17.3 percent(yoy) in 2010 to 13.3 percent (yoy) in 2011. However, import slowdown, which was higherthan the export had caused net export to reach 14.4 percent (yoy) in 2011 from previously8.7 percent (yoy). The downturn of export – import growth for goods was just evident inquarter IV 2011. However, the direct impacts of crumpling European economy to Indonesia’sexports were relatively insignificant because of low direct export composition to these crisishit countries (see Table 2.1.).

From demand side, all economic sectors recorded positive growths in 2011, despite lowerrates for some of them. Processing industry sector, trade, hotel and restaurant sector, financialsector and service sectors chalked up positive growth. Meanwhile, four sectors recordinglower growths were mining sector, electricity, gas and water supply sector, and transportand communication sector. On the other side, agriculture sector reached constant growth.

The highest growth was found in transport and communication sector thanks to its doubledigit growth, i.e. 10.7 percent (yoy). However, this performance was a decrease if comparedin 2010 when this sector reached 13.4 percent (yoy) growth. This growth was particularlyfrom communication sub-sector growing by 12.7 percent (yoy) due to increase ofcommunication equipment, either in terms of types or intensity of their uses. Transportsub-sector was to grow by 7.6 percent (yoy) coming from the increases of land transportsub-sector, sea transport sub-sector and other supporting transport sub-sector recordinggrowths by respectively 6.6 percent (yoy), 2.8 percent (yoy), and 6.8 percent (yoy). Theincreasing number of passengers and varying land and sea transport modes had supportedthis bolstering sub-sector.

Processing industry sector in 2011 was to significantly grow by 6.2 percent (yoy). Thisrealization reflected a great increase in comparison with previous year’s performance of4.7 percent (yoy). This upsurge was due to growth in non-oil and gas sub-sector reaching6.8 percent (yoy). Meanwhile, oil-gas industry sub-sector experienced contraction of0.9 percent (yoy). The growth of non-oil and gas sub-sector was supported by basic metal,iron and steel industries, food, beverage and tobacco industries and textile, leather madeitems and footwear industries. These three sub-sectors contributed by respectively 13.1 percent(yoy), 9.2 percent (yoy) and 7.5 percent (yoy). Contraction in non-oil and gas sub-sectorwas particularly due to minus growth of liquid natural gas industry (see Table 2.2).

Trade, hotel and restaurant sector experienced growth from 8.7 percent (yoy) in 2010 to 9.2percent (yoy) in 2011. Such growth was attributed to sound performance of large trades andretail sectors, which grew by 10.0 percent (yoy). Meanwhile, hotel sub-sector and restaurantsub-sector recorded growths of 9.0 percent (yoy) and 4.1 percent (yoy) respectively.

Agriculture, livestock, forestry and fishery sectors in 2011 were relatively stagnant to previousyear’s performance, i.e, 3.0 percent (yoy). The largest contribution for this agriculture sectorgrowth was from fishery sector of 6.7 percent (yoy). In the mean time, food crop sub-sectorwas the main contribution for this sector, which experienced slowdown if compared with2010’s performance, i.e. from 1.6 percent (yoy) to 1.3 percent (yoy). This lower growth offood crop sub-sector was because of climate factors causing decrease in agriculure production,notably paddy.

Chapter 2

2-6 Financial Notes and Indonesian Budget 2013

Macroeconomic Trend and Fiscal Policy Highlights 2013

Rupiah Exchange RateIn 2007, the rupiah exchange rate was relatively stable at Rp.9,136 per US dollar on theaverage. The fluctuation followed strengtening trends in previous years. Until the third quarterof 2008, rupiah exchange rate remained stable at Rp.9,051 to Rp.9,500 range per US dollar.Entering the fourth quarter 2008, this exchange rate sufferred great pressure arising fromglobal economic slowdown as a result of global financial crisis and commodity price upheavalsin international markets. During such period, rupiah volatility showed upward trend andranged at Rp.9,500 to Rp.12,400 per US dollar. As of the end of 2008, the rupiah exchangerate to US dollar was at Rp.9,678.3 per US dollar on the average implying a decrease ofaround 5.9 percent to the last year’s rate.

Until quarter I 2009, depreciation to rupiah exchange rate continued and hit the lowest rateon 6 March 2009 at Rp.12,065 per US dollar due to worries of spreading global financialcrisis. In gradual fashion, starting from Quarter II 2009, the rupiah exchange rate wasstrengthening and reached Rp.9,985 per US dollar on 8 June 2009. This stronger rupiahwas supported with the bolstering economic foundations and balanced supply and demandof foreign currencies in domestic markets. In addition, the amount of foreign reserves wasalso to hike and yield of rupiah was relatively high if compared with peer countries that gavepositive signals to investors on the economic resilience of Indonesia against internationalmarket turmoils. As of the end of 2009, rupiah exchange rate was at Rp.10,399 per US dollaron the average or to decrease by 7.4 percent compared with previous year.

The intense inflow of foreign capital and proportional demands and supplies of foreignexchange in domestic markets had maintained the stability of rupiah exchange rate during

Sector 2007 2008 2009 2010 2011

Agriculture 3,5 4,8 4,0 3,0 3,0

Mining 1,9 0,7 4,5 3,6 1,4

Industry 4,7 3,7 2,2 4,7 6,2

Electricity, Gas and Water Supply 10,3 10,9 14,3 5,3 4,8

Construction 8,5 7,6 7,1 7,0 6,7

Trade, Hotel and Restaurant 8,9 6,9 1,3 8,7 9,2

Transportation and Communication 14,0 16,6 15,8 13,4 10,7

Finance, Real Estate & Corporate Services 8,0 8,2 5,2 5,7 6,8

Services 6,4 6,2 6,4 6,0 6,7

Sou r ce: Cen tr a l Bu r ea u of Sta tist ics (BPS)

2007-2011 (percent)ECONOMIC GROWTH BY SECTORS

TABLE 2.2

Chapter 2Macroeconomic Trend and Fiscal Policy Highlights 2013

2-7Financial Notes and Indonesian Budget 2013

2010. Rupiah, in quarter I, received great pressure from negative sentiment of market actorsagainst Greek’s fiscal deficit, which was worried to spread to other Europen countries.However, with the bouyance of optimism on global economic recovery, the conditions ofeconomic foundations in Asian regions starting to improve marked with attractive rupiahyields, and the influx of foreign capitals to domestic markets. Rupiah exchange rate to USdollar in 2010 was at Rp.9,085 per US dollar on the average reflecting an increase of 12.7percent higher than previous year’s average rate.

Positive trend of strengthening rupiahexchange rate during 2010 continued in2011. The ongoing economic recoveryprocess in US and uncertain economicrecovery in Europe had forced investorsto switch their investments to emergingmarkets, including Indonesia.Competitive rupiah yield coupled withhigher Indonesia’s credit rating toinvestment grade level became attractivefactors of investments and more foreigncapitals entered to domestic ma